SMA Solar Technology AG

Welcome everyone. We very much appreciate that you are taking the time for this investor and analyst call on the Q1 2022 results.

You can find today's presentation on our Investor Relations website. This conference call is scheduled for 45 minutes and will be recorded.

The replay will be available for seven working days. After the presentation, I will be happy to answer any questions you might have.

I will start with revenue of the Q1 financials, then give you an update on current developments and on our expectations for the full-year. I expect my presentation to last approximately 20 minutes.

I refer to our disclaimer on Page 2 and here on Slide 4, you find a summary of the key financials for Q1. Before expanding you the figures I would like to inform you that we have renamed our business solutions segments to Commercial and Industrial solutions, or short C&I, which is a closer representation of the market for our product offering.

Please note that SMA's three segments continue to represent the same portfolio of products, services, and solutions as in the past. On this page, you can see that our Q1 revenues were affected by the supply constrained for electronic components, which resulted in lower level of profitability compared to Q1 of last year.

In the quarter-over-quarter comparison, Q1, 2022 sales were slightly lower than in Q4 of last year. But our profitability was on a solid level in the first quarter, which I will explain to you in more depth on the next pages.

As usual, I will provide you with more details on our sales, profitability, balance sheet and cash flow in the next slides. But now let's please turn to the next slide and I will provide you with the insights regarding our sales performance.

As explained in our last analyst call, since Q3 of last year, SMA is more and more affected by the global supply constraints for electronic components. Our Q1 sales this year was on the higher end of the range we communicated in our last call, but as a result of the ongoing supply challenges, revenues declined by 8% compared to Q1, 2021.

The situation is rather frustrating given the record high level of demand and incoming orders for our products and solutions, which we cannot fulfill as quickly as we could in the past. Looking at the regions, EMEA remained our largest region in terms of revenues in Q1.

It's a €123 million, which represents 54% of SMA's global sales. In the region, our Large Scale & Project Solutions segment achieved strong double-digit growth, while revenues in our C&I segment slightly increased, and our Home Solutions sales declined compared to Q1 last year, due to the mentioned supply constraints.

Revenues and SMAs in Americas region declined in Q1 due to the strong sales from our large-scale business already in December 2021 and also because of project shifts. With €56 million of revenues, the Americas region represents 25% of our Q1 sales.

These €48 million of revenues, our Asia-Pacific region represented 21% of SMA sales in the first quarter, which also means that they grew by over 50% compared to Q1 last year. In this region, our large-scale business achieved triple digit growth compared to Q1 2021.

Now, let me briefly walk you through the sales per segment on the right side of this slide. Our Home Solutions segment has been impacted more and more by material shortages since Q3 of last year.

As a result of the situation, revenues in the first quarter of 2022 declined by 17% with €63 million of sales in the period. For this segment our top markets, with Germany, U.S.A., and Benelux were all effected by the material shortages, and as such, declined compared to the first quarter of last year.

In contrast, incoming orders in Q1 for this segment were on the highest level since over 10 years. Our C&I Solutions segment also continues to be affected by material shortages, and declined by 8% in Q1, compared to the first quarter of last year.

Germany and the U.S. remained the top markets despite slightly lower sales compared to Q1 of last year.

While Italy, which is the third biggest market for the segment, increased revenues by over 50%. Finally, our Large Scale & Project Solutions segment, slightly declined compared to Q1 2021, due to projects pulled forward from Q1 2022 into December 2021, as well as project delayed to the latter part of this year.

The U.S. remained our biggest market for our business, while Q1 revenues in Australia were nearly on the same level as in the U.S.

and achieved high triple-digit growth compared to the first quarter of last year. Now, let me explain to you how our profitability developed in the first quarter of this year.

In Q1 SMA generated an EBITDA of €50 million, which translates an EBITDA margin of 7%. EBITDA was slightly down compared to Q1 of last year, mainly as a result of a lower level of sales.

Q1 profitability included a positive one-time effect from other income, which resulted from a project cancellation fee in our large-scale business. Our depreciation was slightly lower than in Q1 2021, a result of low level of investments in fixed assets over the last years.

Now let's have a look at the segments in detail. Home Solutions.

As a result of a lower level of sales EBIT in the Home Solutions segment fell below the strong results in Q1 of last year. However, with an EBIT of €8 million, the segment still delivered a solid return on sales of 30%.

C&I solutions segment continued to fall short of break-even as a result of the lower level of sales. The Large Scale & Project Solutions segment had a slightly positive result in the first quarter benefiting from the one-time income from the project cancellation as mentioned.

Now, I will move onto the balance sheet and networking capital on the next slide. At the end of Q1, our networking capital balance increased to €273 million, which represented a high networking capital ratio of 28.

The increase compared to end of 2021 is due to the build up of inventories, which results from our ongoing efforts to increase safety stocks and mitigate effects of global supply shortages. Since the beginning of the year, inventories increased by €31 million, which is mainly a result of the buildup of raw material stocks to allow us to compensate for supply shortages as far as possible.

In Q1, our trade receivables decreased by €6 million to a balance of a €137 million. Represents a slightly higher DSO ratio than we target.

But this can be explained by the high amount of sales achieved at the end of the quarter. Trade payables of a €140 million at the end of Q1 increased by €6 million since the end of last year.

Advanced payments from our customers, which are reflected in our balance sheet under other liabilities, also increased in first quarter from €24 million at the end of 2021 to €28 million per end of Q1. Now let's have a look on the group balance sheet on the right side of this page.

In the balance sheet, the most significant changes since the beginning of this year are related to the development of the networking capital positions, which I just explained, and the related decrease of our cash balance. Our shareholders equity increased by €5 million in Q1 thanks to the positive result and remains solid at 39% at the end of the first quarter.

Now let's turn to the cash flow. In Q1, SMA generated a positive gross cash-flow.

But as a result of a lower level of sales and profits, gross cash-flow was below the level of Q1 last year. Due to cash investments into building up raw materials stocks, our Q1 cash flow from operating activities was negative.

In addition, we continue to invest into key R&D projects in Q1, and the related capitalized R&D costs resulted in slightly higher net CapEx as compared to Q1 2021. So please let me summarize SMA 's financial performance in the first quarter.

SMA's top-line was affected by the ongoing supply constraints for electronic components and as such, declined by 8% compared to Q1 2021. Despite the lower level of sales, profitability was positive, but fell below Q1 of last year as well.

Both revenues and EBITDA were in-line with our expectations, which I communicated in our fiscal year 2021 analyst call, just a few weeks ago. Our key balance sheet positions remain solid with an equity ratio of 39% and net cash balance of €200 million.

This concludes the financials. Now let me briefly provide you with some insights on the current developments.

As mentioned before, the supply situation of electronic components remains very tight and has taken its toll on SMA's sales and earnings in Q1. Situation is very challenging.

Good and bad news are taking turns almost on a daily basis. We have accordingly strengthened the supply chain organization and established mechanisms to monitor the situation very closely.

Management is in continuous contact with chip manufacturers also on C-level, which has recently brought some success. A leading chip manufacturer has risen the amount of chips allocated to SMA by a very large number, enabling us to rise production volumes.

Nevertheless, we expect the chip shortage to continue for the remainder of this year. Another important topic in our Large Scale & Project Solutions segments are the currently high module prices and limited availability of PV modules, this concerns in particular the U.S.

market. The U.S.

Department of Commerce as launched an investigation into alleged dumping and circumvention activities by Chinese module manufacturers working in four Southeast Asian countries, which has stalled module deployment in the U.S. and might lead to high import tariffs for solar panels.

Against this background, we have already seen some project delays in the U.S. So what we must assess here is that SMA currently has a special due to market threats.

In the string inverter market we are suffering under chip shortages, in the central inverter market we are suffering under project postponements. In combination, these two factors harm SMA more than most of our EPS at those who are selling either string inverter or central inverter products.

However, this two layer exposure is of temporary nature, of course. In general, we see our broad product portfolio as a natural hedging against market volatility.

As the current situation where all segments are effective at the same time is rather unique. Next slide, please.

Once we have overcome these challenges, we see excellent growth potential for SMA. As you all know, the regulatory framework for renewables has very much improved not only in European countries, but in various markets that are important for SMA.

Especially in Germany, where SMA holds significant market shares in the residential and commercial segments, we can expect a rally over several years with high demand for ever more complex systems of PV plus battery plus EV charging, plus heat pumps, plus energy management, etc. The ideal habitat for SMA was it's experience and know-how on the convergence of sectors.

We have the right solutions in place and are continuously developing our portfolio. Last couple of months, we have introduced two brand new products that have been received very well by our customers.

The Sunny Tripower Smart Energy is SMA's first hybrid inverter. It controls both the silver generator and the charging and discharging of the battery storage system.

A highly flexible solution also features a battery backup function that secures electricity supply in case of grid failures. Sunny Tripower X is customized for commercial and residential energy systems, with outputs of up to a 135 kilowatt.

For the first time ever, this innovative device combines state-of-the art solar power generation, with the monitoring and energy management features. Inverter can take over monitoring, management and grid-compliant power control of up to five inverters and enable participation in the energy market, but also be capable of managing battery storage systems and loads.

Demand for both devices is far above our expectations and also above what we are able to deliver. Since their market introduction in January, respectively, April this year, we have already received more than a €120 million of orders for this Sunny Tripower Smart Energy, and around €50 million of orders for the Sunny Tripower X from customers from 19 different countries.

Delivery of this Sunny Tripower Smart Energy has just started. Delivery of the Sunny Tripower X is expected to start by the end of June.

This brings me to our guidance and expected future development. Looking at the right side of the slide, you can see that our order backlog with a value of well over €1 billion, continues to grow thanks to the very strong demand for our products and solutions.

Our product order backlog has increased to €572 million at the end of the first quarter and includes a strong level of orders for products from all three segments. Currently, our product order backlog is even above €720 million.

On the lower left side of this page, you can see that our product order backlog has heavily focused on the EMEA region, with especially high orders CF for our Home Solutions and C&I Solutions products. Our year-to-date revenues, plus the current product order backlog would secure even the upper end of our annual sales guidance and this at this early stage in the year.

Although the current supply situation will prevent this from happening, we remain confident that the majority of the product order backlog will be converted to sales within this fiscal year. This brings me to our 2022 guidance.

As mentioned, SMA sales and profitability were in-line with our expectations for the first quarter. For Q2 SMA's management board expects slightly higher sales compared to the first-quarter.

With supply constraints continuing to affect significantly both our ability to convert orders to sales, as well as our production utilization, which will weigh on our profitability. Starting at the end of Q2, we foresee an improvement in the supply situation with confirmed deliveries of key electronic components, which will then ensure improvements in our top and bottom line in the second half of the year.

The supply situation remains highly volatile, with updates from suppliers, as I said, nearly on a daily basis, including both improvements as well as some further deterioration. As such, it is difficult to provide you with a more precise corridor for the annual guidance for sales and profitability at this time.

What we can tell you at this juncture is the following, First, First, SMA's management board is certain that the 2022 guidance of revenues of €900 million to €1.05 billion, and EBITDA between €10 million and €60 million will be achieved. Second, we cannot afford any further deterioration in the supply chain in order to reach the upper half of the sales guidance.

Please turn now to the last page of today's presentation. I would like to take this opportunity to invite you again to our Capital Markets Day in Munich tomorrow.

During the event, SMA's managing board will present its superior solutions following renewable energy market for the future and provide you with its latest update on the global market development. The presentation will be enriched by a short tour of the SMA booth showing the latest product innovations.

We would appreciate your attendance at this IR event. Please register for the Capital Markets Day via our email to [email protected].

This event will not be broadcasted online. However, we will publish the presentation on our corporate website.

Now, I'm happy to take your questions.

Hi, there. Good afternoon.

Thank you very much for taking my questions. My first one will be on the product side.

The new launch as a norm, obviously demand for it seems to be very strong. Just wondering in terms of how sustainable that is?

So what are the key differentiating factors of that product relative to your competitors, or what basically driving the demand for that product? And secondly, my question would be on -- just on the full-year guidance you mentioned that you cannot afford any worst seeing in the supply situation in order to deliver the top end of the guidance.

Now, whereas in the full-year call, you talked about potentially reaching the lower end. So just to confirm, now you eventually expect to deliver the top end?

Thanks.

Thanks, Constantin. Regarding the first question, how sustainable is the demand for this new product.

I have to admit quite overwhelmed by the order intake at the beginning of the year. And of course, asked this ourselves, is it just that everybody makes the orders for the entire year at this point in time and then there afterwards, it will just be disappearing again?

And then, of course, we talk to customers, etc and their reply was of course there is now short boom period in which we will have large orders. But the product is actually that well received that we see it as a high runner for the coming years.

It's not just movement bus situation, but the contrary, which is a very good product, very well received. So the reasons for that, being some deep and technical features, which I cannot go into to a deeper, level than I already described the product.

You'll have some features which products of our peers do not offer, and therefore the distributors have embraced the product very, very quickly. The second question, yes, there is a difference in what I want to give you with regard to the guidance and in between the end of March and today, but not a big one.

We've continued to be cautious about the sales level, and we have seen unforeseen events happening and putting new challenges on us. We have also seen that our supply chain organization has been able to manage those challenges.

And therefore, as I said, we've seen slight improvements in Q2 and then Q3 and Q4 becoming better than Q2. But if you add this up, this brings us in the upper half of our guidance.

However, what I wanted to say is, this is of course difficult to really precisely forecast as anything can happen these days as you all know. We have certainly the potential to get into the upper half of the guidance.

But everything has to go as planned in order to achieve that. That is a slightly better prospect than I conveyed to you three weeks ago.

But I don't want to be here too optimistic and certainly not bullish regarding our guidance.

That's great. Thanks.

Just maybe one more. Just on the chip supplies that you're good.

Within your competitors delivering 20%, 30% growth in the quarter, I mean, SolarEdge grew 50% in European in Q1. Don't they suffer from the same chip supply issue or is there our particular chip that only SMA users, hence, the specific issue towards SMA?

What we can see is that competitors in the U.S. and in China are not suffering from this scarcity of chips in the same manner we do.

I don't want to speculate about the reasons for that. It's just a fact.

There are, of course the SolarEdge and Enphase being very prominent but if we look into the industry and also on the European manufacturer side, they suffer under the same consequences, the same problems that we have. And again, the SolarEdge is not active in the large-scale field and therefore suffers perhaps from scarcity of chips, but not from the project delays that we suffer from.

Though for us, it's really these two-layer, this double impact that you see which differentiates us from those companies which seemed to be quite okay with regard to the top-line. Also, we are of course, not using the same chips.

There are a variety of chips that we talked about, and certainly we do not use the same chips as for instance SolarEdge.

That's great. Thank you very much.

You're welcome.

Hello Hoymann.

Hello. Three questions from my side.

The first one, sorry for coming back on that issue regarding this yield, the agreements in the service business and can you give an update if all parties have agreed now on this contract? That would be the first one.

And the second one is yes, we have already said that there is obviously a structural disadvantage in the recruitment of components as a producer in Europe. So the question is, given the uncertainty about China, how are you adjusting your procurement strategy?

So are you planning to get more from U.S. or maybe also from the new and upcoming EU facilities and the chips, which are plant to be produced, here in Europe in the future, are that the ones you need?

Is that also an option to focus more on EU procurement so to say. Last one, is on this one supplier who obviously agreed to allocate more of the product from the end of Q2 onwards, is that a 2022 transaction?

Or do you only -- or is that the longer-term? Then also with that, then notes arrive, what's your plans next year and the coming years?

Yeah. Understood.

All right. Starting with your first question regarding this, ominous operation and maintenance contract that we were suffering from so much.

And everything is planned with regard to the execution of this contract, and the contract has been approved by the necessary boards and the execution, however, is supposed to last until the end of the year. So in this portfolio, one by one assets will be terminated, will be handed over back to the customer, etc.

And we haven't expected that all third-party agreements would have been collected by now, we rather see that's a whole year exercise. So to make this long story short, everything goes as planned with regards to this O&M contract.

Your second question was regard to the structural disadvantage that SMA is suffering from. Yes, we are of the opinion that the supply chains will reorganize themselves and that we will see more continental driven supply chains.

Especially in Europe, this is the talk of the town in the political arena and we would support such an approach. However, there is really nothing to be seen right now which would give us a concrete idea.

For instance, recently announced chip production sites in Germany, we do not know what what chips would be produced there. We are certainly exploring into that direction.

The idea is still to have a more diverse portfolio, and make us not dependent of just a few chips, which are vital to many of our products that will certainly be reviewed. We have for very long time entrusted on global supply chain.

I think that the industry -- electronics industry as such is revisiting that decision. Which you got to your third question the additional quantities that I mentioned are for 2022 only They would all be consumed in 2022 and they would be very helpful when 2022.

We have of course already standing commitments with the same supplier for 2023 and '24. But as you know these days, it is not to be foreseen whether they will honor their commitment.

And we had the quantities that we now talk about, are of course quantities that we had ordered one or two years ago already. Just ask a question whether you're really receive it.

It's just a welcomed use and also where we'd be, let's say I appreciate that. That's due to this contact on C-level we were able to do that.

But first the supplier us down in the first place. That is certainly the case.

Yeah I hope this answers your questions.

Yeah. Perfect.

Thank you for Mr. Hadding.

Good afternoon.

Hi, Jeff.

Couple questions on my -- hey, great to hear from you Couple of questions on my side. What efforts do you have on cross essentially qualifying other component suppliers?

So a lot of people that have faced the shortages, if say you were using Infineon, or looking at qualifying other vendors, can you just talk about the efforts that you have there that maybe you will alleviate some of these problems in 2023 that are persisting?

Yes of course. That is of course, let's say, the first reflex.

If you have a supplier who let you down, you need to really think about changing the supplier. The fact is that we qualifying a certain chip into our software environment for most of our products takes up to a year, up to 12 months to do so.

So we are doing, as you said, and this will have an impact on our supply security in 2023. And -- excuse me, and onward.

However, all these efforts were not be impacting 2022. It takes more time than that.

Got it. And then, the challenges that you've experienced thus far and are guiding for, how much would you attribute the effect of that as to lost revenue versus deferred revenue?

My sense is that maybe the residential and commercial business that you are unable to fulfill is lost and the utility scale is more deferred, but you -- correct me if I'm wrong.

No, it's absolutely correct. We are going to lose market share in residential and C&I this year towards those competitors who have access to chips.

That's for certain. And that will -- might also enable second tier suppliers from China to get their chance.

That was regard to the central inverters, our large-scale in business. It is a deferred business and this hits the entire industry.

It hits everybody. So and you can expect then other competitors active in this segment to also suffer from project delays and product deferrals.

Got it. And then two other questions.

One, just a housekeeping one on that. I typically asked you the trading revenue and the storage revenue.

Can you just touch on that? And then I was curious.

As you think about Europe and the post Ukraine - Russia war environment moving towards more self-consumption, integration of heat pumps and storage, can you touch on what your view is of the Chinese versus Western brands in terms of market share as the complexity of the inverter gets more integrated with a holistic solution for the Home and Business?

Yeah. Thank you for, especially the last question, but starting with the housekeeping first.

Our -- in Q1 our trading revenue has been 13% of sales. The storage portion has been 7% of our sales, so lower than in the previous quarters.

And then service and operations -- including operation and maintenance added 12% to revenues in Q1.Perhaps something yet you haven't asked for but might be interesting to you as well. Our business with EV charging and solutions, which was deteriorating in the last quarters of 2021 due to the non-availability of parts is now picking up speed again and is making already, let's say, a handful of percentage points to the revenues.

And just recently, we were able to increase the sales in Q1, again, in comparison to the last year. And now to your last question, the trend towards self consumption and also to autokey from your utility.

And also to, let's say, independence in case of power outages, a matter very prominent in the U.S. for instance, is of course helping those providers, those suppliers, will have, let's say a more technical approach, more knowledge, know-how, and IP with regards to the sector convergence.

That does not necessarily mean that the Western companies are advantages -- are better than the Chinese companies. I wouldn't draw the line there because we also have one Chinese company who is, let's say, has our fullest respect in this regard.

But it draws the line between first and second tier suppliers. It draws the line between those companies who really have experience in the convergence of sectors, and those who are just throwing one asset after the other on the customer, and then netting it to the customer to really make them work as one.

Meaning there's fully integration of everything you need in order to master the triangle between PV generator, storage device and the grids. Everything you would like to add on that like an e-vehicle, or a heat pump, or whatever.

This is really challenging and there are only a handful of companies who will be able to deal with that. And SMA as having been the one who put that into center of the strategy already years ago as we see it today, up to the task to really master the convergence of sectors lying ahead of us.

I appreciate the thoughts. Thank you so much.

Welcome, Jeff.

Hello, Stuben.

Hi. Good afternoon.

I just wanted to touch on the segment guidance you provide in your reports on a quarterly basis and some of the changes that have taken place since since you reported at the end of March. More specifically, I noticed you made some smaller changes in C&I and large-scale.

So I'm just wondering if you can walk us through kind of what's driven that? Is it mainly just a better than expected uptake of the new products?

Or is there a structural improvement in that market given it's been quite a tough customer end markets are for almost two years now? So I'd be good to hear your thoughts and maybe also just given the what is quite an astounding increase in the backlog for Home Solutions.

I'm just wondering if you see scope for an improvement on that, at the moment got for constant sales. So I'm just wondering how you think about that obviously depending on supply chains and whatnot.

Thank you.

Yeah. Of course First of all, of course, the high order backlog is welcomed and it's an endorsement of our product strategy.

It first of all shows that our products not only welcomed, they are sort after because they are mostly unique. At the same time, the high product would've backlog, is a pity because it is just a consequence of us not being able to turn that into revenues, and the built up is a consequence of that.

And usually, you know lead times for string inverters are four to six weeks, and for central inverters is just half a year. Now, it's the other way around, you get a central inverter quicker than a string inverter.

And therefore, it just really -- and totally muster situation regarding supply chain, and therefore forecasting becomes very difficult. Let me walk you through the segments.

We think that the Home Solutions revenues which look quite disappointing in Q1 this year, in comparison to what we have achieved last year, will gradually improve. Already in Q2 very slightly, and then a bit more in H2.

By the end of the year, the sales volume should be about the same as last year. With regard to C&I, we have a better supply situation for our key products.

That is, where this chip is going into that I mentioned. And therefore the situation is going to increase.

Still we see the full-year revenue level going down slightly in the C&I segments. With regards to Large Scale & Project Solutions, this is really difficult to forecast because here the project deferrals might also push that out of the 2022 year in its entirety, but we do not know this exactly.

So we see here at this point in time an improvement on the sales level for large-scale on a full-year scale. The reasons behind these mechanisms have been, one more time.

Home Solution is just flying. It's really just about the scarcity of components that makes it difficult to overachieve last year sales level.

We would not have these distressed supply chains and Home Solutions would just fly. C&I is a little bit more difficult.

We will be talking about this more in more detail in tomorrow's event. Here we have a different technical platform.

And we also see now huge potential for our C&I segment. Not the same -- in the same amount as in home, but still potential.

And again, it is somewhat then shortened by the component scarcity. With regards to large-scale, we can fulfill any order that we receive.

Here we see the markets having consolidated to a very large degree than the tendency to include storage devices becomes more and more prominent, that also helps SMA. At least in the mid-term, here we also see strong increase in the coming years.

Would have been already achievable this year, if not for the projects deferrals. I hope this gives you some orientation with regard to the specific segments.

Super helpful, thanks very much.

You're welcome.

Hi. Thanks for taking my question.

I just wanted to ask about the U.S. utility-scale part.

And with regards to the guidance for the year, how much delays have you built into the guidance for the year on the revenue side? If there are further delays, more projects, or maybe even if you can elaborate on, are you aware that in the specific projects that you have in the backlog, the clients have already sourced the panels?

Yeah. It is in the central inverter business.

We do not confirm orders. Actually, we do not receive orders before they are not perfectly agreed on.

So different than with home and C&I, the order backlog that we have with regard to the large-scale segment, that is -- these are orders who will be fulfilled and where we also we'll keep our time plan, etc. So everything that is in the pipeline at this point in time will most likely be fulfilled still in 2022, if not, for other reasons, there is a project delay.

But that really deviates the situation with regard to large-scale from home and C&I. And you asked how much delay there is built-in in our forecasting.

Well, if you say that I understand the backlog part with regards to the guidance for the year, is that only what you already have in the backlog or is there also an estimate of how much you will make from the large-scale business in the U.S.?

The guidance that we give and also the positioning was in this guidance that I try to convey today, is assuming that our entire pipeline fallout scale is turned into revenues as planned, to the dates that we have agreed on with the customers.

Okay. Thanks very much.

You're welcome.

There is Richard Oldham again with a question?

Alright sorry about that. I'll put that question very light.

Can I just ask clarification points on the movement of North America, USA is as a percentage of your total sales. I think it's some in Q1 year-on-year, it's gone from 36% to 25%.

How much of that do you think he's done to the delays that you've been talking about just now. And how much of that do you think he's done to competitors taking market share as you identified some of them have greater access to chips, etc.

And those U.S. competitors as a second question and what trends you still seeing in Europe at the moment?

Are they still gaining market share over here?

Yeah. We have to differentiate between the segments again, Richard.

With regard to large-scale and the decrease for the U.S. to the most part attributable to the large-scale business.

And here we see just few farewells for all competitors. We do not see that we are losing market shares towards the other two.

That the U.S. have gone down from 36% to 25% is the consequence of large utility projects being delayed, and that hits the entire industry.

The portion of our string inverter business in the U.S., which is affected by shortages, is so small in comparison that doesn't really weigh-in very much. If we look on the U.S.

string inverter segments, meaning home and C&I, we see of course a handful of competitors being active in Europe as well, who also have market share in the U.S. Most prominently, the two PS who are listed in the U.S.

Here we haven't really gotten any new intelligence about the entrants into the European markets. We know that they talk a lot about that, but we do not run into them, we do not see calling them greater problems with regard to our market position in Europe.

I hate that I have to repeat myself here for some quarters now, but I'm inquiring with our sales people regularly on that issue. It's not so much about brands or about market share, loss of market share.

Sometimes, certain manufacturer is coming up with new product idea, with a new product generation. Then he gets additional market share in this very particular segment.

Six months later another competitor is coming up with a product and then he regains market share for the next six months and so on and so forth. And that's the reason why over the last 12 to 18 months, SMA was certainly not performing as well as our competitors did.

And you'll see we did not develop as the market did. This is going to change now and that is what we wanted to deliver today and we will also be talking tomorrow, is that we are at the beginning of a long streak of product innovations being brought into the market, which was not the case last year, but that starts now.

And therefore, we will be the one who has been the newest, the hottest products in this particular segment, which will help us in regaining market share. Pity is that we are now refrained from building those products in the quantities that would give us on our wings.

So actually was going to be successful in the competition, can not really be just on the basis of 2022. We will see that in 2023.

Last one follow-up question then. Sorry I apologize I can't be with you tomorrow because I am traveling elsewhere in Europe.

But new product suite that you're talking about then. When can we expect any further follow-up products to the two that you successfully launched in Q1?

We will be talking about further innovations this fall, which are scheduled for beginning of 2023, especially for the U.S. market.

But it's not going to be our talk-of-the-town tomorrow. We will wait for the full season and also the fares in the U.S.

too to about this one in particular. And then we will have a continuous streak of products hitting the markets.

Thank you.

You're welcome, Richard.

Hi, and my apologies that we can't joined you tomorrow either. But could you just provide more granularity about the semiconductor shortage.

Our understanding is that there's the biggest semi-component shortage has been in semiconductors made on 8-inch wafers, where there's relatively little investments and there's more on -- more investment into larger wafers, like 12-inch. Can you do some change like this in your requirements in order to free up the semiconductor supply?

Or if not, could you give us some granularity as to what types of chips your competitors use, and why you don't use those.

Yeah. I have to apologize, Charles, as this goes beyond my technical knowledge.

I don't know whether we are using chips on the basis of 8-inch or 12-inch wafers. I'm sorry, I flush short of an answer here.

I will inquire in the aftermath. And if you approach me one more time, I'll certainly be willing to give you an answer on that.

And it also interests me whether this opens up potential, and we certainly have made up our mind on that. But I just don't know.

That's great.

Thank you very much. And we'll be in touch.

You're welcome.

Thank you. I would like to close by recording what I recently uttered in this forum.

Currently, SMA may not be performing as you would expect, looking on market development and also the improving regulatory conditions. I often get asked by my friends and then by business people, while you in the solar business, you should be flying right now.

And we all know that's not the case. But still, SMA is the world's best suited company for the amount of solar applications in an integrated renewables -driven, decentralized, digitized energy markets of tomorrow.

SMA is just gearing up to play a vital role in this market. A new product that I talked about today, are just the beginning.

SMA is now still taking a deep breath to then offer a total new generation of products. And this will enable our customers in all segments in all three segments to manage any challenge that the energy transition may bring.

Those products will then hopefully remind you of my saying, if you trusted in solar, there is no way around SMA. Thank you.