SMA Solar Technology AG (S92) Earnings Call Transcript & Summary

Good day, and welcome to the analyst/investor presentation financial results full year 2021. Today's conference is being recorded. At this time, I would like to turn the conference over to Ulrich Hadding. Please go ahead.

Thank you, Marian, and welcome, everyone. We very much appreciate that you are taking the time for this investor and analyst call on the 2021 results. You can find today's presentation on our Investor Relations website, ir.sma.de. This conference call is scheduled for 60 minutes. The replay will be available for 7 working days. After the presentation, I will be happy to answer your questions. I will start with a review of the financials before presenting you an overview of our market and competitive landscape and current developments. At the end, I will provide you with an update on our expectations for Q1 '22 and the full year. I expect my presentation to last about 30 minutes. I refer to our disclaimer on Page 2. And here on Page 4, you'll find a summary of the key financials for 2021. In 2021, you can see that revenues in our Home Solutions and Large Scale & Project Solutions segments were on the same level as in prior year. All segments were affected by material shortages and effects from the COVID-19 crisis. However, our Business Solutions was especially impacted, and as such, revenues for this segment fell well below prior year. In total, SMA's revenues were 4% below last year's level and profitability was significantly impacted by onetime effects related to an onerous O&M contract, which SMA terminated. SMA's gross margin of 18% was also affected by the negative onetime effects, and adjusted for these effects, would have been approximately 19%, which is a solid improvement compared to prior year especially if you look on the first 3 quarters of 2021 where the gross margin amounted to 20%, up to 22%. As a result of our negative earnings before taxes, SMA increased its deferred tax assets and reported a tax income for 2021, which explains why our net result is EUR 10 million better than our EBIT. In the next slide, I will provide you with more details on this negative onetime effects as well as on our 2022 -- '21 financials. Let me please allow me to explain you the background of the significant negative onetime back. In 2019 -- late 2019, SMA acquired a contract for operations and maintenance services for photovoltaic power plants in North America and Canada. Part of the solar parks, which were under this contract, were in very poor condition at the time we took them under management. SMA was not aware and not informed about the existing performance problems of that magnitude at the time of the contract signing, but had previously decided not to demand proper remedies for that eventuality in the underlying agreement. As a result, SMA decided to terminate the unfavorable O&M contract in order to cut losses and free future fiscal years from ongoing disputes and financial burdens. Our 2021 results include liquidated damages of EUR 11 million, which had to be accrued due to SMA's inability to achieve contractually agreed performance levels and an accrual of EUR 37 million related to pending termination payments and guaranteed cash discounts on future business. In light of the magnitude of this onetime effect, you might ask whether there is -- whether there are other risks in SMA's O&M portfolio. I can assure you that there is no other contract in our portfolio that shows comparable conditions. This is a onetime effect. Consequences for SMA's O&M business, processes and acting personnel are, of course, under discussion. The negative onetime effect I just mentioned were partly compensated by a positive onetime effect of EUR 10 million from our agreement to allow our former Chinese subsidiary, which serves as an EMS provider to exit the earn-out agreement early. So far with regard to the onetime effect that are lying heavily on the 2021 results, please now turn to the next slide and we'll provide you with insights regarding the sales performance. With net sales of EUR 984 million, SMA's revenues were 4% lower than in 2020, which is attributable to effects from the COVID-19 crisis and material shortages, as well as net sales revenue reductions of EUR 11 million from liquidated damages related to the just-mentioned onerous O&M contracts that I just explained. Revenues in our Home Solutions segment increased by 1% in 2021 with strong sales growth in our EMEA region compensating our sales decline in APAC while sales in Americas remained on prior year level. Revenues in our Business Solutions segment declined mainly due to effects from the COVID-19 crisis and material shortages. Our Large Scale & Project Solutions segment increased sales slightly year-over-year despite effects from material shortages. Looking at the regions on the left-hand side, EMEA remained our largest region in terms of revenues in 2021 with EUR 512 million, which represents 51% of SMA's global sales. Our Home Solutions and Business Solutions segments achieved single-digit growth in the EMEA region, while our Large Scale segment declined compared to 2020. Germany, Italy, Austria were key contributors for growth in the EMEA region and all achieved double-digit sales growth. SMA's revenues in the Americas region declined slightly compared to 2020 with low single-digit growth in the Large Scale segment nearly offsetting decreased sales in the Home Solutions and Business Solutions segments. With EUR 318 million of revenues, the Americas region represented 31% of our 2021 sales. Our Asia Pacific region represented 18% of SMA sales, and revenues declined compared to prior year as a result of lower sales in our Home Solutions and Business Solutions segments. Revenues in our Large Scale segment grew by double digits in this region, driven by strong growth in Australia. Now let me walk you through the sales per segment on the right side of the slide. Our most consistent performer, the Home Solutions segment, achieved revenues of EUR 266 million in '21, growing by 1% compared to prior year despite effects from material shortages in the second half of the year. For this segment, Germany and Austria were key contributors and grew their revenues by double digit compared to 2020. In '21, our Business Solutions segment declined by 16% as a result of COVID-19 effects on several key markets and material shortages leading to project delays. The top markets of Business Solutions were Germany and the U.S. while Italy and France joined the top markets and achieved strong double-digit sales growth compared to prior year. Finally, our Large Scale & Project Solutions segment grew revenues slightly to EUR 473 million. It would have been EUR 11 million higher if we wouldn't have accrued the liquidated damages I just mentioned earlier. The U.S. remained our biggest market by far for our Large Scale business, representing nearly half of the total segment sales and grew revenues by 4%. Australia is the second largest market for this segment, and after a strong second half of the year, more than doubled sales compared to 2020. Now let me provide you with more information on to the 2021 profitability. In '21, SMA generated an EBITDA of EUR 9 million, EBITDA margin of 1%. As you have seen on the summary slide earlier, profitability was solid through the first 3 quarters of '21, but the fourth quarter was significantly impacted by one-off effects related to the onerous O&M contract, which we have reached agreement to exit from. This effect is assigned to our Large Scale segment since our O&M business is part of this. This negative effect was slightly compensated by a positive onetime effect that I already mentioned. This positive effect is assigned to our corporate segment and not shown in our 3 operating segments displayed on the right side of this page. SMA's '21 EBITDA before these onetime effects was EUR 46 million or 5% of sales, which is a much better indicator of the profitability of our business in a year, which was also affected by material shortages and COVID-19. Depreciation was slightly lower than in prior year, but on the level to be expected. Now let's have a look at the segments in detail. Home Solutions grew substantially in '21 with EUR 38 million of EBIT and a strong return on sales of 14% for the segment. And EBIT was nearly 3x higher than in 2020. This very positive development is driven by a shift to higher-margin products and stable prices in the Residential market segment. Business Solutions. EBIT was negative in '21 due to the low level of revenues, which I explained earlier. Though improved, still negative. Large Scale & Project Solutions segment was significantly affected by the negative onetime effect, as I explained. Adjusting the EBIT for the segment by EUR 47 million, which is a total EBIT effect from the provisions and liquidated damages, we achieved an adjusted EBIT of minus EUR 16 million. In '21, the adjusted result was still in the red due to the high service costs and increased material and freight costs, which would have been more than offset by strong sales growth if not for the effects of material shortages. Now I will move on to the balance sheet and net working capital on the next slide. Net cash, which is displayed on the top left of the page, decreased by only EUR 4 million in '21 with positive net cash flows from operations, nearly offsetting cash outflows from investing activities, which are made up of capital expenditures and capitalized R&D costs. Net working capital, which is shown on the bottom left of the page, increased to EUR 258 million or a ratio of 26% as compared to a balance of EUR 211 million and a ratio of 21% at the end of 2020. The increase is attributable to the increase in our inventories and trade receivables as well as decreased trade payables. Going more into detail. You see that the inventories increased by EUR 17 million in '21, which is from increased raw material stocks. That resulted from our efforts to build up safety stocks to mitigate the effects from material shortages. Trade receivables increased to EUR 143 million as a result of the high level of sales at the end of the year. Our trade payables of EUR 134 million are, in effect, EUR 10 million lower than at the end of last year. This is mainly due to lower purchasing volumes in the second half of the year related to supply shortages. Now let's have a look on the group balance sheet. Here, you see the most significant changes in our assets since the beginning of the year are related to the development of the net working capital positions, which I just explained. The reduction of other assets and the additional position, assets held for sale. Here, other assets decreased by over EUR 14 million, mainly resulting from tax reimbursement received in early '21 and the receipt of the second compensation payment from a supplier. Assets held for sale include 2 buildings at our headquarters here in Germany for which discussions with potential buyers are currently ongoing. Shareholders' equity decreased by EUR 29 million, mainly due to the negative annual result. As a result, our equity ratio decreased to 39% at the end of '21, but remained nevertheless very solid. Provisions increased by EUR 41 million since beginning of '21, mainly as a result of the Q4 provisions related to the mentioned O&M contract. Let's now have a look on the cash flow on the next slide. In '21, SMA generated a positive gross cash flow, which was higher than in prior year. Despite headwinds from supply shortages and COVID-19, our cash flow from operating activities was positive, driven by the strong gross cash flow, the second compensation payment I mentioned earlier and bank pledges, which were returned in the first half of '21 and were already considered in our net cash balance in prior year. Our adjusted free cash flow was also positive on a good level, which is also a good indicator of the operating performance, excluding the negative one-off effects. So let me now summarize our '21 key takeaways for you. SMA raised its order backlog and improved gross margins on an adjusted basis, which confirms SMA's path to concentrate on high-margin products, transforming into a provider of energy management platforms. COVID-related effects on customer behavior and distressed supply chains prevented the envisaged increase in revenues. Profitability was consequently negatively affected also by reduced sales volumes, and of course, the onetime effect. Balance sheet and the net cash position as well as our EUR 100 million syndicated loan confirm our financial stability, nevertheless. High order intake shows that customers endorse SMA's new positioning and give evidence to SMA's midterm prospects. And the ongoing shortage of electronic components will pin down SMA's growth path in 2022, but we are working hard to fulfill the high level of customer orders and achieve as high sales as possible. So that's with regard to the overall financials. Let's now turn to the market and competition sector. On the next slide, we have compiled growth prospects of SMA's core business and future business fields until 2030. Both the core business with PV system technology and the new business fields offer enormous potential for SMA. We will provide you with a comprehensive market insight at our Capital Markets Day at the Intersolar in Munich on May 12, and therefore, keep it short here today. So coming to our current developments. As mentioned before, the global chip shortage has negatively impacted SMA's business performance in '21 and the supply situation remains tight. As a European manufacturer, SMA is especially affected by the shortage. This is because the suppliers of the electronic components are mainly located in the U.S. and have the goods produced in China. Accordingly, the customers in these regions are given preferential treatment when it comes to supply. We expect the situation to remain tight over the coming months. In addition, it remains to be seen if the war in Ukraine will lead to additional disruptions in global supply chains. High energy prices and energy supply security are currently among the main topics on the agenda of politicians and business leaders. The importance of a cost-effective, secure and independent energy supply was never as obvious as it is today. This strengthens the case for renewable energies as they are not only a main factor in successfully fighting the global climate crisis, but also key to stable energy prices and reliable supply. Now before we come to our outlook for '22, let's take a look at some milestones that SMA has achieved in '21. Our subsidiary, coneva, expanded its portfolio in the field of intelligent charging solutions for electric vehicles. For example, coneva delivered a dynamic load management solution for optimized automatic charging of electric vehicles for around 640 charging points, among others, to a parcel service provider, DHL, and its international locations in the reporting period. In addition to automatic control of the charging power, the internal administration and billing of the charging point is insured. In the field of storage solutions, we concluded a contract in August to supply the world's largest grid-forming storage power plant in Torrens Island, Australia. SMA will supply 109 medium-voltage power stations to the project. SMA's turnkey solution, the storage power plant can form a utility grid independently. This considerably shortens response times and ensures high grid stability in a utility grid with a large proportion of feed in from fluctuating renewable and resources. The Torrens Island project has implications globally. Australia is among the leading countries in the world when it comes to high levels of renewable energy feeding into the grid at a particular time of the day. By proving that SMA technology can provide ability to the grid, we will enable smoother transition from additional generation sources towards grid dominated by renewable energy. Last but not least, we pressed ahead with our positioning in the new business field of green hydrogen. Projects with SMA system technology for the processing of direct current for electrolysis went into operation in the U.S., Europe, Asia and Australia. This brings me to our 2022 guidance and expected results for Q1 2022. Looking at the right side of the slide, you see that our order backlog remained on a very high level with EUR 887 million at the end of 2021 and has grown in the first quarter of 2022 to well over EUR 1 billion. Our product order backlog is currently above EUR 550 million, which is the highest level we have seen in years. We are especially pleased by the high level of orders received for our new Home Solutions product, Sunny Tripower Smart Energy. The high level of product order backlog is a clear sign confirming the strong demand for our products. And despite some delays in our ability for fill orders due to the ongoing supply shortages, SMA's management is confident that the majority of the orders will be converted to sales in 2022. I emphasize the majority. As you can see, as soon as supply constraints improve, we are in a position to achieve revenues in the upper end of our guidance or even beyond. But the supply situation remains volatile. Regarding our service order backlog, to note that orders related to the onerous O&M contract are included here with a total value of approximately EUR 80 million, which will be canceled as we exit the related portfolios over the next weeks and months. On the left side of this page, you can see that our Large Scale & Project Solutions order backlog for products remains strong with EUR 250 million and nearly half of our total product order backlog is in EMEA, which remains our strongest region. Now the guidance. As communicated in the second half of last year, SMA has been impacted by the global supply shortage for electronic components, and as such, we have been experiencing delays in the conversion of orders to sales. As you have just seen, our order backlog for products is strong and shows that there's a high demand for SMA products. We continue to work around the clock to mitigate the effect of the supply shortages, and we have received some positive signals recently. Nonetheless, sales for Q1 2022 will be relatively low as a result of seasonality and the effect of material shortages as explained. Considering the current supply constraints, the SMA Managing Board expects revenues of EUR 900 million to EUR 1,050 million of EBITDA -- sorry, sales and an EBITDA of EUR 10 million to EUR 60 million for this year. Should the supply situation improve over the next months, market demand is certainly strong enough for SMA to reach the higher end of the guidance. I repeat, should the situation improve. Now let's turn to the last slide of today's presentation. SMA is a truly sustainable investment not only because we are operating in an industry that is key to decarbonizing our way of life, but also because we are doing business in a sustainable manner and have integrated the goal of holistic sustainability in the center of our strategy. This is also mirrored in our excellent ESG scores. We received recognition for our ESG performance in leading sustainability ratings. With our business activities, we are contributing to 9 out of the 17 new and sustainable development goals. And the independent auditors confirmed to us as part of their audit for the nonfinancial statement for 2021 that 100% of the SMA Group's business activities are EU taxonomy-eligible. This is why if you trust solar, there's no way around SMA. Now I'm ready to take your questions.

[Operator Instructions] We will take the first question from Constantin Hesse from Jefferies.

I have 3. One of them -- one with regards to the sourcing of that particular chip for your Home products. How is that developing? The second question is with regards to the profitability across your segments. So obviously, Business continues to suffer. Utility is -- or close to breakeven. So in terms of Business, I think you mentioned you're going to launch new products this year, I think, in Q2. If you could elaborate as well a little bit on the Utility segment, what we're going to see there. And then, three, in terms of the order backlog for Q1, did I understand correctly, sorry, that, that was driven by Home?

Okay. With regard to the chips for the Home segment, Constantin, the situation is volatile, so to say. Our supply chain is doing miracles in order to bring as much as possible to the table. However, it's not so much the question of what are we going to pay on the spot market, but it's really about availability of a product as such. And therefore, we are talking about some positive effects someday and some disappointment on another day. And it is really good news or followed by bad news and vice versa. So it's really difficult to say. We had recently done some successes because the CEO escalated that personally with regard to one chip supplier, but that is already included in our guidance. So I can't give any green light with regard to any higher expectations. The lower end of the guidance, the EUR 900 million, is calculated on the assumption that everything works as we have now it under contract and improvements need to be seen. With regard to your second question, profitability -- let me come to the third question first, order backlog. That is indeed driven by the Home segment, but also the Business segment, which we now call in the future C&I, has had nice order intake, especially in the later months. But primarily, it's driven by Home and also primarily by this new hybrid inverter that I already mentioned, the Sunny Tripower Smart Energy. Now to your second question with regard to segment profitability. Home Solutions is expected to remain on a good level of profitability, but will not reach to the same level as last year. There are some headwinds due to increasing sourcing costs and also with regard to the allocation of costs internally. Business segment is, indeed, a big question mark. It depends on product availability and also market demand. In general, we see that increasing, but it is coming from a very low level. As you may recall, due to the COVID-19 crisis, especially small and medium enterprises were postponing their investments and this is still not over, that overall sentiment, especially under the new circumstances. So demand has to pick up and we need product availability. So that needs to be seen. Certainly, we are not going to get into anywhere near the black area with regard to profitability in C&I -- in Business. Large scale. Also here, product availability and sourcing, trade cost developments need to be seen, but we expect an improvement in the overall profitability in this segment. Does that answer your -- or does that give you enough guidance?

That's great. Just in terms of product launches, is there a product launch in Business this year?

Yes. There is a new product, which is actually the working horse of that segment that is coming out in Q3.

But nevertheless, you still expect to be far from the black in '22. But then obviously, hopefully, into the black in '23.

Yes. It's too early to comment on '23. But no, there is -- I don't see any way that C&I could become positive in '22.

The next question comes from Guido Hoymann from Metzler.

Yes. I think it's 4 questions, please. So the first one is, again, regarding this legal dispute about this service contract. And how long is this probably going to take until we get the final all-clear? I think I understood that there are some, whatever, 10, 20 subcontractors also where you still need approval. So is that already received? So did we already get the all-clear? So that's the first one. The second one regarding the parts shortage once again. So do you think that it is a structural long-term risk that you are located in Europe and that your industry as a whole is relatively small versus car manufacturers also? And in this context, there's the sort of a second question. Since you are -- you, SMA, are nonetheless still a big relevant player in this industry, can this -- doesn't this imply -- does your problem not imply that the whole industry, so the whole solar industry, because they need your products in the end has a problem short and medium term? And the last question would be, yes, shouldn't at least be the selling prices increase? So maybe more concrete, how did ASPs develop, for example, now in Q1? I think for the full year 2021, they improved slightly, which is good. So did you see this trend continue in the first quarter?

Okay. Yes. Thank you for those questions, especially regarding the legal dispute, because it is really my utmost importance to be very transparent in that regard. This onetime effect is so huge. It [ kills ], let's say, 2 years EBIT, that, of course, we are doing everything that is possible to, first, mitigate the effects; and secondly, learn from that experience. So thank you for that question. We have been able to, let's say, first of all, close the accounts in the form that we prognosed it in early March, which was quite something, I can assure you. The reason for that is that we finally came to an agreement with this customer, by the way, only 3 days ago. However, with that signature, we can be assured that the biggest bulk of that risk is covered. There is a slight risk that some of the portfolio asset owners of this customer would opt out of the agreement or would not consent to the agreement. However, the incentive not to do so, but agree to terminating the agreement with SMA is quite high so that we see the likelihood of this happening as being very low. Meaning, there is a risk that also '22 will be affected. You asked how long it will take, I think it will take until the end of the year until we have really finally assembled all the agreements that are necessary, but we are optimistic that the current accruals are covering the entirety of the risks. With regard to the -- if you want to ask again on this topic, I'm, of course, available. Coming to your second question regarding shortages and our geopolitical situation here in Europe. I think the European Union has, for good reason, started to establish mechanisms to ensure energy supply [indiscernible] in its boundaries. And therefore, it needs [indiscernible] in the supply of the solar industry, which means that the production of modules and electronic components needs to be improved. Otherwise, we are in a disadvantageous position in comparison to our peers from Asia and America. The fact that the inverter industry is still small in comparison to other players, I don't think -- it's not that important because the inverter is recognized, as you know, as not the only intelligent interface in the PV system, but also as something that is driving future development of the solar industry as such. So that's why I don't think it's that's much problem. SMA, however, as you said, is, of course, not the only one. And that is giving -- it underlines my [ feelers ] that I always [ mention ] when most of us talk that this endgame in between the inverter industry is going to be battled upon technology where we, as SMA, see ourselves in a very good position. With regard to your third question, how the ASPs developed throughout 2021 and especially in the first quarter of '22, I can say they increased in all segments. However, we are not talking about large increases here. We were able to just give our higher sourcing costs down the value chain that was largely accepted. But different than in the module industry, we're not talking about medium double-digit cost effect. We are talking about low single-digit effect here.

[Operator Instructions] We now take the next question from Jeff Osborne from Cowen.

A couple on my end. You mentioned the acceleration of orders getting over EUR 1 billion. Which segment is that in? And is that due to pent-up demand for the new Tripower? Or is it due to an acceleration in demand given the conditions in Europe with electricity prices? I just want to understand what's actually driving that order acceleration.

Yes. To a very large degree, it is driven by the new product in our Home segment, but not alone. It is also be seen in our C&I segment, which is not coming forward with a brand-new product. So you see the demand picking up. I think that the Ukraine war is actually also responsible for that. But actually, this rally started before, so it's not entirely related to people trying to become more independent from gas. It is probably already to be seen, especially in Germany, as a result of the change in the overall society's perception of renewables and has, as I said, started earlier in the year and can be seen in both of those segments.

Makes sense. And just a quick follow-up. Is the Tripower commercially available today? Or does that come out more in the middle of the year? .

No, no. It is available. You can order it right now.

Got it. And then another question I had was on the O&M piece. You mentioned in the prepared comments that there were future cash discounts on product. Is that the inducement or the concept that you conveyed that would convince the partners to deal with you is essentially replace non-SMA inverters that are prematurely failing with SMA at a cash discount?

Exactly, yes. We are expecting, well, above EUR 100 million of revenues with that customer in the coming years with regard to its intent to improve the performance of that portfolio. Yes.

And the discount charges, so as that EUR 100 million flows through, the gross margin will be normalized because you're taking that as part of the EUR 37 million charge, is that correct?

Well, in this EUR 37 million we have -- a part of that is related to those deducted rebates, only a part of that, a small part of that. And that will -- the remainder is about accruals for, let's say, the termination -- the settlement of the agreement. The discount that we give will dilute margins, but only to a very slight degree.

Got it. That's helpful. Just a couple of other quick ones. In light of the lockdown in Shanghai and Shenzhen a few weeks ago and you flagging part of your supply chain comes from China, should we think about risks to 2Q and maybe 2Q being flattish with 1Q and the year being back end loaded now that tomorrow starts the new quarter? How do we think about the supply chain risk that is sort of new information here over the past week or so?

Yes. I think I had the same picture as you just depicted it. We are not very optimistic regarding Q2, especially with regard to supply chain issues. We see the situation with regard to electronic components still being volatile. We expect them to improve throughout this year, but I wouldn't bet on Q2 becoming a very good quarter. We see the volumes -- the sales volumes rise in H2 only -- then starting to rise only. And again...

Got it. And the last -- go ahead.

And again, it is -- the corridor we gave, the guidance we gave is very broad. And I personally would not see us in the upper half of that guidance. I would rather see us in the lower portion of that guidance because we still need those improvements to materialize. Once those materialize, we can talk about other things. But right now, we have to be careful. This is not a conservative guidance. It is an appropriate guidance, yes.

Absolutely makes sense with everything going on around the world. My last question is something I typically ask you, it's more of a housekeeping question. But do you happen to have the trading and storage revenue for the quarter or for the year that you could share or both ideally?

Yes. Well, again, when we're talking about storage, we -- SMA user refers to the revenues itself with storage inverters and not so much with batteries. So with regard to batteries...

I meant as a percentage?

The percentage related to battery inverters, storage inverters and related equipment is probably about 10% of our overall sales. And batteries they will not make -- sorry, the attach rate in Germany is 90% in the Home segment, in the Residential segment, yes. Probably 90%.

And then the trading revenue, do you happen to have what that was for 2021? And then in light of the medium voltage transformers, which you mentioned for the Australian storage product, would that be in the trading fees as well looking out into 2022 or no?

You mean in the trading portion of our revenues?

Correct.

Yes, yes. Of course, when we do a medium-voltage storage station, medium-voltage power station, we produce inverter by ourselves and then it is integrated with the transformer and with the medium-voltage gear. That goes under trading goods and trading goods make above 12% of our sales.

The next question comes from Lasse Stueben from Berenberg.

Most of my questions have been answered. Just a quick one. I noticed Home Solutions had quite a weak Q4 at least in terms of -- I mean, broken sales and EBIT. Is that just related to the component shortages you witnessed there? Or is there anything else behind that? That would be the first question.

Yes. That's actually the gap in our product portfolio that we had now filled by the beginning of the year with this is new hybrid inverter that very much could be felt in Q4, but also component shortages, yes.

Okay. Understood, understood. And then another one just on -- I understand you can't gave some guidance beyond this year, but just some -- in a more general sense, doesn't the outlook for Large Scale in terms of the -- or the general question is sort of what is the path to profitability here? Just the outlook looks probably as positive as it's ever been for solar, at least in Europe, and you're performing very well in the U.S. So I'm just wondering what the way forward is here. Is it purely a volume game? Or is it the attach rate with storage increasing? Any insights here would also be helpful.

Okay. That is something that I could elaborate about for half an hour because that is one of the keys to our -- to SMA's future. Of course, there is a volume game with regard to regular large-scale, ground-mounted insulation. The more, the better. The lower price, the better. That's the world some independent power producers and APCs are still living in. But what we see is that applications, the installations that also include storage component are increasing in number and those installations need more than just the cheapest inverter available. And the more it gets complicated, the more you would rely on SMA and our experience and our products, especially when it comes to storage. Therefore, the so-called BESS project, B-E-S-S, are increasing in numbers and in volume and also our business with this portion -- with this subsegment is increasing and will be the norm in the future. We see grid stabilizing effects of the storage being sought after by all utilities. And I think that not in -- not the very far in the future, the storage utility combined project will be the norm. And therefore, we see ourselves being very good positioned in this game. However, right now, projects are shifted due to high module prices and the material shortages. So it could be wonderful if the circumstances would just be a little bit different, and again, we cannot see this already picking up again. There are opportunities in the pipeline, huge opportunities. But whether they materialize this year or next year, we do not know. We do not -- we cannot tell. And as I think we have stressed you, as investors, very much with the results of 2021, we are very humble with regards to the prospects of this company and are a little bit shy of being too gloomy here with regard to our prospects.

Understood, understood. That makes sense. Maybe just one follow-up on the -- I noticed on the Q1 guidance, the Q1 margin looks quite healthy versus what you're guiding for the full year. So I'm just wondering what's kind of driving that? Or is there anything sort of -- is there a positive one-off in that Q1 margin guidance? Or how do we think about that in the context of the full year 2022 guidance?

Yes. There's no positive one-off. It is, first of all, the seasonality effect in Q1 costs are always lower than in the other 3 quarters and that was materializing especially this year. We have not started to build accruals for employee-related payments like Christmas bonuses, et cetera. Usually, we start building that already in Q1. This year, we did not even start building those accruals, and therefore, costs were very, very low. And we have to say that this Q1 EBITDA number will not repeat itself in the coming quarters. We will have rising costs, and therefore, lower EBITDAs in the coming quarters. Also we had a very good product mix in Q1 with a high share of higher-margin products. That is also not given that this will repeat itself in the coming quarters.

As there are no further questions, I would like to hand the call back over to Mr. Hadding for any additional or closing remarks.

Thank you, Marian. Ladies and gentlemen, thank you very much for your question and your interest in SMA. Let me just repeat what I just uttered a minute ago. We see SMA unchanged, positioned in a wonderful strategic position to really grasp the opportunities that are coming towards us. The political environment is increasing continuously. The geostrategic difficulties that were becoming apparent due to the Ukraine war are pushing again into the direction of renewables, including green hydrogen. You know that SMA is positioned to really be a game changer in that field. So there are really good prospects. However, at this point in time, SMA is still in the phase of taking a very deep breath in order to grasp those opportunities in the future. We do that by developing product management platforms in all the segments for the future. We will start to bring that to the market soon, but we are not there yet. And I cannot promise anything wonderful for 2022. We are very much affected by the shortage crisis and cannot be too optimistic for this year. Thank you very much for your interest.

Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.