Hello, and welcome to the SolarEdge conference call for the fourth quarter and year ended December 31, 2025. This call is being webcast live on the company's website at www.solaredge.com in the Investors section on the Events Calendar page. This call is the sole property and copyright of SolarEdge with all rights reserved, and any recording, reproduction or transmission of this call without the expressed written consent of SolarEdge is prohibited. You may listen to a webcast replay of this call by visiting the Event Calendar page of the SolarEdge Investor website. I would now like to turn the call over to J.B. Lowe, Head of Investor Relations for SolarEdge. Please go ahead.

Good morning and thank you for joining us to discuss SolarEdge's operating results for the fourth quarter and year ended December 31, 2025, as well as the company's outlook for the first quarter of 2026. With me today are Shuki Nir, Chief Executive Officer; and Asaf Alperovitz, Chief Financial Officer. Shuki will begin with a brief review of the results for the fourth quarter ended December 31, 2025. Asaf will review the financial results for the fourth quarter, followed by the Company's outlook for the first quarter of 2026. We will then open the call for questions. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statements contained in our earnings press release and our filings with the SEC for a more complete description of such risks and uncertainties. Please note, during this earnings call we may refer to certain Non-GAAP measures, which are not measures prepared in accordance with US GAAP. The Non-GAAP measures are being presented because we believe that they provide investors with a means of evaluating and understanding how the Company's management evaluates the Company's operating performance. Reconciliation of these measures can be found in our earnings press release and SEC filings. These Non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP. Listeners who do not have a copy of the quarter and year ended December 31, 2025 press release may obtain a copy by visiting the Investor Relations section of the Company's website. With that, I will turn the call over to Shuki.

Thank you, J.B. Good morning everyone and thank you for joining us today. A year ago, on my first earnings call as SolarEdge's CEO, I laid out the four key priorities that would drive our turnaround. Today, I would like to focus first on the meaningful progress we have made over the last year. And then on the transformation of SolarEdge that we see coming in 2026. First on the turnaround. We gained momentum last year, delivering strong year-over-year revenue growth and expanding our gross margins in each and every quarter. Our solid fourth quarter results continued this trend. Fourth quarter revenue was up 70% year-over-year without the benefit of any significant one-time pull forward of revenue, and outperformed the typical seasonal decline. We expanded margins for the fifth consecutive quarter, exceeding the top end of our margin guidance, and generated $43 million of free cash flow. This concludes a very successful year of stabilizing our financial situation. We grew revenue by 30% year over year, lifted gross margins from negative territory in 2024 to 23% in the last quarter of 2025. And generated $77 million in free cash flow for the year versus negative $421 million in 2024. In the US we increased our market share in all categories: residential, commercial and storage. And in Europe we gained share in C&I and stabilized our share position in the residential market. And we did so before rolling out our SolarEdge Nexis platform, a remarkable achievement and testament to the strength of our brand and execution of our team. We also introduced the Single SKU concept, which has received extremely positive feedback from our customers. We launched several new products including initial units of our Nexis platform. And we continued to ramp up our US manufacturing, serving domestic demand and exporting…

Thank you Shuki, and good morning everyone. Starting with our quarterly results. Non-GAAP revenues for the fourth quarter were $334 million, up 70% year-over-year, and slightly down quarter-over-quarter, outperforming the typical seasonal decline of 10% to 15%. This result does not include any significant one-time or pull forward of revenue from either safe harbor or 25D. Revenues from the U.S. this quarter amounted to $198 million, down 3% quarter-over-quarter, and representing 59% of our revenues. Revenues from Europe were $99 million, down 1% quarter-over-quarter, and representing 30% of our revenues. International Markets revenues were $37 million, up 2% quarter-over-quarter and representing 11% of our revenues. Non-GAAP gross margin this quarter was up significantly to 23.3% compared to 18.8% in Q3, just above the high end of our guidance. The higher gross margin is largely due to higher sales of U.S.-made products and lower seasonal warranty costs. We continue to take actions to streamline our operations and focus on our core businesses. Subsequent to year end, we sold the remainder of our E-Mobility business for a consideration of $12 million. This sale resulted in a GAAP net loss of approximately $8 million. Additionally, in Q4 we recorded a one-time, noncash finance expense of approximately $60 million, related to the closure of the Kokam battery manufacturing division. These actions are a continuation of the process that we began in late 2024 to optimize our portfolio, which included the sale of our tracker business and battery manufacturing facilities in South Korea. We believe these portfolio optimization actions are largely complete, and the expense reduction associated with these moves will allow us to invest and focus more strategically on our core products and businesses, and accelerate the development of our data center offering. Non-GAAP operating expenses for the third quarter were $88.7 million, up…

[Operator Instructions] And we will take our first question from Brian Lee with Goldman Sachs.

Kudos on the solid execution here. Maybe first question on the AI data center opportunity. I mean, it, it sounds like it's starting to crystallize a bit more, so appreciate the additional color this quarter. Can you give us a sense. I know it's not going to impact 2026, but it does sound like it'll be part of your 2027 business plan. What, what kind of needs to happen between now and then? Like, when do you have a product kind of in beta version? How long do you think the qualification cycle will be with, you know, potential customers? And then, I guess, how do you envision, you know, the actual manufacturing of the product? Is that something that you will take on? Is it [ SD Micro ], where you need to build a new factory? Just trying to understand the, maybe the logistics from here to when you fully commercialize the product and get into the market.

Yes. Thank you, Brian. It's really exciting time for the data center opportunity that we have. As we said, we believe this is a multibillion-dollar opportunity for us. And as we shared with you before, NVIDIA is targeting the new generation of the GPUs that require the 800-volt DC architecture for 2027. So assuming there is no -- there are no delays in their roadmap, this is where the market is heading to have initial solution -- initial data centers that are designed to support 800-volt DC. As you know, some of the data centers are looking into hybrid solutions, which is basically taking the AC infrastructure, adding some additional components to it, called the sidecar, and that will give them an 800-volt DC with a lower risk for execution, if you will, but with much lower efficiency. When they look into the SST solution, then that should provide a much higher efficiency, and at the same time, it will require for us and for others to develop the technology, to go through what you refer to as pilot or POCs, or other ways for the data centers to feel comfortable around this solution in order to deploy it in mass. We have started engaging with the ecosystem players, with the different participants, whether it's the hyperscalers, whether it's the other power electronics providers and some other players in the market. The feedback that we've received so far about our technology, about the expertise that we bring to the table, some additional information that we actually bring to the table that some of them were not aware of. The feedback that we've received is that our solution seems to be very attractive for them. The ability to convert 34.5 kilovolts directly into 800-volt DC with efficiency of over 99% is very impressive. We've started the discussions. At this stage, the discussions are at a technical level. The technical teams are under NDA, obviously. They try to understand better how our technology is architectured, how we are implementing the different parts of the solution. And we believe that after that, we will start having discussions about initial real prototype testing. And as you said, we do not expect any revenue before 2027, and the industry is expecting the ramp up to actually start in 2028. That brings another point that many people don't think about, but our ability and our experience in mass production of gigawatt scale inverters or solutions is something that is going to be very important as these data center, AI data center builders and operators are going to consider with whom to partner. That will give us a clear path, we believe, to mass production.

Super helpful. I appreciate all the color. And then just to follow up on the, maybe the guidance in the safe harbor. I know it's not been your, usual policy to, to comment much on safe harbor, and you don't include it in the guidance. But maybe just a question on, you know, the, the sort of, market dynamics here as it relates to safe harbor. You know, you have no safe Harbor per your acknowledgment in Q4 revenues. You're not embedding anything in Q1. I know one of your peers, your major peer, has seen it for several quarters in a row and has also alluded to the fact that, you know, they're seeing it in Q1 and expect it into Q2 and maybe even into Q3. So, how much of this is maybe just a different go-to-market strategy? Or are they just being more aggressive than you? Is there a share shift amongst that part of the market that wants to safe harbor? Maybe speak to that. Or are you actually anticipating safe harbor to positively impact you in Q1 and beyond, but you're just not safe spacing it? Just maybe some thoughts around that and how you're different versus your peers.

Yes. Again, thank you, thank you for bringing it up because there might be some confusion out there about what we're referring to when we say there is no significant pull forward of revenue, and we'd like to emphasize that. When Asaf and I, when we talk about guidance for the quarter or the results of the fourth quarter, we're saying that there was no significant revenue that was recognized, that is safe harbor. At the same time, we've done lots of safe harbor deals based on the physical work test. As we shared in previous calls, what happens over there is the structure of the transaction is such that because of the fact that it's a unique inventory item and there is no revenue recognition until the delivery of the product, and the customers have the ability to actually procure the product at the time that they need it, then we've not recognized revenue associated with that, but we have signed significant safe harbor deals associated with the physical work test. In addition to that, from time to time, we are having the 5% safe harbor deals, and in that case, we recognize them within the quarter. But if they don't fall to the definition of the safe harbor or the pull forward of revenue, then we don't count them towards that.

Maybe just to complement a couple of points. So, as it relates to the physical work test, for us, it results in a revenue recognition profile, but I would say is more similar to the normal cadence of the way we do business. Again, no forward, no pull forward. We note that no pull forward for Q4, no pull forward for Q1 in terms of guidance. And, an important benefit that we do get is it does provide us with a much better visibility, I would say, and we can entirely optimize the entire supply chain. And of course, from our customer perspective, it's a major benefit because they do not have to put a large upfront amount of the payment, and they can pay for the product as they pull them. I think it's beneficial to both ourselves and our customers.

Our next question comes from Philip Shen with ROTH Capital Partners.

I know you haven't provided an outlook for Q2 and beyond, but was wondering if you could give us some color on how you would expect revenue to trend in Q2 and margins as well. Would you expect the kind of similar historical seasonality with revenues going higher in Q2 versus Q1? And if you can share what the magnitude, directionally, might be, that would be fantastic.

Thank you for the great question, and good morning. So in terms of, as you know, we do not guide past the next quarter. As you noted, there is of course a positive seasonality driver in Q2. Typically, it's around 15% and 20%. So we do expect it to be up, but we won't comment on beyond Q1. In terms of the overall drivers for the 2026 revenue, I think as Shuki noted in our prepared remarks, in the U.S., as we have said, we see continued shift towards the TPO this year. As you know, the people we work with, all the DPOs, we build designated the infrastructure with them, and we have a multi-year relationship with them, so we certainly see that as a positive. Our new Nexis platform is on track with our rollout plans, and it comes very, as you know, very highly competitive feature set. We do have a better cost structure implemented in these products. We do see in the U.S. significant C&I opportunities. We believe that we have a unique position as a domestic content and FEOC enabler to our customers, including enterprise customers. Now, moving to the E.U. continent. For the first half of 2025, last year, we, as you know, we saw significant inventory clearance in the channel. This will make year-over-year comps fairly achievable to exceed in the first half of this year of 2026. At the same time, the E.U. market remains sluggish and could even go down this year. So, I would say it will be an interplay between a weak market, a new product rollout, you know, market share expansion efforts. We're highly focused on that. As Shuki mentioned, I think we have multiple reasons to be optimistic, including, again, the Nexis, exporting from the U.S. with…

I was wondering if you could talk through maybe your free cash flow expectations for 2026. The second part of my question is tied to the European market. Was wondering if you could help us understand, you know, give us a better understanding. I know you guys are very enthusiastic about the market out there. And it seems like from a competitive positioning standpoint with the Chinese removing the VAT rebates that might put your products in an even better position. So maybe walk us through kind of the competitive dynamics between the new Nexis platform relative to what's out there today, and then the massive focus on storage and your benefits there.

So thank you for the question. I'll start with the cash flow, and I'm sure Shuki will be excited to tell you about our actions and focus in the EU market. So, for 2025 Q4, we ended with $43 million, a very strong free cash flow quarter, with overall $77 million for the entire year. So again, we believe it's a pretty strong performance. And again, beyond Q1, we said that we would be free cash flow positive for Q1. We gave actual guidance to that. We're not gonna give anything beyond that. What I can say is that we're always focusing on you know, improving our cash conversion cycle, which would be supportive of our cash generation, of course. That said, in a growth environment where we're anticipating, we would invest in working capital. Considering our work towards improved margin profile, we believe this would be a prudent investment that we're making. Actually, you can look at what we've done in, again, 2025. We transitioned from a massively negative free cash flow position in 2024 to a strong $77 million in 2025, and we were positive in three out of four quarters during 2025. So overall, we're very focused on cash flow and working capital management. Q1 would be positive free cash flow, and beyond that, we'll just have to be a bit patient. Shuki, I'm sure you want to add.

Yes. Thank you, Philip. About Europe, to your question, so yes, at this stage, it seems that -- and again, we're talking about different countries, different dynamics in each of the countries, but overall, the market remains somewhat slow. At the same time, we believe that we have a good opportunity in Europe to gain additional market share, both in the CNI and the resi market. And it starts with the fact that we've started exporting our products from U.S. manufacturing to Europe. These are newly built products designed by SolarEdge, manufactured in the U.S. with a very good cost structure that will allow us to compete, as you said, as you suggested, more aggressively in the market. The second piece is the rollout of Nexis, and as I mentioned, on March 19, we are having a launch event in Germany. We are expecting hundreds of installers to come over to experience firsthand the ease of installation, the speed of the commissioning process. And I couldn't avoid sharing the fact that they installed it in my house, you know, yesterday, and we are very happy with that. The Nexis platform brings -- and we discussed it in previous calls as well, it was designed from the bottom up as a system, so it's not like an inverter that somehow a battery is attached to it. We're actually looking at the entire system, the efficiency, both in the high kilowatts rating. As Asaf said, we're addressing now the 15 kW to 30 kW rating, which is a major segment in the DACH region. But at the same time, also many houses, when they go at night, they go to the battery, they actually consume less than 1 kW. And the efficiency over there is really, really important. Some competitors are boasting…

We will move next with David Arcaro with Morgan Stanley.

I was wondering if you could give an update on where channel inventory currently stands, maybe in the U.S. and Europe, how healthy the levels are right now?

Yes. Thank you, Dave. So as we discussed in past calls, most of our distributors in Europe have resumed normal levels of inventory, and that's the reason that we actually consumed some of our own inventory, and now we've started producing product for Europe in the U.S. So when they need additional product, and they do, they will start buying our newly produced products from the U.S. In the U.S. channel, overall, the channel has normal levels of inventories. Nothing major to report over there.

Got it. Okay. Great. And then, let's see, the megawatts battery storage were strong for this quarter. I was wondering if you could just touch on what you're seeing in terms of the market backdrop and demand for storage, maybe in the near term. You know, how is that trending kind of seasonally into 1Q, and as you look into the first half of the year into 2Q, the direction of that you're expecting for battery storage volumes?

Yes. So, as we said, the need for storage is increasing globally and in both segments, both the residential and the CNI. So what you're seeing almost in every market and every segment is up and to the right when it refers to the attach rates. And as I mentioned earlier, we believe that we are offering a complete solution for our customers, and because of that, and where the market is trending, we expect to see storage becoming a bigger and bigger part of our sales. As I mentioned, with the Nexis, actually, this competitive advantage is significantly higher, and we do expect that to be some sort of a step function, if you will, in terms of the attractiveness of our storage and backup solution. In the CNI side, in Europe and in international markets, we continue to see that more and more customers understand or calculate the return on investment that they can have from adding storage to their solution and we see a major opportunity over there. Now I believe that later in the year we will start also addressing the installed base. We have, as you know, a very large installed base in many markets, and in the ones where it makes sense, we will find a way to actually leverage on that as well.

Our next question comes from Dylan Nassano with Wolfe Research.

I just wanted to go back to the solid-state transformer, and maybe approach it from more of a technical perspective. Could you just kind of walk through what you see the relative advantages being, or even differences in application between your planned silicon carbide architecture and something that's like GaN-based, for example?

So thank you, Dylan. This is an excellent question, and I believe that it's too early for us to actually comment on such a question. What we have said is actually we've looked into several potential partners when we develop the architecture that is going to be highly efficient in the conversion. And in a way, if you think about it, in solar, it's about cost is the main driver. While in the AI data center, the cost of our system is obviously important, but it's not the main driver, it's the performance that we can generate. And if we can increase the efficiency from 98% to 99%, it adds significant value. So, it's not like a cost game to the same level. Now, I'm not, you know, a PhD in engineering. I don't have a PhD in engineering, but to the best of my knowledge, GaN are less relevant in AI data center solutions. But let's leave it at that, because I may be wrong.

Okay. Fair enough. And then just for a quick follow-up. So your partner there, Infineon, they had some bullish comments on AI data center demand on their call, and they raised their CapEx outlook as a result of that. So just given your earlier comments, can you kind of frame up this ramping demand in terms of, like, incremental R&D spend or even CapEx? And then, sorry if I didn't catch this earlier, but have you decided where you intend to manufacture these, and is there any benefit to doing so in the U.S. versus overseas?

Yes. So I cannot obviously comment on what Infineon does or doesn't do. I'd like to emphasize two points here. One is we believe that this is a multibillion-dollar opportunity for us, the SST for AI data centers. At the same time, Infineon does support other companies that are larger than SolarEdge as well. So, you know, what they do with regard to CapEx or their comments about the market are not necessarily referring to what we are doing. And to your question about have we chosen where to manufacturing? Not yet. There are some considerations that are favoring the U.S., obviously, and we have the infrastructure that is required and the expertise and the partners that are needed in order to ramp up manufacturing in the U.S., quite quickly. Therefore, it's definitely a region or a location that we may favor.

As it relates to incremental OpEx and CapEx, certainly we believe in the opportunity of the SST, and we plan to invest both CapEx and OpEx. Our investment is incorporated in our guidance for Q1. Beyond that, we will share with you our progress, of course.

We will move next with Mark Strouse with JPMorgan.

Shuki, I wanted to go back to the, the comments that you guys have been making for a while now about, kind of the, the U.S. C&I business and your favorable, competitive advantage with FEOC and domestic content. Just curious, with the initial guidelines that came out from Treasury last week, if you have any comment there, positive or negative, and, and kind of how you're thinking about the, the durability of that advantage over the next, you know, coming quarters or coming years?

Yes, thank you, Mark. And you're right, we're very optimistic about what we can offer to our customers on the C&I segment in the U.S., as our products have been designed to be both FEOC and domestic content compliant. The recent FEOC guidelines or rules with regard to the materials and the manufacturing are more specific, but at the same time, they've not really changed what we had assumed until now. So from that perspective, we are in compliance with the FEOC. We continue to believe that we're in compliance, our products are in compliance with the FEOC requirements. What remains open is about foreign entity, and on that front, SolarEdge has nothing to be concerned about. We are a U.S. company owned by U.S. shareholders, so we are not concerned about that part. So we continue to follow any development that may happen, but at this stage, the products that we currently have, you know, they were designed to comply with the current ruling and will continue doing so.

Then just a real quick follow-up, if I can, Asaf. The Q1 guide, the 20% to 24% gross margin, I'm sorry if I missed it, but did you say kind of what the impact is on, or what the impact is from tariffs reflected in that?

Actually, we did not quantify the tariff impact. At this point, we see tariffs as simply an additional cost of doing business in the U.S., along, of course, with the labor expenses, component costs, everything related to the U.S. manufacturing. As you know, we don't typically single out any specific cost type, unless they're temporary or one time, and we see tariffs no longer as such. So we'll just report our gross margin going forward. And one important point I wanna make is that, as we increase our exports from U.S.-produced product and sell to global business, which is, of course, a meaningful part of our business, as you know, we get back some of the tariffs through what is referred to a drawback mechanism, which will reduce the net impact to tariffs over time, certainly on a weighted average basis of our overall sales. And just to finalize and say that despite these tariff incremental costs, we can note that we still exceeded the high end of our gross margin guidance for Q4. We are only seeing, I would say, a slight dip at the midpoint in Q1, the 22% that you referred to, despite the decline in seasonality. So I hope I answered you fully.

Thank you. We will move next with Chris Dendrinos with RBC Capital Markets.

I guess so maybe just to start here, to follow up on that, on that prior comment. As it relates to battery sourcing, and I think you mentioned you're going from NMC to LFP, do you have supply from, from outside of China? And just maybe speak to the security of that supply chain.

Thank you, Chris, for the question. And as we stated before, what our supply chain team has been doing for years, and definitely in this past year, they've been doing, is we constantly look at the combination of FEOC and domestic content compliance, cost, availability, and cost is inclusive of everything between tariffs and other parameters that impact it. And lastly, but first, is reliability of the product, which obviously we are trying not to compromise on them. So we are going to change from time to time. We have more than one source of battery cells as well as other components that we're using. So we look at that as optimizing the situation as it goes.

Got it. And then maybe just as a follow-up, as it relates to the Nexis platform, you know, how are you thinking about the kind of full-scale rollout here? And when should we expect the platform to be kind of fully scaled or fully rolled out across the globe?

Yes. That's an excellent question. So we are going to start in Europe with the DACH region and with the U.S., and then we are going to continue rolling out to different countries in Europe and then to Australia and some other markets. The ramp-up is going to take some time. We are going to start. As we said, we start initial quantity. We've started already initial quantities, but I would say that the high volume is going to start in the third quarter of the year, and we believe that we can finish the transition, you know, in Q1, maybe, of 2027, but that will be already the long sale, I would say. Most of the transition should happen in the second half of this year.

Our next question comes from Julien Dumoulin-Smith with Jefferies.

Maybe just a quick few follow-up items. First, just in terms of the seasonality commentary from earlier, just to elaborate a little bit further, can you comment on the CNI trend? Is that part of the secular trend that you're seeing, kind of, that performance, and why you didn't want to comment too specifically about through the course of '26? What else is impacting the trends that you're observing, if you can elaborate a little bit more to the earlier question? And I've got a quick follow-up on -- well, I'll ask you the follow-up here as well. Just on 45X, how much of that credit are you expecting here, if you can elaborate just a little bit more on that front, in the quarter itself? When do you expect some of those deferred revenues to unwind?

All right. So, thank you, Julien, and I'll start with the first question, and then Asaf will go to the 45X. So, for the seasonality trend, you know, and you know it as well as anyone, it's -- when we combine storage, resi, CNI, U.S. and Europe, to start talking about seasonality in specific and very precise numbers is kind of hard. When we say historical trends, we're referring to how the industry has trended over the last several years, which includes both CNI and resi. And for that, when we say that we expect Q2 to be higher than Q1, it's a combination of both. Asaf?

Thank you, Shuki. I think you asked about 45X, so, I think as you know, since the beginning of the year, we don't break our 45X in our press release. The reason we don't is it's an integral part of the U.S. manufacturing cost structure, and 45X is the single most attractive incentive, we believe in the world currently for manufacturing our products. This is why, as you are aware, we moved the shift at about 90% of our production capacity to the U.S. over the last couple of years. And generally, as a company, our strategy is to manufacture in the location that delivers the lowest net cost to us, including incentive, of course. And again, this is currently the U.S., and we expect it will continue to be as such, as long as the 45X is in place. So we're very focused in the U.S., certainly as long as the 45X is there.

We will move next with Colin Rusch with Oppenheimer.

You talked a lot about taking some market share here, and I'm just curious about your strategy around pricing and balancing margin within that strategy, and how aggressive you expect to be here over the course of 2026..

Thank you, Colin. We used to say it's the million-dollar question. It's probably the billion-dollar question, you know, how you optimize between margin and market share. We're definitely trying to optimize them both. There are certain things that we need to take into account when we think about pricing and gaining share. The first priority for us is to add value to our customers, whether it's through the product and the benefits that it brings, whether it's through our service, our reliability of the product, and the ease of doing business with us, and we are putting a lot of efforts improving all of these. That being said, we have competition, so while we can have a premium, we have to keep it in check with what we can do with what we can do. And then we are following the share gains as it pertains to the premium that we are charging in the market, and we believe that we are doing a good job so far. Both expanding our margins, increasing our share, and increasing our margins, actually, even.

Excellent. And then, the follow-up is really around the solid-state transformer and the opportunity in data center and how you're, you know, tracking the competitive landscape. There's obviously a number of folks working on solutions here, and there's a lot of, you know, I guess, figuring out that's happening right now. I guess, how are you approaching benchmarking progress from some of the other folks working on this and keeping track of your own progress and some of the future-proofing that's going to be required to really stay competitive and durable as the equipment provider into that market over time?

Yes. So obviously, we're not the only ones who identified the multi-billion-dollar opportunity that is out there, and there is a bunch of startup companies that are pursuing this opportunity, other companies that have been providers of power electronics to data centers and maybe some additional ones. We believe that what we bring to the table is similar to what we did in solar for the last 2 decades, expertise in what matters the most here, which is the DC architecture, the ability to have highest efficiency, the ability to actually manufacture at scale. We think that if we can bring a superior solution and then continue to innovate and to bring additional solutions to the market, we'll maintain the leadership, and we'll be able to get our fair share of this opportunity. It will require additional investment, additional focus, and luckily for us, it's actually right in our wheelhouse. It's exactly where we are really good. Our team is excellent in this area, and we plan on leveraging on that.

We will move next with Corinne Blanchard with Deutsche Bank.

Most of them have been answered, but maybe can you discuss whether you're considering changing pricing strategy in Europe or in the U.S., this year or, like, in 2027? And then maybe if you can talk as well a little bit about, like, you know, your exposure to the TPO market, and you have less exposure to the 25D. Just what are you seeing here in the TPO market and, you know, peer pressure trying to enter the market?

Yes. So I, I've just covered the pricing in Europe and in the U.S. We are not going to change pricing strategy per se, but our intention is to continue pushing forward our advantages, to continue providing more and more value to our customers, and to have the applicable premium paid to us, and at the same time, look at how we can continue to gain share. And that is applicable in both markets. Even though the competitive landscape is slightly different, the strategy remains the same. The second question was about?

Just how you see, like, the TPO market, and I know it has been already asked, but, like, are you seeing, like, an increased competition, like, of peers trying to enter the TPO market? And how do you, like, see the market evolving for this year and 2027?

So obviously, with 48E remaining the only tax benefit in solar, the market is shifting towards the TPO. And as we said earlier, we feel that over the years, we've partnered with the TPOs. We are providing them with the value that they need, not only at the product level and the additional power that we generate and the best efficiency that we can have in both high kilowatt and low kilowatts, but actually in terms of integration of systems, knowing how to work with them and support them. So we feel that we are there for them, and we are happy that this part of the market is growing.

We will move next with Vikram Bagri with Citi.

Shuki, you talked about single SKU, consolidating warehouses, streamlining operations, and a lot of, you know, initiatives you're taking to improve the profitability. Is there a way to quantify the impact of these initiatives on op costs as well as on OpEx? I'm trying to understand the building blocks of how you reach EBIT profitability by year-end 2026. How much of that is operating leverage from, you know, gaining market share, increasing revenues, versus, you know, 45X ramping up, versus, you know, cost saving? If you can quantify or sort of directionally guide us, you know, how these factors will contribute towards, you know, the EBIT profitability by then. And then I have a follow-up.

Sure. I think on the gross margin levers, I expanded in the last question talking about the main levers, of course, the high revenue, the ramp up U.S. production, introduction of the Nexis, the shift from NMC to LFP, and so on and so forth. I didn't touch about the OpEx much, so maybe it's an opportunity to talk about our OpEx drivers and cost reduction levers. So there are, of course, a couple of moving parts, I would say. As we noted in the prepared remarks, we continued in 2025, and throughout 2025, to optimize our product portfolio. We shut down our Kokam Energy Storage division, we divested our Tracker business, SolarGik, and we sold our e-Mobility operation that just after the year ended. All of these are positive contributors to our expenses, and will enable us to focus more on the core businesses and on the SST. But on the other hand, during 2026, as I said, we plan to increase our investment in OpEx and CapEx in the SST project. Another important factor, maybe the last one to relate to, is the strengthening of the Israeli new shekel, which has been a meaningful headwind for us over the course of the last 12 months. If I remember correctly, it's up to more than 14% over the course of the last 12 months. Yet, with this shekel trend, we've been hedging, of course, but at a less attractive rate. Still, putting all of these factors together, we feel very comfortable with our $88 million to $93 million guidance for Q1. Like I said, it's a pretty good run rate to assume. Of course, assuming current macro environment condition will persist, nobody knows that. So, again, we didn't give specific guidelines as to when we will reach profitability. We are highly focused on returning to profitable growth, sometime within 2026.

And then as a follow-up, Asaf, you mentioned investments in working capital this year. And you also mentioned in response to this question and previous questions, potential investments in solid-state transformer product as well. I wanted to ask the free cash flow question slightly differently. Do you expect positive free cash flow this year, or you know, there will be sort of free cash flow draw this year because of all the investments you're making?

Sure. So again, I think I answered this question before, but for Q1, we gave specific guidance as it relates to being free cash flow positive. Beyond that, we're not guiding. We'll have to wait for the next quarter. We are extremely focused, Shuki, myself, and the entire company, in managing our working capital. I think as the profile margin will improve, and we keep controlling, of course, the discipline around OpEx and CapEx, you will see that. In terms of CapEx, I do have to say that we do expect to have significantly higher CapEx next year. In 2025, if I remember correctly, it was in the neighborhood of $25 million. With the incremental investment associated with the SST, and to ramp up our production, I think we will see higher CapEx next year, in 2026.

And at this time, we have reached our allotted time for questions. I will now turn the call back over to Shuki.

Thank you. Thank you everyone for attending this call. As we said at the beginning, we are very excited about what we did in 2025, and now we are moving into offense. Our intention is to drive into profitable growth, to gain market share, to roll out Nexis, and we're very excited about the opportunity we have in the AI data center power solution. And we can't wait to update you as we make more progress. Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.