Q1 2022 Fluence Energy Inc Earnings Call

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Speaker 1: Today's conference is scheduled to begin shortly. Please continue to stand by and thank you for your patience.

Today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.

Speaker 2: Music

[music].

Speaker 2: ["Pomp and Circumstance"]

Speaker 2: The part.

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Yes.

Speaker 1: Good day and thank you for standing by. Welcome to the Fluence Energy first quarter 2022 earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during this session you'll need to press star 1 on your telephone. Please be advised that today's conference...

Good day, and thank you for standing by welcome to the to the fluent energy first quarter 2022 earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you need to press star one on your telephone.

Please be advised that today's conference maybe recorded.

Speaker 1: I would now like to hand the conference over to your speaker today, Sam Chung, Treasurer and Head of Investment Relations. Please go ahead.

I would now like to hand, the conference over to your Speaker today, Samsung Treasurer and head of Investor Relations. Please go ahead.

Speaker 3: I would like to welcome everyone to our earnings call for the first quarter of fiscal year 2022. On the call today are Manuel Perez-Tubuc, our Chief Executive Officer, Dennis Fehr, our Chief Financial Officer, Rebecca Ball, our Chief Products Officer, and Syed Medhany, our Chief Digital Officer.

I would like to welcome everyone to our earnings call for the first quarter of fiscal year 2022 on the call today are Manuel <unk>, Our Chief Executive Officer, Dennis <unk>, our chief financial.

<unk> Officer, Rebecca ball, our Chief product Officer, and site Modini, Our Chief Digital officer before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private.

Speaker 3: Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Securities Litigation Reform Act of 1095.

Speaker 3: The forward-looking statements are neither promises nor guarantees, and based upon our current estimates and various assumptions, and are subject to material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Forward looking statements are neither promises nor guarantees.

And based upon our current estimates and various assumptions and are subject to material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.

Speaker 3: These and other risks are described in our filings made with the Securities and Exchange Commission.

These and other risks are described in our filings made with the Securities and Exchange Commission. We encourage you to review these filings for a discussion of these factors, including our annual report on Form 10-K for the fiscal year ended September 32021, and our other filings with the SEC you are cautioned.

Speaker 3: We encourage you to review these filings for a discussion of these factors, including our annual report on Form 10-K for the fiscal year ended September 30, 2021, and our other filings with the SEC.

Speaker 3: You are cautioned not to place undue reliance on these forward-looking statements which speak only as of today, and the company disclaims any obligation to update such statements for new information.

Not to place undue reliance on these forward looking statements, which speak only as of today and the company disclaims any obligation to update such statements for new information.

Speaker 3: This call will also reference non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is available in our earnings materials on the company's investor relations page at ir.fluenceenergy.com. I will now turn the call over to Manuel Perez-Dubuc, our CEO .

This call will also reference non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is available in our earnings materials on the company's Investor Relations page at IR Dot.

Fluence energy Dot com.

I will now turn the call over to Manuel Perez to book our CEO .

Speaker 4: Thank you, Sam. I would like to extend a warm welcome to our investors, analysts, and employees who are participating on today's call.

Thank you Sam I would like to extend a warm welcome to our investors analysts and employees who are participating on today's call.

Speaker 4: Let's start on slide four on the earnings presentation found on our investor relations website.

Let's start on slide four on the earnings presentation found on our Investor Relations website.

Speaker 4: This morning, I will provide an update of our market outlook, which remains strong and demonstrate the significant progress we have made since our last earnings call.

This morning, I will provide an update of our market outlook, which remains strong and demonstrate the significant progress we have made since our last earnings call.

Speaker 4: During the quarter, we have seen a tremendous increase in demand for our energy storage products, as evidenced by our recent contracting activity.

During the quarter, we have seen a tremendous increase in demand for our energy storage growth evidenced by our recent contracting activity.

Speaker 4: The market for energy storage products, service, and digital applications continues to grow at a rapid pace, with Fluence solidifying itself as an industry leader.

The market for entities started prevalence service and digital applications continues to grow at a rapid pace.

Fluids solidify in itself as an industry leader.

Speaker 4: We expect this strong demand to continue, and we are on track to deliver our fiscal year 2022 revenue guidance of $1.1 to $1.3 billion, despite some recent headwinds.

We expect this strong demand to continue and we are on track to deliver our fiscal year 2022 revenue guidance of $1 one to $1 3 billion. Despite some recent headwinds.

Speaker 4: Finally, I'm excited to share some additional details with you regarding our recently announced strategic initiatives, including our India joint venture with RenewPower, the expansion of our digital ecosystem through our partnership with PlexiPark, and our collaboration with Quantumscape on solid-state battery technology. Moving.

Finally.

Im excited to share some additional details with you regarding our recently announced strategic initiatives, including our India joint venture with renewable power.

Spansion of our digital ecosystem through our partnership with <unk> and our collaboration with quantum escape on solid state battery technology.

Moving onto slide five.

Speaker 4: We continue to contract increasing amounts of megawatts across each of our three business lines.

We continue to contract increasing amount of megawatts across each of our three business lines.

Speaker 4: Industry appetite for applications of energy storage remains robust, suggesting continued momentum for orders throughout 2022.

Industry appetite for applications of and I would just direct you remained robust suggesting continued momentum for orders throughout 2022.

Speaker 4: As we have seen, energy storage is key to providing clean energy for a sustainable future.

As we have seen energy storage is key to providing clean energy for a sustainable future.

Okay.

Speaker 4: I am pleased to report that during the first quarter, we contracted 600 megawatts of energy storage products, which is a 525% increase from a year ago.

I am pleased to report that during the first quarter, we contracted 600 megawatts of energy storage products, which is that.

525% increase from a year ago.

Speaker 4: This amount exceeded our expectations as the first quarter has historically been a seasonally lower one for contract.

This amount exceeded our expectations as the first quarter has historically been a seasonally lower one for contracting.

Speaker 4: We continue to experience very strong demand for energy storage products across the globe as companies and countries seek long-term solutions for grid stability and reliability as more renewables come online, creating challenges for grids around the world. As of December 31st, we deployed or contracted more than 4.2 gigawatts of energy storage products.

We continue to experience very strong demand for energy storage products across the globe as our companies and countries seek long term solutions for grid stability and reliability as more renewables come online, creating challenges for grids around the world.

As of December 31, we deploy or contracted more than or two gigawatts of energy storage products.

Speaker 4: Turning to our Fluent Services business, we added 250 megawatts of contracts during the first quarter. We also signed 335 megawatts of contracts for our Fluent IQ bidding application.

Turning to our fluid services business, we added 250 megawatts of contracts during the first quarter. We also signed 335 megawatts of contracts for our fluids IQ beating application.

Speaker 4: More importantly, after the end of the quarter, we signed an additional 1.1 gigawatts with AES Clean Energy.

More importantly, after the end of the quarter, we signed an elevation of one one gigawatts with Aes clean energy.

Speaker 4: which represents our single largest Fluence IQ order ever.

Which represents our single largest fluids IQ order ever.

Speaker 4: This contract highlights the value that FluenceIQ can deliver. With this, we have already achieved our fiscal year 22 annual recurring revenue target for FluenceIQ, seven months ahead of schedule.

This contract highlights the value of that voice IQ can deliver with this.

We have already achieved.

Our fiscal year 'twenty, two annual recovery recurring revenue target for fluids Iq.

Seven months ahead of schedule.

Turning to slide six.

Speaker 4: I would like to update you on the headwinds that we discussed in our last earnings call and the steps we're taking to mitigate their impact. This mostly stems from supply chain disruptions as a result of COVID-19, as well as some cost overruns in the rollout of our first generation six product installations and commission.

I would like to update you on the headwinds that we discussed on our last earnings call and the steps, we're taking to mitigate their impact this mostly stem from supply chain disruptions as a result of COVID-19, as well as some cost overruns in the rollout of our first generation.

Product installations and commissioning.

Speaker 4: Our team has acted swiftly to implement corrective actions that provide us the confidence to further execute on our plan.

Our team has acted swiftly to implement corrective actions that provide us the confidence to further execute on our plan.

Speaker 4: Some of these mitigation efforts include securing shipping capacity for our high-volume routes on a two- to four-month forward-looking basis.

Some of these mitigation efforts include securing shipping capacity for our high volume routes on a two to four month forward looking basis.

Speaker 4: giving us better visibility to deliver our product to our customers on time.

Given off.

<unk> ability to deliver our products to our customers on time.

Speaker 4: Furthermore, we have increased the size of our supply chain and manufacturing teams by 57% to provide us with the resources necessary to meet the robust demand we

Furthermore, we have increased the size of our supply chain and manufacturing teams by 57%.

To provide us with the resources necessary to meet the robust demand we see.

Speaker 4: And finally, we are documenting lessons learned from our teams around the world and providing additional training so they can deliver our Gen 6 product installation and commissioning more effectively.

And finally, we are documenting lessons learned from our teams around the world and providing additional training. So they can deliver our gen six proud installation and commissioning more effectively.

Speaker 4: During the second quarter, we will continue to catch up on some of the installations that were delayed in the first quarter. As of today, a vast majority of the products required to fulfill our anticipated Q2 deployments have already made landfall in their respective countries and are going through installation, commissioning, and acceptance testing as we speak.

During the second quarter.

We'll continue to catch up on some of the installations that were delayed in the first quarter.

As of today, a vast majority of the products required to fulfill our anticipated Q2 deployment have already made landfall in their respective countries and are going through installation commissioning and acceptance testing as we speak.

Speaker 4: I would also like to address another topic that is a concern for many in our industry.

I will also like to address another topic that is of concern for many in our industry.

Speaker 4: Inflationary pressures and raw material price increases.

Inflationary pressures and raw material price increases.

Our our current backlog.

Speaker 4: is hedged through the fixed price contracts we have signed with our suppliers and customers.

As hedge through the fixed price contracts, we have signed with our suppliers and customers.

Speaker 4: given the substantial volatility in commodity prices, we are introducing raw material indices or RMI-based pricing for future contracts.

Given the substantial wallet, leading commodity prices, we are introducing raw material indices or R. M B.

Base pricing pricing for future contracts.

Speaker 4: By implementing RMI on both the supply side and the demand side, we are further minimizing our exposure to future commodity price fluctuations.

By implementing our MRI on both the supply side and the demand side, we are further minimizing our exposure to future commodity price fluctuations.

Speaker 4: I would also like to provide a brief update amongst land

I would also like to provide a brief update amongst landing.

Speaker 4: Although we cannot comment on the press release issued by Vistra in late January regarding its alleged technical findings about the overheating event last September , we can say that we continue to work with Vistra on the repair of the facility. Our own technical investigation is still actively in progress, and we will provide you an update once it has concluded.

Although we cannot comment on the press release issued by <unk> in late January regarding its alleged technical findings about the overheating event last September .

We can say that we continue to work with <unk>.

On the repair of the facility.

Our own technical investigation is still actively in progress and we will provide you an update once he has to conclude.

Turning now to slide seven.

Yes.

Speaker 4: As I noted earlier, we continue to execute on our business plan during the quarter to position ourselves for long-term success. I will cover.

As I noted earlier, we continued to execute on our business plan during the quarter to position ourselves for long term success.

I will cover a few examples.

Speaker 4: Let's start with one of our key wins in the new transmission enhancement segment of the market.

Let's start with one of our key wins in the new transmission enhancement segment of the market.

Speaker 4: As you might have seen last year, we were selected to provide a small 1-megawatt pilot to lead grid in Lithuania.

After you might have seen last year, we were selected to provide a small one megawatt pilot to lead grid in Lithuania.

Speaker 4: This pilot program was designed to test the concept of utilizing energy storage to enhance transmission and distribution network rather than incur the costly expense of installing additional transmission lines.

This pilot program was designed to test the concept of utilizing energy storage to enhance transmission and distribution network rather than in core the costly expanse of installing additional transmission lines.

Speaker 4: The pilot turned out to be so successful that we were awarded a follow-on 200 megawatts order for virtual transmission line.

The pilot turn out to be so successful that we were awarded a follow on 200 megawatts order for virtual transmission lines.

Speaker 4: This outcome aligns well with our strategic effort to be the leader in this market segment.

This outcome.

Our aligns well with our strategic effort to be the leader in this market segment.

Speaker 4: The transmission and distribution enhancement market requires a highly redundant and resilient technical architecture that supports advanced grid forming applications.

The transmission and distribution enhancement market requires a highly redone that are resilient technical architecture that supports advanced grid forming applications.

Speaker 4: This suggests a high margin potential compared to other segments.

This suggests a high margin potential compared to other segments.

Speaker 4: We continue to be bullish of this growing market segment as there are numerous areas around the world that can benefit from this technology, and we are proud to be among the first companies to bring it to the market.

We continue to be bullish of this growing market segment. That's there are numerous areas around the world that can benefit from this technology and we are proud to be among the first companies to bring it to the market.

Speaker 4: Additionally, we selected our contract manufacturer for our North American and European location.

Additionally, we selected our contract manufacturer for our North American and European locations.

Speaker 4: We are on track to start seeing initial production for our North American facility in our fourth quarter.

We are on track to start seeing initial production for our North American facility in our fourth quarter.

Speaker 4: For our European facility, we expect to see initial production in the first quarter of our fiscal year 2023.

For our <unk> facility, we expect to see initial production in the first quarter of our fiscal year 2023.

Speaker 4: Both of these contract manufacturing facilities will alleviate the burden of a single manufacturing location.

Both of these contract manufacturing facilities will alleviate the burden of a single manufacturing locations.

Speaker 4: On the software development side, we made several key additions that further strengthened our deep talent pool. These additions were part of the 139 full-time employees added during the first quarter, providing us with the knowledge and experience to keep the pace with the extraordinary demand we are seeing.

On the software development side, we made several key additions that further strengthen our deep talent pool.

Additions were part of the hundred 39 full time employees.

Added during the first quarter, providing us with the knowledge and experience to keep the pace.

With the Australian energy demand we are seeing.

Speaker 4: Now, I would like to provide you with some color on our recently announced strategic partnerships.

Now I would like to provide you with some color on our recently announced strategic partnerships.

Turning to slide eight.

Speaker 4: In January , we signed a term sheet to enter into a 50-50 joint venture in India with Renew Power.

In January we signed a term sheet to enter into a 50 50 joint venture in India with renewable power.

Speaker 4: which is one of the largest pure renewable IPPs in the country.

Just one of the largest pure renewable ipp's in the country.

Speaker 4: Renew Power is a well-respected renewables player and by establishing a joint venture, we will collectively leverage our first mover advantage in this significant market.

Renewable power is a well respected renewables player and by establishing a joint venture we will collectively leverage our first mover advantage in this significant market.

Speaker 4: India currently has just 24 megawatts of energy storage deployed. Almost half of that comes from a Fluence pilot that we built in 2019.

India currently has just 24 megawatts of energy storage deploy.

Almost half of that Comscore effluence pilot that we built in 2019.

Speaker 4: Even more importantly, the Indian government has stated that we'll need at least 27 gigawatts by 2030, which provides Florence a tremendous opportunity to be the industry leader in this significant market.

Even more importantly.

The Indian government has stated that we'll need at least 27, gigawatts by 2030, which provide fluids a tremendous opportunity to be the industry leader in this significant market.

Speaker 4: The joint venture will serve as our primary sales outlet in India by licensing Fluence products and services.

The joint venture will serve as our primary sales outlet in India by licensing fluids product and services as a leading IPP renewable power will also be a significant customer to the JV beginning with our recently announced first contract for 150 megawatt hours.

Speaker 4: As a leading IPP, Renew Power will also be a significant customer to the JV, beginning with a recently announced first contract for 150 megawatt hours. Now.

Now turning to slide nine.

Speaker 4: I would like to highlight the recent expansion of our digital ecosystem. As you may recall, we are developing several in-house applications to complement our flagship digital application, the bidding app.

I would like to highlight the recent expansion of our digital ecosystem.

As you May recall, we are developing several in house applications to complement our flagship digital application the beating up.

Speaker 4: who are paving the way for third parties to build their own applications for the Fluence IQ platform.

We're paving the way for third parties to build their own application for the fluids the IQ platform in.

Speaker 4: In January , we entered into a long-term strategic partnership with PEXAPARC, an award-winning provider of software and advisory services for renewable energy cells.

In January we entered into a long term strategic partnership with <unk>.

An award winning provider of software and advisory services for <unk>.

Renewable energy yourself and risk management.

Speaker 4: Purza Park has supported 20 gigawatts worth of renewable PPA transactions and are currently in 18 markets with a large presence in the EMEA region.

Towards the park has supported 20 Gigawatts worth of renewable PPA transactions and are currently in 18 markets with a large presence in the EMEA region.

Speaker 4: By partnering with tech support, we will bring together our unique insights that will help investors, IPP, and utilities make better decisions as they navigate merchant markets while trying to maximize revenue.

By partnering with Pic support we will bring together.

Our unique insights that will help investors IPP and utilities make better decisions as they navigate merchant markets, while trying to maximize revenue.

Speaker 4: In addition, their significant EMEA presence will also help to accelerate the coverage for our bidding app in that region.

In addition, there are significant EMEA presence will also help to accelerate the coverage for our leading app in that region.

Speaker 4: This partnership is a significant milestone for Fluent.

This partnership is a significant milestone for fluids.

Speaker 4: and it corroborates our vision for our ecosystem.

At at corroborate our vision for our ecosystem.

Speaker 4: Through this partnership, we will commercially introduce PECSupport and its four apps to our customer base via our digital platform. In turn, we expect to receive customer referrals for our products and services from PECSupport.

Through this partnership we will commercially introduced tech support and its four apps to our customer base via our digital platform in churn, we expect to receive customer referrals.

Our products and services from Tech support.

And finally, turning to slide 10.

Speaker 4: In January , we entered into a collaboration agreement with Quantumscape, a leader in solid state battery technology.

In January we entered into a collaboration agreement with quantum escape.

Later in solid state battery technology.

Speaker 4: This agreement strengthens the advancement of solid-state battery technology in a stationary storage application.

This agreement.

Strengthened the advancement of solid state battery technology in a stationary storage application.

Speaker 4: we will test QuantumScape solid-state technology in Fluence smart energy storage products. This collaboration sets the stage for Fluence and QuantumScape to potentially enter into a large-scale supply agreement once commercialization is determined.

We will test quantum escaped solid state technology influence as smart energy storage products.

These collaborations.

Page four fluids that quanta escape to potentially enter into a large scale supply agreement once commercialization is determined.

Speaker 4: We are encouraged by the benefit we see in solid-state battery, specifically around density and performance. And we remain battery technology agnostic and committed to providing our customer with the most economic and efficient product possible.

We are encouraged by the benefit we see in solid state battery, specifically around density and performance and we remain bought any technology agnostic and committed to providing our customers with the most economic and efficient product possible.

Speaker 4: I would like to take the opportunity to send our gratitude and admiration to our people during this pandemic. Thank you for your passion.

I would like to take the opportunity to sand.

Our gratitude and admiration to our people during this pandemic.

Thank you.

For your passion hard work and commitment.

Speaker 4: I will now turn the call over to Dennis to cover our financial performance and fiscal year 2022 revenue guidance.

I will now turn the call over to Dennis to cover our financial performance and fiscal year 2022 revenue guidance.

Speaker 4: Thank you, Manuel. And good morning to everyone on the call. As Manuel stated, we delivered a very strong quarter of new orders for our energy storage products. In addition, we were able to execute on some of our near-term strategic initiatives, which position us for continued growth.

Thank you model and good morning to everyone on the call as <unk> stated, we delivered a very strong quarter of new orders for energy storage products. In addition, we were able to execute on some of our near term strategic initiatives, which position us for continued growth.

Speaker 5: Turning to slide 12, we continue to deploy capital in line with our investment framework with a strong focus on supply chain and talent acquisition. In the first quarter, we prepaid 60 million into our supply chain to support capacity buildup for calendar year 2022 and calendar year 2023 battery supply. And as Manuel already explained in detail, in January , we entered into agreements with Renew, QuantumScape and Paxapart, which I would like to financially highlight in more detail.

Turning to slide 12.

We continue to deploy capital in line with our investment framework with a strong focus on supply chain on talent acquisition in the first quarter, we prepaid 60 million until its supply chain to support capacity buildup.

Calendar year, 2022, and calendar year 2023 battery supply.

This model already explained in detail in January we entered into agreements with three new quantum skaven picks up Hawk, which I would like to financially a highlight in more detail.

Speaker 5: Our 50-50 joint venture agreement with RENEW is projected to be aligned with our capital light approach, as we will be licensing our technology to the JV.

Our 50 50 joint venture agreement with three new is projected to be in line with a capital light approach as we will be licensing our technology to the JV.

Speaker 5: We anticipate that a JV will be mostly self-funded and operational with nominal amounts of paternal support, while the terms of the transactions are not yet publicly disclosed. This investment and expected results are in line with our previous expectations.

We anticipate that the JV will be mostly self funded went operational with nominal amounts of paternal support.

The terms of the transactions are not yet publicly disclosed this investment and expect the results are in line with all previous expectations.

Speaker 5: The collaboration agreement with QuantumScape will be accounted for as R&D expense and is consistent with our previous expectations. At this juncture, we expect that it will be a few years until we can have a mass-produced solid-state storage battery. Upon production, we expect that a future solid-state-based energy storage product will contribute to achieving our long-term product margin target.

The collaboration agreement with quantum scape will be accounted for as R&D expense and is consistent with all previous expectations. At this juncture, we expect that it will be a few years until we can have a mass produced solid state storage battery.

<unk> production, we expect that our future solid state based energy storage product will contribute to achieving our long term product margin targets.

Speaker 5: The Paxar Park Partnership is a validation of commercial relationships being built on our digital platform. As part of the partnership, we have a revenue share agreement in place for sales of Paxar Park applications made through our app store.

The <unk> partnership is a validation of commercial relationships being bolt on our digital platform as part of the partnership we have a revenue share agreement in place with sales of textile park applications made through our App store as all previous expectations did not include any such revenue share incomes.

Speaker 5: As our previous expectations did not include any such revenue share incomes, this partnership will be accretive to our financials from calendar year 23 on.

This partnership will be accretive to our financials from calendar year 2003 onwards.

Speaker 5: Furthermore, we continue to add talent and resources necessary to keep pace with the robust demand we are seeing. As such, during the quarter we increased our supply chain organization by close to 60%.

Furthermore, we continue to add talent and resources necessary to keep pace with the robust demand we are seeing as such during the quarter, we increased our supply chain organization by close to 60%.

Speaker 5: our service organization by approximately 20% and acquired key talent to strengthen our software development.

Service organization by approximately 20% and the quiet key talent to strengthen our software development team. These additions are in line with our model and our important steps for executing our plan.

Speaker 5: These additions are in line with our model and are important steps for executing our plan.

Turning to slide 13.

Speaker 5: Before we move on to our Q1 results, I would like to remind everyone of the seasonality of our revenues and order intake. This seasonality is due to customers' desires to have products operational in time for summer in the Northern Hemisphere. Historically, we recognized approximately 70% of our revenue mostly in our fiscal second half. This aligned with our patterns for order intake. As a result, fiscal first half results are usually lower compared to our second half.

Before we move on to our Q1 results I would like to remind everyone of the seasonality of our revenues and order intake. This seasonality is due to customers' desires to have products operational in time for somewhere in the northern hemisphere, historically recognized approximately 70% of our revenue mostly in our fiscal second half this aligns with all patents of order intake.

As a result fiscal first half results are usually lower compared to our second half. However, as Manuel mentioned, while our current Q2, there is a caveat to the seasonality and that we expect the portion of the delayed revenue from the fourth quarter of fiscal year, 'twenty, one and fourth quarter of fiscal year 'twenty tool will be recognized during Q2 therefore.

Speaker 5: However, as Manuel mentioned, for our current Q2, there is a caveat to the seasonality in that we expect a portion of the delayed revenue from the fourth quarter of FY21 and fourth quarter of FY22 will be recognized during Q2, therefore leading to a higher revenue contribution than typical in the second quarter.

Leading to a higher revenue contribution than typical in the second quarter.

Speaker 5: Moving on to slide 14, starting with the table on top of the slide.

Moving on to slide 14, starting with the table on top of the slide.

Speaker 5: In Q1, we contracted 600 megawatt of energy storage product, which was an increase of 525% from Q1 of fiscal year 20.

In Q1, we contracted 600 megawatt of energy storage product, which was an increase of 525% from Q1 of fiscal year 'twenty one yes.

Speaker 5: We are encouraged by the high demand for products in the seasonally slower quarter.

We are encouraged by the high demand for product in the seasonally slower quarter.

Speaker 5: Energy storage services added 250 MW of contract, which was a 10% decline from Q1 FY21.

Energy storage services at a 250 megawatt of contracts, which was a 10% decline from Q1 fiscal year 'twenty one.

Speaker 5: We sold higher levels of products to utility customers, which typically acquire service at the later date, as they did in Q4 of last year.

So with higher levels of products to utility customers, which typically acquire service at a later date.

As they did in Q4 of last year.

Speaker 5: We do expect an attachment rate of at least 70% for the product sold in Q1.

We do expect an attachment rate of at least 70% for the product sold in Q1.

Speaker 5: Finally, we contracted 335 megawatt for our Fluence IQ bidding applications in Q1, which was a decline of 36% from Q1 of fiscal year 21. However, in January , we entered into a 1.1 gigawatt contract with AES Clean Energy. With this order, we have already achieved our fiscal year 22 Fluence IQ annual recurring revenue target, about seven months ahead of time.

Finally, we contracted 335 megawatt fall influence IQ bidding applications in Q1, which was a decline of 36% from Q1 of fiscal year 'twenty one.

In January we entered into a one one gigawatt contract with Aes clean energy with this order we have already achieved all fiscal year 'twenty tool Fluence IQ annual recurring revenue target.

<unk> seven months ahead of time.

Speaker 5: Now moving to the second table on the slide. Despite impact on our supply chain, the number of megawatts that we deployed for energy storage products grew 6% sequentially. Due to our strong contracting results, contract backlog megawatts increased 20% from the fourth quarter.

Now moving to the second table on the slide despite impacts on our supply chain. The number of megawatts that we deploy it fall in entry storage products grew 6% sequentially due to a strong contracting results contract backlog megawatts increased 20% from the fourth quarter.

Speaker 5: Our product pipeline is being driven by strong tailwinds from the market and demand for a proprietary Gen6 product. It stood at almost 14,000 MW at the end of Q1.

Our product pipeline is being driven by strong tailwind from the market and demand for our proprietary Gen. Six product. It stood at almost 14000 megawatts at the end of Q1.

Turning to energy storage services.

Speaker 5: Assets under management grew 8% and contracted backlog grew 10% from Q4. Similar to our storage products, our services pipeline remains robust, standing at almost 12,000 MW at the end of Q1.

<unk> under management grew 8% and contracted backlog grew 10% from Q4 similar to our starch products or services pipeline remains robust standing at almost 12000 megawatts at the end of Q1.

Speaker 5: Moving to our Fluence IQ digital platform. In Q1, digital assets under management grew 25% to almost 3,900 megawatts from Q4, while contracted backlog declined 26% due to successful transitioning to assets under management.

Moving to our influence IQ with digital platform in Q1 digital assets under management grew 25% to almost 3900 megawatts from Q4 by contracted backlog declined 26% due to successful transitioning to assets under management.

Speaker 5: Our digital pipeline achieved a new high of 4,500 megawatts at the end of Q1, which increased by almost 1,200 megawatt from Q4.

Our digital pipeline achieved a new high of 4500 megawatts at the end of Q1, which increased by almost 1200 megawatts from Q4.

Turning to slide 15.

Speaker 5: Our Q1 FY22 revenue grew 50% to $175 million versus $116 million for Q1 FY21.

Our Q1 fiscal year 'twenty tool revenue grew 50% to $175 million versus $116 million for Q1 fiscal year 'twenty one.

Speaker 5: Q1 FY22 revenue is below expectations, driven by the already discussed headwinds. We view the delays of revenue recognition as temporary. This expectation to largely catch up within Q2 FY22.

Q1 fiscal year 'twenty, two revenue was below expectations driven by the already discussed headwinds. If you were to delay of revenue recognition is temporary.

Spectation to largely catch up within Q2 of fiscal year 'twenty two.

Speaker 5: On a last 12-month basis, total revenue grew 9% versus Q4 to $739 million in Q1.

On a last 12 months basis total revenue grew 9% versus Q4 to $739 million in Q1.

Turning to page 16.

Speaker 5: In the first quarter, cross-profit was negative $53 million versus positive $5 million in Q1 FY21. This decrease was driven by $41 million of non-recurring expenses in Q1 FY22, which included $31.3 million related to project charges and other costs attributable to the compounding effects of COVID-19 pandemic, $5.6 million related to non-recurring access shipping costs and other non-recurring costs.

In the first quarter gross profit was negative 53 million versus positive $5 million in Q1 fiscal year 'twenty one.

This decrease was driven by $41 million of nonrecurring expenses in Q1 fiscal year, 'twenty, two which included $31 $3 million related to project charges and other costs.

Bold to the compounding effects of COVID-19, pandemic, $5 6 million related to nonrecurring excess shipping costs and other nonrecurring costs.

Speaker 5: In our last earnings call, we forecasted non-recurring expenses related to shipping and other COVID-related items of at least $50 million to $55 million in the first half of fiscal year 2020.

In our last earnings call, we forecast that nonrecurring expenses related to shipping and other COVID-19 related items of at least $50 million to 55 million in the first half of fiscal year 'twenty two in.

Speaker 5: In Q1, these expenses totaled about $37 million.

In Q1, these expenses totaled about $37 million.

Speaker 5: We continue to forecast an impact of 50 million to 55 million in the first half.

We continue to forecast an impact of $50 million to $55 million in the first half.

Speaker 5: Adjusting for these non-recurring items, we generated adjusted gross loss of $8 million in Q1 FY22 versus positive $5 million in Q1 FY21. Adjusted gross profit was negative in Q1 due to $13 million of costs associated with first time deploying our Gen6 product. As Manuel noted, we have taken significant corrective actions. However, we expect to see some trailing costs over the months in Q2.

Adjusting for these nonrecurring items, we generated adjusted gross loss of $8 million in Q1 fiscal year 'twenty, two whereas was positive 5 million in Q1 fiscal year 'twenty one.

Adjusted gross profit was negative in Q1 due to $13 million of costs associated with first time deploying our gen. Six product as Manuel noted we have taken significant corrective actions. However, we expect to see some trailing cost over on the months in Q2.

Continuing on to slide 17.

Speaker 5: EBITDA in Q1 was impacted largely by the same non-recurring expenses as the gross profit. Adjusted EBITDA excludes these non-recurring expenses and additional $24.9 million of stock-based compensation, which we have started to record since our successful IPO. However, the $24.9 million includes catch-up entries since April 2021. Therefore, future quarters will see significantly lower stock-based compensation expense.

EBITDA in Q1 was impacted largely by the same nonrecurring expenses. The gross profit adjusted EBIT excludes these nonrecurring expenses and additional 20.

<unk> 9 million of stock based compensation, which we have started to report since our successful IPO.

Over the $24 9 million includes catch up entry since April 2021, therefore, future quarters, we will see significantly lower stock based compensation expense.

Moving on to page 18.

Speaker 5: Our cash-in-cash equivalence as of December 31st was $632 million. We raised about $940 million in IPO proceeds in October , net of offering costs. Immediately following the IPO, we repaid a total of $100 million in debt. Our short-term working capital in the quarter was negatively affected by the shift in revenue recognition and by the $60 million prepayment to secure battery capacity.

Our cash and cash equivalents as of December 31 was $632 million, we raised about $940 million in IPO proceeds in October net of offering costs immediately following the IPO, we repaid a total of $100 million in depth, our short term working capital in the quarter was negatively affected by the shift in revenue recognition and by the 60 million.

Prepayment to secure battery capacity.

Speaker 5: However, we expect to catch up on cash flow later in the year.

However, we expect to catch up on cash flow later in the year.

Speaker 5: Our strong balance sheet is now enabling us to keep pace with the robust demand we see for our entire year.

Our strong balance sheet to smell, enabling us to keep pace with the robust demand we see for entire ecosystem.

Speaker 5: Going forward, we will continue to deploy our capital in line with our investment framework of enhancing unit economics, expanding recurring revenues, and developing structured offerings to deliver attractive value for our shareholders.

Forward, we will continue to deploy our capital in line with our investment framework of enhancing unit economics, expanding recurring revenues and developing structured offerings to deliver attractive value for our shareholders.

Speaker 5: Turning to slide 19 and our fiscal year 22 out.

Turning to slide 19, and our fiscal year 'twenty two outlook.

Speaker 5: Our contracted backlog as of December 31st was $1.9 billion.

Our contracted backlog as of December 31 was $1 9 billion.

Speaker 5: Our guidance for FY22 revenue in the range of $1.1 billion to $1.3 billion takes into consideration risks and uncertainties related to our ability to recognize revenue from our energy storage products on a timely basis in H2 FY22.

Our guidance for fiscal year 'twenty two revenue in the range of $1 1 billion to $1 3 billion takes into consideration risks and uncertainties related to our ability to recognize revenue from our energy storage products on a timely basis and age to fiscal year 'twenty two.

Speaker 5: Despite a challenging Q1, we expect our H1 FY22 revenue to be in line with our historic seasonality of 30% of full year revenue plus the majority of the $125 million delayed revenue from Q4 FY21.

Despite a challenging Q1, we expect our H one fiscal year 'twenty two revenue to be in line with our historic seasonality.

80% of full year revenue plus the majority of the $125 million delayed revenue from Q4 fiscal 'twenty one.

Speaker 5: As previously discussed, we also reconfirm our forecast of $50 million to $55 million of non-recurring expenses related to shipping and COVID-19 compounding effects.

As previously discussed we also reconfirm our forecast of 50 to 55 million of nonrecurring expenses related to shipping and COVID-19 compounding effect.

Speaker 5: Lastly, we have already achieved our Fiscal Year 2022 FluenceIQ Annual Recurring Revenue Objective ahead of time and have created upside to our digital plan through the PEXA partnership. At this time, I would like to turn the call

Lastly, you have already achieved our fiscal year 'twenty two fluence IQ annual recurring revenue objective ahead of time.

<unk> created upside to our digital plan.

Subpar partnership.

At this time I would like to turn the call back to model.

Thank you Dennis.

Speaker 4: The first quarter proved to be exciting as we continued to execute on our mission to transform the way we power our world for a more sustainable future.

The first quarter proved to be exciting as we continue to execute on our mission to transform the way we power our world for a more sustainable future.

Speaker 4: We continue to see robust demand for our product services and digital solutions as society continues to implement more renewables and reduce its reliance on fossil fuels, providing unique opportunities for fluency.

Continue to see robust demand for our products services and digital solutions as society continues to implement more renewables and reduces reliance on fossil fuels, providing unique opportunities for fluids.

Speaker 4: We are at a better place now than we were three or six months ago.

We are at a better place now that we were three or six months ago.

Speaker 4: with improved visibility, more capabilities, and more resources that we can deploy to meet the growing demand we are seeing.

With improved visibility more capabilities.

And more resources that we can deploy to meet the growing demand we are seeing.

Speaker 4: We are still in the very early stages of the clean energy transition.

We are still in the very early stages of the clean energy transition.

Speaker 4: And I can say the future looks bright for Fluence as we look to deliver attractive value for our shareholders. Operator.

And I can say the future looks bright for fluids as we look to de lever attractive value for our shareholders.

Operator, we are now ready to take questions.

Speaker 1: Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press star 1 on your telephone.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

To withdraw your question press the pound key.

Speaker 1: Our first question comes from James West with Evercore. Your line is open.

Our next question comes from James West with Evercore.

Your line is open.

Hey, good morning, guys.

Okay.

Good morning.

Speaker 6: I'm curious, so looking at the order intake for Q1 down year over year, but of course you had the AES order that came in in January , so kind of how should we think about

I'm curious.

Looking at the order intake for Q1.

Down year over year, but of course, we had the sort of the came in in January so kind of.

How should we think about.

Speaker 6: order intake, should we be looking at that on a quarterly basis or should we look at it on a kind of a rolling 12-months basis? Is it lumpy and seasonal? And so I guess

Order intake.

Should we be looking at that on a quarterly basis or should we look at it on a kind of a rolling 12 months basis as it is lumpy and seasonal and <unk>.

So I guess.

Speaker 6: It doesn't seem to spark a concern at all from you guys, from your commentary, it sounds like things are very robust, but just curious how we should be thinking about that as we kind of monitor the business on a quarterly basis.

It doesn't it doesn't seem to spark a concern at all from you guys from from your commentary it sounds like things are very robust.

Just curious how we should be thinking about that as we kind of monitor the business on a quarterly basis.

Speaker 4: Good morning. Thank you very much for your question. And first, I see you looking more at the FluenceIQ platform and not the overall, you know, backlog. First is that we are extremely happy and excited that we achieved our goal seven months ahead.

Good morning, and thank you very much for your question.

First is I see you're looking more at Fluence Iq platform.

And another overall.

Backlog.

Firstly is that we are extremely happy and excited that we achieve our goal of seven months.

Had.

Speaker 4: of our plan, which is, you know, it's fantastic. The best way to see FluentIQ is that on a rolling basis. It's a product that.

Of our plan, which is fantastic.

The best way to see fluids IQ is that.

On a rolling basis.

It's a trial that we're in.

Speaker 4: We're expanding to other markets, we're entering to the California, we're making inroads in that market. In Australia, we're solidifying our presence there with 20% of market share, incorporating additional projects in Australia. California is an open market for us, so you will see more coming, and it will take a few months until you, you know, first you test it.

Spanned into other markets, we enter into the California, we're making inroads in that market in Australia, we solely define our presence there with 20% of market share in core putting in additional projects in Australia, California is that it's an open market for us. So you will see more coming.

And it takes a few months until you its first <unk> test and you model that problem for them for the customer we incorporate that the portfolio into the platform. We do some sometimes we do some modeling in parallel so they can see what is the upside in the outlet revenue uplift potential and then.

Speaker 4: and you model the product for the customer, we incorporate the portfolio into the platform. We do some.

Speaker 4: Sometimes we do some modeling in parallel so they can see what is the upside and the revenue uplift potential.

Speaker 4: and then you sign a contract that usually it's a significant amount of megawatts. Because the fact that we are just not using Fluence IQ for energy storage, but also for renewables, make the market, you know, more significant, the addressable market more significant, and also the growth, it's, you know, it's.

You sign a contract that usually it's up.

A significant amount of megawatts because the fact that we are just not using fluids IQ for energy started by also for renewables make the market more significantly addressable market more significant and also the growth.

It is becoming the standard in the market. So the more people they start testing out the more people that they see the benefits.

Speaker 4: is becoming the standard in the market. So the more people they start testing out, the more people that they see the benefits, they will keep coming. So I would say that, you know, very excited.

We'll keep coming so I would say that.

Very excited.

Speaker 4: We're extremely happy about the outcome and we keep moving forward and developing new applications. Cedilla, do you want to share any of yours? No, I think that answers the question. As Manuel mentioned, we had great momentum over the past last 12 months. So if you want to think about it as a rolling basis.

Im extremely happy about the outcome and we keep moving forward and developing new applications. So.

Yet you want to share.

No I think that answers the question as Manuel mentioned, we had great momentum.

Over the past last 12 months, if you want to think about it as a rolling basis, we're super excited about the progress of the application as Manuel mentioned.

Speaker 7: We're super excited about the progress of the application, as Manuel mentioned.

Speaker 7: We're very penetrated deeply in Australia, continue to grow in California. You'll see us growing into adjacent markets here in the U.S.

<unk> penetrated deeply in Australia, continuing to grow in California, you'll see us growing into adjacent markets here in the U S.

Speaker 7: And the landscape has been great for us. So if there are any further questions, happy to take them. But I think, Manuel, you covered it. Thank you. Thanks, Ayyad.

The landscape has been great for us so.

Are there any further questions have been taken but I think Manuel you've covered it. Thank you thanks for yet.

Speaker 6: Okay, that makes perfect sense. And then I guess, Manuel, the momentum in the business seems to be exceptionally strong right now. I mean, every time we speak, you're on an airplane or heading to an airplane or going somewhere to see a customer. Could you maybe describe kind of

Okay, Okay that makes that makes perfect sense.

And then I guess.

Well.

Sure.

The momentum in the business seems to be exceptionally.

Strong right now I mean every time, we speak youre on an airplane or heading to an airplane or go in somewhere to see if thats true.

Could you maybe describe kind of how the.

Speaker 6: how the market is developing what type of a, where we are in kind of the land grab for storage and kind of where the customer acceptance and understanding of this as being a necessity stands today versus, you know, three, six, 12 months ago.

Market is developing what type of the.

Where we are in kind of the the land grab for storage.

And kind of where the customer acceptance.

And understanding the this has been a necessity stands today versus three 612 months ago.

Speaker 4: Thank you. Thank you very much for the question. Yes, I mean, the market is exceptionally strong. Even if you consider all the...

Thank you. Thank you very much for the question.

Yes.

The market is.

<unk> is strong.

And if you consider all of that.

Speaker 4: of the headwinds that we've seen on supply chain and some of the concerns in some markets about the capacity to deliver.

The headwinds that we see on supply chain and then some of the concerns in some markets about the capacity to deliver but that the market is there.

Speaker 4: The market is there, the more they test the technology, the more they like it. We see a lot of, you know, recurring.

More they test the technology the more they like it.

We see a lot of.

Recurring.

Speaker 4: customers coming back to us and repeating their orders and looking at additional applications because this is a...

Customers coming back to us and repeating their orders and looking at additional application. Because this is that is that is a compound effect on growth first the sites are becoming bigger and bigger because the technology has been understood and really they see the benefit.

Speaker 4: It's a compound effect on growth. First, the sites are becoming bigger and bigger because the technology is being.

Speaker 4: understood and really they see the benefit. So now you see more and more companies, IPBs out there and utilities, they combining renewables with energy storage, but they also replacing traditional fossil fuel generation with energy storage. So then the sites are getting bigger in megawatts in capacity, but also the sites are getting bigger in hours. So the total megawatt hours is a compound, the combination of both. But on top of that, look at what happens with, you know, we have been working for some time on the virtual transmission line concept.

Now you see more and more.

Company's IBP is out there in the utilities, they combining renewables with energy storage, but they also replacing traditional fossil fuel generation.

Energy storage. So then the sites are getting bigger in Mega watts and capacity, but also the sites are getting bigger and hours. So the total megawatt to eight megawatt megawatt hours is a compounding set them.

The combined the combination of both but on top of that look at what happens with them. We have been working for some time on the virtual transmission line concept.

Speaker 4: We developed the architecture, which is extremely complex and very, very unique. There are very, very little people that really understand how to do that.

We developed the architecture, which is extremely complex and <unk>.

Very very unique there.

They are very very little people that really understand how to do that we did a test just a pile of a one megawatt and immediately when they saw that operate our operational they came back to us and say well, we need 200 megawatts. So that is.

Speaker 4: We did a test, just a pilot of one megawatt, and immediately when they saw that operational.

Speaker 4: They came back to us and say, well, we need 200 megawatts.

Speaker 4: So that is 200 times a pilot. So, and then see transmission line bottlenecks everywhere in the world, Germany, Chile.

The pilot.

And then.

Transmission line bottlenecks everywhere in the World, Germany, Chile.

Now.

Speaker 4: You know, there's so many places where you have offshore and onshore wind that that energy cannot be delivered to the load centers because transmission constraints. If we can solve that equation without the problem, we all know how difficult it is to build a transmission line without building a new transmission line, that is a whole segment with a hard margin, and we are, you know, extremely uniquely positioned to take advantage of that. I don't know. I don't know.

There are so many places where you have offshore and onshore win that that energy cannot be delivered to the low centers because transmission constraints. If we can solve that equation without the problem.

We all know how difficult is to build transmission lag without building a new transmission line that is a whole segment with higher margins and we are.

<unk> uniquely positioned to take advantage of that.

I don't know Rebecca.

Speaker 8: Sir, Manuel, thanks again. I think you covered a lot of it. I would summarize it that the market does continue to grow and the buckets of growth are in segments.

Ben.

Sir Emmanuel Thanks, again, I think you covered a lot of it I would summarize it.

The market does continue to grow in the buckets of growth are in segments.

Speaker 8: And the transmission opportunity is an example of that kind of segment. Another segment is data centers. So more segments is more upward movement of that total available market.

Transmission opportunity as an example of that kind of segment and other segment is data centers. So so more segments is more upward movement of that total available market. We also see growth in new geographic regions. So regions that didn't like India. As an example regions that previously didn't adopt energy storage and the associated services and digital and they are now.

Speaker 8: We also see growth in new geographic regions, like India as an example, regions that previously didn't adopt energy storage and the associated services in digital and they are now ready to adopt that. So clearly in our story, we're on top of that with India and actually some other countries as well that we're moving into.

To adapt that so so clearly in our story, we're on top of that with India and actually some other countries as well that we're moving into something about the regions as they move from short duration to long duration solution. So that helps us grow that total available market as well and then of course to summarizes manuals had just the penetration of renewables I think it's clear in the market right now.

Speaker 8: Something about the regions is that they move from short-duration to long-duration solutions. So that helps us grow that total available market as well. And then of course, to summarize as Manuel said, just the penetration of renewables. I think it's clear in the market right now that to make the renewable story work, we need to pair renewables with battery energy storage. So great news. Yeah, allow me just to make a very, very short sample because this is, you know, we are so happy and so proud that we are part of this story. Last weekend.

Is that to make the renewable story work, we need to pair of renewables with battery energy storage so great yeah.

Yes.

Now let me allow me just to make a very very short sample. Because this is we are so so happy and so proud that we are part of this story.

Last weekend in Ireland, they broke the all time record.

Speaker 4: They broke the all-time record of renewable generation, of 89% of renewable in the system last weekend.

Renewable generation of 89% of renewables in the system last weekend.

During the storm.

Speaker 4: our ultra-fast response energy storage solutions in that market. We are the only ones in that market. If you see the performance of our site with ultra-fast, which is the only one that is in the market right now, how we absorb the ups and downs of the wind generation.

Our ultra fast response energy storage solutions in that market. We are the only ones in that market. If you see the performance of our sites with ultra fast which is the only one that is in the market right now how we absorbed the ups and downs of the wind generation.

Speaker 4: and keep the lights on and reliable. 20% of the load, 20% of the load in Ireland, or close to that, is data centers. And you know the need of them, of the five nines.

And keep the lights on and reliable 20% of the low 20% of the low in Ireland or close to that is data centers and you know the need of the end of the five nines of reliability and availability and we supported that market. If you look at if you go to.

Speaker 4: of reliability and availability, and we supported that market. If you look at, if you go to the statistics and you look at the way that the system operated, we are really, really enabling the high penetration of renewables in a sustainable and reliable way.

Due to.

So the statistics when you look the way that the system and operate it we are really really enabling the high high penetration of renewables in a sustainable and reliable way.

Great. Thanks, Joe Thanks, Greg Thanks, guys.

Speaker 1: Thank you. Our next question comes from Mahip Nandloi with Credit Suisse. Your line is open.

Thank you. Our next question comes from Mohit.

And then <unk>.

<unk> with credit Suisse. Your line is open.

Speaker 9: Hi, this is Chamni on behalf of Maheet, can you talk a little bit, you talked a little bit about the near-term headwinds that you're seeing, could you help us think through, you know, the impact on margin and cash flow through the rest of the year?

Hi, This is chandni <unk> on behalf of Mohit.

Sure.

Can you talk a little bit.

Could you talk a little bit about the near term headwinds that youre seeing at could you help us think too.

The impact on margin and cash flow to directives.

Sure.

Speaker 5: Yes, absolutely. Let me take this. This is Dennis speaking. So first of all, when we think about especially the second half of the financial year, we look ahead with confidence.

Yes, absolutely let me take the Stena speaking so first of all when we think about especially the second half of the financial year.

Look ahead with confidence.

Speaker 5: When we say confidence, that's stemming from two parts. First of all, it's about the measures and the actions which Manuel outlined in his prepared remarks that we are seeing to have them taking track.

Say confidence that stemming from tool parts first of all it's about the measures and actions, which Martin will outline.

In his prepared remarks that we are seeing to take them.

I'm, taking traction secondly, overall, we are seeing that the omicron wave.

Speaker 5: Second, that overall we are seeing that the Omicron wave is going down. So that means while we have seen stronger headwinds from the pandemic before, that's declining. So in that regard, we're looking ahead with confidence.

Going down so that means while we have seen stronger headwinds from the pandemic before that's declining so in that regard we're looking ahead with confidence.

Speaker 5: what that now means in terms of the margin development and the cash.

No means in terms of the margin development and cash so on the on the profit side gross profit side, we are seeing that cross profit margins to be improving and increasing on a quarter by quarter basis to come back to the level of our previous expectations by year end on a rolling basis, but.

Speaker 5: So on the profit side, cross profit side, we are seeing that cross profit margins are to be improving and increasing on a quarter by quarter basis to come back to the level of our previous expectations by the year end on a rolling basis. But also just to be clear on that, on the full year basis, considering the full 12 months, we won't be able to recover on what we have debated in the first half.

I also just to be clear on that on a full year basis, considering the full 12 months you won't be able to recover on what you have debated in the first half.

On the cash flow side.

Speaker 5: In the first quarter, we have made the prepayment to secure battery capacities, which is an important step for us to secure our backlog and the demand until the end of the calendar year 2023. In addition to that, cash flow has been also impacted by the delays and the shifting in the revenue recognition from the first quarter into the second quarter.

The first quarter, we have made the prepayment to secure battery capacities, which is an important step for us to secure our backlog and the demand until the end of the calendar year 2023 years. In addition to that cash flow has been also impacted by the delays in the shifting and the revenue rec.

Recognition from the first quarter into the second quarter.

Speaker 5: As we are catching up and looking forward with confidence on that, on the revenue recognition, we will also catch up on the cash side and on the working capital side in the later part of the year.

Yes, we are catching up and looking forward with confidence on that on the revenue recognition. We will also catch up on the cash side and on the working capital side.

The later part of this year.

Speaker 9: Thanks, Dennis, that's very helpful. Switching gears a bit, we're expecting to perhaps see changes in the net metering policy in California, which could potentially drive significant demand for residential batteries. As that market potentially grows at a much faster pace, would it be of increased affluence to bring your capabilities of manufacturing and modular batteries to residential markets?

Okay, that's great.

Helpful.

In gears a bit.

We're expecting to perhaps see changes in the net metering policy in California, which could potentially drive significant demand for residential <unk>.

That market potentially grows at a much faster pace.

Would it be of interest to flu and to bring our capabilities of manufacturing and modular battery to residential market.

Okay.

Speaker 8: So, we see the same thing in the market, that there is potential for residential. I would say, surely, that we're evaluating it. So, we're not in the market today, but we're evaluating it.

So we see the same thing in the market that there is potential for residential.

I would say shortly that we're evaluating it so we're not in the market today, but we're evaluating it.

Yeah.

Yeah.

That's about it for me thank you.

Speaker 1: Thank you. Our next question comes from Mark Strauss with J.P. Morgan. Your line is open.

Thank you. Our next question comes from Mark Strouse with Jpmorgan. Your line is open.

Speaker 6: Yeah, good morning. Thanks very much for taking our questions. When thinking about the India market, are there any local manufacturing requirements that we need to be aware of? And how are you planning for that? If so, and how does that impact the potential ramp that we might see in orders in that market?

Hey, good morning, Thanks, very much for taking our questions.

When thinking about the India market are there any local manufacturing requirements that we need to be aware of.

How are you planning for that if so and how does that impact the potential.

Ramp that we might see in orders in that market.

Speaker 4: Yeah, thank you. Good morning, Mark, and thank you. India, very, very excited about India. You know, we established our first pilot of 10 megawatts in India in 2019. We waited for several months or even a few years to the right moment to find the right time, the right partner.

Yes. Thank you good morning, Marc and thank you, India very very excited about India.

We established the first our first pilot of 10 megawatts in India in 2019.

We wait for for several.

Mazo even.

A few years to.

To the right mum into fine.

The right time, the right partner.

Speaker 4: and be ready for such a big market. Because it's not just that we have the technology, it's also that do we have the capacity to ramp up production and to really, really be able to penetrate a market with a reliable and enough resources.

And be ready for such a big market because it's not just that we have the technology. It's also that we have the capacity to ramp up production and two two really really.

Be able to penetrate a market with a reliable.

And enough resources to.

Speaker 4: to fulfill the demand that we might see there. We found the right partner. Very, very happy with the JV. We renew power. The leaders in pure renewable projects in India. Initially, there's no.

<unk>.

We will feel that.

The demand that we might see there we found the right partner very very happy with the JV.

Renewable power the leaders in pure renewable.

Projects in India.

Initially there is no.

Speaker 4: requirement of localizing, but you know how competitive that market is.

Requirement of localizing, but you know how competitive that market.

Speaker 4: So eventually, when the time is right, we will be publishing and letting you know about how we are going to be starting to use local suppliers to.

Eventually.

When the time is right, we will be publishing and letting you know about how we are going to be starting to use local local.

Suppliers.

Speaker 4: to complement our technology. But the target is just to fully localize the production.

Two.

To complement our technology there.

Target is jetblue fully localized production.

Speaker 4: We have, you know, all this, you know, tremendous first-mover advantage. Imagine, you know, our pilot, the actual amount of energy storage in India is very, very small. And we represent, right now, 50 percent.

We have all of these.

Tremendous first mover advantage imagine our pilot the actual amount of energy storage in India is very very small and we represent right now 50% of that.

Speaker 4: of that, of what is already operating in India. They will do a multi-gigawatt demand. We see that coming. The good thing is that the government already did a local tender.

That.

What is already operating in India.

They will do a multi gigawatt demand, we see that coming.

The good thing is that the government already data.

Our local tender.

Speaker 4: for battery manufacturing, giving them a price subsidy on energy for those who will want to establish up to 50 gigawatts of energy of battery manufacturing. So the government is already thinking about that. In the short term, there will be most of the equipment is going to come from abroad. There are some inverters.

For battery manufacturing given them.

Our price subsidy on energy for those tool will want to establish up to 50 Gigawatts of energy about 80 manufacturing. So the government is already thinking about that in the short term there will be most of their equipment is going to come for a broad they are some in <unk>.

Speaker 4: manufacturers in India, we are already talking to them, we are already exchanging some technical specifications with them. I don't know, Rebecca, if you want to give us some color about that. Very exciting. Right partner, right time. The government is supporting. There's some very, very strong political, economic and political support, economic incentive. So, I think that the time is right for us to enter into that market.

<unk>.

Manufacturers in India, we are already talking to them we already.

Exchanging some technical specifications with them I don't know Rebecca if you want I'll give us some color about that very exciting right partner right time. The government is supporting there are some very very strong political economic and political support economic incentive so I think that the <unk>.

He is right for us to enter into that market.

Speaker 3: Okay, thank you very much. And then you kind of touched on this earlier about the opportunity for more transmission, you know, upgrades over time. Just curious though, just kind of looking out kind of more near term, do you have any similar size projects in your kind of late stage pipeline?

Okay. Thank you very much.

And then you kind of touched on this earlier about the.

The opportunity for more transmission.

Upgrades over time.

Just curious, though is just kind of looking out kind of more near term do you have any similar sized projects and youre kind of late stage pipeline.

Speaker 4: Yeah, I cannot disclose exactly, you know, who are we working with, but yes, we are working with world-class developers and energy companies actively participating in bidding processes that are already taking place in Europe .

Yes, I cannot disclose exactly.

We walked in with but yes, we are working with world class or class.

Developers and and energy companies.

Actively participating in bidding process are already taking places in Europe .

Speaker 4: uh... and in and in america uh... there are

And in America.

Our.

Speaker 4: There were some more, you know, certainly, I mean, if we get this right, there will be a very, very good segment for us opening up with good margins. And we are, so far, we are the only one.

There were some more certainly I mean if.

We get this right.

There will be a V.

Very very good segment for us opening up with good margins.

And we are.

So far we are the only one.

Speaker 4: We have developed so many applications in the past. We know that others will follow, but we keep, you know, innovating. We keep having this first-mover advantage and creating more and more applications. Rebecca, you want to say something about the transmission? Again, I think you've summarized it well. There certainly are opportunities that currently exist, particularly in Europe , and we have bids going on right now. Thank you. Okay. Yeah.

If we had developed so many applications in the past, we will know that others will follow what we keep.

Innovating.

We keep having this first mover advantage and are creating more and more applications.

You want to say something about the transmission.

Again, I think you've summarized it well there are certainly are opportunities that currently exist, particularly in Europe and we have.

That's going on right now.

Thank you Okay, yes, it will take the rest offline. Thank you.

Thank you Mark.

Speaker 1: Thank you. Our next question comes from Brian Dredd with Goldman Sachs. Your line is open.

Thank you. Our next question comes from Brian <unk> with Goldman Sachs. Your line is open.

Hey, guys. Good morning, Thanks for taking the questions.

Speaker 3: Maybe the first one, just going back to the margins. I know there's some pressures here near term.

Maybe the first one just going back to the margins I know, there's some pressures here near term.

Speaker 10: It sounds like they should ease moving through the back of the fiscal year.

It sounds like they should ease moving through that.

Back of the fiscal year, but.

Speaker 10: uh... it sounds like we should expect sort of uh... steady state margins by your answer dennis uh... i think based on your prior model that would imply like positive mid single-digit adjusted gross margins by you know let's call fiscal Q4 first is that and then maybe can you give us a bit of the bridge here that's about a fifteen hundred basis point uh...

It sounds like we should expect sort of steady state margins by year end so Dennis.

Based on your prior model that would imply like positive mid single digit adjusted gross margins by let's call. It fiscal Q4 first is that fair and then maybe can you give us a bit of a bridge here thats about a 500 basis point.

Speaker 10: expansion from from today's level over just the next couple quarters and then i had a follow-up yeah hey good morning

Expansion from from today's level over just the next couple of quarters, and then I had a follow up.

Yeah, Hey, good morning, Brian . Thanks for the question. So in that regard things like various started in Q1. So in Q1 has been impacted by the nonrecurring expenses as well as Bud Lite, a cost overruns, which we disclosed on the call. So if youre thinking forward into the second quarter, we will still have some portion of the nonrecurring expenses.

Speaker 5: So in that regard, think it like where we started in Q1. So in Q1, has been impacted by the non-recurring expenses as well as by the cost overruns, which we disclosed on the call. So if you're thinking forward into the second quarter, we will still have some portion of the non-recurring expenses where we had reconfirmed our.

Reconfirmed our.

Speaker 5: our outlook of $50 million to $55 million, and then we said we will still have...

Outlook of $50 million to $55 million and then we said we will still have.

Speaker 5: a smaller amount, a trailing off amount of that cost overrun. So that means in that regard we will see a reduction in the non-recurring expenses as well as in the cost overruns in the second quarter.

A smaller more on the trailing off a moment of that coastal or on so that means in that regard we will see a reduction in the nonrecurring expenses as well as on the cost overruns in the second quarter and then while we are entering its third quarter and into the fourth quarter into the second half of the year, we're seeing that.

Speaker 5: And then while we are entering in third quarter and into the fourth quarter, into the second half of the year, we are seeing that we are moving back towards this previous expectation levels into the mid-single digits, as we had previously.

Moving back towards previous expectation levels into the mid single digits as well.

Had previously discussed.

Speaker 10: Okay, fair enough, but it's all the non-recurring going away, or it seems like there's a bit more to the bridge than just that.

Okay fair enough, but it's all of the nonrecurring going away or it seems like there is a bit more to the bridge then than just that.

Speaker 5: Yeah, on the non-recurring side, let's say like this, I mentioned before that we have high confidence in the measures which we put out. Nevertheless, we had stated the 50 to 55 million as a guidance for the first half. At the end, we're just through quarter one of this year, and therefore, we will give you an update on potential non-recurring expenses in our next earnings call.

Yeah on the on the nonrecurring side, let's say like this I mentioned before that we have high confidence in the measures, which should put all nevertheless, we have state of the $50 million to $55 million. That's the guidance for the first half at the end, we adjust through quarter. One of this year. So and therefore, we will give you an update.

On the on potential nonrecurring expenses in our next earnings call.

Speaker 10: Okay, fair enough. And then just a second question around this Fluence IQ contract with AES, congrats on the scale of that. Just wondering, it sounds like clearly this is a big deal, the biggest one you guys have ever done over 1 gigawatt. I recall you had like a $3 or $4 million revenue target for the digital business this year.

Okay Fair enough and then just the second question around this.

Fluent.

Contract with Aes, congrats on the scale of that.

Just wondering it sounds like.

Clearly this is a big deal the biggest when you guys have moved on over one gigawatt.

I recall, you had like a three or $4 million revenue target for the digital business. This year. So.

Speaker 10: uh... if i kind of back into it this one gigawatt deal uh... is worth maybe uh... a million or two annually since it adds about twenty five percent to your assets under management for that piece of the business is that the right way to kind of think about the scale of

If I kind of back into it this one gigawatt deal.

It is worth maybe.

$1 million or two.

Since it adds about 25% to your assets under management for that piece of the business is that the right way to kind of think about the scale of the.

Speaker 10: the revenue opportunity every time you're getting like a gigawatt into uh... into the iq business

The revenue opportunity every time, you're getting like a gigawatt into into the IQ business segment.

Speaker 7: Yeah, I mean, I'll pass it to Dennis in terms of going to some more details about our targets. All I can tell you, it's been a great deal for us, very energizing to see the rate of adoption of FluenceIQ in California. As Dennis mentioned, we've already achieved our expected ARR targets.

Yes.

Pass it to Dennis in terms of going to some more details about our targets. All I can tell you. It's been a great deal for us very energizing to see the rate of adoption of Effluence IQ in California, as Dennis mentioned, we've already achieved our expected targets for this year way ahead of the schedule and we will.

Speaker 7: for this year, way ahead of the schedule, and we're building a lot of momentum. I also want to note that I'm really proud and excited about the diversity of our customer base.

Building a lot of momentum I also want to note that I'm really proud and excited about the diversity of our customer base. Obviously the deal with Aes is very exciting gigawatt, but if you look at the six gigawatts that we have contracted in the diversity of our customer base, we have utilities, we have community choice Aggregators.

Speaker 7: Obviously, the deal with AES is very exciting. It's over a gigawatt, but if you look at the six gigawatts that we have contracted and the diversity of our customer base, we have utilities.

Speaker 7: Community Choice Aggregators, we're helping communities with FluenceIQ.

We're helping communities with Fluence Iq.

Speaker 7: We have IPPs, we have renewable developers.

We have IP piece, we have renewable developers, we have renewable asset managers and most importantly, we have investment banks involves influence IQ. So a lot of great momentum, maybe I'll pass it to Dennis do you want to speak more about the revenue targets right. Let me take that Brian So what makes this deal.

Speaker 7: We have renewable asset managers, and most importantly, we have investment banks involved in InfluenceIQ. So, a lot of great momentum. Maybe I'll pass it to Dennis if you want to speak more about the revenue targets.

Speaker 5: Right. Let me take that, Brian . So what makes this deal so attractive for us are two things. So first of all, it has a high share of battery storage. So that means in that regard, we typically

So attractive for us two things. So first of all that has the highest share of battery storage. So that means in that regard.

Speaker 5: Going out with Fluence IQ to also go after the renewable side, this also includes renewable, but it has a high share of the energy storage, which brings a higher ASP in terms of dollar per kilowatt. That makes it attractive first. And then the second portion is that it has also a highly attractive performance sharing revenue portion to it.

Typically.

Going out with <unk> towards the Gulf to the renewable side.

It also includes renewable but it has the highest share of the after energy storage, which brings a higher ESPN in terms of dollar per kilowatt that makes it attractive first and then the second portion of that has also on the highly attractive performance sharing revenue portion to it.

Speaker 5: which as you may recall from previous discussion, we have been very conservative on how we have put that into our model and So therefore we are seeing an upside here on our digital side

Which as you may recall from previous discussions we have been very conservative on how we have to put that into our model and so therefore, we are seeing an upside here on our digital side.

Okay fair enough I'll take it offline thanks guys.

Speaker 4: Yeah, something that I would like to add, because I think it's important, you know, it is every every market is different. I mean, just the same proportion by by, you know, percentage of of of the, you know, the portfolio increase.

Something that I would like to add that because I think that's important.

Is every every market is different.

Just the same proportion bye bye.

Percentage of the portfolio.

The increase.

Speaker 4: There are markets with higher volatility, there are markets with higher price points, there are contracts that include renewables that are not just renewables, and remember that

They are markets with higher volatility in their markets with higher price points there are.

There are contract that they include renewables, there not just renewables and remember that.

Speaker 4: The revenue uplift potential for just renewables is between 10 to 15 percent.

The revenue uplift potential for just renewables is between 10% to 15%.

Speaker 4: But when you have energy storage or you add energy storage, that number goes up to 50%. And if you have the revenue sharing and you know that the uplift is 50%, so that is not, you know, it's not linear. You actually have an exponential, the possibility of exponentially higher revenue sharing when you have a higher revenue uplift, I mean, capacity for the AI system or software. But also by the dynamics of the market.

But when you have energy storage or you add and you saw that that number goes up to 50% and if you have the revenue sharing and you know that they all believe at 50%. So that is not it's not linear.

Actually have an exponential therefore, the possibility of exponentially higher revenue.

Sharon when you have a higher revenue uplift.

I mean capacity for AI system, our software, but also by the dynamics of the market.

Speaker 1: Thank you. And our next question comes from Julian Dumoulin-Smith with Bank of America. Your line is open.

Thank you and our next question comes from Julien Dumoulin Smith with Bank of America. Your line is open.

Speaker 11: Hey, good morning, team. Thanks for the time. I'll make it quick here, just two follow-up questions if I can. First, on AES, how do you think about the future backlog from AES?

Hey, good morning team thanks for the time.

I'll make it quick here.

Two follow up questions. If I can first on Aaas, how do you think about the future backlog from a.

Speaker 11: As you think about the percent exposure to AES as a counterparty both in the quarter and then in terms of your future backlog and sales, you know, both in the context of IQ but also overall in your business, how do you see that evolving here, right? Obviously, things were fairly elevated. We've talked a lot about it on this call, for instance, with the IQ. But how would you frame that 22 onwards, you know, from what you know already with your backlog and otherwise?

Do you think about the percent exposure to.

Yes, as a counterparty both in the quarter and then in terms of your future backlog.

Both in the context of our Q, but also overall in your business. How do you see that evolving here right. Obviously things were fairly elevated we've talked a lot about it on this call for instance, with IQ, but how would you frame that 'twenty two onwards from what you know already with your backlog and otherwise.

Speaker 4: Yeah, thank you. Good morning, Juliana. Thanks for your question. And yeah, we saw you wrote this morning about our call and your first impressions, and you highlighted that in this quarter we had a high concentration on fluency IQ on AES. First,

Yeah. Thank you good morning, Julien and thanks for your question.

Yes.

We saw euro this morning about our call and Youre first in.

<unk> and.

And you highlighted that in this quarter, we had a high concentration influence IQ on Aes first.

Speaker 4: Let's say that, you know, we're extremely happy that AES as a

Let's say that we're extremely happy that aes.

Speaker 4: one of our sponsors and main shareholders, but also one of our very, very important customers. They are ramping up, they're expanding aggressively their renewable targets. And they have done that in a very solid way. So we're very happy to be linked to them.

As one of our sponsors and Jan main shareholders, but also one of our very important customers. They they are ramping up they are expanding aggressively their renewable targets and they have done that.

Solid waste. So we are very happy to be to billing to them. That's one element second.

Speaker 4: That's one element. Second, we have customers all over the world. And the fact that

We have customers all over the world and the fact that.

Speaker 4: California is such an important market for AES, and we will keep capturing market share in California. Well, I mean, AES will be in the mix. There's no way that, you know, with their huge portfolio that they have in California, we will not be there.

California is such an important market for Aes and we will we will keep capturing market share in California, well I mean, aes will be in that mix. There is no way that.

Huge portfolio that they have in California, we will not be there. So that's one element, but we will see and we are expecting that that number will go back to the traditional long term numbers that we have seen in the last three or four years in terms of what is the contribution.

Speaker 4: So, that's one element, but we will see and we are expecting that that number will go back to the traditional, you know, long-term numbers that we have seen in the last three or four years in terms of, you know, what is the contribution from AES on the overall ecosystem platform expansion and populating process that we are achieving.

From Aes on the overall ecosystem platform expansion.

And populate populate in process that will here.

Achieving so and we're very very excited about aes and and we will see them in California, obviously, but as we expand to other Microsoft Fluence, IQ well, but even that propulsion might change.

Speaker 4: So I'm very, very excited about AES and we will see them in California, obviously, but as we expand to other markets and influence IQ, well, I mean, that proportion might change.

Speaker 11: Got it. Yeah, clearly always good to write on the coattails of a company expanding like AES. All right. No doubt about that. Other companies will follow Julian, you know that.

Got it yes, clearly always good to riding the coattails of the company expanding.

Alright.

No doubt about that.

I don't know if somebody as well other companies you follow Julien you know that.

Speaker 11: Yes, totally, totally. Well, so if I can, actually, I'm just curious on, if you think about the balance of this year, certainly talked about some delays from 4Q from last year here. Can you talk about, you know, when you get some of the $130 million back, if you will?

Yes totally totally.

So if I can't actually I'm just curious.

As you think about the balance of this year certainly talked about some delays from <unk> <unk> from last year here can you talk about when you get some of that $130 million back if you will.

Speaker 4: Yeah, let me take this, you know, high level. I want to send a message to you and the rest of our, you know, investors and customers out there. First is that the demand is very strong. We're working.

Yes, let me take this.

High level I wanted to send a message to you and the rest of our <unk>.

Investors in <unk>.

And customers are out there.

First is that.

The demand is very strong we working.

Speaker 4: very close to each one of our customers to overcome those delays, to close the gaps. We've seen already that happening in many of our projects. We developed our technology for the first time, the Gen6. So, it's normal that you will see some things that you need to find, you need to fine-tune. The size of the mega sites that we have is a significant step up in the company. We brought new talent.

Very close to each one of our customers.

To overcome those delays to fill up the now to close the gaps we seen already that happening in many of our projects we develop our technology for the firsthand against <unk>. So.

It's normal that you will see some things that you need to find you'd need to fine tune the size of the Mega Mega sites that we have.

<unk> is a significant.

The step up in the company, we we brought new talent, which in these times is really difficult and then we had been able to attract very very good talent. They like their lifelong is that they like our mission. The light that we are the leaders.

Speaker 4: which in these times is really difficult, and we have been able to attract very, very good talent. They like Fluent, they like our mission, they like that we are the leaders. So in that sense, you know, things are going in the right direction. We haven't had any cancellation, which is a very, very good sign. And Dennis, you want to add something? Yeah, Julian, to your question. So we expect to recognize the majority of the 125 million of revenue.

In that sense.

Things are going in the right direction, we haven't had any cancellation, which is a very very good sign and and then if you want to add something yes, Julian to your question. So we expect to recognize the majority of the $125 million of revenue.

Speaker 5: which shifted over from Q4 21 in our first half.

<unk> shifted over from Q4, 'twenty, one first half.

Speaker 5: plus being back in line with our historic seasonality of 30% of all.

US being back in line with <unk> toric seasonality of 30% of our annual guidance.

Speaker 11: All right. Thank you for that. All right. Excellent. I appreciate both the context and the direct answer there.

Alright. Thanks.

Thank you for that alright, excellent I appreciate both the context and the direct answer there.

Thank you Julien.

Thank you.

Speaker 1: Thank you, and our next question comes from George Gianvikas with Baird. Your line is open.

Thank you and our next question comes from George <unk> with Baird. Your line is open.

Speaker 12: Hey, good morning, everyone. First, can you talk about your service attach rate at 69?

Hey, Good morning, everyone. First can you talk about your service attach rate at 69%.

Speaker 12: uh some of the dynamics that went into that and your confidence of that improving over time?

Some of the dynamics that went into that and your confidence of that improving overtime.

Speaker 4: Yeah. First, we are very confident that the attachment rate that we have seen in the past is stable. It's going forward, so it's going to stay there. As you know, in general, the fluent services, they lag.

Yes.

First is our view.

Firstly, we are very confident that the attachment rate that we had seen in the past is stable is going forward. So it's going to stay there.

We as you know the fluids in general the fluid services.

<unk>.

Speaker 4: a bid after you get the signing of the systems and then the products for the energy storage of smart solutions. And it will take some time to get those contracts up on a sign and then, you know, incorporating into our metric.

<unk>.

After that you get that.

Signing up.

The systems and the products forward for the energy storage of Smart solutions.

And it will take some time to get those contracts.

Upon a sign and then incorporating into our metrics.

Speaker 4: You saw that in our last earnings call that we had an increase of 750%, so you will probably see that coming, but the way that we see it is that around 70%, 75% attachment rate is going to stay at those levels.

You saw that in our last earnings call that we had an increase of 750%. So you will probably see that coming but we look.

The way that we see it as that.

Around 70%, 75% attachment rate is going to stay at those levels.

Speaker 12: And just one follow up, just to make sure that we all understand your guidance for the year and the context around it, are you assuming that the world continues to improve from a COVID perspective, that supply chain disruptions get better, and that's how you'll hit your guidance? Or do you assume continued disruption? I just want to make sure we all understand the context around it and what to look for to understand

And just one follow up just to make sure that we all understand your guidance for the year in the context.

Rounded.

Assuming that the world continues to improve from a COVID-19 perspective that supply chain disruptions get better and Thats, how youll hit your guidance or do you assume continued disrupted I just want to make sure. We all understand the context around it and what to look for.

I can understand it.

Speaker 4: Yeah, my first reaction and thank you for your question is my, you know, we, we, we coach, coach you list optimist.

Yes, My first reaction and thank you for your question it's Matt.

We cautiously optimist.

Speaker 4: As we see the Omicron variant subsiding and we see less port congestion, for example, in the west coast of the United States, as we have most

As we see the army chrome volume subsiding.

And we see less port congestion.

For example, in the West coast of the United States.

As we have most.

Speaker 4: A vast majority of our products are already in-country in the different locations where we have to install and commission for Q2. So we are cautiously optimistic. And we do see an improvement for the second half of the year.

A vast majority of our products already in country in the different locations, while we have to install and commission.

For Q2, so we are cautiously optimistic.

And we do we do see an improvement for the second half of the year.

Speaker 4: But we are also accounting that it might be some still places where things will get a little, it will delay their process to get back to normal. But we are considering both.

But we are also accounting that might be some steel places where things will get a little bit will delay.

There their process to get back to normal, but we are considering both.

Speaker 5: Right, so we maybe internally would call it like a, consider it a new normal, that means like a

Alright.

Internally, we call that like considered a new normal that means like.

Speaker 5: pandemic slash post-pandemic kind of level of supply chain reliability. That means not as good as pre-pandemic, but also not as bad as we have seen, especially over the end of the last calendar year with the high levels of Omicron.

Pandemics Slash post pandemic kind of level of supply chain reliability that means not as good as pre pandemic, but also not as bad as we have seen those especially over the end of the last calendar year was still high levels of forming chrome.

Speaker 4: Thank you. I also would like to add that the fact that we are already selected our contract manufacturers for Europe and the US, that will also help us on the supply chain and logistics.

Thank you.

I also would like to add that the fact that we are.

Already selected our contract manufacturers for Europe , and the U S.

We will also help us on the supply chain and logistics.

Thanks, guys.

Speaker 1: Thank you. Our next question comes from Graham Price with Raymond James. Your line is open.

Thank you. Our next question comes from Graham price with Raymond James Your line is open.

Speaker 6: Hi. Good morning, and thanks for taking the questions. Just on the newly announced PEXA partnership, I was wondering if you could talk a little bit about how that expands coverage for the IQ platform and maybe specifically what that does for the addressable market for the bid app side of that.

Hi, good morning, and thanks for taking my questions.

Just on the on the newly announced <unk> partnership I was wondering if you could talk a little bit about.

How that expands coverage for the IQ platform and maybe specifically.

What that does for the addressable market for the bid out side of that.

Speaker 7: Yes, thank you. Great question. So, let me take you all back to what we shared during our roadshow and analyst day conversation. So, with Fluence IQ, our flagship application has been the bidding application.

Yes, Great question. So let me take you all back to what we what we shared during our road show and analyst day conversation. So workflow inside our flagship application has been the bidding applications, but we have been contemplating and in the process of developing new applications.

Speaker 7: but we have been contemplating and in the process of developing new applications. We also noted that an upside for us is to create opportunities for third parties to integrate or get into partnerships with us for additional applications.

<unk> well, we also noted that.

Yes.

And upside for us is to create opportunities for third parties to integrate or get into partnerships with us for additional applications.

Speaker 7: Now, I should also note none of that was built into our financial models in terms of revenue upside by the fact that we have actually announced this partnership, we're way ahead of the schedule in terms of creating that momentum around third-party applications.

You should also note none of that was built into our financial models in terms of revenue upside by the fact that we have actually announced this partnership we're way ahead of the schedule in terms of creating that momentum around third party applications, obviously parts of park with their presence of Europe that gives us a greater insight.

Speaker 7: Obviously, Pexapark, with their presence of Europe , that gives us a greater insight into the European market and allows us to get into that European market with deeper customer relationships. So, all great, ahead of schedule, and let me pause there if there's any follow-ups, but I should say it's very positive momentum in the right direction.

In the European market and allows us to get into that European market with deeper customer relationships. So all great ahead of schedule.

And let me let me let me pause there if there's any follow ups, but I should say, it's very positive momentum in the right direction.

Speaker 11: Got it. Understood. Thank you for that.

Got it.

Thank you for that.

Speaker 11: And then, I guess, quickly, on the cost overruns that you saw for the Gen 6 product installation.

And then I guess quickly on the cost overruns.

You saw from the Gen six product installations.

Speaker 6: Just wondering, are those largely due to commodity price inflation, kind of the typical logistics issues? Is there one thing you can point to, or is it just kind of a combination?

Just wondering are those largely due to commodity price inflation kind of a typical logistics issues.

One thing you can point to or is it just kind of a combination.

Sure I'll take that so so we've kind of separated the cost overruns in the logistics issues and on the cost overruns. They are temporary and they are associated with installation and commissioning. So the way that we have addressed that and we have had root cause analysis as either operational issues or technical issues that we could optimize to.

Speaker 8: So we've kind of separated the cost overruns from the logistics issues, and on the cost overruns, they are temporary, and they are associated with installation and commissioning. So the way that we have addressed that.

Speaker 8: is we have done root cause analysis of either operational issues or technical issues that we could optimize to ensure that those cost overruns get to zero closer to the end of this quarter. We've implemented those fixes either in our field installation manuals or in our factory and those are in play right now. So we've identified the issues and we've implemented the fixes.

Ensure that those cost overruns get to zero closer to the end of this quarter, we've implement those Texas either in our field installation manuals are in our factory and those are in play right now and we've identified the issues and we've implemented the fixes we've also hired.

Speaker 8: We've also hired a significant number of more people to be able to handle the installation and commissioning. So that was one of the lessons learned is that we needed more people. And we have trained those people in the installation procedures and updated our installation manuals.

Significant number of more people to be able to handle the installation and commissioning. So that was one of the lessons learned is that we needed more people and we have trained those people in the installation procedures and updated our installation manuals.

Okay understood. Thank you very much.

Speaker 1: Thank you. Our next question comes from Ryan Levine with Citi. Your line is open.

Thank you. Our next question comes from Ryan Levine with Citi. Your line is open.

Speaker 13: Good morning. Has the AES Fluence IQ contract duration compared to the existing portfolio and are there any material term differences in that agreement versus other contracts that you've signed?

Good morning.

Hence the Aaas fluence IQ contract duration compared to the existing portfolio and there are there any material terms. They are consistent in that agreement versus other contracts that you sign.

Speaker 7: So, it's actually more on the longer duration side in terms of the contract length, which is more exciting. So, that gives us further momentum to really adapt IQ with the dynamics of the California market and like I said, it's more on the longer duration side.

So it's actually more on the longer duration side in terms of the contract lengths, which is which is more exciting.

So that gives us further momentum to really adapt IQ with the dynamics of the California market and like I said, it's more on the longer duration side.

Speaker 13: Okay, thanks. And then in terms of your hiring ability or trends, can you update us to your ability to hire new people both on the engineering and Salesforce side throughout the organization?

Okay. Thanks, and then in terms of your hiring.

Our ability or trends can you update us your ability to hire new people both on the engineering and sales force side throughout the organization.

Speaker 4: Yeah, as I mentioned, I mean, we're very pleased that in such a difficult market, and we all know that the labor market is, especially for high-qualified engineers and professionals, it's very tight.

Yes, I am.

Mentioned I mean, we're very pleased that in such a difficult market and we all know that the labor market is.

Especially for high qualify engineers and professionals.

It's very tight.

Speaker 4: And it has been a quite nice surprise to us that the number of people that they want to come, they want to be part of.

And is it has been a key.

Nice surprise to us that the number of people that day, they want to come they want to be part of fluent story.

Speaker 4: They want to, they like our mission and our purpose.

They want to delight, our mission and our purpose.

What we're doing in our global presence and we are truly truly enabling more and more renewables around the world. So we will increase our our teams in supply chain supply chain and manufacturing logistics by 57%, we hire a significant amount of engineers on <unk>.

Speaker 4: We hire a significant amount of engineers and control engineers and commissioning engineers. Honestly, you know, the demand has been, you know, tremendous. We have an extremely high volume. We might call it, you know, groin pains. We are surprised by, you know, the amount of demand that we have. So and the simultaneously effect that having all those sites being commissioned and installed at simultaneously, well, it was a big challenge.

For all engineers and commissioning engineers.

Honestly the demand has been tremendous we have a extremely high volume we might call it growing pains.

Speaker 4: We are surprised by the amount of demand that we have.

We are surprised by the.

The amount of demand that we have so and the simultaneously.

Speaker 4: So, and the simultaneously effect that having all those sites being commissioned and installed at simultaneously, well, it was a big challenge. I think that, you know, by the almost 150 people that we added.

Fact that having all those sites being commission any Sally that simultaneously while it was a it was a big it was a big challenge I think that by that almost 150 people that we added.

Speaker 4: in a very, very, you know...

They are very very.

Speaker 4: tight market is remarkable. So thank you very much for asking. And we, I mean, the opportunity for us to welcome all of them and thank them for all their hard work.

Tight market eats app is remarkable so.

Thank you very much for asking and that opportunity for us to welcome all of them and.

Thank them for all their hard work.

Speaker 13: And then just to clarify, the comment around fourth quarter achieving single-digit margin, is that referring to on a gap basis or is that on an incremental contract signed or incremental sales basis given the revenue recognition that you have throughout your organization?

And then just to clarify the comment around fourth quarter, achieving single digit margin.

Is that referring to on a GAAP basis or is that on a.

Incremental con.

Contract signed or incremental sales basis, given the revenue recognition.

You have throughout your organization.

Speaker 5: So that's referring to the in-quarter numbers on an adjusted cross-profit level.

So that's referring to the in quarter numbers on a on an adjusted on an adjusted gross profit level.

Speaker 13: When do you think you'll be able to achieve single digit on a gap?

When do you think you'll be able to achieve single digit on a GAAP basis.

Speaker 5: We will see that same trend on the gap basis as on the adjusted basis, as mentioned before. We are a bit early in the year and we therefore will give you a more concrete answer on that one in the next earnings call.

We will see that same trend on the GAAP basis us on the adjusted basis as mentioned before.

We are a bit.

Earlier in the year and therefore, we'll give you a more concrete answer on that one in the next earnings call.

Okay. Appreciate it thank you.

Speaker 1: Thank you. And our last question comes from Steve Fleischman with Wolf Research. Your line is open.

Okay.

Thank you and our last question comes from Steve Fleishman with Wolfe Research. Your line is open.

Speaker 11: Yeah, hey, good morning. Thank you. Just, I guess, just on the shipping costs and the like, how are you thinking about, as we move on, kind of what to consider one time versus ongoing, to the degree that we stay in a kind of a higher inflation environment?

Yeah, Hey, good morning, Thank you.

Just.

I guess just on the stripping costs and the like.

How are you thinking about.

As we move on kind of what to consider.

One time versus ongoing to a degree that we stay in a kind of a higher inflation environment.

Speaker 5: Yeah, let me take that. So in general, we think that, or we are seeing that prices have been stabilized on a high level in the shipping market. And then since Q4, fiscal year 21, we have been including these higher logistic costs into our customer prices.

Yes, let me take that so in general we think that are we are seeing that prices have been stabilized on a high level in the shipping market and then since Q4 fiscal year 'twenty, one we have been including this higher logistic costs until our customer prices.

Speaker 5: and have been pushing them, therefore, into the market. That means overall in terms of the shipping cost side, we're seeing actually a light at the end of the tunnel and seeing that these type of non-recurring expenses are subsiding throughout this fiscal year. Okay. So, we should assume those costs. We shouldn't have non-recurring…

<unk>.

<unk> been pushing them therefore into the market. So that means overall in terms of the shipping cost side, we are seeing actually a kind of a light at the end of the tunnel and seeing that type of nonrecurring expenses are subsiding throughout.

This fiscal year.

Okay. So we should assume those costs, we shouldnt have nonrecurring.

Speaker 14: shipping costs pulled out as we get later in the year.

Shipping cost pulled out as we get later in the year.

That is correct.

Speaker 14: Okay, great. And then, could you just...

Okay, Great and then could you just.

Speaker 14: clarify the comments that you made about Moss Landing? And are you implying that you may disagree with the report that was issued on Moss Landing? And are you there? There's plans to build a lot more storage there?

Clarify the comments that you made about Moss landing and are you implying that you may disagree with the report that was issued on Moss landing.

Are you.

There there is plans to build a lot more.

More.

Storage there are you.

Speaker 14: in the running for that or not? Or just like more clarity on what's going on there? Yeah, I

In the running for that or not or just like more clarity on what's going on there.

Yes.

I can.

Speaker 4: I just want to repeat what I stated in my initial remarks, is that we are conducting. First, we're helping. And we are working with the Vistra, putting that facility back in operation and fixing the problem.

I just want to repeat.

I stated in my.

Initial remarks is that we are conducting first we helping and we are working with the <unk>.

Putting that.

Facility back in operation and fixing them.

Then the.

Speaker 4: the installations, we are conducting our own investigation, and it's too early once we have, you know, the final results, where we will share that with the market. It's too early to say exactly what it is, and so we will be informing you on the market when that happens.

Based on <unk>.

We are conducting our own investor.

Investigation and its too early once we have that.

The final.

The results, we will share that with the market. It's too early to say exactly what is what it is.

And so we will be informing you on the market win when that happens.

Okay, great. Thank you.

Thank you.

Sure.

Speaker 1: And that's all the questions we have for today. I'd like to send a call back to Sam Chung for any closing remarks.

And Thats all the questions we have for today I'd like to turn the call back to Samsung for any closing remarks.

Speaker 3: Thank you. We would like to thank everybody for listening to our earnings call today. If you have any further questions, please contact us at InvestorRelations at Synergy.com.

Thank you we would like to thank everybody for listening to our earnings call. Today. If you have any further questions. Please contact us at Investor Relations at <unk> Dot com.

Thank you.

Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.

This concludes today's conference call. Thank you for participating you may now disconnect.

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