Q1 2024 Fluence Energy Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Fluence Energy First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Good day and thank you for standing by welcome to the Fluence Energy first quarter 2024 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 the session you will need to press star one on your telephone.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

You will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lex Mayne, Vice President of Finance and Investor Relations. Please go ahead.

<unk> named Vice President Finance and Investor Relations. Please go ahead.

Lex Mayne: Thank you. Good morning, and welcome to Fluence Energy's first quarter 2024 earnings conference call. A copy of our earnings presentation, press release, and supplementary metric sheet covering financial results along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures, is posted on the investor relations section of our website at fluenceenergy.com. Joining me on this morning's call is Julian Nabreda, our President and Chief Executive Officer. Ahmed Pasha, our Chief Financial Officer, and Rebecca Bull, our Chief Products Officer.

Thank you good morning, and welcome to fluids Energy's first quarter 2024 earnings conference call a copy of our earnings presentation press release, and supplementary metric sheet covering financial results along with supporting statements and.

Schedules, including reconciliations and disclosures regarding non-GAAP financial measures are posted on the Investor Relations section of our website at Fluence energy Dot com.

Joining me on this morning's call are Hooley, and Nebraska, our President and Chief Executive Officer Ahmed Pasha, Our Chief Financial Officer, and Rebecca Ball, our Chief products Officer during.

Lex Mayne: During the course of this call, Fluence Management may make certain forward-looking statements regarding various matters relating to our business and company that are not historical facts. Such statements are based upon current expectations and certain assumptions and are, therefore, subject to certain risks and uncertainties. Many factors could cause actual results to differ materially.

During the course of this call fluids management may make certain forward looking statements regarding various matters relating to our business and company that are not historical facts.

Such statements are based upon the current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward looking statements and for more information regarding certain risks and.

Lex Mayne: Please refer to our SEC filings for our forward-looking statements and for more information regarding certain risks and uncertainties that could impact our future results. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Also, please note that the company undertakes no duty to update or revise forward-looking statements based on new information.

Ts that could impact our future results you are cautioned to not place undue reliance on these forward looking statements, which speak only as of today.

Also please note that the company undertakes no duty to update or revise forward looking statements for new information.

Lex Mayne: 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 measure is available in our earnings materials on the company's investor relations website. Following our prepared comments, we will conduct a question and answer session with our team. During this time, to give more participants an opportunity to speak on this call, please limit yourself to one initial question and one follow-up. Thank you very much. I'll now turn the call over to Julian. Thank you, Lex.

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 measure is available in our earnings materials on the company's Investor Relations website.

Following our prepared comments, we will conduct a question and answer session with our team. During this time to give more participants an opportunity to speak on this call. Please limit yourself to one initial question and one follow up. Thank you very much I'll now turn the call over to Julio.

Thank you next I would like to stem a warm welcome to our investors analysts and employees participating on today's call.

Julian: I would like to send a warm welcome to our investors, analysts, and employees participating on today's call. I will provide a brief update on our business and then review progress on our strategic initiatives. Ahmed will then give more details on our financial performance and outcomes, beginning on slide four with the key height. I'm pleased to report that we are off to a good start for Fiscal 24 and continue to benefit from our robust energy storage. In the first quarter, we recognized $364 million in revenue.

I will provide a brief update on our business and then review progress on our strategic objectives.

Ed will then give more details on our financial performance and outlook.

Beginning on slide four with the key highlights I'm pleased to report that we are off to a good start for fiscal 'twenty four and.

<unk> continued to benefit from a robust energy storage mark in the first quarter, we recognized $364 million of revenue.

Julian: Furthermore, we deliver our second consecutive quarter of double-digit growth. Our adjusted EBITDA for the first quarter was approximately negative $18 million, in line with our expectations in an improving from negative 26 million in the first few. Additionally, we recognize a record $1.1 billion of new orders. This is broken down by our solution business contracting 2.7 gigawatt hours, our services business adding 2.3 gigawatt hours, and our digital business adding 400 megawatt hours of new. Furthermore, our signed contract backlog as of December 31st increased $800 million to $3.7 billion, the highest level in our history. Additionally, our pipeline increased $400 million to $13.4 billion, which gives us confidence to achieve our growth goals in 2024. Our service and digital business, which together represent our recurring revenue streams, continue to gain traction. We ended the quarter with 3.3 gigawatts of service assets under management.

Furthermore, we delivered our second consecutive quarter of double digit growth margin or.

Our adjusted EBITDA for the first quarter was approximately negative $80 million in line with our expectations and improving from negative 26 million in the first few of 'twenty three.

Additionally, we recognized a record $1 $1 billion of new orders.

This is broken down by our solution business contracted two seven gigawatt hours, our services business, adding two three gigawatt hours on our digital business, adding 400 megawatt hours of new contracts.

Furthermore, our signed contract backlog of December 31 increased 800 million to $3 $7 billion, the highest level in our history.

Additionally, our pipeline increased $400 million, two starting point 4 billion, which gives us confidence to achieve our growth goals in 2024 and beyond.

Our service and digital businesses, which together represent our recurring revenue streams continue to gain traction we.

We ended the quarter with three three gigawatts of salaries assets under management importantly are deployed service attachment rate, which is weighs on our community of active services contracts relative to our deploying starts remains above 90%.

Julian: Importantly, our deployed service attachment rate, which is based on our community-backed services contracts relative to our deployed storage, remains above 90. We had a strong quarter in our digital business, adding 400 megawatts to our battery, were important. Our digital assets under management increased to 17 gigawatts as of December 31st, from 15.5 gigawatts at September.

We had a strong quarter in our digital basis, adding 400 megawatts to our backlog and more importantly, our digital assets under management increased to 17 Gigawatts as of December 31st from 15.5 Gigawatts at September 30.

Julian: In summary, our combined Services and Digital Annual Recurring Revenue, or ARR, was approximately $64 million as of December 31st, and it's on track for our guidance of approximately $80 million by the end of fiscal year. Turning to slide five, I'd like to discuss our progress on the five strategic objectives that guide our decisions and. There are also important markers for investors to monitor and measure our performance, first on delivering profitable growth. This quarter, we continue to grow our backlog as we added 1.1 billion of projects that we expect to yield double-digit growth. Our disciplined approach to offer competitive solutions at cost keeps us on track to deliver on our financial... Second, we will continue to As such, I'm pleased to report that we're on track for our battery module manufacturing to begin production in the summer of 2020, gradually ramping up over the subsequent. This battery module manufacturing will enable us to provide a product that meets the U.S. domestic content requirements for battery energy storage, which I will touch on more in a minute.

In summary, our combined services and digital annual recurring revenue or <unk>.

<unk> was approximately $64 million as of December 31.

And it's on track for our guidance of approximately $80 million by the end of fiscal year 'twenty four.

Turning to slide five I'd like to discuss our progress on the five strategic objectives that guide our decisions and actions. There are also important marker for investors to monitor and measure our performance.

First on delivering profitable growth this quarter, we continue to grow our backlog as we added $1 1 billion of projects that we expect to yield double digit gross margins.

Our disciplined approach to offer competitive solutions to customers keeps us on track to deliver on our financial objectives.

Second we will continue to develop products and solutions that our customers need.

As such I'm pleased to report that we're on track for a bathroom module manufacturing to begin production in the summer of 'twenty four.

We're really ramping up over the subsequent quarters.

This battery module manufacturing will enable us to provide a probe that meets the U S domestic content requirements for battery storage, which I will touch on more in a moment.

Julian: Third, due to our scale and global outreach, we have established a supply chain as one of our key strategic competitors. Our diversity of suppliers is a key component and enables us to take advantage of favorable terms and battery prices, which I will discuss in more detail. Fourth, we will use FluentDigital as a competitive differentiator and a margin driver. I'm pleased to report that we have strong digital customer retention, with 21 digital contracts renewed during the quarter and zero customers lost, and our fifth objective is to work better. I'm proud to state that in November, Fluence became an official signatory member of the UN Global Conference, ahead of the expected timeline outlined in our 2023 sustainability plan. Turning to slide six.

Third to our scale and global outreach, we have established a supply chain is one of our key strategic competitive advantage.

<unk> our suppliers is a key component of these.

It enables us to take advantage of favorable terms and battery prices, which I will discuss in more detail shortly.

Fourth we will use <unk> as a competitive differentiator and a margin driver.

I'm pleased to report that we have strong digital customer retention with 'twenty, one digital contracts renewed during the quarter and zero customer attrition.

And our fifth objective is to work better.

I'm proud to state that in November fluids became an official signatory member of the UN Global compact.

Of the expected timeline outlined in our 2023 sustainability report.

Turning to slide six we continue to see strong growth in demand for utility scale energy storage system.

Julian: We continue to see strong growth in demand for utility-scale energy stores. Over the past 12 months, we've seen lithium carbonate prices decline over 80%. This has, in turn, led to a decrease in battery prices, which has improved customer economics and allowed for more projects to be retired. This has been reflected in the growth of our backlog, which now sits at a record level of $3.7 billion, which is an increase of approximately $800 million from the fourth quarter. This is also the ninth consecutive quarter in which we added more orders in tech to backlog than revenue that was recognized out of, further illustrating the growth in the. Additionally, $3.7 billion does not include some awards signed since the end of the quarter, such as our 650-megawatt-hour Morse Lake project. More important,

Over the past 12 months.

We seem lithium carbonate prices decline over 80%.

In turn led to a decrease in battery prices, which have improved customer economics and allowed for more projects to be banned silly.

He has been reflected in the growth of our backlog, which now sits at a record level of $3 7 billion, which is an increase of approximately 800 million from the fourth quarter.

This is also the ninth consecutive quarter in which we added more order intake to backlog that revenue that was recognized auto back.

Further illustrating the growth in demand.

Additionally, $3 7 billion does not include some award signed Suzanne on the water such as our Sichuan Magna 50 megawatt hour more of Lake project in Australia.

More importantly, 100% of our backlog is at fixed prices with both suppliers and customers with no commodity price exposure, thus, giving us strong visibility into revenue and margin for these projects. Additionally, approximately 80% of our fiscal 'twenty four revenue guidance.

Julian: 100% of our backlog is at fixed battery prices with both suppliers, with no commodity price portion, thus giving us strong visibility into revenue and margins. Additionally, approximately 80% of our fiscal 24 revenue guidance is already covered by our current backlog attributable to fiscal 24 plus revenue already recognized. These two data points provide us with high confidence that we will be able to achieve our guidance ranges for revenue and adjusted EBITDA for fiscal year 2021, based on the conversations we're having with our customers and potential customers. We're expecting to see continuous strong revenue growth in fiscal 25 of approximately 35 to 40 from fiscal.

Midpoint is already covered by our current backlog attributable to erode into fiscal 'twenty, four plus revenue already recognizing the first quarter.

These two data points provide us with high confidence that we will be able to achieve our guidance ranges for revenue and adjusted EBITDA for fiscal 'twenty four.

Based on the conversations we're having with our customers and potential customers. We're expecting to see continued strong revenue growth in fiscal 'twenty five of approximately 35 to 40 from fiscal 'twenty four.

Julian: Our 2025 Outlook is supported by our partners, which sits at approximately $13.4 billion and grew $400 million from the last. As we have communicated in prior calls, our expectations for pipeline conversion are at approximately 50% over the next 20 years. Turning to slide seven, over the past couple of years, we have taken major steps to diversify and improve the resilience of our supply chain. Our supply chain strategy is centered around four key elements. The first is the diversity of batteries. Curran will utilize five battery suppliers located in China, South Korea, Sweden, and the United States.

Our 2025 outlook is supported by our pipeline, which sits at approximately $13 4 billion and grew $400 million from the last quarter.

As we have communicated in prior calls our expectations for <unk> conversion is that approximately 50% over the next 24 months.

Turning to slide seven over the past couple of years, we have taken major steps to diversify and improve their resilience of our supply chains.

Our supply chain strategy centered around four key elements.

The first is diversity of battery suppliers.

We utilized five battery suppliers located in China, South Korea, Sweden, and the United States.

Julian: This ensures we have multiple yogurts to pull from, which supports our growth while mitigating disruption. We will also note that building a stable and reliable U.S. supply chain is critical for the company, and as I will discuss, we are taking significant steps to establish a U.S.-based supply chain. Second, to capitalize on growing demand for our products, we have secured multi-year guarantee battery capacity from this, which meets our needs for fiscal 24 and fiscal 25 and provides flexibility for upside. These capacity agreements are subject to market price adjustment. We also use a price discovery mechanism involving multiple battery supplies to ensure we are constantly delivering the most competitive prices to our customers. And finally, these capacity agreements come with minimal take or pay obligations. Sir,

This ensures we have multiple geographies to pull from which support our growth while mitigating disruptions.

We will also note that build a nice stable unreliable U S supply chain is critical for the industry.

As I will discuss we are taking significant steps to establish a U S based supply chain easier.

Second to capitalize on growing demand for approach, we have secured multi year guarantee battery capacity from these suppliers.

This covered our need for fiscal 'twenty, four 'twenty, five and provides flexibility for upside in them.

These capacity agreements are subject to market price adjustments. Additionally, we also use surprises covering mechanism involving multiple battery suppliers to ensure we are constantly the leering the most competitive prices to our customers.

And finally, these capacity agreements with minimum take or pay obligations.

Julian: To capture the incentives laid out by the IRA, we will be manufacturing our own battery models in the US, which represents two-thirds of our global market. It also enables us to introduce our proprietary battery management system, the software that runs the controls at the battery cell level and the initial point of control in a battery. Additionally, it enables us to further commoditize our supply chain by facilitating the integration of multiple batteries. We're currently on schedule for battery module manufacturing to begin this summer. In doing so, we expect to qualify for the Domestic Content Tax Credit under Section 42.

Sir two.

To capture the incentive laid out by the <unk>, we will be manufacturing our own battery modules in the U S.

Which represents two thirds of our global basis. It also enables us to introduce our broker very battery management system. The software that runs the controls at the battery cell level and the initial point of going to all of you know battery storage system.

Additionally, it enables us to further commodity that's our supply change by facilitating the integration of multiple weather events.

Were currently on schedule for our battery module manufacturing to begin this summer.

In doing so we expect to qualify for the domestic content tax credits under section 45 X.

Julian: The fourth element of our strategy is an asset-light regional strategy. This involves using two major contract manufacturers for system integration, one in Vietnam and one in Europe. We will look to continue to regionalize our asset line model in other areas, such as Europe and India. This strategy provides us with enhanced flexibility and agility, particularly in, and positions Fluence for a high return on invested capital, as we do not incur the capital costs associated with building or maintaining our own production. When we look around the world, we're using various shipping routes for our projects. To that end, I would like to make a few comments in relation to the recent disruptions in the red. Only approximately 50% of our global treatments were expected to use the red zero. The rerouting of these shipments adds around two weeks to our shipments, but we have been able to accommodate it without affecting customer delivery.

The fourth element of our strategy is an asset light regional supply chains.

Involve using two major contract manufacturers for system integration, one in Vietnam and one in Utah.

We will look to continue to regionalize, our asset light model in other areas, such as Europe and India.

This strategy provides us with enhanced flexibility and agility, particularly in its scale and position Fluor for a high return on invested capital as we do not incur the capital costs associated with building our maintain our own production capacity.

When we look around the world, where you assume <unk> been route for our projects.

To that end I would like to make a few comments in relation to the recent disruptions in their agency.

Only approximately 50% of our global achievements were expected to use that red Cedar out.

The rerouting of the equipment that's around two weeks towards <unk> that we have been able to accommodate without affecting customer delivery commitments. Finally, the incremental costs, we're experiencing and deepen we're able to transfer to our customers in their entirety in accordance with our contracts.

Julian: Finally, the incremental costs we're experiencing in GDP, we were able to transfer to our customers in their entirety, in accordance with our. In any event, our logistics team is working very diligently to reduce as much as possible this increase. Overall, the four elements are the cornerstone of our supply chain strategy, which provides flexibility, competitiveness, and high certainty for our company.

In any event our logistics team is working very diligently.

To reduce as much as possible these increases in costs.

Overall, the four elements out of the cornerstone of our supply chain strategy, which provides flexibility competitiveness and high certainty for our customers. We will look to build on this as we continue to strengthen our global supply chain.

Julian: We will look to build on this as we continue to strengthen our global presence. Turning to slide eight, we're well positioned to recognize multiple Venuses from the IRA, which is already boosting demand for energy storage. These benefits fall in two categories. Under the first category, our customers have the potential to receive up to a 50% tax credit for their project's capital costs, which significantly improves project economics and attracts customers. These incentives to our customers include a base RTC or investment tax rate, as well as bonus incentives for deploying in an energy community and using a domain. The second category of incentives in the IRA includes those provisions that directly benefit. By producing battery modules in the U.S., as I just discussed, we expect to qualify for a production tax credit of $10 per kilowatt hour for battery modules produced under Section 45.

Turning to slide eight we are well positioned to recognize multiple bonuses from the IRA which is already boosting demand for energy storage.

This benefit.

<unk> in two categories.

Under the first Cup area, our customers have the potential to receive up to a 50% tax credit for their project capital costs, which significantly improved project economics and attractive.

This is the incentives to our customers include a base ITC or investment tax credit as well as bonus incentive for deploying in an energy community and using domestic contact.

The second category of incentives on the Ara includes those provisions that directly benefit fluids.

By producing by two malls in the U S. As I just discussed we expect to qualify for a production tax credit of $10 per kilowatt hour of battery module produce under section 45 tax there.

Julian: These two categories of incentives provide for our products to be more competitive and enable us to benefit from increased scale, more volumes, and operating. Turning to slide 9, I'm proud to report that in November, Fluence became an official signatory member of the United Nations Global Company. Being accepted as a signatory member is an important step on our sustainability journey of building a strong ESG program based on a structured framework, data, and active engagement. Fluence has joined more than 20,000 companies and organizations around the world that have signed the UN Global Covenant and are committed to responsible corporate citizenship.

They still category yourself incentives provide for our approach to be more competitive and then annual results to benefit from increased scale more volumes and operating leverage.

Turning to slide nine I am proud to report that in November fluids regain men official signatory member of the United Nations Global compact.

Being affected as a signatory remember it's an important step on our.

And really the journey of building a strong ESG program.

Based on our structural framework data and active engagement.

Drilling has joined more than 20000 companies or organizations around the world that has signed the UN global compact and.

And our commitment to responsible corporate.

Citizenship and sustainability.

Julian: We're excited to collaborate with like-minded companies, non-governmental organizations, and other stakeholders through the Global Compact Network to exchange best practices and drive positive change. Now, I would like to make a few remarks regarding the article published in late December regarding the Diablo project in California that highlighted a contract claim filed against us by the project owner alleging that we did not have a valid construction license. This contract claim was filed in response to our claim for $37 million in unpaid amounts and related. As we have said already, we believe these contract claims are without merit.

We're excited to put our Ed with Likeminded companies nongovernmental organizations and other stakeholders to the grower combined network.

Exchange best practices and drive positive change.

Now I would like to make a few remarks regarding the article published in late December regarding the Diablo project in California that highlighted our contract claims filed against us by the project owner.

<unk> that we did not have a biologic construction licenses in California.

This conduct claim was filed and respond to our claim for $37 million in unpaid amounts unrelated damage.

As we have said already we believes has gone through Graham's are without merit.

Julian: We intend to get paid for our work on the project, but the legal proceedings are ongoing. In the meantime, I wanted to highlight that the Diablo project is performing very well and has delivered availability or uptime above its contractual requirement during 2000. In conclusion, I'm pleased with the achievements of the first. Although we are mindful there is still a lot of work to be done, we will look to continue this momentum as we progress through 2020. I will now turn the call over to Thank you, Julian. And good morning, everyone.

<unk> tend to get paid for our work on their projects.

Legal proceedings are ongoing.

In the meantime, I wanted to highlight that the Avalon project is performing very well and has delivered availability our uptime at Bob is contractive requirement during 2023.

In conclusion I am.

I'm pleased with the achievements of the first quarter.

Although we are mindful theres still work to be done.

We'll look to continue this momentum as we progress through 2024, I will now turn the call over to Amit.

Thank you Julian and good morning, everyone before we dive into the reserves I am very pleased to be here at fluence and I would like to share my perspective on my first month at <unk> on a macro level fluence is well positioned to capitalize on this once in a lifetime opportunity.

Ahmed Pasha: Before we dive into the results, I am very pleased to be here at Fluence, and I would like to share my perspective on my first month at Fluence. On a macro level, Fluence is well-positioned to capitalize on this once-in-a-lifetime opportunity as energy storage benefits from declining input prices and an ever-increasing focus on grid stability. I have learned much about the company, the people, and the culture.

As energy storage benefits from declining input prices and an ever increasing focus on good stability.

I have learned much about the company the people and the culture.

Ahmed Pasha: I have been impressed by the team's laser focus on offering competitive solutions to customers while adhering to a disciplined approach to growing our top and bottom lines. I am looking forward to maintaining this financial discipline and stewardship of our strong balance sheet while delivering attractive returns to our shareholders. This morning, I will review our first quarter results and 2024 guidance, which we have reaffirmed across all, beginning with our first quarter 2024 results on slide 11. We generated $364 million in revenue, 70% of which was in the US, and largely in line with our expectations.

I have been impressed by the team's laser focus on offering competitive solutions to customers, while adhering to a disciplined approach to growing our top and bottom lines.

I am looking forward to maintaining this financial discipline and stewardship of our strong balance sheet, while delivering attractive returns to our shareholders.

This morning, I will review, our first quarter results and 2020 guidance, which we have reaffirmed across all metrics.

Beginning with our first quarter 2020 results on slide 11.

We generated $364 million in revenue, 70% of which was in the first in the U S and largely in line with our expectations.

Ahmed Pasha: This was an increase of 17% from the first quarter last year. As we discussed on our previous quarterly call, we expect to realize 30% of fiscal 2024 revenue in the first half, and our first quarter results reflect this mix. Turning to adjusted gross profit. For the quarter, we generated approximately $38 million, or an adjusted gross margin of approximately 10.5% versus 4.2% in the first quarter of last year. It also represents the second consecutive quarter in which we posted double-digit gross margins. Our operating expenses were $62 million, in line with expectations and consistent with the first quarter of last year, representing 17% of quarterly revenue. Adjusted EBITDA for the quarter was negative $18 million versus negative $26 million in the first quarter of last year.

This was an increase of 17% from the first quarter last year as.

As we discussed on our previous quarterly call, we expect to realize 30% of fiscal 2004 revenue in the first half and our first quarter results reflect this mix.

Turning to adjusted gross profit.

The quarter, we generated approximately $38 million or an adjusted gross margin of approximately 10, 5% versus four 2% in the first quarter of last year.

It also represents the second consecutive quarter in which we posted double digit gross margins.

Our operating expenses were $62 million in line.

Expectations and consistent with the first quarter of last year, representing 17% of quarterly revenue.

Adjusted EBITDA for the quarter was negative $18 million versus negative $26 million in the first quarter of last year.

Ahmed Pasha: Negative adjusted EBITDA reflects our revenue weighting towards the second half and operating costs that are relatively flat on a quarterly basis, as I just mentioned. Overall, we believe these results reflect our disciplined approach to grow our top line and improve our bottom line to deliver on our financial targets. So turning to slide 12, I am pleased to report that we ended the first quarter with $477 million of cash. This represents an increase of $14 million from the fourth quarter and is the third consecutive quarter that we have increased our total cash position. From a liquidity perspective, we are in an excellent position to capitalize on the growing energy storage market. In addition to our cash position, we have access to approximately $130 million in credit facilities.

Negative adjusted EBITDA reflects our revenue weighting towards the second half and operating costs that are relatively flat on a quarterly basis as I just discussed.

Overall, we believe these results reflect our disciplined approach to grow our topline and improve our bottom line to deliver on our financial commitments.

So turning to slide 12, I am pleased to report that we ended the first quarter with $477 million of cash. This represents an increase of $14 million from the fourth quarter and is the third consecutive quarter that we increased our total cash position.

From a liquidity perspective, we are in excellent position to capitalize on the growing energy storage market. In addition to our cash position, we have access to approximately $130 million in credit facilities.

Ahmed Pasha: This includes $75 million available under our recently signed $400 million asset-backed lending facility, or ABL facility. Availability under this ABL facility is dependent on the level of collateral available to secure, which is mostly our U.S. inventory. Thus, as our inventory balance increases, so should our borrowing capacity, which provides us another lever to manage our working capital needs. In summary, we have total liquidity of more than $600 million, which is sufficient to meet our current business needs. Moving to slide 13, which is wholly unnoticed.

This includes $75 million available under our recently signed $400 million.

Asset backed lending facility or ABL facility.

Availability in this ABL facility is dependent on the level of collateral available to secure which is mostly our U S inventory.

Thus as our inventory balance increases so should our borrowing capacity, which provides us another lever to manage our working capital needs.

In summary, we have total liquidity of more than $600 million.

Which is sufficient to meet our current business needs.

Moving to slide 13, as Holian noted we are reaffirming our guidance for fiscal 2024 of revenue between $2 7 billion and $3 3 billion.

Ahmed Pasha: To that end, we are reaffirming our guidance for fiscal 2024 of revenue between $2.7 billion and $3.3 billion. Additionally, we have approximately 80% of the midpoint of our annual revenue guidance covered by our backlog plus revenue recognized in the first quarter. This provides us confidence that we are on the path to achieving our fiscal 24 guidance range from a Margin perspective. We continue to anticipate fiscal 2024 Adjusted Gross Margin of between 10% and 12%, which is in line with our first quarter results. Additionally, we are reaffirming adjusted EBITDA guidance of $50 million to $80 million. Furthermore, we are on track to achieving ARR of approximately $80 million by the end of fiscal 2020. I would also remind you that we continue to expect fiscal 2024 revenue split of 30% in the first half and 70% in the second half, which implies fiscal Q2 revenue of approximately $530 million. For Q2, we expect adjusted EBITDA to be negative because annual operating costs have a more even rating by quarter than revenue.

To that end, we have approximately 80% of the midpoint of our annual revenue guidance covered by our backlog plus revenue recognized in the first quarter.

This provides us confidence that we are on the path to achieving our fiscal 'twenty four guidance range.

From margin perspective.

We continue to anticipate fiscal 2024 adjusted gross margins.

Of between 10% and 12%, which is in line with our first quarter results.

Additionally, we are reaffirming our adjusted EBITDA guidance of 50 million to $80 million.

Furthermore, we are on track to achieving.

<unk> of approximately $80 million by the end of fiscal 2024.

I would also remind that we continue to expect fiscal 2024 revenue split of 30%.

In the first half and 70% in the second half, which implies fiscal Q2 revenue of approximately $530 million.

For Q2, we expect adjusted EBITDA to be negative because annual operating costs.

More even beating by quarter than revenue.

Ahmed Pasha: Consistent with our full year guidance, we expect second half 24 adjusted EBITDA to improve significantly relative to the first half, as we realize 70% of annual revenue during that time period. Finally, looking ahead to 2025, we continue to believe that we will achieve 35 to 40% year-over-year top-line revenue growth driven by our robust pipeline and record backlog of signed contracts. With that, let me turn the call back to Julian for his closing remarks. Thank you, Ahmed.

Consistent with our full year guidance, we expect second half 2004, our adjusted EBITDA to improve significantly relative to the first half as we realize 70% of annual revenue during that time period.

Finally, looking ahead to 2025, we continue to believe that we will achieve 35% to 40% year over year topline revenue growth driven by our robust pipeline and record backlog of signed contracts.

With that let me turn the call back to <unk> for his closing remarks.

Julian: Turning to slide 14, and in conclusion, I want to emphasize the key takeaways from this quarter. First, we had a record set in order intake and a record backlog of 3.7. We have lock-in battery supply at fixed prices for all our projects in our value, thus providing strong visibility to achieve. Second, we have a sustainable and resilient supply chain that is a key component of our company. Sir, we are on track to begin our module manufacturing this summer. Together with our customers, we believe we are in a prime position to capitalize on various incentives under the IRA. Fourth, the falling battery price environment serves as a tailwind for us, and it allows more energy storage projects to be introduced by our economy.

Thank you Amit.

Turning to slide 14 and in conclusion.

I want to emphasize the key takeaways from this quarter results.

First we had a record set in order intake and a record backlog of $3 7 billion.

We have locked in battery supply at a fixed prices for all our projects in our backlog.

Providing strong visibility to achieving our guidance.

Second we have a sustainable and resilient supply chains that is a key component of our competitive set.

Third we are on track to begin our module manufacturing this summer.

Together with our customers. We believe we are in that Brian position to capitalize on barrios incentives under the IRI.

Fourth the falling back to your price environment serves as a tailwind for us and it allows more energy storage projects that we've been selling by our customers. All of these factors provide us confidence in our ability to successfully deliver on our fiscal 'twenty four 'twenty five objectives.

Operator: All of these factors give us confidence in our ability to successfully deliver on our fiscal 24 and 25. This concludes my prepared remarks. Operator, we're now ready to take questions. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

This concludes my prepared remarks, operator, we're now ready to take questions.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, we ask that you. Please limit yourself to one question one follow up question by while we compile the Q&A roster.

Operator: We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile our Q&A roster. And our first question comes from the line of George Kounerakis with Canaccord Genuity. Your line is open, please go ahead. Good morning, guys. How are you?

Yeah.

And our first question comes from the line of George <unk> with Canaccord Genuity. Your line is open. Please go ahead.

Good morning, George how are you.

Julian: Good morning, I'm doing great. How about you? Yeah, I'm doing great. Thank you for asking my question. So maybe just first, I'd like to ask about the orders, the 1.1 billion in orders. Can you help us understand sort of the geographic profile and also are those orders consistent with your gross margin profile of mid-teens over the long term? Yeah, the geographic profile is in line with what we have said, you know, two-thirds in the U.S. and one-third internationally, and they are, you know, at double-digit margins for that order intake, in line with what we have communicated. And then just as a follow-up here, as you look at the M&A landscape, you know, we talked about Vartila in the past; they're still undergoing their strategic review. Do you feel compelled at all to change the profile of Fluence?

Good morning, I am doing great.

How about you.

Great.

Thanks for that question.

So maybe just first I'd like to ask about the orders the $1 1 billion in orders can you help us understand.

Sort of the geographic profile and also are those orders consistent with your gross margin profile of mid teens over the long term.

Yes. Thank you rapid profile is in line with what we have said two thirds in the U S on <unk> internationally.

Double digit margins for four.

For those for that order intake.

Line with what we have communicated to the market.

Okay and then.

Just as a follow up here as you look at the.

The M&A landscape.

<unk> talked about <unk> in the past they are still undergoing their strategic review.

Do you feel compelled at all to change the profile of fluids.

Julian: You know, if you have a nice cash balance, and if you look across the landscape, are you looking to potentially expand your footprints or your software profile by making acquisitions? No, no, yes. We have said we're very happy with our corporate business, in terms of a strong, very, very strong sales channel. And, you know, you can see it not only in our backlog but also in our pipeline. You know, our technology; we have a very clear roadmap that is going well, and we're very happy with. And so, generally, I don't see any need for acquisitions at this stage. We're not looking at any.

You have a nice cash balanced and if you looked at across the landscape are you looking to potentially expand footprint or your software profile by making acquisitions. Thank you.

So we have said we.

Well.

We're very happy with our corporate business position.

Strong very very strong sales channel then you.

Because here not only in our backlog, but also in our pipeline.

Our technology, we have a very clear roadmap that is going well and we're very happy with and so generally I don't see any need for a for acquisitions at this stage.

Julian: We're clearly in the market, ensuring we understand how the environment looks, but there's no need to do any acquisitions in any of our businesses, you know, to support any of our businesses at this time. Thank you. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Brian Lee with Goldman Sachs. Your line is open. Please go ahead. Good morning, Brian. Hey Julien, good morning.

Not looking at anything where clearly the market.

Ensuring to understand what that what they buy how the environment looks but there is no need to do any acquisitions in any of our to support any of our business.

Structure.

This stage.

Thank you.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Brian Lee with Goldman Sachs. Your line is open. Please go ahead.

Morning, Brian.

Hey, good morning, and good morning, everyone. Thanks for taking the questions I had two sort.

Operator: Good morning, everyone. Thanks for taking the questions. I had two sort of related numbers related one. First on the legacy backlog. I think entering the year, you guys talked about something like $150 million of still low margin, no margin legacy backlog you needed to work off this year, and I believe, you know, most of it was going to get deployed in Q1. So if that's right, it implies the gross margins on the non-legacy business were, you know, mid to the high teens or something in that range since you reported 10.5% for the quarter. So I guess wondering if that's right, if the backlog legacy is all gone, and then how do you, you know, how should we be thinking about gross margin for the rest of the year, given the implicit, you know, higher level for the non-legacy stuff? It seems like the 10 to 12% annual guide for gross margin seems a bit conservative. I don't know how to follow up. Yeah, all the legacy has, you know, is now gone.

Sort of numbers related one first bought them.

Legacy backlog I think.

Entering the year you guys had talked about something like $150 million is still low margin no margin legacy backlog immediate work off this year and I believe most of it was going to get deployed in Q1, So if that's right.

It implies that margins are the non legacy business was mid to the high teens or something in that range. Since you reported 10, 5% for the quarter. So I guess wondering if thats right. If the backlog of legacies are gone and then how do you how should we be thinking about gross margin for the rest of the year given the implicit.

A higher level for the non legacy stuff it seems like the 10% to 12% annual guide for gross margins.

And then I had a follow up.

All the legacy has.

<unk> now gone.

Julian: But the actual number for the first quarter of the legacy contracts that we had in the, that we recognized revenue for in the first quarter was closer to $50 million, not $150 million. So I'll give you, you know. I think that we are in line with our 10, you know, 10 to 12 margins that we communicated for the year. And this quarter proves that if you take into account the $50 million in legacy contracts, which are essentially roughly breakeven. But you're at no more legacy going forward, and the actual number for this quarter was $50 million. Okay, okay, that's fair. Then if I take the 50, it seems like you're sort of closer to the mid-teens, but still within that range.

While the actual number four for the first quarter of the legacy contracts that we had in the ore that we recognize revenue in the first quarter closer to 50 $50 million 150, So I gave you.

I think that we are in line with our 10.

10 to 12.

Margins that we that we communicated for the year in this quarter proves that if you take into account.

The $50 million of late.

Of legacy contracts, which are essentially at roughly breakeven so.

But you had no more legacy going forward and the actual number for this quarter was $50 million.

Okay. Okay. That's fair then if I take the FID it seems like youre sort of closer to the mid teens.

Still within that range.

Julian: Uh, understood. Um, and then, you know, there's been a lot of questions, Julian, about, um, lower battery prices. We see what's happening with lithium carbonate.

Understood.

And then.

There's been a lot of questions about.

The lower battery price as we see what's happening with lithium carbonate.

Julian: Uh, I think you made a comment on slide 12 or 13 that, um, your fiscal 24 battery supply and prices are locked in. So, does that mean, I know, you know, there's the index-based adjustments for your customers? Is there anything in your, I guess, fiscal 24, uh, backlog to be deployed that can still get adjusted on price? Or is that all for future, um, you know, outside of fiscal 24, uh, backlog that maybe still has some of those indexed, uh, linked adjustments that could take place? I'm just trying to understand.

You made a comment on slide 12, and 13 that.

Your fiscal 'twenty for battery supply and prices are locked in.

So does that mean I know, there's the index based adjustments for your customers is there anything in your fiscal 'twenty four.

Backlog to be deploy that can still get adjusted on price or is that all for future.

Outside of fiscal 'twenty four backlog that may be still has some of those index.

Julian: I'm just trying to understand how locked and loaded the backlog dollar value is for this year versus, you know, what could potentially move around next year if battery prices keep going lower. So let me walk you through where we are. So we use RMI, as you know.

Linked adjustments that could take place I'm, just trying to understand how locked and loaded the backlog dollar value is for this year versus what potentially could maybe move around next year battery prices keep going lower.

So let me walk you through where we are so we use rmi as you know.

Julian: So that's an important part of how we manage our risk. The RMI supports our projects from the time we start negotiating with our customers to the point when we issue the purchase order. No, when we buy the batteries, when we make a down payment to our battery suppliers and get an actual commitment from the battery.

So thus far.

An important part of how we manage our race the Rmi supports our projects from the time, we start negotiating with our customers to the point when we issue the purchase order, but no when we buy them as it was when we make a down payment or battery suppliers on gap and that's a commitment from their other suppliers.

Julian: So what do we have in our backlog? What we have said, what we have, you know, what we have in our bag looks like we have fixed all our battery prices in all our backlog, all of it, you know, the 3.8 million billion. We have already fixed it with our suppliers and with our customers. Our current backlog does not have any commodity risk on either the right or the left, and exposure to the suppliers moving up or down or the customer.

So why do we have in our backlog.

While we have said what we have.

Our backlogs that we had to fix all our battery prices in all our backlog all of it.

$3 8 million billion.

Alrighty fix it with our suppliers and with our customers. So.

Our current backlog does not have any commodity risk on either direction and exposure to a supplier of movement up or down or the customer moving up on them.

Julian: That means that for 24, as we have also said, 80% of our revenue for 24 is already in our backlog. So that 80% is very much already fixed, and the battery prices will not move that. However, we have 20% to go, 20% that will be subject to contracts that are in the very late stage of negotiation, that will be coming in the next couple of months, and where the current offers we have outside or what we are negotiating with our customers are based on current prices. So, you know, we feel very, very comfortable that, you know, and secure that we will meet our guide, you know, our guidance for the future. And then that gives us 25, no? That gives you 25 in front of us.

That means that for 'twenty four as we have said also 80% of our revenue for 'twenty four is already in our backlog so.

That 80% is very much already effects and battery prices will not move that $80. However, we have 280% oil 20% will be subject to contracts that are in very late stage of negotiation that will be coming in the next couple of months and where the current <unk>.

We have outside of what we have negotiated with our customers is based on current price. So we feel very very comfortable that security that we will meet our guide and our guidance for the year and then that gives us 75 no.

That gives you 25 in front of us and we have roughly a billion and a half of revenue of 25 already in our backlog that billions of roughly 40% of next years.

Julian: And we have roughly a billion and a half of revenue of $25 already in our bank, that bill. So roughly 40% of next year's implied guidance we have, that is already in our backlog and is also. So when you looked at, you know, if you looked at it from a, from a, you know, from the upside 80% already in the backlog, fix 20% for 24, 20% subject to new contracts, which are already at a very late stage of negotiations. We feel very confident, which reflects our current battery, and we feel very confident, as I said, feels very, very confident we'll meet our numbers.

Implied guidance, we are giving you that is already in our backlog and is already also fix so when you looked at if you looked at it from a from a from the outside.

80% already in the backlog fix to any input for 24, 20% subject to no contracts, which are already very late stage of negotiations, we feel very confident which reflect current battery prices and we feel very confident and we will address it.

We feel very very confident that we'll meet our normal negotiating.

Julian: We are negotiating these numbers, we're talking to our customers, we know where we are. Those will support our 24 revenue guys. And then for 25, we're still clearly working on this. 40% is already in the book, the 60% to go, when we look at it, and then you can say, well, why do you feel confident about it? Look at our pipeline.

Negotiating that number but I will get to our customers. We know where we are those will support our 24 revenue guidance for 25, we're still really working on this 40% is already in our in our in the books.

The 60% oil with no when we looked at and then you can say well why do you feel confident <unk> looked at our pipeline.

Julian: You looked at our pipeline. I'm sorry for the long answer. Maybe you should look at our pipeline. We grew our pipeline by 400, but that means that the $1.1 billion we converted from our pipeline to backlog is also covered. So in reality, the pipe we brought in is at the current price. $1.5 billion in new content. So it gives us, you know, very, very clear in one quarter that, you know, the demand we're seeing in the market, the interest that is coming to this day, how much investors, customers, and regulators feel comfortable with our technology makes us, you know, very confident that we will meet our commitments for 24 and. And I do understand that sometimes the financial markets are concerned about the potential downward pressure on revenue from battery prices, but let me be very clear The elasticity of a man is tremendous.

If you looked at our pipeline and I'm sorry for the long answer maybe if you look at our pilot we grew our pipeline by $400 million.

Well that means that the $1 1 billion, we convert them from our pipeline.

Tobacco, we also cover so in reality, our pipe we brought in into our pipeline.

Current prices $1 $5 billion from yogurt gives us.

Very very clear in one quarter.

We are seeing in the market the interest that is coming to this day, how much investors customers regulators feel comfortable with our technology makes us very confident that we will meet the commitments.

Commitments for 'twenty, four and 'twenty, five and I will do understand that it sometimes.

The financial markets or concern about the potential downward pressure on revenue of battery prices, but maybe a numerically.

<unk>. This is a tremendous headwind for this industry the elasticity of the Madness tournament.

Julian: And that provides for a significant upkick in demand that significantly covers the potential downside of our revenue price. So, you know, very, very confident, 24, 80% on it, already fixed, clear line of sight within, you know, the shooting range to use an army concept, and for 24, for the other 20% and 25, 40 in the book, 60 to go, and with tremendous pipeline coming in, we feel that will more than cover all. All right, that's great. I appreciate all that. Sorry for the very long answer, Ryan. No, it was crystal clear.

And that provides for a significant uptick in in demand that significantly cover the potential downside of hour that revenue prices.

So very very confident on 24, 80% already fixed real clear line of sight within you know Jordan range led to us.

Army.

A concept and for 'twenty for the other 20% and $25 40 in the walk 60 duo and with the remainder of pipeline coming in that we feel that will more than cover all of their problems.

Alright.

Great I appreciate all the color as far as the very long answer Ryan.

Julian: I think I got the message crystal clear. Thanks a lot, guys. I appreciate it. Thank you, Ryan.

Crystal clear I think I got the message Crystal clear. Thanks, a lot guys I appreciate it thank.

Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Christine Chow with Barclays. Your line is open. Please go ahead. Good morning, Christine.

Thank you Ryan.

Thank you one moment as we move on to our next question.

Okay.

And our next question is going to come from the line of Christine Cho with Barclays. Your line is open. Please go ahead.

Operator: Good morning. Thank you for taking the question. I just wanted a clarification question on the backlog. You know, as I understood it, if the customer had not issued notice to proceed but had booked, that was still subject to move.

Hey, good morning Christine.

Thank you for taking the question.

I just wanted a clarification question on the backlog.

As I understood. It if the customer had not issued notice to proceed but had but that was still subject can move.

Julian: And it sounded like you locked everything in as for the backlog, as it stands today. But as you get incremental bookings, should we think that on a go-forward basis, all of that will be locked in when it enters your backlog as well? Or the same thing, you know, it's subject to move until they issue notice to proceed.

And it sounded like you lost everything and as for the backlog as it stands today.

But as you get incremental bookings should we think that on a go forward basis all of that will be locked in when it enters your backlog as well or same thing.

Subject to move until they issue a notice to proceed.

Julian: Yeah, very good point; the RMI covers from the point we start negotiating the cost to the point that the purchase order is issued, which is usually at the point of not. So the new order intake that we will get, there will be a point between the moment we sign the contract to the point we issue the notice to proceed that where that, you know, where that potential risk is. However, what we have seen and what we kind of show you this time is that that time frame has, you know, collapsed, and that we are now issuing notices to proceed very close, in most cases, very close to the point at which we are signing the contract. So, you know, I will say that, generally, the risk for RMI in our backlog will continue to be a small number as we move forward. There might be one or two projects that come in where the customer wants to wait a little bit, you know. Maybe that will happen. But in general, I think most of the contracts we're signing, the customer wants to secure batteries immediately, take advantage of the good price, and more. Okay, I got it.

Good point.

<unk>.

The Rmi covered from the point, we start negotiating with the customer to the point that up the purse.

Tesoro, Larry fish, which is usually at the point of notice to proceed.

The new order intake that we will get there will be a point between the moment that we signed the contract with Boeing we issued a notice to proceed that were that were there.

You know whether that potential raises however, while we have seen at what we can assure you. This time is that that timeframe has collapsed.

Collapsed significantly and that we are now issued a notice to proceed very close in most cases very close to the point at which we are.

We're finding the contract so I will say that generally the reef for IMI in our backlog will continue to be a small number as we move forward.

One of the projects that come in where the customer wants to wait a little bit and maybe that will happen, but in general I think most of the contracts. We're signing the customers wants to secure batteries immediately take advantage of the good price.

And move forward.

Okay got it.

Julian: And then can you give us an idea of how much of your backlog has EPC services tied to it, maybe a percentage of the contracted volumes? And as demand goes up, should we think that this number, you know, this percentage number moves up or down consistent with incremental bookings? And sorry, how different are the ASPs and margins today for new orders if you provide the EPC versus not? Yeah, the EPC is roughly around 30%, a lot of you know, and it's very much market and project dependent. So we have this, to give you a sense, all our transmission projects, our ultrastat projects have EPC, very complex projects that require significant, you know, coordination between all the elements so that those are EPC. Australia is a market for EBS, the U.S. is less so.

And then can you give us an idea of how much of your backlog has EPC services tied to it maybe percentage of the contracted volumes and as demand goes up should we think that this number this percentage number moves up down consistent.

Incremental bookings and sorry, how different are the asps and margins today from your orders if you provide the EPC versus not.

The EPC at roughly around 30%.

<unk>.

A lot of and it's very much market on project.

So we gave you a sense all our.

Transmission projects are ultra stack projects EPC very complex projects that required significant.

Coordination between all the elements of that those are EPC.

Australia is a market for ABC.

Julian: So it depends a little bit where we're working. As we see, we clearly are working on improving, continuing to move forward, and our ultra-stack projects. Australia is a market that we're very excited about. You might see that, you know, as we bring more Australia and ultra-stack projects into the market, those will be. But generally, if you want to model this going forward, I think the 30% is a good

The U S is less so either Panther lido at where wet what how the way we're working as we see it.

Clearly, we're working on improving continue moving forward on our ultra start project in Australia is a market that we're really excited with you might see that.

So as we bring more frail.

Failure, and ultra stack projects, though will be those will be ABC, but generally if you want to model. This going forward I think 30% is a good it's a good proxy for it as I said it depends a little bit on on the complexity of the projects in their markets. We're working on.

Julian: For it, as I said, it depends a little bit on the complexity of the projects and the markets we're working on and going for. And in terms of returns, you know, I think that we're in the 10 to 15 percent range; there's no change. Clearly, the more complex projects where we take more risk are closer to the upper band, as we have always said, and the ones that are simpler and less of a problem are on the lower side of that band. But, and generally, you would say that most of the APC projects are more complex, but, you know, I wouldn't necessarily say that it doesn't take us out of the range of 10 to 15 percent. Got it. Thank you.

Going forward and in terms of returns and I think that would in the 10% to 15% no change clearly theyre more complex projects, where would take more relief are closer to the upper band as we have always said on the ones that are simpler and less of a problem or on the lower side of that band, but generally you will say that most of the ABC projects.

Complex.

I wouldn't necessarily.

He was also take cost out of the range of 10 to 15.

Got it thank you.

Operator: Thank you. Thank you, and one moment as we move on to our next question. Our next question comes from the line of Justin Clear with Ross MKM. Your line is open. Please go ahead. Yeah, good morning. Good morning.

Thank you. Thank you.

Thank you one moment as we move on to our next question.

Our next question comes from the line of Justin Clare with Roth and Cam. Your line is open. Please go ahead.

Hey, Jeff Good morning.

Operator: Thanks for taking our questions here. First, I wanted to ask about the demand that you're seeing for batteries that would meet the domestic content requirements. And have you signed contracts at this point for those domestic batteries?

Good morning, Thanks for taking my questions here.

So first I wanted to ask you about the demand that youre seeing for batteries that would meet the domestic content requirement.

Have you signed contracts at this point for those domestic batteries and then is it possible to give us a sense for what the uplift in pricing might be and then do you see potential for a margin uplift.

Julian: And then, is it possible to give us a sense for what the uplift in pricing might be? And then do you see potential for a margin uplift, given that you're going to be one of the first to supply domestically produced batteries? Could you get out of that 10 to 15 percent range?

Given that youre going to be one of the first two supply domestically produced batteries, because you get out of that 10% to 15% range.

Julian: Hey. Very strong demand, you know. I'll say that not only with our current customers, but we're also attracting new customers that are, you know, talking to John, our America's CEO or president, who's really, you know, we see a lot of people interested and understanding and getting. So that's the first thing: very strong demand. In terms of margin, so we have said that kind of what you implied, we believe we have a first mover advantage here and that that first mover advantage should allow us to capture some additional margin. However, you know, this is early in the game.

Okay.

Strong demand.

I will say that not only with our current customers, while also attracting new customers.

Talking to John our hour.

Because.

<unk> CEO of <unk>, who is really you know we see a lot of people interested in understanding and getting them. So that's the first thing very strong demand in terms of margins.

Margins, though we have said that.

Kind of what have you, but your implied we believe we have a first mover advantage here in that that first mover advantage will allow us to capture some additional margin. However.

Julian: We're still negotiating with our customers. You know, we have to wait. You know, if I tell you here a number, customers will use it against me. So, you know, we are working with our customers to ensure that they can meet the higher returns, and then we can capture some additional margins because they're doing much better than anybody else on those projects. And that's what we're working with them on. And, you know, as these things settle down and we see those projects, those contracts, you know, coming in, and our customers, you know, secure about the returns they're getting, I think we will communicate to you what potential upside we might get. But for now, I prefer not to talk about it.

This is early in the game, we're still negotiating with our customers will have to wait if I tell you hit that number.

My customers will use it against me. So you know we are we are working with our customers to ensure that they can meet the higher returns and then we can capture some additional margin because they are doing much better than anybody else from those on those projects and that's what we're working with them on.

Why.

As these things settle down and we see those projects.

Drugs coming in and our customers secure about where the returns are getting I think we will communicate to you what potential upside we might get but for now I prefer not to talk about it.

Julian: And then, up to date, we have not signed any domestic content contracts, even though they are in a very late stage. Just to give you a point, which I think is important, the domestic content projects are for $2,025 revenue. They're not going to be supporting $24 revenue.

And then after that we have not signed any domestic content contracts, even though they are there.

They are very in very late stage just to give you a point, which I think is important the domestic content.

Projects are 2025 revenue that not one of the supporting 24 revenue our our supply our module manufacturers stars in in the summer and then it will pick up during the quarter and we will start receiving you know domestic a matter of fact arrived in the last quarter of this year.

Julian: Our supply, our module manufacturing starts in the summer, and then it will pick up during the quarter, and we will start receiving, you know, domestically manufactured batteries in the last quarter of this year. But, you know, we'll need to integrate, move them in to deliver them to our customers, so we won't see any revenue this year from domestic production. Got it.

Sure Bob.

Need to integrate them and then move them into it.

Delivers to our customers. So we won't see any revenue in this year from from domestic content.

Julian: Okay. And then just following up on that, just wondering how much of your Utah manufacturing capacity could be supplied with domestically produced cells, given your agreement with AESC? You know, could you fully utilize that facility to produce, you know, domestic content or cells that meet the requirements?

Got it okay.

Just following up on that just wondering how much of your Utah manufacturing capacity could be supplied with domestically produced cells given your agreement with ASC.

Could you fully utilize that facility to produce.

Domestic content or domestic sales that meet the requirements. How are you thinking about that that does any of that we will have.

Julian: How are you thinking about that? That's the idea that we will have, you know, we could fully utilize our current capacity. And as I think we have communicated to you, that capacity can easily be doubled if we need to. Got it.

We could fully utilize our current capacity and as we I think we have communicated to you that that capacity can be easily available if we need to do so.

Julian: Okay. Thank you. Thank you very much.

Got it okay. Thank you thank.

Thank you very much. Thank you and one moment as we move on to our next question.

Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Andrew Prococo with Morgan Stanley. Your line is open. Please go ahead. Hey Andrew.

And our next question is going to come from the line of Andrew <unk>.

With Morgan Stanley. Your line is open. Please go ahead.

Operator: Good morning. Hey, good morning. Thanks so much for taking the question. I did just want to go back to some of your commentary on the Red Sea. It sounds like you haven't seen an impact on margins from the freight rates yet, but I'm just curious, do all of your contracts kind of exposed to the Red Sea have freight adjusters, or could there be some potential margin risk if freight rates don't come back down? All of our contracts, irrespective of whether they go through the Red Sea or or any or any other route have freight adjustments, logistic adjustments, so you know they're all these Okay, that's super helpful.

Andrew Good morning, Hey, good morning, Thanks, so much for taking the question.

I just wanted to go back to some of your commentary on the Red Sea. It sounds like you haven't seen an impact to margins from from the freight rates, yet, but I'm. Just curious do all of your contracts kind of exposed to their etsy, you have freight adjusters or could there be some potential margin risk if freight rates don't come back down.

All our all our contracts irrespective of that going through the red sea or any or any other route.

Freight adjustments logistic adjustments. So there are all these costs are pass on so we should not see any.

The effect on our margins coming out of the Red Sea issues.

Okay, that's super helpful.

Julian: And then my second question is a little bit more theoretical. But you know, there's been a lot of attention paid to, you know, AI data center power needs. And it's a big theme right now.

And then my second question is a little bit more thematic, but theres been a lot of attention paid to AI data center power needs and it's a big theme right now and I think it's the view of energy storage is a pretty critical component when thinking about powering that load with reliable clean electricity. So can you maybe just provide some insights into your conversations that youre, having with maybe some of these come.

Julian: And I think the view of energy storage is a pretty critical component when thinking about powering that load with reliable clean electricity. So can you maybe just provide some insights into your conversations that you're having with maybe some of these customers and what the timeline might look like for Fluence for this opportunity? I mean, yeah, this is something we have looked at. We are working with Google on a project. However, to be very sincere today, we're so busy with utility scale projects, and you know that we are not we haven't really worked a lot on it. You know, but we did have a project to test it with them.

And what the timeline might look like for fluids for this opportunity.

I mean this is something we have looked at we work with Google on project, However to lead various as they are today where solvency.

The utility scale projects than we.

We are not.

We haven't really worked a lot on it recently.

But we did had a project we tested with them it went well.

Julian: It went well, but it's something that we have not actually, you know, in the recent quarters, something that we have not. So but you know, one of those opportunities we're going to the point on battery cost reductions where this lowering of prices will start making this project very attractive. It makes it a lot more attractive than what it was when we looked at it, I think, roughly a year ago. So, I think this is kind of the type of thing that when we talked about it, it's the El Estas, El Estas, on Demand Elasticity, sorry for that, that comes in and it becomes one-off, you know, you put the price to set a point and you turn the lights on and all this demand comes in and that's kind of my point to all of you on the tremendous, tremendous, tremendous tailwind of battery prices in our technology, you know, and how business cases start, you know, start being pencil in and become very, very attractive. Got it. But that's helpful.

But is that something that we have not actually in the recent quarters, hoping that we have not worked on.

So, but you know it's one of those opportunities were going to a point on battery cost reductions, where this lowering of prices will start making this project is very attractive no. It makes it a lot more attractive than where they were when we looked at it I think roughly a year ago. So.

So I think this is kind of at that type of things that we talked about the past.

Yes.

[laughter] on demand elasticity, sorry for that.

<unk> got that comes in and it becomes as one off youll be appointed Brian Wenzel.

Why don't you turn the light lights on all this demand comes in.

And that's kind of my point to all of you on the tremendous tremendous tremendous tailwind.

Battery prices in our in our in the in our technology and how business cases.

<unk>.

It means that being pencil in and they become very very attractive so.

Rebecca: And I guess, maybe just one more follow-up on that. When you had that pilot project, or you did that demonstration with Google, was there anything on the software side or battery chemistry side that they were looking for, you know, to be changed versus your traditional utility customer? This is Rebecca. On the battery side, no, the chemistry is the same.

Got it that's helpful and I guess, maybe just one more follow up on that.

When you have that pilot projects or you did that demonstration with Google was there anything on the software side or a battery chemistry side that they were looking for maybe changed versus your traditional utility customer.

This is rebecca on the battery side now that the chemistry, it's the same the physical delivery of the product with the same based on the size of what we're delivering for Google There were some changes on the software side for the application space that was working on.

Rebecca: The physical delivery of the product was the same based on the size of what we're delivering for Google, but there were some changes on the software side for the application space that was working. Thank you. Thank you. And one moment as we move on to our next question, and our next question is going to come from the line of Julian Dumoulin-Smith with Bank of America. Your line is open. Please go ahead. Hey, good morning, team.

Thank you.

Yes.

Thank you one moment as we move on to our next question.

Yeah.

And our next question is going to come from the line of Julien Dumoulin Smith with Bank of America. Your line is open. Please go ahead.

Hey, good morning.

Operator: Ahmed, congrats again. Pleasure. Hey, guys, just a good morning. I'm just coming back to the top of the Q&A roster here on the gross margin piece. I just want to come back to this a little bit. I mean, you guys obviously have this 10 to 15 and then 10 to 12 here in the near term. Starting off the year the way that you did with revenues really poised to scale through the year. Again, I get there's not an OPEX operating leverage piece here, but to what extent can we expect those gross margins to scale as revenues and the size of these projects conceivably continue to expand into the bulk of the year? I mean, is there an argument to be trending higher within even that 10 to 12 range?

And congrats again pleasure.

Hi, guys. Good morning, I was just coming back to the top of the queue. The Q&A roster here on the gross margin piece I just want to come back just a little bit I mean, you guys. Obviously have this 10 to 15, and then 10 to 12 here in the near term.

Starting off the year the way that you did with revenues really poised to scale through the year again I get there's not an opex operating leverage piece here, but I mean to what extent can we expand the expect those gross margins to scale as revenues and the size of these projects that could conceivably.

Can you expand into the bulk of the year here.

Is there an argument to be trending higher within even that 10 to 12 range.

Ahmed Pasha: Now, I think our guidance, hey Julian, thanks for your comments. I think in terms of gross margin, I think our guidance was 10 to 12 percent. I think we feel pretty good about that range going through the rest of the year. So I think it will be north of where we had realized in the first quarter, but I think we feel pretty good about where we will end up in terms of our range for the full year. I got it.

No I think our guidance.

Hey, Julien Thanks for your comments.

It complements I think in terms of the gross margin I think our guidance was 10% to 12% I think we feel pretty good about that range going.

Through the rest of the year, So I think it will be.

North of where we had realized in the first quarter, but I think we feel pretty good there.

We will end up in terms of a range for the full year.

Julian: And then, Julien, you mentioned this earlier on the domestic content, your ability to potentially, I think you said something like double AESC contributions here, potentially, if need be. I mean, just looking at the trade backdrop here, can you comment a little bit about your ability to pivot, depending on any future shift in the trade policy landscape here?

Got it excellent and then you mentioned this earlier on the domestic content your ability to potentially I think you said something like double ASC contributions here potentially if need be I mean, just looking at the trade backdrop here can you comment a little bit about like what the back what's your ability to pivot is depending on any future shift in trade policy.

Julian: I'm really curious about your ability to shift even more so back to domestic product, especially if the ESS market demands it. What is your ability to bring that to market as you think about providing for the disclosures of the year in scaling up, if you will? Yeah, I mean, this is a 25, you know, issue more than 24.

Inscape here I'm really curious about your ability to shift even more so back to domestic product, especially if the market demands. It what is your ability to bring that to market. As you think about providing further disclosure through the year in scaling up if you will.

I mean this is a 25 issue more than 24 hours and all these line will come back will come online.

Julian: As you know, this line will come back, will come online, or these sales were coming up online. We are working with our suppliers to ensure that we have access to their additional demand, to additional production capabilities, and have a first right of refusal on the production. It's a multi-year contract.

Sales were coming up on nine.

We are working with our suppliers to ensure that we have access to additional to that additional demand.

Additional production capabilities and have a first right of refusal on on their production as we move forward. These are multiyear contracts. So this is what I can tell you we haven't really disclosed their volumes and stuff that we're working with but the way we are.

Julian: So, you know, this is what I can tell you. We haven't really disclosed the volumes and stuff that we're working with, but the way we envision this project is a long-term relationship where, you know, we are able to take advantage of their increasing production as it continues moving forward. That's the way I will put it. So in case, I guess your question is indirectly, Julian, maybe, I'm sorry that I'm implying is that what happens is that, you know, trade issues, and then this production becomes even more valuable. Well, you know, we believe that we are putting that into consideration the way we will, at least for a period of time, be able to scale up if this becomes a lot more attractive than what it is today due to potential trade disruptions. And your point is the 10 to 15, as it stands today, there is fundamentally some upside as you disclose what that domestic content, sort of ASPF, is. That's right. That's our current view. That's right.

Based on these projects have a long term relationship where you know where we are able to take advantage of the increasing.

Production continues moving forward.

Yes.

So I'll turn them again.

So in case that I guess your questions indirectly Union, maybe I'm, sorry that I am implying is that what happens is that trade issues and then this week.

Production becomes even more valuable.

We believe that we are put into that into consideration in the way we at least for a period of time to be able to scale up if this becomes a lot more.

That is not what it is still able to potential trade disruptions.

And your point is the 10 to 15 as it stands today, there is fundamentally sort of upside as you disclose what that domestic content sort of ASP.

Julian: That's our current view. We'll talk more as we move forward. And we signed these contracts, and the competitive environment settled. But essentially, just going back, it is that our customers need to feel comfortable with their business cases we have, you know, and that they can capture more than what they usually capture. And that we will capture part of what they use, you know, that upside that we're giving them. So that's kind of how all this works.

That's right that's economy will talk more as we move forward and we signed these contracts in the U K.

Baidu environment settles, but essentially just going back it is our.

Our customers need to feel comfortable with their business cases, we have.

Great that they can capture more than what they usually capture and that we will capture a part of what they use that upside that we're giving them. So that's kind of out all of this works out and we're working with them on that process and as soon as that settles down in a way I feel comfortable that is the way it's going to work for a period of time, we will communicate to the fire.

Julian: And we're working with them on that process. And as soon as that settles down in a way that feels comfortable, that is the way it's going to work for a period of time, we'll communicate that to the financial markets. Excellent, thank you guys, good luck, speak to you soon. Thank you.

Rachel markets, what it what it is.

Excellent. Thank you guys. Good luck speak to you soon.

Thank you.

Thank you one moment as we move on to our next question.

And our next question comes from the line of Kashi Harrison with J P. Morgan. Your line is open. Please go ahead.

Operator: Thank you, and one moment as we move on to our next question. And our next question comes from the line of Kashi Harrison with J.P. Morgan. Your line is open. Please go ahead.

I think cash Eric a question Hey, guys. Good morning.

Okay.

Sure.

Yes. So first question is for 2020 for guidance.

Operator: The first question is for 2024 guidance. You indicated that you have 80% already locked in, and you should be able to get to 100% shortly, but I was just wondering if you could give a sense of where you were at this point last year. Were you 80% booked last year as well, or were you 100% at this point for the prior year?

You indicated that you have 80% already locked in.

And you should be able to get to 100% shortly but I was just wondering if you could give a sense of how where you were at this point last year, where you 80% booked last year as well over a 100% booked at this point.

Julian: And then just in general, how should we conceptually think about the amount of revenues that can be booked and captured within a year? Yeah, so last year, if you looked at what we had in the backlog last year at the end of the first quarter, compare against where we ended in revenue know where we were guiding us remember we got it up over the year so that gives a little bit of I'll get we were roughly at 90% so 90% of our revenue for for 23 was in our backlog at this stage so we're a little bit behind compared to last year from that, However, you know, looking at, the late stage of development of our contracts and how we're going to, you know, how we're going to, how we're going, you know, where these contracts are. We have very, very high confidence that we will be able to secure the contracts we need to meet our guidance, you know, generalize the way it is. And, you know, and that's it, you know, we feel very, very good.

For the prior year and then just in general how should we conceptually think about.

The amount of revenues that can be booked and captured within.

A year.

So last year, if you looked at our or what we had in the backlog last year at the end of the first quarter compare against where we ended in revenue where we were guiding is remember we guided up over the year. So that gives a little better I'll get we were roughly at 90% or 90% of our revenue for for 'twenty.

Three was in our backlog.

At this stage, so we're a little behind compared to last year from that point of view. However, you know looking at the.

The late stage of the element of our contracts and how we're going to you know how we're going to how we're going where do these contracts are we have very very high confidence that we will be able to secure the contracts we need to meet our guidance.

So that's the way it is and.

That said, we feel very very good we have several contracts.

Ahmed Pasha: We have, there are several contracts, you know, we have, they're all very positive in all of them. And it should allow us to be at a point where we will meet our guidelines. Yeah, actually. This is Ahmed.

We have been there they are all very positive in all of them and which will allow us to be at a point that we will meet our guidance for the year.

Ahmed Pasha: And I think your second part of your question was about the profile for the rest of the year. I think, as I discussed in my comments, you know, 70% of our revenue or annual revenue is in the second half, and it's more back-end loaded.

Yes, actually this is Amit and I think your second part of your question was on the profile for the rest of the year I think as I discussed in my comments.

70% of our revenue or annual revenue is in the second half and it's more backend loaded but that is frankly all.

Ahmed Pasha: But that is, frankly, all based on our current contracts that we have, which are when we execute, it's the timing when we are delivering those contracts. So it's more driven by the timing of projects that we have in our pipeline or backlog. Got it.

Based on our current contracts that we have which are when we execute as a timing when we are delivering those contracts. So this is more driven by the timing of the projects that I'd be happy in our pipeline our backlog.

Julian: Thanks for both of those responses. And my follow-up question is just around the order intakes, you know, 1.1 billion, clearly very impressive. If we look at, you know, last year and the prior year, it seems like your orders had some type of order seasonality where, you know, the second quarter orders look about the same as the first quarter, then you have like a dip into 3Q and then somewhat of a recovery into 4Q. Is that, directionally, how we should think about seasonality for orders in your business? I mean...

Got it.

Thanks, Thanks for the both of those responses.

And my follow up question is just around the order intake $1 1 billion clearly very impressive.

If we look at last year and the prior year it seems like your order.

There was some type of order seasonality, where the second quarter orders look about the same as the first quarter. Then you have like a dip into <unk> and then somewhat of a recovery in the <unk>.

Is that Directionally, how we should without giving super explicit order guidance I'm just wondering if that's directionally, how we should think about seasonality for orders and you're moving forward.

Julian: If you look back at every year, it's very different. So I don't think there is a strong seasonality in our order. That's what, you know; it moves around. Mm-hmm. It's more of how things worked out.

I mean.

If you look back every year is very different so I don't think there is a strong seasonality in our order intake.

Sure.

Yes.

That does something with us.

It moves around so.

Okay.

If it's more of how things worked out on you know.

Julian: And something that can be signed on December 15 or January 15 has quite nothing to do with season. It's more of whether people want to take vacations, to give you a sense of this part. So, I wouldn't give any, don't, we are, we cannot give you a view on the season and the seasonality of products.

So hopefully that can be fine on December 15, or January of 15 is why not.

And also do with this one is more of what people want to think about Asia, maybe one phase of this quarter.

So I wouldn't give any the dawn.

We cannot give you our view, we'll see some seasonality or private waters.

Julian: Got it. Thank you. Thank you, and one moment for our next question. And our next question comes from the line of Mark Strouse with J.P. Morgan. Your line is open. Please go ahead. Great. Good morning, everybody.

Got it thank you.

Thank you and one moment for our next question.

And our next question comes from the line of Mark Strouse with Jpmorgan. Your line is open. Please go ahead.

Operator: Thanks for taking our question. I appreciate the color that you were giving earlier about no margin risk from changes in pricing because your contracts with your suppliers and your customers are locked in. Can you talk about the ability of your customers to potentially cancel an order? I mean, especially if the price goes lower enough? And if so, can you kind of give us what your average deposits that you're collecting on those contracts?

Great. Good morning, everybody. Thanks for taking my question.

I appreciate the color that you were giving earlier about no margin risk from changes in pricing because your contracts with your suppliers and your customers are locked in.

Can you talk about the ability, though of our customers to potentially cancel an order.

Especially if pricing goes lower enough.

If so can you give us what your average deposits that you are collecting on those on those contracts.

Julian: And then, on the other side, do you then have the ability to turn around and cancel any orders with suppliers? I mean, they are what we bring to our backlog, binding contracts that the customer cannot get out of with making us hold on to any cancellation. Today, to this day, we have never seen a cancellation of a contract in our backlog. There's a reason for it.

And then on the other side do you then have the ability to turnaround and cancel any orders with suppliers.

I mean the.

What we bring in our backlog.

Our binding contracts.

Consumer cannot get out with making us whole on any on any cancellations do they deliver we have never seen a cancellation of a contract in our backyard. There is a reason for it we are very very strict on what comes in even though we have contracts that we have signed which are or are not in our backlog until they meet the conditional to ensure.

Julian: We are very, very strict on what comes in, even though we have contracts or we have signed them, which are not in our backlog until they meet the conditions to ensure that if there's a cancellation, everybody's covered. So, you know, we haven't seen a cancellation yet. Nobody has been turned down; these projects are very much on. So, you know, that's never been a risk. And the contract will make it difficult for the customer to get out if they have significant financial penalties to ensure they meet and make us whole. But, as I said, that has never happened.

Or that if there is a constellation of everybody's cohort.

We haven't seen a cancellation nobody has turned out this.

This project is very much so.

Never been at risk and the contract will make it difficult for the customer to get out if they.

The significant financial penalties.

Penalties to ensure they meet and make us whole about as I said that has never happened.

Ahmed Pasha: And your second question, sorry, on... If you don't mind reminding me, well, maybe it's not a risk now, but the second question was, if your customers canceled on you, would you have the ability to cancel with your supplier? I mean, we put purchase orders in, we'll have penalties if we cancel with our suppliers, but as I said, our customers will more compensate for that. So that's the way.

And your second question I'm, sorry, a one one.

Don't mind reminding me.

Maybe it's not a risk now but the second question was if your customers canceled or would you have the ability to cancel with your suppliers.

I mean, we put purchase orders of Ohio will have penalties, if we cancel with our suppliers, but as I said, our customers will compensate for that so that's the way we do.

Ahmed Pasha: You know, so the only thing I would add to that is Mark, I think when we signed the contract, our counterparties signed the contract at a price that made sense for them at that time. So they looked into, took into account the economics of the project. So I think that is what really drives their decision to continue. And then they make advanced payments, you know, because we generally get anywhere from 10% to 30% advance payments. And I think those are the things that you have to take into account. But overall, as Julien mentioned, you know, we have never seen any contract getting cancelled for the same reason.

So the only thing I would add to that because mark I think our comp when we signed the contract Counterparties signed the contract at the price that makes sense for them at that time. So they look into taking into account. The economics of the project. So I think that is what really drives their decision to continue and then they make advanced payments because we generally get anywhere.

From 10% to 30% advanced payments.

And I think those are the things and that you have.

Have to take into account.

So I think but overall as William mentioned, we have never seen any contract getting canceled for the same reasons.

Julian: Yeah, yeah, that makes sense. Okay, thank you both. One quick follow-up, Ahmed. On the last call, Manu gave some color about the timing of down payments to AESC. Was there any update there? I'm sorry if I missed it. No, nothing changed.

Yes that makes sense. Okay. Thank you both yeah, one quick one quick follow up Ed.

On the last call mono gave some color about the timing of down payments to <unk> was there any update there I'm sorry, if I missed it.

Ahmed Pasha: I think we basically are on track. No, nothing to, and all of our great... Okay, excellent. Thank you very much.

No nothing changed I think we particularly are on track.

Going to the board.

Look I just thought of this.

Operator: Great, thank you. Thank you, and one moment as we move on to our next question. And our next question comes from the line of Tom Curran with Seaport Research Partners. Your line is open. Please go ahead. Good morning. Hey, Tom. How are you?

Okay excellent. Thank you very much.

Thank you.

Thank you and one moment as we move on to our next question.

Okay.

And our next question comes from the line of Tom Curran with Seaport Research Partners. Your line is open. Please go ahead.

Good morning.

Julian: So under the EU's climate law, the European Commission is working on an updated version of its national energy and climate plans that will establish decarbonization targets for 2040. Between an early draft that leaked into the media and then a subsequent official communication, the Commission has proposed a target for the power generation mix of 90% renewables complemented by nuclear and referred to grid-scale energy storage as a key element, in their words, for achieving that. You know, this news following last year's adoption of accelerated permitting for standalone storage suggests the EU really is placing increasing emphasis on storage support when it comes to policy. What are you guys most excited about that either is gestating and seems to have good odds of becoming part of the law or a new rule or incentive? What are you most excited about that you have visibility on over, you know, either this year or, let's say, by the end of fiscal 25? I'll tell you what the things we have seen in the last quarter. Clearly, the mind is very strong.

Tom Horton.

Good good so under the EU climate law. The European Commission is working on an updated version of its national energy and climate plan.

We will establish decarbonization targets for 2040.

Between an early draft.

And to the media and then a subsequent official communication.

Commission is proposed to target for the power Gen mix of 90% renewables complemented by nuclear.

And referred to grid scale energy storage as a key element in their words for achieving that.

This news following last year's adoption of accelerated permitting for Standalone storage.

Suggests the EU really is placing increasing emphasis on storage support when it comes to policy.

What what are you guys most excited about.

That either as Gestating and it seemed to have good odds of.

Becoming part of a wall or a new role or incentive.

What are you most excited about that you have visibility on over.

Either this year or let's say by the end of fiscal 'twenty five.

I will tell you what the things we would have seen in the last quarter.

Clearly the amount is very strong.

Julian: Also, I don't know if you saw the announcements, a supply change moving into Germany or into Europe, let's put it this way, Norfolk announcing a big factory in Germany, other players announcing factories all around Europe. So, our localization of supply change is coming now with a better environment for it. So, good. That's a good sign.

Also I don't know if you saw the announcements.

Supply change moving into Germany or into Europe, let's put it in a normal announcing a big factor in Germany or other players announcing factors all around Europe. So our localization of supply change coming now with a better environment for it. So good that's a good sign and then our pipeline moving very strongly you know.

Julian: And then our pipeline moving very strongly, you know, especially Germany becoming a cost to a market that's very active. The UK has always been a market, but then markets that have not been that active are now becoming more, you know. Italy came out with a six-hour capacity payment.

Especially Germany, becoming a cost or a market. That's very active that UK has always in market, but then markets that have not been that active now becoming more you know, Italy came out with a six hour capacity payments. There are few things happening around that makes us very very excited.

Julian: There are a few things happening around us that make us very, very happy. I will tell you if you ask me what I'm excited about, all of the above, you know, everything. Excited about the fact that we have, you know, the supply changes, you know, starting CPN, but you know, good. The fact that we believe in the realization of the supply chain, so that's great. And now there are a lot of more players and regulators supporting it, you know. It's so great.

I would tell you if you asked me what Im excited about all of that Bob you know everything.

We're excited about the fact that we have.

Apply changes.

C P M, but good.

So we believe that the reorganization of our supply chain as well as great and now these a lot of more players unregulated are supporting.

The regulator supported so Greg we see these changes and in Italy.

Julian: We see these changes in Italy and in some of the northern countries, that's right. And then there are a lot of customers in Germany and the UK that we have been working on contacting us to move forward. So, you know, all of the above. I will say Europe is a fertile ground for batteries. That's helpful. It makes sense. And then, Ahmed, on the balance sheet, you saw a big sequential increase in inventory, which more than doubled to $564 million. You know, given the steep ramp in shipment and installation activity that you're preparing for as part of recognizing roughly 70% of fiscal 2024 revenue in the second half, I suppose that is at least partly self-explanatory, but could you just expound on that inventory surge and then give us an idea of how working capital as a source or use of CFFO should evolve quarter by quarter over fiscal 2024?

And some of the northern contracts, that's great and then a lot of customers in Germany, and the UK that'd be having working on contacting us to before so you know all of them all but I will say Europe is a fertile ground for battery storage. So.

That's helpful. It makes sense.

And then Ahmed on the balance sheet, you saw big sequential increase inventory, which more than doubled to $564 million.

Given the steep ramp in shipment and installation activity that youre preparing for as part of recognizing roughly 70% of our fiscal 'twenty revenue over the second half.

I suppose that is.

At least partly self explanatory, but could you just expand on that inventory surge and then give us an idea of how working capital as a source or use of CFO should evolve quarter by quarter over fiscal 'twenty four.

Julian: So, sure, I think in terms of, yes, you're right. I think our inventory balance has increased by a couple of hundred million dollars. You know, I mean, this year, I think this quarter, and that is primarily, I think, as we are ramping up our growth in revenue, because, as I discussed, you know, I mean, our revenue next quarter, second quarter, will be about $550 million. So that inventory balance is largely, I think, will be deployed to serve our, or recognize our revenue in Q2. In terms of working capital needs, you know, I think we discussed on our Q4 call. I think in 2024, there will be, I think, about $100 million or so of additional working capital needs.

So sure.

I think in terms of yes, youre right I think on the inventory balance has increased a couple of hundred million dollars.

This year I think this quarter and that is primarily I think as we are ramping up our <unk>.

Growth in revenue because as I discuss our revenue next quarter second quarter will be about $550 million. So that inventory balances largely I think is will be deployed to serve our.

Recognizing revenue in Q2 in terms of their working capital needs I think we discussed on our Q4 call I think in <unk>.

1024, there will be I think about $100 million or so of additional working capital needs, but that is part of the plan I think that we will be funding to our.

Ahmed Pasha: But that is part of the plan, I think, that we will be funding from our existing liquidity. So nothing changed from that perspective as to what we discussed in our Q4 call. I think we feel pretty good, given our liquidity is north of $600 million, so we can manage any short-term working capital needs if we have any. Great. I appreciate the insights. Thank you, and one moment. And our last question is going to come from the line of Ben Kallo with Baird. Your line is open. Please go ahead.

Just a liquidity.

So nothing changed from that perspective, what we discussed in our Q4 call feel pretty good.

Given our liquidity is north of $600 million. So we can manage any.

Short term working capital needs, if we have to.

Great I appreciate the insights.

Thank you and one moment.

Yeah.

Alright.

Okay.

Our last question comes from the line of Ben <unk> with Baird. Your line is open. Please go ahead.

Operator: Hey. Thanks for putting me in, guys. Just two quick ones.

Hi, Thanks for fitting me in guys.

Just two quick ones first.

Julian: First, maybe this relates to those to proceed, but could you talk about any risk in project or sales timing based on interconnection delays or shortage of electricians or labor shortages? And then my second question is just your appetite for offering your software to other battery providers, whether lithium ion or other types of storage providers. Thank you. In terms of, you know, when you looked at our, in terms of the risk of delays, interconnection. Essentially, it is an acute problem in the U.S., but less of a problem generally, you know, in other markets.

Maybe this relates to those to proceed but could you talk about any risk.

Vito project or sales timing based on.

Interconnection delays or shortage of electricians.

And then my second question is just your appetite for.

Ddos offering your software to other.

Battery providers, whether lithium ion or other types of.

Storage providers. Thank you.

In terms of you know what when you looked at our in terms of their race of the of the of the delays interconnection essentially it is cute.

Acute problem in the U S less of a problem generally no and no.

Julian: It's important to make that point. The second one is that what we have in our backlog has already been resolved. Our customer has a clear line of sight of when they're going to connect, what they need to do, and by when. So, you know, there could be delays, but the delays are usually weeks because something didn't get to the sign on time, and so on, so not the delays we talked about.

It's important to make that point and the second one is that what we have in our backlog already have you know the Q hasnt been resolved our customer has a clear line of sight of when theyre going to come in and what they need to go one by one. So you know there could be delays weather delays I, usually weeks, because something didn't get to a final time.

Things of that sort of not northern relays with doctor. So generally I would say that our backlog is there risk on that.

Julian: So generally, I would say that our backlog is the risk of transmission delays in general, except for more of a civil work step type of delay. Then you do see clearly our pipeline, our ability to convert our pipeline into backlog, it is subject to our customers in the US ensuring that they can get on the queue and get those problems resolved; just see what happened this quarter. You know, we are not seeing a significantly delay in when we look, when we build a pipeline, we set days when we see that projects are going to be, projects that we believe they're going to be, we're going to be able to find them. And we haven't seen a significant delay that has affected our results or ability to meet our financial metrics. There are projects here and there, ones that surprise you by how fast they move, and ones that surprise you because they're a little late, but I'll say when you put them in balance, they're generally, they're generally not ahead, the same.

Transmission delays in general.

Except for you know more of a fever walk step that poly days that you do see you know clearly our pipeline there.

Our ability to convert our pipeline into backlog it is subject to our customers in the U S insurance that they can get on the queue.

Those problems resolved, we you know.

Just see what happened this quarter.

Not seeing a significantly when we look when we build our pipeline we said days when we see the projects are going to we see it.

Projects that we believe they're gonna be able we're going to be able to sign them and we haven't seen a significant delays.

That in any way affect our results are related to meet our financial metrics projects. He Orlando ones that surprised by how fast they move and one that's surprised me because they are a little late but I'll say it in when you put them in balance there generally they're generally not.

Julian: In terms of digital solutions, I think I will have to make two. We have, you know, our operating system, our BMS, our operating systems, which are integral to our, you know, hardware solutions. And that's not because we're not going to sell that to anybody. We're not we don't offer it to third parties. This is ours. We use it for ourselves. And it makes us different, one of our competitive barriers and our competitive capacity. However, we do have our Fluence digital offering, our Mosaic offering, which is a bidding app, and our Nispera offering, which is a performance management tool. We do sell those to third-party technology. So there are competitors of us who the owners of their technology prefer to use our bidding, prefer to use our performance management tools rather than whatever the other companies... I'll say that only on those two points, the OS, the operating system, and the BMS. It is integral to what we do, and we don't offer that to anybody else.

This is the same in terms of digital solution. So I think I'll have to make too we have our operating our BMS, our operating systems, which are integral to our.

Hardware solutions and those are not that we're not going to sell that to anybody we're not we don't offer to third parties, which is ours, we'll use it for ourselves and it makes us different.

He is one of our competitive buyer.

Barriers and a competitive capacity.

We do have our fluids digital offering our mosaic offering which is I'm eating up R&D spare offered with Gs.

Our performance management tool those to those with all sell to third party.

Third party technology, so there are competitors or loss.

The owners of their technology prefer to use our BD nap and preferred to use our performance management tools, rather than whatever that competitor is offering but I will say that only on those two points on the OIS and on the operating system on the BMS is integral to what we.

And we don't offer that to anyone else.

Julian: Thank you. Thank you, and I would now like to hand the conference back over to Julian for any further remarks. Well, thank you.

Thank you.

Thank you and I would now like to hand, the conference back over to Julio for any further remarks.

Julian: Thank you so much, everybody, for your interest and questions. And, you know, we had a great quarter, a great quarter, great order intake, and revenue. We knew from, you know, in line with what we expected, this was kind of in line with where we were going. I think an important point and something that you all brought up to me last year that, you know, as a main point is, you know, the double-digit growth margin. This was the main discussion during 23, whether we were going to be able to do it. Now we have two quarters of the meeting, you know, double-digit gross margins. I think this is the basis of which, you know, as we ramp up on revenue, the basis of which we will be able to become, you know, get rich profitability for this quarter again.

Well. Thank you. Thank you so much everybody for your interest and questions on it then.

Great.

In a quarter a great quarter, great order intake revenue renewal from you know that is in line with what we expected. What this is what kind of in line, what we were going.

I think an important point and something that you all brought to me last year that is our main point is that.

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This was the main discussion during 'twenty three whether we were going to be able to do it now we have two quarters of bring meeting you know double digit gross margins I think this is a this is the basis of which you know as we ramp up on revenue the basis on which we will be able to become too.

Reached profitability for this quarter again, so we're very confident on our 'twenty three 'twenty four guidance on are related to meet our.

Julian: So we're very comfortable with our 23 or 24 guidance on our ability to meet our to, you know, $3 billion middle of the range earnings revenue guideline and our 50 to 80 in terms of adjusted EBITDA. So very happy with what's going on. Thank you so much, and talk to you later. This concludes today's conference call. Thank you for participating. You may now disconnect. Who's going to watch the rest of this shit?

Two three.

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Earnings revenue.

And then.

And our 50 to 80 in terms of.

Adjusted EBITDA is all very happy for what's going on thank you so much and talk to you.

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

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