Q1 2025 Fluence Energy Inc Earnings Call
Script, Mode Sadhguru Emotion, Control, Appeal It Won't Hurt You
Thank you.
Speaker Change: And welcome to fluids Energy's first quarter 2025 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 <unk>.
Speaker Change: Bester relations section of our website at Fluence energy Dot com.
Speaker Change: Joining me on this morning's call are who land the breeder, our president and Chief Executive Officer.
Speaker Change: Ahmed Pasha, our Chief Financial Officer.
Speaker Change: During the course of this call fluids management may make certain forward looking statements regarding various matters related to our business and company that are not historical facts.
Speaker Change: Such statements are based upon the current expectations and certain assumptions and are therefore subject to certain risks and uncertainties.
Speaker Change: 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 uncertainties that could impact our future results.
Speaker Change: You are cautioned to not place undue reliance on these forward looking statements, which speak only as of today.
Speaker Change: Also please note that the company undertakes no duty to update or revise forward looking statements for new information.
Speaker Change: 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.
Speaker Change: 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.
Julian: Thank you very much I'll now turn the call over to Julian.
Julian: Thank you Alex.
Julian: I would like to stand our one world come to our investors analysts and employees who are participating in today's call.
Julian: I will review our Q1 results briefly and then provide an update on our business and financial outlook.
Julian: Amit will then go into more detail on our financial results.
Amit: Beginning on slide four we continue to see very strong battery storage market.
Julian: With the U S as a cornerstone.
Julian: We have carved out a solid competitive advantage, where our domestic content offering where.
Julian: Well, we continue to see strong interest from customers.
Julian: This has been a key driver of the growth of our backlog, which is now at a record $5 $1 billion.
Julian: Our diversity by our diversified supply chains.
Julian: Equally our U S domestic content strategy allows us to meet the gate they potentially impacts of current geopolitical geopolitical uncertainty that we expect will continue for the foreseeable future.
Julian: Looking at our first quarter performance.
Julian: First we generated a $187 million of revenue with a 12, 5% adjusted gross margins.
Julian: Revenue was significantly lower than fiscal Q1 2024.
Julian: Resulting from our fiscal 'twenty five.
Julian: And the way the plan as discussed in our prior earnings call.
Julian: Second we continue to add to our backlog with another strong quarter of more than $770 million in order intake.
Julian: This propel our backlog to a record $5.1 billion.
Julian: Providing a high degree of visibility to future revenue growth.
Julian: Sure.
Julian: Our annual recurring revenue or <unk> are $106 million, which is an increase of 6 million from the previous quarter. We're on track to achieve.
Julian: Our 145 million target by the end of the fiscal year.
Julian: Finally, we ended the quarter with more than $650 million of total cash.
Julian: Which puts us in a strong position to continue investing in our probes and delivering value to our customers.
Julian: Turning to slide five.
Julian: We are providing an update to our fiscal year 'twenty five guidance.
Julian: We now expect revenue between $3 1 billion and $3 7 billion.
Julian: With a midpoint of $3 four.
Julian: This is a 600 million reduction from the midpoint of our prior guidance.
Julian: Which is due mostly to delays in the expected signing of contracts for three projects in Australia.
Julian: The delays were project, especially quick one was delayed for permitting issues related to traffic control.
Julian: Due to recent delays in their correspondent customer off take agreement and the third project is located at a brownfield site, where it took longer to prepare the site don't expect.
Julian: All these contract delays were unique right on systemic and do not represent the cool down of the Australia any storage Mark.
Julian: The issues affecting the strip projects are now resolved or are close to resolution.
We expect to sign all three contracts later this year.
Julian: With revenue to be recognized in fiscal 'twenty six.
Julian: The midpoint of our revised revenue guidance is approximately 85% covered by contracts in our backlog.
Julian: Revenue recognized to date.
Julian: This coverage ratio exceeds the coverage ratio we had at this point in fiscal 'twenty, four and fiscal 'twenty three.
Julian: The new guidance mid point abate disappointed still represents approximately 26% growth from fiscal 'twenty four.
Julian: Turning to slide six.
Julian: The strong demand for about three any storage in our markets continue to attract competition.
Speaker Change: Shelley from Chinese players trying to pre in trade restrictions and compensate for all of their performance in the Chinese market.
Speaker Change: Recently, we have seen Chinese players intensified their competitive position in international markets.
Speaker Change: Ferreting significant pressure on pricing to win contracts.
Speaker Change: We believe these competitive environment will continue.
Speaker Change: We'll discuss later, we're making the required investments in probe their element to compete successfully.
Speaker Change: However, as Simon will address shortly these competitive environment is putting pressure on our fiscal 'twenty five margins.
Speaker Change: We recognize that a key to our success in the face of this increased competition is our ability to continuously innovate our technology.
Speaker Change: Which should lead to superior performance competitive price and a more reliable supply chain and better security of our products.
Speaker Change: During the course tumors at the center of our efforts on ensuring we're their best technology partner to support their project objective has been the foundation of our success to date.
Speaker Change: Supports our continued leadership position in their markets.
Speaker Change: Yeah.
Speaker Change: In response to the increased competition from Chinese players, we have accelerated our pro development program.
Speaker Change: And I would like to highlight a new product platform that we'll be launching as part of our customer Road show. This Thursday February 13, we.
Speaker Change: We expect to see the benefit of these new platform beginning in fiscal 'twenty six.
Speaker Change: This platform will put us in an industry leading position in terms of density.
Speaker Change: When our customers are increasingly request to reduce their footprint and cost.
Speaker Change: The time will be an AC block incorporating the inverter and the other balance of plant equipment within the enclosure.
Speaker Change: The new platform also offers a lower cost point horizon from its higher density more rollout of this time faster installation and reduce operating costs.
Speaker Change: These will provide our customers with a significant reduction in their required investments and their total cost of ownership over the life of the project.
Speaker Change: The newer side in conjunction with our digital capabilities and services offering will allow us to offer our customers 99% availability.
Speaker Change: Which represent industry leading performance.
Speaker Change: We can achieve this performance with the seamless integration of our hardware.
Speaker Change: <unk> controls digital tools and service offerings.
Speaker Change: The platform will also offer industry, leading safe safety features similar to the element from inappropriate.
Speaker Change: And gray suck probe product lines, which includes our beyond burn certification, but now at a much higher base.
Speaker Change: This new platform will integrate our most recent developments in cyber security, which will provide us confidence that our customers regulators and communities require to ensure the security of their power grids.
Speaker Change: This new platform. We also enables faster realization of project investments as we continue to reduce our integration cycle times, which we aim to reduce to 12 months from 18 months historically.
Speaker Change: All of these factors are critical to enable our customers to achieve the lowest total cost of ownership across the project life.
Speaker Change: Leading to a higher return on their investments.
Speaker Change: This new platform will be the most substantial generational change for fluids phased introduction of the Gen six skus.
Speaker Change: Because of our significant benefits to customers.
Speaker Change: The lower total cost of ownership and a broad performance, we plan to price it competitively, while securing gross margins within our range of 10% to 15%.
Speaker Change: This new platform also provides a foundation to continue program element that will allow us to accelerate our innovation road map going forward.
Speaker Change: We believe the speed of our innovation is key to our success.
Speaker Change: Turning to slide seven.
Speaker Change: I am pleased to report that our backlog as of December 31.
Speaker Change: <unk> five 1 billion and increased volume of 18, five gigawatt hours.
Speaker Change: It is a higher level the highest level in our history.
Speaker Change: Representing a year over year increase of 38% in value.
Speaker Change: More than doubled in terms of volume.
Speaker Change: This growth reflects the strong elasticity of demand for our technology.
Speaker Change: Which supports our continuous growth in terms of both revenue and volume despite declining price.
Our backlog provides us with strong visibility to future revenue and position ourselves well to continue growth in our recurring services and digital basis.
Speaker Change: Turning to slide eight.
Speaker Change: The size of our Pi lehmkuhl stimulus to reflect the strong growth prospect for energy storage.
Speaker Change: As a reminder, our pipeline reflects a rolling 24 month view thus.
Speaker Change: Thus, giving us confidence in our ability to continue our growth trajectory.
Speaker Change: Since the end of the previous quarter.
Speaker Change: Increase our pipeline by $500 million to $21 4 billion cards.
Speaker Change: This is particularly impressive considering that during the first quarter, we converted more than $700 million in tobacco.
Speaker Change: To provide more perspective are biomarin has increased 60% from this time last year.
Speaker Change: Which reflects significant growth prospect for energy storage globally.
Speaker Change: We continue to see a very robust international Mark which will further diversify our geographic mix in the coming years.
Speaker Change: Nearly half of our $21 $4 billion pipeline is in the U S market.
Speaker Change: And the rest in the international markets, with Germany, Australia, Canada, and Chile, representing the bulk of it.
Speaker Change: Turning to slide nine I would like to provide an update on the U S. Any startups, mark where growth continues to surpass expectations.
Speaker Change: First we expect power demand to increase to more than 5000 terawatt hours by 2030.
Speaker Change: Which represents a two 4% CAGR from 2022 to 2000 I'm sorry.
Speaker Change: These anticipated robust growth is driven by data center growth domestic manufacturing sector wide electrification.
Speaker Change: Second battery storage is becoming more mainstream in the Americas, but their storage installation increased 83% year over year to more than 45 gigawatt hours in 2024.
Speaker Change: This robust growth is reflected in the interconnection fuels for major U S. Mark.
Speaker Change: Across the entire U S interconnection queue battery storage is second only to solar in Gigawatts of interconnection request.
Speaker Change: For example in America battery storage represents 43%.
Speaker Change: The outstanding grid connect solar applications and in <unk>.
Speaker Change: ISO.
Speaker Change: <unk> represents an even larger contribution at 68%.
Speaker Change: Turning to slide 10, and continuing with our discussion of the U S market.
Speaker Change: I'd like to review some of the recent policy announcements at headline since our last call.
Speaker Change: Starting with trade related headlines our U S domestic container strategy on our proactive initiatives.
Especially with respect to supply chain puts us in an excellent position to successfully weather the changing U S trade policy.
Speaker Change: We view tariff in two buckets announcing potential time.
Speaker Change: First of all could you say universal tariff that already have been announced on China.
Speaker Change: All of our business strategy that I, just outlined less than 15% of our backlog is exposed to the stock.
Speaker Change: We estimate that for our fiscal 'twenty five the impact of the recently announced 10% tariffs on Chinese imports.
Speaker Change: Approximately $10 million of gross profit.
Speaker Change: Which is reflected in our updated guidance.
Speaker Change: The second bucket is potential product specific tariff that have not been announced.
Speaker Change: We view that announced and potential tariffs on China, and specifically on Chinese battery storage systems as a net positive.
Speaker Change: They will enhance the competitiveness of our U S domestic offered.
Speaker Change: Next moving to potential changes to the inflection reduction or not or IRI rigs.
Speaker Change: Regarding the section 48, ITC that our customers clearly we believe there is sufficient bipartisan consensus in keeping the standalone ITC for storage as it supports much needed and then your security and reliability.
Speaker Change: Additionally, looking at section 45 X. We also note that there is sufficient bipartisan consensus for maintaining these tax credits I'd say supportive domestic manufacturer sovereign debt dropout administration has been very vocal about.
Speaker Change: As we noted previously most of our U S supply chain is in Red States and currently provide thousands of jobs.
Speaker Change: Finally on the broadcast front, we're being very proactive with the Trump administration promoting awareness of the importance of cyber security for critical grid infrastructure and.
Speaker Change: And thus advocating for a ban on foreign control for battery startup.
Speaker Change: The security of power grids is of Paramount importance and regulation shown Im sure Theyre not software to these kinds of controls by foreign entities that will provide them. They are related to this raw power grids. This is especially important for battery storage systems given their increase enroll in.
Speaker Change: U S power grids.
Speaker Change: Fluence is proud to build its own control systems for battery storage in the U S.
Speaker Change: But their stores represents the fastest and most economical way to provide the much needed capacity and resiliency that the U S power grids need to support the AI industry. The U S Reindustrialization and general economic growth.
Speaker Change: Turning to slide 11, our strategy of developing a U S supply chain is something will be done working on even before they are AOS path in 2020.
Speaker Change: As a result, we can now offer a product that is 100% non Chinese this is something the market has taken notice as we have doubled our number of U S customers over the past year.
Speaker Change: Our ability to mix and match various components of the battery storage system to enable approach to meet their required thresholds for domestic count is something unique to fluids.
Speaker Change: And enables us to stretch our U S cell supply.
Speaker Change: John its nameplate plant capacity.
As a result, we have the ability to meet all our expected U S domestic container demand in 2025 and 26.
Speaker Change: Regarding our domestic manufacturing efforts, we continue to make good progress U S element of factor and efforts.
Speaker Change: The AUC, Tennessee facility.
Speaker Change: <unk> is in process of ramping up production.
Speaker Change: Aligned to come online sometime during the summer of 'twenty six.
Speaker Change: This concludes my prepared remarks, I will now turn the call over to Amit.
Amit: Thank you Julian and good morning, everyone. Today, I will review, our first quarter financial results and then discuss our updated outlook and liquidity for our fiscal 2025.
Amit: Turning to slide 13 in the first quarter, we generated $187 million of revenue, which was a decrease of 49% from the same quarter last year. The decrease was largely anticipated and reflects the backend weighted nature of our expected full year revenue, which we noted on our last call.
Amit: <unk>.
Amit: We generated $23 million of gross profit representing gross profit margin of approximately 12, 5%. This was our sixth consecutive quarter of double digit gross profit margins.
Amit: We reported negative $50 million of adjusted EBITDA, mainly due to the fact that our operating expenses are more evenly distributed across the year than our revenue.
Amit: Turning to slide 14, and our guidance for 2025 as wholly owned discussed we now expect revenue of between $3 1 billion and $3 7 billion with a midpoint of $3 4 billion.
Amit: This is a reduction of $600 million from the midpoint of our prior guidance, which is due mostly to the timing of three specific projects in Australia that have been delayed but not lost we.
Amit: We had been expecting to sign these contracts in January such that we will recognize the associated revenue over the following nine months.
However over the past month, it became clear that the signing would be delayed until later in the year, which does not allow us enough lead time to be able to execute on these contracts and recognized revenue in the fiscal 2025.
Amit: We expect to recognize revenue from these contracts in fiscal 2026.
Amit: I would like to emphasize that the midpoint of our revised revenue guidance represents backlog coverage of approximately 85%. Although it has disappointed to us to reduce guidance.
Amit: Weis midpoint of $3 4 billion still reflects 26% year over year growth from fiscal 2024.
Amit: From a revenue timing perspective, we now expect our fiscal 2025 revenue split to be 15% in the first half and 85% in the second half a shift primarily reflects timing of signing some of the projects.
Amit: In terms of annual recurring revenue from our services and digital businesses, we continue to see traction in our recurring revenue platform and still expect to end the fiscal year with $145 million of IRR.
Amit: Regarding gross margin, we have narrowed our expectations for gross margin to 10% to 12% from 10% to 15% due to the factors I will discuss shortly.
Amit: When looking at our fiscal 2026 outlook, we expect revenue growth of 30% plus in the fiscal 'twenty six starting from our updated fiscal 'twenty guidance midpoint.
Amit: Turning to slide 15.
Amit: And looking at fiscal 'twenty fives, adjusted EBITDA, we have lowered the midpoint of our guidance by $95 million to $85 million.
Amit: This change reflects a $125 million reduction in gross margin, partially offset by cost cutting initiatives.
Amit: More specifically the $600 million reduction to our revenue guidance at the midpoint attributable to the delay in signing the contracts.
Amit: Has an impact on adjusted EBITDA of approximately $75 million based on our previously assumed 12, 5% gross margin. In addition, there is an impact of $50 million from competitive pressures and the recently announced tariff on Chinese imports that resulted in a lower gross margin of 11.
Amit: Percent.
Amit: To mitigate the impact of EBITDA of lower gross margin. We are implementing a targeted action plan to reduce our costs that will better align our resources to deliver long term sustainable growth.
Amit: We expect these actions to generate $30 million of offsets, which takes us to the new revised adjusted EBITDA guidance midpoint of $85 million.
Amit: Turning to slide 16, I will now discuss our liquidity, which continues to be strong.
Amit: We ended the quarter with $654 million of total cash, which represents a 37% increase from the same quarter last year.
Amit: Additionally, we have $458 million available under our revolver and supply chain facilities, which puts our total liquidity at more than $1 1 billion.
Amit: This reflects the benefits of $400 million of convertible notes issued in December which results in a fully funded plan for 2025.
Amit: During the first quarter, we used more than $200 million of cash.
Amit: For our operating activities, which was partially driven by the purchase of inventory to fulfill near term contracts.
Amit: This use of working capital represents the substantial majority of the expected working capital needs for this year.
Amit: In summary.
Amit: We have strong liquidity that positions us well to capitalize on significant growth in the energy storage market.
Speaker Change: With that let me turn the call back to <unk> for his closing remarks.
Speaker Change: Thank you Amit turning to slide 17.
Speaker Change: I'd like to emphasize the key takeaway from this quarter's results.
Speaker Change: First <unk>.
Speaker Change: In fiscal year, 'twenty five guidance, primarily to reflect delays in signing specific counter and secondly, due to some competitive pressures there.
Speaker Change: The strong backlog coverage of our revised guidance significantly de risk <unk>.
Speaker Change: Year toward.
Speaker Change: Second.
Speaker Change: The battery storage market remains robust.
Speaker Change: Driven by rising demand and highlighted by the U S market, where we have a competitive advantage with domestic contract.
Speaker Change: Third our U S supply chain puts us in an excellent position to mitigate the geopolitical volatility, we're experiencing and foresee for the near future.
Speaker Change: And fourth our strategy of rapid innovation and more specifically, our new product platform provides the technology Foundation.
Speaker Change: Sustained our leadership position in the competitive environment, we are experiencing.
Speaker Change: In summary.
Speaker Change: Even with the disappointing guidance, we set today.
Speaker Change: Have confidence in the strength of our business model to guide us to success in this mark.
Speaker Change: We remain dedicated to delivering the profit return our.
Speaker Change: Our shareholders are seek through.
Speaker Change: One our strategy of profitable growth that provides robust topline growth with double digit margins.
Speaker Change: Two.
Speaker Change: Our successful operating track record that provides confidence in our ability to realize the margins in our backlog.
Speaker Change: Three scalable operating leverage implying strong growth of adjusted EBITDA on top of our topline growth.
Speaker Change: For Kantar.
Speaker Change: Continued investment in product innovation and sales capabilities to ensure our offering is competitive and more important.
Speaker Change: Customers are well served and enjoy a figure route to value for their investment.
Speaker Change: And fifth.
Speaker Change: And finally, our capital light approach that on top of the agility to adapt to a genuine environment allows for robust profitability metrics with that I would like to open up the call for questions.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star One wondering your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, we compile the Q&A roster.
Speaker Change: And our first question comes from the line of George generic <unk> of Canaccord Genuity. Your line is now open.
Speaker Change: Good morning, Doug Good morning. Good morning, Thank you for taking my questions.
Speaker Change: Maybe first just to focus on.
Speaker Change: In 2026 revenue guidance that you pointed to in your deck, you mentioned that you expect 30% plus growth there.
Speaker Change: Which is the same as last quarter. Despite the fact that you had some push outs.
Speaker Change: Here in Australia does that mean that you've maybe lost some business or do you just decided not to update that for population. Thank you.
George Generic: Thanks George.
George Generic: We've taken a conservative view of our 26 of 26%.
George Generic: While we have today and the way we present, there's going to a floor.
George Generic: Or where we say, we can do 30% on top of our guidance.
George Generic: Is that as we move forward during the year, we will be able to give you more clarity on these numbers our firm Denmark.
George Generic: Today, our best view as of 30, plus 30% on top of the of the midpoint for 25, and I will provide more a better view for four 426 as we move along the way we have like $1 2 billion or a backlog for 'twenty six time, we need to bring some additional.
George Generic: <unk> backlog in order to firm that Nomura.
George Generic: Up to that as we move forward, but we have taken after what happened now we have taken a more conservative view of 26 at what we have done.
George Generic: Thank you and maybe as a follow up just different topic do you have any comments on.
George Generic: On Moss landing.
George Generic: Some of the recent events there help us kind of walk through that thank you. Yes. Most of them we have no information except for what we got from the breast. So we have we have not been too uptight. Since 2022, we have no contract with outside we have no service agreement with our size. So we have seen there is any liability coming out of that area and Russ you said.
George Generic: While we will always want the same thing goes broad Sunday in the media.
George Generic: In general, yes, or no.
George Generic: Cannot come in more of that.
Speaker Change: Okay. Thank you gentlemen for next question.
And our next question comes from the line of Brian Lee of Goldman Sachs. Your line is now open.
Brian Lee: Good morning, Brian.
Okay.
Brian Lee: Everyone. Thanks for taking the questions.
Brian Lee: Sure you didn't get a lot of them, but I wanted to focus on the margins for a little bit so.
Brian Lee: Maybe to start off can you can you talk about sort of.
Brian Lee: What margins you're seeing on.
Brian Lee: Certainly on new bookings this quarter as well as these Australia bookings youre expecting later in the year like.
Brian Lee: Is that all going to be at the lower end of that 10% to 15% range you've targeted overall or are you going to be able to.
Brian Lee: Start seeing some margin expansion based off the new the new product didn't redesign of that just trying to understand like how.
Brian Lee: Structural and how.
Brian Lee: Are these margins at the lower end of the range for a while and then is it something you recover in 'twenty six or does it take longer than that.
Brian Lee: Very good question two points I think that are important lets talk about first one effects, we believe that our new progress on.
Brian Lee: Our strategy for <unk> will bring us back to a.
Brian Lee: Two our range will put us in the middle of that range or hopefully better than that but that's our view today. When we looked at are proud of what he can do so we see this margin reduction Fas.
Brian Lee: Our temporary situation why do we have for the year. When we looked at two things are driving this margin 0.1, a change of mix the mix of projects changed due to the delay in the in the Australia projects.
Brian Lee: Second the new our current view of the recent backlog.
Brian Lee: The backlog that we will be and where we will need to enter into to support 26 25 revenue is that they will come in high single digits.
Brian Lee: Simple math when.
Brian Lee: When you do the simple math of what we added in our backlog of 12, and a half or the high single digits. It comes around these tend to be 10% to 12% organic we think this is temporary.
Brian Lee: This is something that we are addressing it comes out.
Brian Lee: Competitive pressure, we're still not there.
Brian Lee: Far, but we clearly need to put it we are putting up a plan to get to where we need to.
Brian Lee: And that's conceptually this is a temporary situation that we will address in the <unk>.
Brian Lee: Our investments in technology.
Brian Lee: Okay Fair enough and then just follow up for me would be.
Speaker Change: I mean, presumably this competitive pressure you called out Chinese peers is more acute in international markets in the U S. Because I know who remain you spent a lot of time on the call talking about how the advantages that are starting to come back your way in terms of the U S. So is it.
Brian Lee: Sure.
Brian Lee: A large function of incremental bookings coming from the international part of your pipeline in the U S side are you seeing the same type of pressures or are you actually seeing any kind of margin.
Brian Lee: Upside because of your kind of domestic advantages have you started to see any of those benefits accrue to your margins and pricing, but can maybe just dissect the difference between U S and international sort of margin outlook.
Brian Lee: So on the U S side first.
Brian Lee: We see a very strong position the problem the problem in the U S. The Asia into the U S. Our tariff as I said, we mentioned that $10 million on margins on U S contracts that we expected upon because we're going to realize in 'twenty five.
Brian Lee: That is why we see that that.
Brian Lee: A lower point.
Brian Lee: The competition was mostly in international markets, mostly that significantly more strong in international markets and that's what we have seen our margins compress.
Brian Lee: We are seeing competition all around but the compression in margin comes mostly from international markets. However, as I said, just repeating my point the U S I've seen that $10 million.
Speaker Change: In Darius.
Brian Lee: It is a margin.
Brian Lee: The reduction Opex into Russell most of our U S. Essentially all of our U S domestic content.
Brian Lee: <unk>.
Brian Lee: <unk> seen.
Brian Lee: Or do you ask for 25 has already been contracted so generally we don't see that there will be any.
Brian Lee: And the ability to that we will lose some of that.
Amit: Thank you Amit for next question.
Speaker Change: Our next question comes from the line of Telenet Sano of Wolfe Research. Your line is now open.
Telenet Sano: Hey, good morning, how are you.
Speaker Change: Good how are you.
Speaker Change: It will be bad or let me put it that way yeah understandable can.
Speaker Change: Can you just talk to your confidence level that these Australian contracts do kind of come back and get signed by the end of the year and then if they do is there is there any chance that any of that would be realized in 25 at the time that you book them and then I guess just taking a step back can you just talk about what kind of gave you. The confidence initially to include them in the guidance.
Speaker Change: And what kind of relative to your assumptions.
Speaker Change: This is a very very good point.
Speaker Change: These delays were cost some of the other projects and by minor.
Speaker Change: Issues.
Speaker Change: That my being very very transparent here my team did not see on time.
Speaker Change: By the time we.
Speaker Change: Sorry delayed.
Speaker Change: Realize these projects have all their major impairments that jewelry ready we are very much vary advances.
Speaker Change: Things that we had already we will.
Speaker Change: We had on their.
Speaker Change: Pocket however.
Speaker Change: However, these minor issues delayed the projects in a way that that's already so we're very confident.
Speaker Change: At least two of them are essentially fully the recent youll be signing with sign.
Speaker Change: <unk>.
Speaker Change: And they should not be you know on which we'll be able to is there a pro I really think that it might be revenue 26. There is what is today not I hope I don't feel confident enough to bring it into the into our forecast. So we decided to take them out of their forecast for this year.
Speaker Change: Clearly.
And one point that if some of you had asked me made I think the connection none of these things as they are connected.
Speaker Change: Have all those permits the Asia has been minor issues that traffic.
Speaker Change: Road, passing to a bound that in there.
Speaker Change: That did not get the permits until recently small issues with the offtake of that delay their project and some regional who either preparing that side that were that you know I will say my teams you have picked up.
Speaker Change: First of all it because theres, where big contract with 50 things as more controversy around there.
Speaker Change: Chile delays that do not affect our ability to meet our forecast. However, when we are minority issues on three big contracts.
Speaker Change: Indeed oil 2025.
Speaker Change: So we feel very confident they'll come in.
Speaker Change: And our current view is that they will be 26 revenue there.
Speaker Change: <unk> elite that Youll get some some 25, but today, we took it out of the forecast decided to become.
Speaker Change: Two.
Speaker Change: Drive and continue on this.
Speaker Change: Keep it Kurt Kane.
Speaker Change: Okay. Thank you.
Speaker Change: Helpful. And then just as a quick follow ups at this slide on the tariff exposure is helpful. But I guess the one thing that's kind of missing in that discussion is the section 301 tariffs that hit in 2026 can you just kind of.
Readdress your exposure to that 25% tariff that hits next year and kind of how you may getting that.
Speaker Change: We have that that that we have included in our forecast it should not it should not affect our numbers. So it affects our cost structure and stuff, we need to but it will not affect our ability to meet our focus has already put in place.
Speaker Change: Great. Thank you.
Speaker Change: Youre welcome.
Speaker Change: Thank you Mohammed for next question.
Speaker Change: Maybe I point I'm, sorry, if I can add one thing that sort of England.
Speaker Change: Is the following.
Speaker Change: The problem with ferrous comes our announced with time, we have all the tools to manage them not to go who at least domestically content gives us that ability.
Speaker Change: We have all the tools to manage that very effectively like the 300 ones.
Speaker Change: The problems are they so pricing stuff that comes out of nowhere that people were not expecting that that are more difficult and it takes us a little longer too.
Speaker Change: So.
Speaker Change: If.
Speaker Change: I think that at some point, we will get to a normal cadence with the Trump administration and that things will be announced with time, and we will be able to manage it because our domestic content strategy.
Speaker Change: It is designed for a world of protections.
Speaker Change: At this time.
Speaker Change: <unk> do very very well so just to give you a sense of why the 300 ones with three of them very very differently than what we treat how we treat the.
Speaker Change: The tariff on.
Speaker Change: The 10%, China tariff, which came out.
Speaker Change: Solid.
Speaker Change: Our next question comes from the line of Christine Cho of Barclays. Your line is now open.
Speaker Change: Hi, This is Tom on for Christine.
Speaker Change: Hi, good morning, how are you.
Speaker Change: Good morning.
Speaker Change: So you guys had a very large deferred revenue number of over $300 million run through your cash flow statement for the magnitude was much larger than what we've seen in the past could you talk about what drove that this quarter and if there is anything notable.
Speaker Change: About when we should see that reverse and booked as revenue.
Speaker Change: I'll give you.
Speaker Change: This is I mean, I think that's we will expect that to be reversed within next.
Speaker Change: <unk> are so so this is more just the accounting, but I think.
Speaker Change: We expect that to be rolled over the next few months.
Speaker Change: Okay.
Speaker Change: Okay, great. Thank you that's helpful.
Speaker Change: And then I guess, just one follow up for me could you talk about what measures measures you are taking on the graphite supply and procurement front given the <unk> investigation.
Speaker Change: How how any duties would impact your existing operation in the event that they were retroactive.
Speaker Change: I don't think there can be a retroactive by the way.
Speaker Change: It can be retroactive okay.
Speaker Change: So where are we doing on the one first thing I think the first point.
Speaker Change: We are in order to prepare for a potential duties, we are trying to accelerate some graphite into a contra clearly.
Retroactive.
Speaker Change: Yeah.
Speaker Change: Duties that will not apply so you know if they were which would reduce our program. It seems like the walk forward.
Speaker Change: How to think about it generally tariff that sales are roughly 30%.
Speaker Change: <unk>.
Speaker Change: Graphite, it's 10 to 15, so roughly on a project in a total project cost 5% as graphite.
Speaker Change: We the way we understand the petition explain.
Speaker Change: Is that their clients they are asking for and application of duties on graphite imports.
Speaker Change: On all of that or is that including all of the elements that include graphite. So what it will mean is that this will create a level playing field for both domestic content and for imported rock. So it will not be it will not be that domestic.
Speaker Change: Offerings will be more expensive than important.
Speaker Change: If there were successful in their claim that's what it will mean the whole market will go up in price and which all feel differently.
Speaker Change: From our part of what we're doing is accelerating some zone.
Speaker Change: Some graphite imports board.
Speaker Change: I will say that if we if it is.
Speaker Change: They can go back I don't know how far walk back. They can go it will that will not be that would not be super.
Speaker Change: So patients so Oswald what are the one.
Speaker Change: We believe that these will create disruptions it will create a problem no doubt.
Speaker Change: But it will grab problem for the whole industry.
Speaker Change: <unk> not make domestic content by itself more less competitive.
Speaker Change: The main objective of this by graphite amount of potential.
Speaker Change: I'll find manufacturers still develop vessel.
Speaker Change: Battery industry in the U S, where they can deliver their products.
Speaker Change: They destroy domestic production there will not be able to they will not meet their objective. So I think at the end of the day.
Speaker Change: Which you'll be able to add absolute however, if it come to say that if there is.
Speaker Change: The retroactive tariff it will be create some disruptions that we will have we will let you know when it comes I mean, it's difficult today to see to see what it is.
Speaker Change: Thank you one moment for.
Speaker Change: Our next question.
Speaker Change: Yes.
Speaker Change: Our next question comes from the line of Andrew <unk> of Morgan Stanley. Your line is now open.
Andrew <unk>: Good morning, guys. Thanks for taking the question.
Speaker Change: Good morning, I, just wanted to come back to a question on margins I think loud and clear that margin compression in pricing compression really originating some of these international markets, but just kind of wanted to put a finer point on what youre seeing.
Speaker Change: From domestic customers, you've talked a lot about strong domestic content demand can you confirm whether or not that's translating into maybe premium pricing and higher margins on those contracts today.
Speaker Change: I mean, our margins already within a range of 10 to 15, we have not been able to go beyond that to the up to now.
Speaker Change: While we have seen in the U S is that a lot of these players are trying to sell into the US Ahead of these rules coming out I'm trying to I don't know.
Speaker Change: Little bit of noise about that generally the customers, we're working with our customers with wire betting on domestic content, that's not something that really affects them, but we have seen the Chinese players trying to become more active especially on projects out of the liver in 'twenty during 'twenty five.
Speaker Change: To try to win space in the U S trying to preempt trade restrictions so.
Got it.
Speaker Change: My main point is that I don't think that is affecting our.
Speaker Change: Our domestic content margins and our domestic content margins are in the 10 to 15 and today, we haven't seen premiums that would take us out of the Idaho, Idaho that range.
Speaker Change: Understood, Okay that makes sense and maybe shifting gears to the cost side of the equation for a second.
Speaker Change: You've ramped your facility in Utah can you just discuss.
Speaker Change: How is the cost trajectory play.
Speaker Change: Played out maybe relative to your expectations or is everything going as planned or are you, maybe a little bit higher on the cost.
Speaker Change: Cost per kilowatt hour than maybe expected just maybe give a general.
Speaker Change: Outlook of cost trajectory from that facility.
Speaker Change: That's a very good question I am very pleased pleasantly surprise no surprise me.
Speaker Change: I'm very pleased with how that facility is going and he makes the point that I don't know how to say.
Speaker Change: You know I'm not reasonably born in the U S. The U S kind of compete factories stuff come on let's get out of the site.
Speaker Change: The only the Chinese can do it this is a facility.
Speaker Change: Machines made in Indiana, Indiana and that is run by Americans and it works very very well.
Speaker Change: At our facility in China, you want to leave our facilities better Theres No reason why we need to see we lost the vitals off products.
Speaker Change: I know that is difficult with your financial market, you're not into it but when I talk to people I don't know why I mean this is award this is.
Speaker Change: By the weekend Wayne.
Speaker Change: We you know we're not even experts on this we've been able to bring the facility very quickly and doing very very well I really think that hopefully you know I hope that we all get that confidence.
Speaker Change: But then.
Speaker Change: Enterprise in the U S.
Speaker Change: Confidence that we can build stuff in the U S. At a competitive price. There's no reason why we need to think that the Chinese are any better than Austin doing any other stuff. So.
Speaker Change: Very good is doing very very well and very very happy and I.
Speaker Change: So that when things got better will embody all where you can see it.
Speaker Change: And I see it for yourself.
Speaker Change: Great.
Speaker Change: The machines. These machines were not important that were made in Indiana.
Andrew <unk>: Thanks, so much okay. Thank you Andrew.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Mark Strouse with Jpmorgan. Your line is now open.
Mark Strouse: Yes. Good morning, Thanks for taking my questions.
Speaker Change: Hey, Julien.
Speaker Change: I wanted to go back to slide 10, we talk about government policy and.
Speaker Change: Trade Theres nothing on there about the.
Speaker Change: The temporary permit increase in Trump's executive order.
Speaker Change: Is it safe to say that there is there is no impact of affluent there or is it maybe just too early to tell.
Speaker Change: Haven't seen any any impact.
Speaker Change: No real impact I understand that there were all in applied to federal lands I mean, they were all late lifted that's why that ramp.
Speaker Change: This week I don't know if thats, the case or not but that's what I've got that haven't been involved directly to what I heard is that all the permitting freeze westward lifted what lifted areas.
Speaker Change: Okay.
Speaker Change: Got it okay ill take the rest offline. Thank you very much.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Christopher <unk> of RBC capital markets. Your line is now open.
Christopher: Hey, Greg good morning.
Speaker Change: Thanks.
Speaker Change: I wanted to ask about the new product launch and I guess my question is is this sort of industry, leading or is this a bit of a catch up product and the reason I'm asking is I'm curious if you think youre going to be able to maintain that margin profile of it and then just.
<unk>, leading product and Youre.
Speaker Change: I guess competition, but play catch up in price down as well thanks.
Speaker Change: We see that as an industry leader in project.
Speaker Change: It will allow us to get to the <unk>.
Speaker Change: 70, 775, 12, two gigawatts of.
Speaker Change: Sorry, it will get us to seven seven megawatts of.
Speaker Change: Capacity.
Speaker Change: Per unit, which is industry, leading 30% better than anybody else.
Speaker Change: So we believe that you know people copy us about why have we done to make this we've separated the router is from the intelligence of the year and they were put in the all the units in the base of that product line that you'll see there.
Speaker Change: That allows us to go higher in terms of batteries per square meter.
Speaker Change: It also allows us to continue transporting everything in containers.
Speaker Change: So by separating the parts that Youll see the debut of parts into a specific unit is important all the intelligence and the balance of power plant equipment in the base. We can go higher in terms of height, and we can reach a much higher than anybody else using 300 mm powerhouse. So that I think will put us in a very bad.
Speaker Change: Very very competitive position all they are.
Speaker Change: Probes that are close to what we're doing are products that are.
Speaker Change: Sure.
Speaker Change: That are using higher empower ourselves about three so these will allow us to provide these with lower end by ourselves and others, which means we are at the higher empowered fell about this will be even higher than that so we're very happy with the problem. We really were an industry leader and this will allow us to be to regain our competitive advantage and you know also this facility gives us.
Speaker Change: Our plan for this really these new producer pro gives us a platform, where we can innovate. So we already have a broad roadmap to ensure that this is not <unk>.
Speaker Change: This is just a beginning of a set of innovations that will keep that project that project competitive as we go alone or a competitor try to copy awesome government stuff.
Speaker Change: Stuff.
Amit: So I think as Amit.
Speaker Change: Your question.
Speaker Change: You had mentioned you know what I mean, I think the goal is to create value for our customers and you're done at the same time, it's a win win proposition that will bring us back.
Speaker Change: Our targeted returns that we talked about 10% to 15%.
Speaker Change: That's right.
Speaker Change: Okay, and then maybe just a follow up here to hit the margin question again, but if I go back to the prior commentary the original outlook and I think you mentioned that you are 65% booked for the year. So if I just do kind of the bridge on that to the new guide it looks like the incremental margin on the booked portion here.
Speaker Change: Pretty low to kind of almost.
Speaker Change: Negative.
Speaker Change: Chris just to I think step back now.
Speaker Change: Last time, when we gave our guidance, we were saying 10% to 15% margin.
Speaker Change: And we had 65% of our.
Speaker Change: <unk> coverage for our.
Speaker Change: Our revenue guidance of $4 billion fast forward, what we are saying today is I think since then the contracts we have signed.
Speaker Change: Our roughly high single digits nine 9%.
Speaker Change: Minus so I think that is what we are saying net net that brings us at around 11%.
Speaker Change: Gross margin for the revised guidance. So so the impact is only on the new contract start the backlog that we had signed at that time, we have not seen any material change except the tariff that we talked about which is only $10 million in that shaved roughly three 4%.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you Manav for next question.
Speaker Change: Our next question comes from the line of Cashew Harrison of Piper Sandler Your line is now open.
Cashew Harrison: Good morning, everyone.
Speaker Change: Two quick ones for me.
Cashew Harrison: Morning Julien.
Cashew Harrison: So a quick a quick clarification question.
Speaker Change: Is the margin weakness in the U S or is the margin weakness in international markets I, just wanted to make sure I.
Cashew Harrison: No.
Cashew Harrison: Most of that most of the international I mean, we do have some some low as you know non domestic offering in the U S. Most most of the interaction.
Okay.
Cashew Harrison: And then my follow up question. So if I just take a step back if I just think about the broader renewable space.
Cashew Harrison: A recurring theme is that competition against the Chinese.
Cashew Harrison: Especially when they have severe excess capacity.
Cashew Harrison: And markets that don't have strong protectionist policies in place. It just it just never seems to end, while it's fantastic to hear your enthusiasm enthusiasm on competition, but generally speaking theyre more focused on utilization and profitability, which makes it tough.
Cashew Harrison: So as you look at markets outside the U S. That you are competing in are there any places you feel have startup protectionist policies in place.
Cashew Harrison: Or is there perhaps a thought on pulling back from some of these more competitive markets where.
Cashew Harrison: The Chinese can can play without worrying about.
Cashew Harrison: Thank you.
Speaker Change: My first one is I will disagree on that premise.
Speaker Change: When you look that as products why do we have.
Speaker Change: Battery cell, where do you think.
Speaker Change: No.
Speaker Change: The ability to make that router sale worked well is a combination of calling software controls the linearity.
Speaker Change: That's what they value.
Speaker Change: We you know you're right the Chinese could have on our ability to sell batteries at very low margins of rare to see the margin. While the reality is that these are less and less relevant in the value proposition.
Speaker Change: So when we looked at our new product, we compare it against the prices our seeing the middle East where there are zero restrictions, where we have seen in some other markets, where we see very little restriction and we can get competitive drawing noise by integrated our software by the signing of probes in a way that we can transport them better that we candidly.
Speaker Change: Better reliability that they can be safer.
Speaker Change: A lower cost point.
Speaker Change: <unk>.
Speaker Change: I don't disagree that because that was my point earlier that we this is a this is a manufacturing industry. This is an industry of innovation of technology noise and I think that we have that technology innovation to compete on will continue.
Speaker Change: So that's what I think clearly as you said they are now going to your question. There are markets that have more restriction with the U S. As a market with significant restrictions to Chinese competition, Australia is a market with some restrictions to Chinese competition, Taiwan is a market that has many restrictions to Chinese competition that you'll see more.
Speaker Change: Open markets.
Speaker Change: Europe is in their way and they are defining why are they how are they going to manage the polyphase on more open market. The middle East is very much open.
Speaker Change: I'll say Latin American Aesop anyway, so that's kind of where youll see the world there are markets, where our but our objective as a company is to compete globally.
Speaker Change: We are here to compete globally. The thing that is important and we believe that through innovation integrating software. Our control is our ability to rethink all the value added around the router, we can create enough value to beat up on back on price the Chinese willingness to sell stock.
Speaker Change: At lower cost.
Speaker Change: So our view today, when we look at it when we see their margins. They have what are the other ways that that's why we see that.
Speaker Change: We can see all right.
Speaker Change: Our premise.
Speaker Change: Clearly I can understand as to what will happen, you'll probably do not necessarily too.
Speaker Change: Believe me not bought or you might go if I put it in doubt, but that's that brand because of our view through technology.
Speaker Change: A world, where lower rotary cost through technology, we can win this.
Speaker Change: Yes.
Speaker Change: Operator.
Speaker Change: Thank you I don't know if I answered your question Gotcha, I went a little bit or if you need a second one here.
Speaker Change: No no you answered. The question you entered all point and I appreciate your thoughts on the market I mean, if I could just sneak one more in.
Speaker Change: Since I'm talking right now.
Speaker Change: So I think in the past you had part of the in house converter as being margin accretive.
Speaker Change: Due to the business.
Speaker Change: When you look at your current offering do you do you think that this in house inverter. It gives you a path to go from the 10% to 15% and then how long do you and how long do you think it'll take before 100% of your shipments are using the in house.
Speaker Change: Thank you yes.
Speaker Change: In housing.
Speaker Change: Add in the inverter into is not only the inverter, we're adding all the violence.
Speaker Change: Plant equipment and by adding these additional places we're also adding edge computer to edge computing.
Speaker Change: Our software to a system, which will allow a much better performance because you don't need to put things in the cloud threat and then send them back that we will be able to now artificial intelligence in the system itself.
Speaker Change: By the way we are now designing this.
Speaker Change: This is all upgraded their housing burden. We believe this is a problem that is like our cube is going away.
Speaker Change: It's going to take all our our sales as we move forward.
Speaker Change: You know, we're very happy we believe that at some point all of our sales will be on the this type of architecture.
Speaker Change: What is most more than the inverter that's my point.
Speaker Change: Okay.
Speaker Change: Thank you our next question.
Speaker Change: Our next question comes from the line of Jordan Levy of true Securities. Your line is now open.
Jordan Levy: Good morning, all and thanks for all the details.
Speaker Change: To get your thoughts on the new Guy at 85% covered our current backlog I think you've covered that well.
Speaker Change: Recognize that that's higher than the same time last year, but can you just.
Speaker Change: Talk through your thinking process there given what we saw last year in terms of project push outs and yes. I know these are kind of one off occurrences that arent necessarily interconnection related or anything, but maybe just talk to your confidence on the ability to deliver on that on the uncovered portion of the guide.
Speaker Change: Yes, I mean, we felt.
Speaker Change: Very confident clearly we're setting the guidance, but that number what I will say I mean.
Speaker Change: I know, where we are today, we're kind of in that penalty box.
Speaker Change: We need to find a substantial part of the of this number by the next earnings call.
Speaker Change: And that will be the that's the point we are working on it we believe we're going to get it on.
Speaker Change: We will see where by the next earnings call, which will have a substantial part of these resolve in the race for it would also mean that we will get to a 100% because we'd recognize some revenue as we sign contracts, but we will get to a point that you can feel comfortable that the meat side of it.
Speaker Change: Mid size of the range is covered enough about that.
Speaker Change: You woke up we can get you draw back on our ability to earlier.
Speaker Change: Thanks for that and then just a quick follow up on the $30 million in cost reductions and right sizing is there.
Speaker Change: Depending on market conditions or is there still more wood to chop on that front or is that sort of what your the level you're comfortable with on a go forward basis.
Speaker Change: These cost reduction aligns our cost structure with our business model of <unk>.
Speaker Change: Or not.
Speaker Change: Not allowing our cost to grow more than half of our top line growth. So if our growth is 25% not allowing our cost to go more than 12 and a half so that's where we're at.
Speaker Change: What we're doing with this cost structure alignment to our business business case that there probably are always a little opportunity here or there, but thats the objective.
Speaker Change: Thank you al.
Speaker Change: Thank you next question.
Speaker Change: Our next question comes from the line of Vikram <unk> of Citi. Your line is now open.
Speaker Change: Good morning, everyone.
Speaker Change: You talked about reading from the Chinese <unk>, and Minto Turkish deflationary as well.
Speaker Change: You saw the announcement from China, and DRC recently, Richard It seems like.
Speaker Change: They make the move to situations are Chinese manufacturers are little more desperate and a little more worse I was wondering like how are you thinking about ASP. This year and next year do you.
Speaker Change: I understand and appreciate that you should be able to get to the targeted margins and protect the margins I was wondering like how much of ASP pressure or do you anticipate we might see.
Speaker Change: And our next year.
Speaker Change: We still see some bench.
Speaker Change: During the call, we still see some ASP pressure going forward that the competitive environment you saw there and we're working with IBU.
Speaker Change: A further reduction of USB is going forward.
We looked at the a and the Chinese tender prices, which are you know we get information on until we kind of know and we I know we have had some recent tenders.
Speaker Change: In the Middle East personnel in the Saudi Saudi Arabia that gives us a sense of where the lower side of that though that ranges. So we already are expecting certain reductions going forward that we will be working on them, but we have enough debt.
Speaker Change: As part of our plan.
Speaker Change: This is amit excuse I mean last year since last year, we've seen roughly.
Speaker Change: 35%, 40% decline in Asps, but I think at the same time, we have seen.
Speaker Change: Volume pick up north of 60%. So I think there is there is a benefit and the volume pick up that helps to continue to grow our revenue.
Speaker Change: But these trends are continuing but at the same time, we are seeing more and more volume.
Speaker Change: Got it.
Speaker Change: Then as a follow up I wanted to ask about the $30 billion in cost reductions if you can share where theyre happening.
Speaker Change:
Speaker Change: Your arms are.
Speaker Change: The last question I was wondering if this this $30 million reduction speaks to the growth this year.
Speaker Change: Lighting.
Speaker Change: Expenses to growth longer term so its related more to growth next year any expectation for the growth outlook are changing for forward years and Thats why that is.
Speaker Change: <unk> is happening.
Speaker Change: I mean, we looked at our cost structure per year dependent on top line growth and then we look at our cost structure generally what we're doing is saying that we were planning to later in the year that we're now one though because we don't have the revenue.
Simple as that I mean, we are defending or investments in product and defend and all the investments in sales, but the rest of the organization. We are adapting it to a company that notwithstanding 15% less of what are you going to expect that for next year, we will whatever we have the 30%.
Speaker Change: 30% top.
Speaker Change: Plaza, we just communicated to you depending on where we end up we will ensure that our cost structure aligns with our business models are not allowing our costs to grow more than half the rate of growth of our top line growth.
Speaker Change: Thank you.
Speaker Change: Thank you Juan for next question.
Speaker Change: And our final question comes from the line of Julien Dumoulin Smith of Jefferies. Your line is now open.
Speaker Change: Hey can you hear me okay.
Speaker Change: Hey, Julien good morning.
Speaker Change: Hey, good morning, guys. Thank you very much for letting me on just following up here on a couple of things first briefly on liquidity backdrop. Obviously, you commented about working capital here the start of the year I mean, given the EBITDA profile.
Speaker Change: Basically, saying, suggesting that the cash balance should remain relatively intact through the course of the year. I mean, you want to make sure. We're on the same page about how did you said, yes, alright, Robert speaking.
Speaker Change: Yes, Hey, Julien Julien, Yes, I think the main reason for working capital use is the buildup in inventory as you may have seen we have over $300 million of inventory and that is primarily to basically serve our demand.
Speaker Change: Contracts, we have in place so net net during the whole year you know we are not expecting the working capital.
Speaker Change: Use more than I think historically roughly $225 million that we are forecasting for the full year and 200 of that is already in.
In Q1, so we don't expect any material change in the forecast.
Speaker Change: And there are no material building cash, though that was the key piece that just never looked like where you went through the year or do you expect that to reverse here I mean for the full year, we basically will be in around the same ballpark because we even have significant receivables.
Speaker Change: In the Q4, given the revenue profile, we have but I think we expect.
Speaker Change: That will be collected.
Speaker Change: And the following quarters, but for the full year, we feel pretty good where we are today.
Speaker Change: Awesome, and who and if I can go back and look at better practices I mean, obviously $25 26.
Speaker Change: This funding advantage versus your peers in the U S. Admittedly by 27, when we start to see some suggestions of international entrants into the U S market.
Speaker Change: Various levels here, how do you think about the competitive landscape in the U S over time and as much as what you just described internationally.
Speaker Change: Competitive pressures bearing weight here again.
Speaker Change: Would you think that 26 would be a relative peak versus 27 as you see some of those congrats you've come in again open question. Obviously you responded to park. The cash you on this but would love to hear your thoughts, especially as you think about your product innovation like Devon.
Speaker Change: So in terms of we believe that over time, the U S market, where we have domestic content market for most players that will compete in the market will compete with domestic offering. So youre right, probably you know I'm surprised that he has taken this long to get ready, but my own personal view abroad. So I agree with you. Our view today is that they will be probably.
Speaker Change: In 'twenty six.
Speaker Change: In 2007, where they will see.
More of a domestic offering and competing there you know who they are.
Speaker Change: Competition will have to wait till the technology buy.
Speaker Change: Offering things that are better that do better behaved.
Speaker Change: You know run better and that last longer than that.
Speaker Change: The way to win.
Speaker Change: That's what I will say that the normal way youre, winning any new industry. So.
Speaker Change: Yes.
Speaker Change: But that would be my view I think the domestic content gives us a couple of years of upside or opportunity to to have kind of a quote unquote a safe place, but we are getting ready for a world where we compete chest with.
Speaker Change: All of the domestic content players and he will be technology as a driver of success.
Speaker Change: Right, but the margin dynamics, there, but over time I mean.
Speaker Change: Obviously, you brought down expectations here in the near term.
Speaker Change: Do you think there is a little bit more pressure and you need to offset that with technology.
Speaker Change: Beyond the theater.
Speaker Change: I think that generally will be you know the 10 to 15 I will have to be very clear I don't think I have a huge add on 27 margins, but I think that our current view when we looked at are proud of our golf on our competitors that 10 to 15 per signing something that we can safely guide too.
Speaker Change: So that's what I would tell you is clearly a required part of these new platforms Youre already has a roadmap of improvements not to ensure that because we don't we know our competition will not sit idle. So we already have that as part of it. So we have investments in them in probably a element that will continue need to continue to to ensure that we can.
Speaker Change: To be competitive.
Speaker Change: Great excellent guys. Thank you.
Speaker Change: Thank you Julien.
Speaker Change: Thank you everybody for participating on today's call I really appreciate the opportunity.
Speaker Change: Thank you. This concludes our question and answer session I would now like to turn it back to Lexington may for closing remarks.
Speaker Change: Thank you for your participation on today's call. If you have any questions feel free to reach out to me when I look forward to speaking with you again, when we report our second quarter results have a good day.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.