Q3 2025 Fluence Energy Inc Earnings Call

Speaker #1: Thank you for standing by. My name is Janice, and I will be the operator. For today, at this time, I would like to welcome everyone to Fluence Energy, Inc.'s Q3 2025 earnings conference call.

Ahmed Pasha: Thank you for standing by. My name is Janice, and I will be the operator for today. At this time, I would like to welcome everyone to Fluence Energy, Inc. Q3 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Lexington May, Vice President of Investor Relations. You may begin.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask questions during this time, simply press star followed by the number one on your telephone keypad.

Speaker #1: If you would like to withdraw your question, press star one again. Thank you, and I would now like to turn the conference over to Lexington May, Vice President of Investor Relations.

Speaker #1: You may begin.

Speaker #3: Thank you. Good morning, and welcome to Fluence Energy's third quarter 2025 earnings conference call. A copy of our earnings presentation press release and supplementary metrics 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 fluenceenergy.com.

Lexington May: Thank you. Good morning and welcome to Fluence Energy's third 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 Investor Relations sections of our website at fluenceenergy.com. Joining me on this morning's call are Julian Nebreda, our President and Chief Executive Officer, and Ahmed Pasha, our Chief Financial Officer. 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.

Speaker #3: Joining me on this morning's call are Julian Navrata, our President and Chief Executive Officer. And Ahmed Pasha, our Chief Financial Officer. 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.

Speaker #3: 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.

Speaker #3: 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.

Lexington May: 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 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. 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.

Speaker #3: 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.

Speaker #3: This call will also reference non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of these non-GAAP measures to the most comparable GAAP measure is available in our earnings materials on the company's investor relations website.

Speaker #3: 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.

Speaker #3: Thank you very much. I'll now turn the call over to Julian.

Lexington May: Thank you very much. I will now turn the call over to Julian.

Speaker #4: Thank you, Lex. I would like to send a warm welcome to our investors analysts and employees, who are participating in today's call. This morning, I will briefly review our Q3 results, and then address the impact of recent legislation.

Julian Nebreda: Thank you, Lex. I would like to send a warm welcome to our investors, analysts, and employees who are participating in today's call. This morning, I will briefly review our Q3 results and then address the impact of recent legislation, which we believe provides a strong foundation for the future of our business. I will also provide an update on the current market environment and the progress we made in executing on our strategy. Ahmed will then cover our quarterly financial results and 2025 outlook in more detail. Starting on slide four, I am pleased to report that since our Q2 call, as we expected, we signed two contracts in Australia worth approximately $700 million of combined revenue. One of these contracts is the largest contract in our history.

Speaker #4: Which we believe provides a strong foundation for the future of our business. I will also provide an update on the current market environment. And the progress we made in executing on our strategy.

Speaker #4: Ahmed will then cover our quarterly financial results, and 2025 outlook in more detail. Starting on slide four, I am pleased to report that since our Q2 call, as we expected, we signed two contracts in Australia, worth approximately $700 million of combined revenue.

Speaker #4: One of these countries is the largest contract in our history. Additionally, we delivered on our first domestic content product, which we believe is the first domestic content compliant battery storage system, delivered in the US.

Julian Nebreda: Additionally, we delivered on our first domestic content product, which we believe is the first domestic content-compliant battery storage system delivered in the U.S. We're ramping up our U.S. production and working through some typical production ramp-up issues as we scale. Finally, all of our contracts that were halted in the U.S. market due to tariff and regulatory uncertainty are now reactivated and moving forward. Turning to slide five and our Q3 performance. First, we ended the quarter with approximately $4.9 billion in backlog. Since June 30th, we had added to our backlog approximately $1.1 billion of contracts, including the two Australia contracts that I mentioned. Second, we recorded approximately $603 million in revenue, which was below our expectations, mostly due to delays in ramping up volume at our U.S. manufacturing facility.

Speaker #4: We are ramping up our US production and working through some typical production ramp-up issues as we scale. And finally, all of our contracts that were halted in the US market due to tariff and regulatory uncertainty are now reactivated and moving forward.

Speaker #4: Turning to slide five, and our Q3 performance. First, we ended the quarter with approximately $4.9 billion in backlog, since June 30th, we had added to our backlog approximately $1.1 billion of contracts.

Speaker #4: Including the two Australia contracts that I mentioned. Second, we recorded approximately $630 million in revenue, which was below our expectations, mostly due to delays in ramping up volume at our U.S. manufacturing facility.

Speaker #4: We expect to recover this revenue in fiscal 26, as production rates at this facility continue to improve and reach their targeted capacity levels. Third, despite this revenue shortfall, we generated at $15.4 percent adjusted gross profit margin, well above our target for the quarter.

Julian Nebreda: We expect to recover this revenue in fiscal 2026 as production rates at these facilities continue to improve and reach their targeted capacity levels. Third, despite this revenue shortfall, we generated a 15.4% adjusted gross profit margin, well above our target for the quarter, and our annual recurring revenue increased to $124 million. Finally, we closed the quarter with more than $900 million in liquidity, including approximately $460 million in total cash, which we believe allowed us to continue operating from a position of financial strength and provides significant flexibility in the current markets. Please turn to slide six. Since our last call, several developments have reshaped the energy policy landscape in the United States. The One Big Beautiful Bill Act, or the OB3, came out with strong support for battery storage.

Speaker #4: And our Annual Recurring Revenue increased to $124 million. And finally, we closed the quarter with more than $900 million in liquidity, including approximately $460 million in total cash.

Speaker #4: Which we believe allowed us to continue operating from a position of financial strength. And provide significant flexibility in the current market. Please turn to slide six.

Speaker #4: Since our last call, several developments have reshaped the energy policy landscape, in the United States. The one big beautiful bill act, or the OB3, came out with strong support for battery storage.

Speaker #4: It differentiates itself from other sources of generation by recognizing our technology as a dependable and dispatchable source of electricity, much like nuclear or gas plants.

Julian Nebreda: It differentiates battery energy storage from other sources of generation by recognizing our technology as a dependable and dispatchable source of electricity, much like nuclear or gas plants. This morning, I would like to highlight four provisions of the OB3 that provide support to Fluence Energy, Inc.’s U.S. strategy centered on domestically produced energy storage systems. First, the OB3 extends the investment tax credits for standalone storage through 2034. Second, it establishes new restrictions on the base ITC, limiting eligibility for Chinese equipment. Third, it imposes tighter and increasing over time Foreign Entity of Concern requirements on the 10% domestic content ITC bonus. Fourth, it adds Foreign Entity of Concern restrictions on Section 45(x) manufacturing credits. We believe that these provisions enhance our competitive position.

Speaker #4: This morning, I would like to highlight four provisions of the OB3, that provide support to Fluence US strategy, centered on domestically produced energy storage system.

Speaker #4: First, the OB3 extends the investment tax credits for standalone storage through 2034. Second, it establishes new restrictions on the base ITC, limiting eligibility for Chinese equipment.

Speaker #4: Third, imposes tighter and increasing over time FLC requirements on the 10 percent domestic content ITC bonus. And fourth, it adds FLC restrictions on Section 45X manufacturing credits.

Speaker #4: We believe that these provisions enhance our competitive position. As one of the few companies currently capable of delivering domestic content energy storage systems at scale.

Julian Nebreda: As one of the few companies currently capable of delivering domestic content energy storage systems at scale, we are seeing increased customer interest and growing opportunities that reflect the scarcity of compliance solutions in the U.S. storage market. Turning to slide seven, as I noted, the OB3 adds Foreign Entity of Concern restrictions to the Section 45(x) tax credit, limiting ownership, control, and material sourcing from certain countries. We expect that the forthcoming Treasury rules implementing these restrictions will be workable. We are actively engaged with our suppliers to ensure compliance by the deadline next year. Here, I want to highlight two important topics. First, we are looking at multiple options, none of which requires any significant capital beyond liquidity needs we have previously earmarked, thus not requiring us to raise additional equity. Second, the increasing domestic content thresholds on the OB3 favors our established U.S.

Speaker #4: We are seeing increased customer interest and growing opportunities that reflect the scarcity of compliance solutions in the US storage market. Turning to slide seven.

Speaker #4: As I noted, the OB3 adds FLC restrictions to the Section 45X tax credits, limiting ownership, control, and material sourcing from certain countries. We expect that the forthcoming Treasury rules implementing these restrictions will be workable.

Speaker #4: And we are actively engaged with our suppliers to ensure compliance by the deadline next year. Here I want to highlight two important topics. First, we are looking at multiple options none of which requires any significant capital beyond liquidity needs, we have previously earmarked.

Speaker #4: This does not require us to raise additional equity. Second, the increasing domestic content thresholds on the OB3 favor our established U.S. supply chain, positioning us well to deliver compliant, cost-competitive systems in this evolving regulatory landscape.

Julian Nebreda: supply chain, which positions us well to deliver compliant, cost-competitive systems in this evolving regulatory landscape. Turning to slide eight, the significantly higher tariffs on China proposed by the Trump administration and the uncertain tariff environment overall were the primary reasons for the halt in contracting activity last quarter. More recently, though, the tariffs on certain Chinese battery components have been reduced from 155.9% to 40.9%. This has restored a level of predictability that has prompted customers to resume contracting discussions. We are now seeing early signs of renewed U.S. order activity, supported by our flexible contracting model, global sourcing, and strong customer relationships. As I mentioned earlier, all our contracts that were halted in the U.S. market due to tariffs and regulatory uncertainty are now reactivated and moving forward.

Speaker #4: Turning to slide eight. The significantly higher tariff on China proposed by the Trump administration. And the uncertain tariff environment overall, where the primary reasons for the halt in contracting activity last quarter.

Speaker #4: More recently though, the tariff on certain Chinese battery components has been reduced, from $155.9 percent to $40.9 percent. This has restored a level of predictability that has prompted customers to resume contracting discussions.

Speaker #4: We are now seeing early signs of renewed US order activity. Supported by our flexible contracting model, global sourcing, and strong customer relationships. As I mentioned earlier, all our contracts that were halted in the US market due to tariff, and regulatory uncertainty, are now reactivated and moving forward.

Speaker #4: Separately, the Department of Commerce issued a preliminary 114% duty on certain Chinese-origin graphite material. With an estimated $5 per kilowatt-hour cost impact, this is manageable and reflected in our guidance.

Julian Nebreda: Separately, the Department of Commerce issued a preliminary 114% duty on certain Chinese-origin graphite material, with an estimated $5 per kilowatt-hour cost impact that is manageable and reflected in our guidance. We are pursuing alternative sourcing and believe these rulings, along with recent legislation and tariff changes, reinforce the value of our U.S. content leadership and diversify supply chains. Turning to slide nine, I would like to touch on the competitiveness of energy storage. The data is increasingly clear. Battery storage is now one of the most competitive solutions for meeting capacity needs and is superior to gas turbines. It's not just about cost. It's also about speed and scalability. Generally, battery projects can be permitted, sighted, and deployed far more quickly than new fossil generation, making batteries a flexible tool for utilities and grid operators navigating rapidly growing demand. We are already seeing this shift in real-world operations.

Speaker #4: We are pursuing alternative sourcing and believe these rulings, along with the recent legislation and tariff changes, reinforce the value of our US content leadership and diversified supply chain.

Speaker #4: Turning to slide nine. I would like to touch on the competitiveness of energy storage. The data is increasingly clear. Battery storage is now one of the most competitive solutions for meeting capacity needs and is superior to gas turbines.

Speaker #4: It's not just about cost, it's also about speed and scalability. Generally, battery projects can be permitted, cited, and deployed far more quickly than new fossil generation.

Speaker #4: Making batteries a flexible tool for utilities and great operators navigating rapidly growing demand. We already see this shift in real-world operations. In June, battery supply accounted for 26 percent of Kaisos' evening peak demand.

Julian Nebreda: In June, batteries supplied 26% of Tyson's evening peak demand, surpassing gas for the first time. That's a landmark moment for our industry and a clear signal that grid-scale storage is no longer a futuristic concept. It's here, it's working, and it's scaling. Turning to slide ten. In addition to competitive costs, we're also seeing an expanding addressable market for battery energy storage. One of the most transformative trends we've seen in the energy landscape is the rapid growth of data center demand, driven by AI and machine learning workloads. These workloads are not only energy-intensive; they are also highly variable. Training large AI models or processing inference tasks can lead to sudden spikes in power consumption, placing immense strains on the grid and creating localized reliability challenges.

Speaker #4: Surpassing gas for the first time, that's a landmark moment for our industry. And a clear signal that grid-scale storage is no longer a futuristic concept.

Speaker #4: It's here, it's working, and it's scaling. Turning to slide ten, in addition to competitive costs, we also see an expanding addressable market for best.

Speaker #4: One of the most transformative trends we've seen in the energy landscape is the rapid growth of data center demand. Driven by AI and machine learning workloads.

Speaker #4: These workloads are not only energy intensive, they are also highly variable. Training large AI models or processing inference tasks can lead to sudden spikes in power consumption.

Speaker #4: Placing immense strains on the grid and creating localized reliability challenges. This is where battery energy storage can play a critical and unique role, that cannot be filled by conventional sources of generation or renewables.

Julian Nebreda: This is where battery energy storage can play a critical and unique role that cannot be filled by conventional sources of generation or renewables. Battery energy storage can act as a buffer, absorbing rapid surges in power and releasing it during high-demand intervals, effectively leveling out the fluctuations that come with AI-driven compute cycles. What's more, batteries can be collocated at the data center itself or deployed at the transmission or distribution level, offering both behind-the-meter and grid-level flexibility. That is a key advantage in markets with interconnection bottlenecks or constrained infrastructures. Fluence is engaging with leading data center operators to develop storage systems that meet these fast-changing power demands, providing real-time flexibility for some of the grid's most dynamic loads. Initial estimates place the demand for these solutions at $8.5 billion through 2030. Turning to slide 11.

Speaker #4: Best can act as a buffer, absorbing rapid surges in power and releasing it during high demand intervals. Effectively leveling out the fluctuations that come with AI-driven compute cycles.

Speaker #4: What's more, batteries can be co-located at the data center itself, or deployed at the transmission or distribution level. Offering both behind-the-meter and grid-level flexibility.

Speaker #4: That's a key advantage in markets with interconnection bottlenecks or constrained infrastructure. Fluence is engaging with leading data center operators to develop storage systems that meet these fast-changing power demands.

Speaker #4: Providing real-time flexibility for some of the grid's most dynamic loads. Initial estimates place the demand for these solutions at 8.5 billion through 2030. Turning to slide eleven.

Speaker #4: Coming back to our Q3 performance, we delivered a strong double-digit gross margin, driven by disciplined execution, cost controls, and supply chain optimization. Our product mix, pricing strategy, and scale are sustaining higher margins in a dynamic market, reflecting a structurally improved margin profile and supporting long-term attractive returns.

Julian Nebreda: Coming back to our Q3 performance, we delivered strong double-digit gross margin, driven by disciplined execution, cost controls, and supply chain optimization. Our product mix, pricing strategy, and scale are sustaining higher margins in a dynamic market, reflecting a structurally improved margin profile and supporting long-term attractive returns. These results reflect the success of our commitment to profitable growth that we laid out a few years back. Turning to slide 12. As of June 30, our backlog was approximately $4.9 billion, providing strong visibility into future growth. Since quarter end, we have signed approximately $1.1 billion in additional contracts, including the approximately $700 million from the delayed Australia projects. The backlog is well-diversified across North America, EMEA, and Asia Pacific. Momentum remains strong in Asia Pacific and EMEA, and we are seeing early signs of recovery in the U.S.

Speaker #4: These results reflect the success of our commitment to profitable growth that we laid out a few years back. Turning to slide twelve, as of June 30, our backlog was approximately $4.9 billion, providing strong visibility into future growth.

Speaker #4: Since quarter-end, we have signed approximately $1.1 billion in additional contracts, including the approximately $700 million from the delayed Australia projects. The backlog is well diversified across North America, India, and Asia Pacific.

Speaker #4: Momentum remains strong in Asia Pacific and India, and we are seeing early signs of recovery in the U.S. as tariff-related uncertainty eases. The enactment of OB3 addresses concerns about risk to the regulatory environment.

Julian Nebreda: as tariff-related uncertainty eases and the enactment of OB3 addresses concerns about risk to the regulatory environment. Our domestic content-compliant product, flexible contracting, and resilient supply chain position us to capitalize on this rebound. Our pipeline has grown to $23.5 billion from $22 billion last quarter, underscoring broad global demand. This concludes my prepared remarks. I will now turn the call over to Ahmed.

Speaker #4: Our domestic content-compliant product, flexible contracting, and resilient supply chain position us to capitalize on this rebound. Our pipeline has grown to $23.5 billion from $22 billion last quarter.

Speaker #4: Underscoring broad global demand. This concludes my prepared remarks. I will now turn the call over to Ahmed.

Speaker #2: Thank you, Julian, and good morning, everyone. Today, I will review our third quarter financial results and then discuss our liquidity and updated outlook for the remainder of fiscal 2025.

Ahmed Pasha: Thank you, Julian, and good morning, everyone. Today, I will review our third quarter financial results and then discuss our liquidity and updated outlook for the remainder of fiscal 2025. Turning to slide 14. Starting with our third quarter performance, we generated $603 million of revenue. This brings our year-to-date revenue to $1.2 billion, or 46% of expected full-year revenue, which is consistent with our prior year results. Q3 revenue was approximately $100 million, or 15% below plan due to a slow ramp-up at our new U.S. manufacturing facilities, particularly at our recently commissioned enclosure facility in Arizona. Enclosures are the final stage in the production process and therefore the gating item from a revenue standpoint. We have already seen recovery milestones met across our cell, module, and enclosure facilities and expect to reach targeted production levels by the calendar year end.

Speaker #2: Turning to slide fourteen. Starting with our third quarter performance, we generated $630 million of revenue. This brings our year-to-date revenue to $1.2 billion, or 46 percent of expected full-year revenue, which is consistent with our prior year results.

Speaker #2: Q3 revenue was approximately $100 million or 15 percent below plan, due to a slower ramp-up at our new US manufacturing facilities, particularly at our recently commissioned employer facility in Arizona.

Speaker #2: Employers are the final stage in the production process, and therefore the gating item from a revenue standpoint. We have already seen recovery milestone met across our cell module and employer facilities, and expect to reach targeted production levels by the calendar year end.

Speaker #2: I would note that our delivery commitments have sufficient time contingency to cover this delayed ramp-up, thus we expect to continue delivering products to our customers on time and on budget.

Ahmed Pasha: I would note that our delivery commitments have sufficient time contingency to cover this delayed ramp-up. Thus, we expect to continue delivering products to our customers on time and on budget. Our Q3 adjusted gross margin was 15.4%, which reflects solid execution across our portfolio, particularly in Europe and Asia, where we generated more than half of Q3 revenue. Our adjusted EBITDA was approximately $27 million, which reflects the higher margins carried by the international projects during the quarter. Turning to slide 15, we remain focused on maintaining strong liquidity to support our operations. We ended the third quarter with more than $900 million in liquidity. This includes approximately $416 million of cash, with the rest coming from availability under our credit facilities. I am also pleased to report that last week we executed a new $150 million of supply chain facility.

Speaker #2: Our Q3 adjusted gross margin was 15.4%, which reflects solid execution across our portfolio, particularly in Europe and Asia, where we generated more than half of Q3 revenue.

Speaker #2: Our adjusted EBITDA was approximately $27 million, which reflects the higher margins carried by the international projects during the quarter. Turning to slide fifteen, we remain focused on maintaining strong liquidity to support our operations.

Speaker #2: We ended the third quarter with more than $900 million in liquidity, this includes approximately $416 million of cash, with the rest coming from availability under our credit facilities.

Speaker #2: I'm also pleased to report that last week we executed a new $150 million supply chain facility. This is Fluence's first-ever unsecured facility, which carries an all-in interest cost of approximately 6 percent and is available to us to meet working capital needs.

Ahmed Pasha: This is Fluence's first-ever unsecured facility, which carries an all-in interest cost of approximately 6% and is available to us to meet working capital needs. We appreciate the continued confidence of our relationship banks, who share our vision and believe in Fluence's long-term growth potential. On a pro forma basis, this brings our total liquidity as of June 30th to more than $1 billion, giving us additional flexibility to execute on our future growth plans. As I mentioned on our second quarter call, we expected to require a couple of hundred million dollars of working capital during the second half of fiscal 2025. During the third quarter, we have already funded approximately $150 million of that, mostly to purchase inventory, which now totals $650 million. The majority of this inventory will be used to meet our near-term customer commitments.

Speaker #2: We appreciate the continued confidence of our relationship banks, who share our vision and believe in Fluence's long-term growth potential. On a pro forma basis, this brings our total liquidity as of June 30th to more than $1 billion.

Speaker #2: Giving us additional flexibility to execute on our future growth plans. As I mentioned on our second quarter call, we expected to require a couple of hundred million dollars of working capital during the second half of fiscal 2025.

Speaker #2: During the third quarter, we have already funded approximately $150 million of that. Mostly to purchase inventory, which now totals $650 million. The majority of this inventory will be used to meet our near-term customer commitments.

Speaker #2: Accordingly, we don't foresee any material additional funding needs in the near term, and we expect to maintain our strong liquidity which is critical to supporting our growth plans.

Ahmed Pasha: Accordingly, we don't foresee any material additional funding needs in the near term, and we expect to maintain our strong liquidity, which is critical to supporting our growth plans. Turning to slide 16, next I will review our financial guidance for fiscal 2025. We now expect revenue to come in at the low end of our prior guidance range, or approximately $2.6 billion. As I noted earlier, the delays in ramping up our U.S. manufacturing facilities have had the impact of shifting approximately $100 million of fiscal 2025 revenue into fiscal 2026. With respect to other guidance metrics, we are reaffirming our ARR of $145 million by the end of fiscal 2025. In addition, we are reaffirming our adjusted EBITDA guidance range of $0 to $20 million. We also continue to expect our full-year 2025 adjusted gross margin to be between 10% and 12%.

Speaker #2: Turning to slide sixteen, next I will review our financial guidance for fiscal 2025. We now expect revenue to come in at the low end of our prior guidance range, or approximately $2.6 billion.

Speaker #2: As I noted earlier, the delays in ramping up our US manufacturing facilities have had the impact of shifting approximately $100 million of fiscal 2025 revenue into fiscal 2026.

Speaker #2: With respect to other guidance metrics, we are reaffirming our ARR of $145 million by the end of fiscal 2025. In addition, we are reaffirming our adjusted EBITDA guidance range of zero to $20 million.

Speaker #2: We also continue to expect our full-year 2025 adjusted gross margin to be between $10 and $12 percent. Despite the macro headwinds, that have occurred this year, such as tariff and legislative uncertainty, we have continued to take necessary steps to manage the business for profitability and cash flow.

Ahmed Pasha: Despite the macro headwinds that have occurred this year, such as tariffs and legislative uncertainty, we have continued to take necessary steps to manage the business for profitability and cash flow, and this is reflected in our results. For 2026, we will provide formal guidance on our year-end call in November, consistent with our prior practice. We intend to base guidance on backlog coverage of 80% to 90%, which will represent higher confidence in our revenue and EBITDA forecast compared to the historical practice of 65%. Today, we have fiscal year 2026 backlog of $2.5 billion. In summary, we remain confident in the long-term prospects of energy storage in general, and particularly in Fluence's ability to deliver maximum value to our shareholders and customers. With that, I would like to turn the call back to Julian for his closing remarks.

Speaker #2: And this is reflected in our results. For 2026, we will provide formal guidance on our year-end call in November, consistent with our prior practice.

Speaker #2: We intend to base guidance on backlog coverage of 80 to 90 percent, which will represent higher confidence in our revenue and EBITDA forecasts compared to the historical practice of 65 percent.

Speaker #2: Today, we have fiscal year 2026 backlog of $2.5 billion. In summary, we remain confident in the long-term prospects of energy storage in general and particularly in Fluence's ability to deliver maximum value to our shareholders, and customers.

Speaker #2: With that, I would like to turn the call back to Julian for his closing remarks.

Speaker #3: Thank you, Ahmed. Turning to slide seventeen, in closing, I will highlight the key takeaways from this quarter's performance and our outlook moving forward. First, the market for energy storage remains robust globally.

Julian Nebreda: Thank you, Ahmed. Turning to slide 17. In closing, I will highlight the key takeaways from this quarter's performance and our outlook moving forward. First, the market for energy storage remains robust globally. More importantly, we have started to see the U.S. market activity pick back up after the pause we saw earlier this year, driven by a very supportive backdrop from recent federal legislation and some easing of tariff uncertainty. Second, we are actively working with our supply partners to structure our supply arrangements to achieve compliance with the new requirements under OB3, including the FEOC provisions, and will continue to do so as new regulations and guidance are issued. We are working towards these being completed ahead of the deadlines under the OB3.

Speaker #3: More importantly, we have started to see the US market activity pick back up after the pause we saw earlier this year. Driven by a very supportive backdrop from recent federal legislation and some easing.

Speaker #3: Of tariff uncertainty. Second, we are actively working with our supply partners to structure our supply arrangements to achieve compliance with the new requirements on the OB3.

Speaker #3: Including the FLC provisions. And we'll continue to do so as new regulations and guidance are issued. We are working towards these being completed ahead of the deadlines on the OB3.

Speaker #3: Third, there is a strong business case for battery storage. As battery technology is now cheaper than gas, and is uniquely positioned to adapt the growing AI data center power demand to grid conditions.

Julian Nebreda: Third, there is a strong business case for battery storage, as battery technology is now cheaper than gas and is uniquely positioned to adapt the growing AI data center power demand to grid conditions. Together, these factors reinforce our confidence in Fluence's ability to excel in today's environment and deliver value to our stakeholders. With that, I would like to open up the call for questions.

Speaker #3: Together, these factors reinforce our confidence in Fluence's ability to excel in today's environment. And deliver value to our stakeholders. With that, I would like to open up the call for questions.

Speaker #1: At this time, I would like to remind everyone in order to ask questions, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q and A roster.

Ahmed Pasha: At this time, I would like to remind everyone, in order to ask questions, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question is coming from the line of Brian Lee from Goldman Sachs. Please go ahead.

Speaker #1: Your first question is coming from the line of Brian Lee from Goldman Sachs. Please go ahead.

Speaker #4: Good morning, Brian.

Lexington May: Good morning, Brian.

Speaker #5: Hi. Thanks for, thanks for taking the questions. I guess first, when I look at the guidance for, you know, the rest of the year fiscal Q4, it implies, you know, gross margin, I know you guys don't like to focus on it too much, but you had a really good gross margin, in, in Q3 here.

Brian Lee: Thanks for taking the questions. I guess first, when I look at the guidance for the rest of the year, fiscal Q4, it implies gross margin. I know you guys do not like to focus on it too much, but you had a really good gross margin in Q3 here. Q4, it is indicating something south of 10%, so below the low end of the guidance range for the year, even though it is a big revenue quarter. Can you kind of talk about the puts and takes on margin into the year-end quarter? You have got a decent amount of backlog heading into 2026, some really good Australia activity here that presumably is going to show up in your 2026 execution. What are you seeing in terms of margin outlook for the backlog? Are we tracking ahead of kind of the 10% to 12% that you did this year?

Speaker #5: Q4, it's indicating something, you know, south of, of 10 percent, so below the low end of the guidance range for the year, even though it's a, it's a big revenue quarter.

Speaker #5: So can you kind of talk about the puts and takes on margin into the year-end quarter? And then also, you know, you got a decent amount of backlog heading into '26, some really good Australia activity here.

Speaker #5: that, you know, presumably is going to show up in your '26, execution. What, what are you seeing in terms of margin, outlook for the backlog, or, are we tracking ahead of kind of the, the 10 to 12 that you did this year, just trying to understand what to read into Q4, but also what you see in the backlog at the end of '26?

Brian Lee: Just trying to understand what to read into Q4, but also what you see in the backlog ahead of 2026.

Speaker #3: Great. Thanks, Brian. O-on the, on the margins for the fourth quarter, the fourth quarter has a lot of US revenue, a lot of the, of the revenue, in the fourth quarter comes from the US.

Julian Nebreda: Right. Thanks, Brian. On the margins for the fourth quarter, the fourth quarter has a lot of U.S. revenue. A lot of the revenue in the fourth quarter comes from the U.S., and it has been affected by the new tariff. Roughly, we disclosed in the last call roughly $30 million, which generally represents 1%. That is what is driving, I would say, the softer margin numbers for the year. From an execution point of view, from where I am at, putting that aside, the other parts of the execution are going—putting the tariff aside, I meant—the other parts of the execution are going very well. We are working hard to take this as high up as we can. We are delivering things that are working well. That is the driver, essentially. As you know, we had to take some of those tariff costs into our results.

Speaker #3: And it has been affected by the, you know, the new tariff. You know, it's roughly, as we disclosed in the last call, roughly $30 million.

Speaker #3: Which generally represents 1 percent, so that's what's driving I would say the softer margin numbers for the year. But from an execution point of view, from a, putting the, that aside, the o the other parts of the, of the, of the execution are going, putting the tariff aside I meant.

Speaker #3: The other parts of the execution are going very well, and we're working hard to, to take this as high, as high up as we can.

Speaker #3: So, you know, we're delivering things are working well. So, but that's the driver essentially, you know, as you know, some we had to take some of those, you know, tariff costs into our, into our results.

Speaker #3: So that's driving it. In terms of '26 guidance, I, you know, we, we, you know, on, on gross margins for '26. I don't want to provide guidance today, but, on that number, but what we're seeing is roughly in line with the 10 to 12 that we are giving you, that we, we set for this year.

Julian Nebreda: That is driving it. In terms of 2026 guidance, on gross margins for 2026, I do not want to provide guidance today on that number, but what we are seeing is roughly in line with the 10% to 12% that we are giving you, that we set for this year. Still some work to do that we are working on, and hopefully, things will work out better, but that is where we are at this stage.

Speaker #3: still some work to, work to do that we're working on. and hopefully, you know, things will, will work out better, but that's, that's where we are at the, at this stage, you know.

Speaker #5: Okay, fair enough. And then, Julian, I know you talked a lot about the, kind of, you had a couple of slides here around the policy actions of late and how they impact your business.

Brian Lee: Okay. Fair enough. Julian, I know you talked a lot about the policy actions of late and how they impact your business. Can you, I know there has been a lot of investor focus and concern around FEOC restrictions and how Fluence Energy, Inc. fits into the new landscape with your relationship, the ownership structure of AESC. Can you give us a bit more elaboration around how you are navigating that and how you are positioned with respect to FEOC and AESC, and if there are actions you need to take in what timeframe and what potential investments you might need to make to make that happen? Thank you.

Speaker #5: Can you, I know there's been a lot of investor focus and concern around fiat restrictions and how Fluence fits into the new landscape with, your relationship and the ownership structure of AESC.

Speaker #5: Can you, give us a bit more, elaboration around how you're navigating that and, and how you're positioned with respect to fiat and AESC and, if there are actions you need to take and what timeframe and, and what potential investments you might need to make to, to make that happen?

Speaker #5: Thank you.

Speaker #3: Yeah. I'll, I'll tell you a fair, I know that, that you all have or have expressed some concern around on the macro view. Our view has always been that the US battery storage market was going to be a domestic content market.

Julian Nebreda: I will tell you at first, I know that you all have expressed some concern around, on the macro view, our view has always been that the U.S. battery storage market was going to be a domestic content market. That has been our view even before the IRA and all of that. Think politically about the role that this technology was going to play, how this technology is built. It was going to be difficult to see it being dominated, that the U.S. would allow this to become dominated by Chinese suppliers. So that has been our view from day one, and that is what we have been working on. We started this ahead of the IRA. Clearly, when the IRA came in, we got financial support. I think now with the OB3, it kind of confirms our view of that case. We do not see it as a threat.

Speaker #3: You know, that has been our view, even before the IRA and all of that. You know, think politically about the role that this technology was going to play, how this technology is built.

Speaker #3: It was going to be difficult to see it being dominated, that the U.S. would allow this to become dominated by Chinese suppliers. So, that has been our view from day one.

Speaker #3: And that's as we've been working on and, you know, we started this ahead of the IRA, we cleared when the IRA came in, we got in, you know, financial support.

Speaker #3: And I think now with the OB3, it kind of confirms our view of that case. So, you know, we don't see it as a threat.

Speaker #3: It's as always been the basis of our, assumption planning. I know, you know, I just wanted to give you that general statement because that's very, very important how we see this company.

Julian Nebreda: It has always been the basis of our assumption planning. I know, I just wanted to give you that general statement because that is very, very important how we see this company. In terms of AESC, which is what you are asking, there are three drivers of 45(x) credits for any supplier. Ownership, it cannot be owned by a company that is from certain countries. It cannot be controlled by a company from that group. Materials have a limitation of how much of the materials can come from one of the certain countries. We are working on the three of them. Ensuring that we have the supply chain that meets the OB3 requirements, and we had developed with AESC, we have worked together on developing that supply chain, which is sourced out of that area, and we need to do, we are working on it.

Speaker #3: In, in terms of AESC, which is what you're asking, there, you know, there are three drivers of 45X credits on, on, on the, the for, for any, for any supplier.

Speaker #3: And, and, you know, ownership, it cannot be owned by a company that is from certain countries. It cannot be controlled by a company from that group and, and materials have a limitation of how much of the materials can come from, from one of these certain countries.

Speaker #3: We're working on the three of them. You know, ensuring that we have the supply chains that meet the OB3 requirements, and we had developed with the, or AESC has developed, we have worked together on developing that supply chain, which is from source out of those that area, and we need to do, we, we are working on it.

Speaker #3: We already have converted some of it. We have many, many suppliers that are going through the process, and we believe our view—and that is—we will be ready by the deadline under the act.

Julian Nebreda: We already have converted some of it. We have many, many suppliers that are going through the process, and we believe our view and that we will be ready by the deadline under the act. Control is more of how you are going to manage your O&M, and we have been talking to our lawyers, it can be managed effectively. Ownership is what you all are a little bit concerned about. It is understandable. We have been working with AESC. AESC is looking at different options, and we are looking at different options. We believe those options, there are a lot of opportunities, there are some opportunities, there are some of them that are very viable that we can execute them on time under the OB3 line.

Speaker #3: Control is more about how you're going to manage your O&M. You know, we've been talking to our lawyers, and it can be managed effectively.

Speaker #3: Ownership is what you all are, you know, are, are a little bit concerned about, understandable. You know, we have been working with AESC. AESC is looking at different options, and we are looking at different options.

Speaker #3: and we believe those options, they are, they are as a good, there are a lot of opportunities, there are some opportunities, there are some of them that are very viable that we cannot execute them on time, on the, on the OB3 line.

Speaker #3: And when we look at off potentially entering into the ownership of the line, you know, when we have looked at that option, it's one of them, not the only one.

Julian Nebreda: When we look at Fluence potentially entering into the ownership of the line, when we have looked at that option, it is one of them, not the only one. We believe that it can be, we can do it, and we can make it work within the cash flow, with the financial liquidity that we have today. We do not see any need for any capital raise, and we believe that transaction can be done on time with it, and it is not that complicated. I will tell you, when we looked at the act, and we looked at the effort to convert to the act, ownership has been one of them. I think we can, there are not only us, there are other opportunities here that they are working on. We can do, and we can transact on time to meet the active requirements.

Speaker #3: We, we believe that it can be, we can do it, and we can make it work within the cash flow, with the equity, with the financial liquidity that we have today.

Speaker #3: We do not see any need for any capital raise, and we believe that transaction can be done on time with it. And it's not that complicated.

Speaker #3: So, you know, I'll tell you, when we looked at the act and we looked at the effort to convert to the act, ownership has been one of them.

Speaker #3: I think we can, we, they are not, there's no, we're not only our, only us. There are other opportunities here that they're working on.

Speaker #3: We can do, and we can transact on time to meet the act requirements. So, generally that, that's the view. And, and, and generally, if I can repeat the way I started, if you don't mind, if you don't mind.

Brian Lee: Understood.

Julian Nebreda: Generally, that's the view. If I can repeat the way I started, we do not see the FEOC restrictions as necessarily a threat. We see that this, in a way, confirms our view of how this market was going to evolve. We have been investing on this. We have been moving supply chains to the U.S., which is challenging, and everybody thought that it could not be done, and we are doing it. We are optimistic that the regulatory environment is supporting our view of the market.

Speaker #3: We don't see the, the FLC restrictions as necessarily a threat. We see that this in a way confirms our view of how this market was going to evolve.

Speaker #3: We have been investing on this. We have been moving supply chains to the US. With this, you know, challenging and every, everybody thought that it could not be done.

Speaker #3: And we're doing it. and so we are, we are optimistic that the regulatory environment is supporting our view of the market.

Speaker #5: So if I could just squeeze one last one in. I know, again, you're not going to give '26 guidance, but, you know, we're here at the end of almost end of fiscal '25.

Brian Lee: If I could just squeeze one last one in. I know, again, you are not going to give 2026 guidance, but you know, we are here at the end of, almost end of fiscal 2025. You had a lot of good contracts come in in July and August, so you know, good momentum, but you are almost done for the year. And you talked about at least high-level guidance should be 80% to 90% covered. You know, just as you think about maybe being more conservative and having more, you know, more visibility into the upcoming guidance range that you are going to give on the next call.

Speaker #5: you had a lot of good contracts come in in July and August, so you know, good momentum, but you're, you're almost done for the year.

Speaker #5: And, and you talked about at least high level, guidance should be 80 to 90 percent covered. you know, just as you think about maybe being more conservative and, and having more, you know, more visibility into the upcoming guidance range that you're going to give on the next call.

Speaker #5: But is that the way to think about it? You're sort of 80 to 90 percent covered, and, and you got this sort of two and a half billion dollars of backlog thus far through, you know, through, end of July, early August.

Brian Lee: But is that the way to think about it? You are sort of 80% to 90% covered, and you got this sort of $2.5 million of backlog thus far through, you know, through end of July, early August, and whatever you book between now and the rest of the quarter is sort of the starting point of reference for what guidance should look like for next year?

Speaker #5: And whatever you book between now and, and the rest of the quarter is sort of the, the starting point of reference for what guidance should look like for next year?

Speaker #3: We, we will base guidance on the backlog we have for '26 at the time of the earnings call. So that, you know, a couple of months, to, to move forward.

Julian Nebreda: We will base guidance on the backlog we have for 2026 at the time of the fiscal that, you know, a couple of months to move forward. We have a good pipeline going forward, so we expect the 2.5 to be a higher number at the time. We are resolute of guiding to 80% to 90%. I think I do not want to go over what happened this year. We are very, you know, the market in the U.S. picked up. Things are moving forward. We see good prospects in Australia, not only in Australia, where we have done a good job, but also in EMEA. So, stay tuned. We will provide you the actual guidance, but it will be based on the 80% to 90% of the backlog we have for 2026, starting at the end of the call. I think Ahmed would like to.

Speaker #3: We have a good pipeline going forward, so we expect the 2.5 to be a higher number at the time. But we, I mean, I'm resolute of guiding to 80 to 90.

Speaker #3: I think I don't want to go over what happened this year. You know, so I'm, I'm, you know, we're very, you know, the market in the US picked up, things are moving forward.

Speaker #3: We see good prospects in Australia, not only in Australia, where we have done a good job, but also in India. So, you know, stay tuned.

Speaker #3: We'll provide you the, the actual guidance, but it will be based on, on the 80 to 90 percent of the backlog we have for '26, starting on, at the end of the call.

Speaker #3: I think Ahmed would like to.

Speaker #2: Yeah, I think right, I think I don't think you need to leave anything in between the lines here. I think it was more to, to tell you how we are thinking about the guidance when we give our guidance, come November.

Ahmed Pasha: Yeah. I think, Brian, I don't think you need to read anything in between the lines here. I think it does more to tell you how we are thinking about the guidance when we give our guidance on November. I think it's more, hopefully, we will continue to do what we have done in the first month. In July, we have signed a $1.1 billion contract. So I think, hopefully, we will maintain this momentum, but that is where we will end up. The goal is to give you guidance where we have more confidence, unlike in the past where we had 65% coverage and we had to sign contracts and then we missed the numbers. That was the intent. I don't think there's anything beyond that.

Speaker #2: I think it's more hopefully, you know, we will continue to do what we have done in, in the first month. In July, we have signed a billion one contract.

Speaker #2: So I think hopefully, we will maintain this momentum, but that is where we will end up. So goal is to give you guidance where we are more confident, unlike in the past, where we had 65 percent coverage and we had to sign contracts and then we missed the numbers.

Speaker #2: So that was the intent. I don't think there's anything beyond that.

Speaker #4: That's right.

Julian Nebreda: That's right.

Speaker #5: Okay, thanks, guys. I'll pass it on.

Brian Lee: Okay. Thanks, guys. I will pass it on.

Speaker #3: Thanks, Brian.

Julian Nebreda: Thanks, Brian.

Speaker #1: Thank you. Your next question is coming from the line of Dylan Nesano with Wealth Research. Please go ahead.

Ahmed Pasha: Thank you. Your next question is coming from the line of Dylan Nassano with Wolfe Research. Please go ahead.

Speaker #4: Morning, Dylan. How are you? How are you?

Julian Nebreda: Morning, Dylan. How are you?

Dylan Nassano: No worries.

Speaker #6: can we just, can we just start with opening comments on data centers? So, correct me if I'm wrong, but I mean, it sounds like maybe you're engaging a little more directly.

Brian Lee: Can we just start with some comments on data centers? Correct me if I am wrong. It sounds like maybe you are engaging a little more directly with the data centers. Can you just kind of walk us through that? Have you actually signed any kind of new contracts there?

Speaker #6: with the data centers, can you just kind of walk us through that? Have you actually signed any kind of new contracts there?

Speaker #3: No, so this is a new and emerging need. That, that, you know, as you know, we've been serving data centers indirectly. Through our, through IPPs and, and, and, and other players, who actually provide services to them.

Julian Nebreda: No. This is a new and emerging need that, as you know, we have been serving data centers indirectly through IPPs and other players who actually provide services to us. But now we have this emerging need that data center, AI data centers that are, you know, training or managing AI, complex AI processes have very volatile energy consumption. There is no way, there is no other way of resolving that issue and not affecting the grid by adding battery storage to it. This is an emerging need. It requires a lot of technical work, especially the response time of the batteries needs to be very, very quick. I do not want to give you a number not to give my competitors a view, but it requires very, very quick response time to ensure that the electrons in no way affect the algorithms that are learning in the process.

Speaker #3: But now we have this emerging need that data center, AI data centers that are, you know, we're training or, you know, managing AI complex AI, processes.

Speaker #3: Have very volatile energy consumption. And there's no way, there's no other way of resolving that issue. And not affecting the grid that adding, battery storage.

Speaker #3: So, you know, we, this is an emerging need. It requires a lot of technical work, especially the response time of the batteries needs to be, you know, very, very quick.

Speaker #3: I want to give you a number not to, not to provide, give access, my competitors a view. But, it requires very, very quick response time to ensure that the, the, the electrons in no way affect the, the algorithms that are learning in the process.

Speaker #3: So, that's picking up. We have a pipeline, but we have not signed an agreement. And, as I said in the call, we're working on the solution.

Julian Nebreda: That is picking up. We have a pipeline, but we have not signed an agreement. As I said in the call, we are working on the solution. The solution is, we think we have it, but you know, we need to test it and be sure that we have it available for our customers. But it is our view. This, in a way, the reason why we included in the script is not only because clearly it is a data center opportunity, but it also shows the expanding scope of products that battery storage can offer. I think that is where our solutions, if you want to put it differently.

Speaker #3: The solution is, we think we have it, but, you know, we need to test it and be sure that we have it, you know, available for our customers.

Speaker #3: But it is our view, this in a way, and the reason why we included in this pro, in, in, in, in the script is not only because clearly it's data center opportunity, but it also shows the span this scope of products that battery storage are going to, can offer.

Speaker #3: And I think that's where, where, or, or solutions, if you want to put it differently. And I think that's where has been our view from day one, that the value of this technology should not be only looked at, hey, my, you know, integrating renewables into the grid is much broader and will continue to play a, a very broad loop jobs, more broad, more jobs both behind and in front of the meter as we move forward, so.

Julian Nebreda: I think that is where it has been our view from day one that the value of this technology should not be only looked at, hey, you know, integrating renewables into the grid. It is much broader, and we will continue to play a very broad job, more broad, more jobs, both behind and in front of the meter as we move forward.

Speaker #5: Yeah.

Speaker #3: Dylan, you're getting cut out. I'm sorry.

Ahmed Pasha: Your next.

Julian Nebreda: Dylan, you are getting cut out.

Ahmed Pasha: Your next.

Julian Nebreda: Sorry.

Speaker #1: Yeah. Sorry. yeah, your next question is coming from David Arcaro with Morgan Stanley. Please go ahead.

Ahmed Pasha: Your next question is coming from David Arcaro with Morgan Stanley. Please go ahead.

Speaker #4: Hello, David. Good morning.

Julian Nebreda: Hello, David. Good morning.

Speaker #7: Good morning. I was wondering if you could give a little bit more color on just how the U.S. demand picture is trending following the passage of the OBBB.

Brian Lee: Good morning.

Lexington May: Morning. I was wondering if you could maybe give a little bit more color on just how the U.S. demand picture is trending following the passage of the OB3. I was curious if you are seeing the executive order uncertainty impacting the pace of bookings, given that it might impact the solar outlook and any battery attachments to solar.

Speaker #7: I was curious if you're seeing the executive order uncertainty impacting the pace of bookings, given that it might impact the solar outlook and any battery attachments to solar.

Speaker #3: well, it's picking up. We, we remember we had to, halt a few, the execution of a few contracts we had signed. All those contracts are now moving forward and, and are moving forward to execution.

Julian Nebreda: Well, it is picking up. We remember we had to halt a few, the execution of a few contracts we had signed. All those contracts are now moving forward and are moving forward to execution. There will be generally 2026 revenue rather than 2025. So, very active. We have signed a few contracts as of late, and we are seeing more and more opportunities come up. We have not seen people concerned today, at least with the projects they have in, concerned about the executive order. I think that the projects we have been working on are projects that people feel are very much solidly within, you know, start-up construction. They are already, you know, buying the stuff and putting it in place. So, I think at least the projects that we are signing, which are projects that are very, very mature, will not be affected or are not affected.

Speaker #3: There will be generally 26 revenue rather than 25. so very active. We have signed a few contracts as of late. and we are seeing more and more opportunities come up.

Speaker #3: we haven't seen, people concerned today, at least with the projects they have in, concerned about, about the executive order. I think that the projects we've been working on are projects that people feel are very much solidly within, you know, start of construction.

Speaker #3: They're already, you know, buying the stuff and putting it in place. So the, the, I don't think at least the projects that are, that we're signing, which are projects that are very, very mature, are, are, are, will not be affected.

Speaker #3: Or are not affected.

Speaker #7: Great. Got it. That makes sense. and, let me see. I was wondering if you could just elaborate on the, ramp-up issues that you had.

Lexington May: Great. Got it. That makes sense. I was wondering if you could just elaborate on the ramp-up issues that you had. I think you mentioned it was at your Arizona facilities, but are those now fully resolved? Any lingering impacts or issues that you are managing through the end of the year?

Speaker #7: I think you mentioned it was at your, Arizona facilities, but are those now, fully resolved, any, any lingering impacts, or, issues that you're managing, through the end of the year?

Speaker #3: Yeah. We had, we had had some, some typical, ramp-up issues. You know, that come out of putting in place, these production lines. In the case of the Arizona facility, it was saying, we were, we essentially did a technology transfer from what we were doing in Vietnam to the US.

Julian Nebreda: Yeah. We had some typical ramp-up issues that come out of putting in place these production lines. In the case of the Arizona facility, we essentially did a technology transfer from what we were doing in Vietnam to the U.S. Some of the work processes and some of it needed to change to affect the U.S., and that kind of delayed the start-up and the ramp-up. We believe we have it all under control, and we are in the process of starting to ramp up. We believe that by the end of the year, we should have resolved the problem. Unfortunately, we would not believe today that we will be able to recuperate the $100 million of revenue that we have to move to next year.

Speaker #3: And, you know, some of the work processes and some of the needed to change to affect to the US. And that, kind of delayed the startup and the ramp-up.

Speaker #3: We believe we have it all under control, and we are in the process, in the process of stand, starting to ramp up. And we believe that we will be, you know, by the, by the end of the year, we should be, we should have resolved the problem.

Speaker #3: Unfortunately, we would not believe today that we'll be able to recuperate the 100 million of revenue that we have to move to next year.

Speaker #3: So, you know, we will, we, we will meet, you know, our ramp-up objective for the end of the year. But it will not be enough that we will do more than, you know, from now to year end.

Julian Nebreda: We will meet a ramp-up objective for the end of the year, but it will not be enough that we will do more than from now to year-end that we will recuperate the $100 in revenue. That is the reason why we have to be a little bit more. But they are typical ramp-up issues. The things that are small but get delayed, processes that need to be affected, processes that needed to adapt to OSHA rules, things of that sort that you only find out or you find out usually when you are trying to ramp up production out of our facility. We are, the quality of the work is very good.

Speaker #3: That, that will recuperate the 100. in revenue. So that's, that's the reason why we had to be a little bit more, but they are typical, you know, typical ramp-up issues.

Speaker #3: You know, the things that are small but get delayed, processes that need to be affected, processes that need to adapt to OSHA rules—things of that sort that you only find out or you find out usually when you are trying to ramp up production out of a facility.

Speaker #3: So. we are, you know, the, the, the quality of the work is very good. You know, it was on the, on the, on the, on that factory last week, meeting the employees, looking at the people who have like, you know, 40 of our engineers working with them, trying to resolve these issues very quickly or actually helping them resolve these issues very quickly.

Julian Nebreda: I was on that factory last week meeting the employees, looking at the people who have like 40 of our engineers working with them, trying to resolve these issues very quickly or actually helping them resolve these issues very quickly. I am really excited. It is also, if I can give a little bit of an ad, nobody believed we could buy the enclosure, we can build the enclosures with U.S. steel. These are U.S. steel enclosures. The view was that you could not do it, that it was too expensive, that the steel industry in the U.S. was not going to be able to do it. We now, we are, these enclosures that are coming out of that line are made with 100% U.S. steel. We are very, very happy with the process, and we think this is the way to go forward. We are believers in the U.S.

Speaker #3: And, and we are, I'm really excited. And it's also, if I can give a, a little bit of an ad, nobody believe we could buy the enclosure, we can build the enclosures with US steel.

Speaker #3: These are US steel enclosures. You know, the view was that you could not do it, that it was too expensive, that the steel industry in the US was not going to be able to do it.

Speaker #3: We now, we are this. The enclosures that are coming out of that line are made with 100 percent U.S. steel, so we're very, very happy.

Speaker #3: With the process and, you know, we think this is the way to go forward. And then we have believers in the U.S. industry and, you know, issues that we have, but we'll make it happen.

Julian Nebreda: industry and issues that we have, but we will make it happen.

Speaker #7: Okay. Excellent. Yeah. Thank you so much.

Lexington May: Okay. Excellent. Thank you so much.

Speaker #3: Welcome.

Julian Nebreda: Welcome.

Speaker #1: Thank you. Thank you. Your next question is coming from the line of Julian Dumoulin-Smith with Jefferies. Please go ahead.

Ahmed Pasha: Thank you. Your next question is coming from the line of Julian Dumoulin-Smith with Jefferies. Please go ahead.

Speaker #8: Hey, good morning team. Thank you guys very much. I appreciate the time.

Brian Lee: Hey, good morning, team. Thank you guys very much. I appreciate the time.

Speaker #3: Hey, Julian, how are you?

Julian Nebreda: Hey, Julian. How are you?

Speaker #8: Just wanted to follow up. Hey, a pleasure. My name's Hank. Just on this $26 number here, you know, on the two and a half.

Brian Lee: Just to follow up.

Julian Nebreda: Hey, a pleasure, my namesake.

Brian Lee: Just on this 2026 number here, you know, on the two and a half, how would you think about that seeing up here in the next year? I mean, I know you talked about this 80% to 90%. I just want to understand how you think about the line of sight and sort of the timing and cadence of when you see some of that backlog coming in. I mean, do you really see that number accelerating into the end of the year based on OB3? Also, can you speak a little bit more? It is notable the non-U.S. acceleration that you are seeing here too.

Speaker #8: How would you think about that team up here in the next year? I mean, I know you talked about this, 80 to 90 percent.

Speaker #8: I just want to understand, like, how you think about the, the line of sight and, and, and sort of the timing and cadence of, of when you see some of that backlog coming in.

Speaker #8: I mean, do you really see that number accelerating into the end of the year based on OOB? And then also, can you speak a little bit more?

Speaker #8: I mean, it's notable the non-U.S. acceleration that you're seeing here too.

Speaker #3: Yeah. So, I don't want to provide guidance for next year, you know, unfortunately. And we highlighted that number, and we highlighted the conservative approach because, remember, last year we guided with $2.6 billion in our backlog.

Julian Nebreda: Yeah. So I do not want to provide guidance for next year, Julian, unfortunately. We highlighted that number, and we highlighted a conservative approach. Remember, last year we guided with 2.6 in our backlog, not this year. We guided to $4 billion. I did not want to say $2.5 billion, and you tell me these guys are going to guide to 3.8. That is kind of what we wanted to give you a sense. It is going very well. Things are picking up globally. We are in a very good position, but we are going to be a lot more conservative. That was the message. I think that is the message I can say. We are seeing very good momentum, and you know, stay tuned. Unfortunately, I do not want to give up. We cannot provide a view today.

Speaker #3: Not this year. And we

Speaker #8: Yeah.

Speaker #3: guided to 4 billion. So, you know, I didn't want to say 2.5 billion, and you tell me, this guy's not going to guide to 3.8.

Speaker #3: So, so that's kind of what, what we wanted to give you a sense. So, going very well, things are picking up globally. we are in a very good position, but we're going to be a lot more conservative.

Speaker #3: That was a message. And I think that's a message, message I can say, you know. We, we are seeing very good momentum, and, you know, stay tuned.

Speaker #3: Unfortunately, I don't want to give, you know, I, we cannot provide a view today.

Speaker #2: We're not tracking down our shop. That's brilliant. So, so I think our goal is to continue to grow. And provide service to our customers.

Ahmed Pasha: are not trying to own or shop. I think our goal is to continue to grow and provide service to our customers and grow the business. That is the goal. Let us stay tuned, but we will come and report. Our sales team is actively working, and we are adding more resources in sales.

Speaker #2: And grow the business, you know. So. That's a goal. So let's stay tuned, but we will come and report. But our sales team is actively working, and we are adding more resources in sales.

Speaker #3: That's right.

Julian Nebreda: That's right.

Speaker #2: So.

Speaker #8: Right. And, and maybe can you speak to a little bit of what you're expecting on FLC here and how that's going to be implemented and, and, and how you see yourself, vis-à-vis like the cadence of bookings?

Ahmed Pasha: Right.

Brian Lee: Can you speak a little bit about what you are expecting on FEOC here and how that is going to be implemented, and how you see yourself vis-à-vis the cadence of bookings? I know someone tried to ask the same question earlier, but how do you think about that driving acceleration or at least the clarity? When does that drive order activity? If folks are safe harbored here, perhaps they are a little less concerned.

Speaker #8: I know, I know someone kind of tried to ask the same question earlier, but how do you think about that driving acceleration? Or just the, at least the clarity, like when does that drive order activity?

Speaker #8: I mean, if, if folks are safe harbored here, perhaps they're a little less.

Speaker #3: No, Julian, you got disconnected a bit. I didn't get the. Can you repeat again, please? Sorry, the, the, the.

Julian Nebreda: No, Julian, you got disconnected for a while. I didn't get there. Can you repeat again, please? Sorry.

Speaker #8: Oh, oh, sorry.

Speaker #3: The sound in my part got out, got out, got out.

Brian Lee: Oh, the sound in my part got out. Okay, I got you. Look, keep it short. On the FEOC part, you have contracts where perhaps folks are safe harbored, perhaps FEOC exempt equipment. When do you think you will start to see FEOC compliant equipment orders really start to come in, given where?

Speaker #8: Oh, okay. I, I gotcha. Look, keep it short. on the FLC part, you got, the, you have contracts where, perhaps folks have safe harbored, perhaps FLC exempt, equipment.

Speaker #8: When do you think you'll start to see FLC-compliant equipment orders really start to come in, given what you're seeing with the OOB? What’s the timeline there as you think about it, right?

Speaker 1: You are seeing with the OB3, what the timeline there is. You think about it, right? Again, in theory, that might be somewhat lagged. Is that near term, or do you think that there could be some changes here with the Safe Harbor that would force folks to procure more FEOC compliant type products? How do you think about that fitting into your business model?

Speaker #8: Again, in theory, that might be somewhat lagged. Is that near term, or do you think that there could be some changes here with the safe harbor that would force folks to, to procure more FLC compliant type products?

Speaker #8: And how do you think about that fitting into your business model?

Speaker #3: Yeah, yeah. Good point. Yeah. You, as you know, safe harbor gives you a little bit of flexibility on meeting some of the FLC restrictions.

Ahmed Pasha: Yeah, good point. As you know, Safe Harbor gives you a little bit of flexibility on meeting some of the FEOC restrictions. What we said for ourselves and with our suppliers is to meet the actual deadlines, which are all happening, as you know, in the first half of next year, unless there were to see any changes going forward. So that's generally our view. We want to meet the deadlines that are in the act that they are, even though we'll have some flexibility meeting some contracts with things that are slightly different. So that's our approach. That's the way we take it. We have taken, I wouldn't call it a conservative approach, but we do not want to lose any of our first moving advantage on this.

Speaker #3: What we said for ourselves, and with, and with, you know, with our suppliers, is to meet the, the actual, act deadlines. You know, which are all happening, as you know, in the first half of the year, next year, unless there was, we see any changes going forward.

Speaker #3: So that's generally our view. We want to meet the deadlines that are in the act that they are, even though we'll have some flexibility meeting, you know, some contracts with things that are slightly different.

Ahmed Pasha: I think that part of it is ensuring that we have that supply chain, that ownership, and that control, restructured in accordance with the law as soon as we can.

Speaker 1: Got it. Thank you, guys.

Lexington May: Thank you. Your next question is coming from the line of Justin Claro with Ross Capital. Please go ahead.

Ahmed Pasha: Hey, Justin. Good morning.

Speaker 1: Good morning. I wanted to just follow up on gross margins here. It sounds like the tariffs in the U.S. might affect your gross margin into the fiscal Q4. I am just wondering if you are anticipating being able to offset the tariff-related costs in the U.S., whether through pricing, sourcing through your domestic supply chain here, or other levers. If this is a temporary issue, should we anticipate margins for the U.S. being similar to your international margins over time and what that looks like?

Ahmed Pasha: Yeah, it's a very good question. I think these reflect the contracts we already signed that were already in our backlog and where we had some rules with our some, you know, rules with or some provisions in our contract, how we divided the tariff effect. The tariff effect on the contracts are a bigger number, but this is the amount. The $30 million is the net amount that we need to reflect in our numbers. This applies to the contracts we already signed. I think new contracts come in, they will reflect the new cost structure, and we should see them going back to the normal margin levels of 10% to 15% that we have set for ourselves. So this is a temporary situation. There might be some in the first quarter of 2026 that still have these issues.

And this applies to the contract, where is already signed. That's it. New contracts come in. They will reflect the new cost structure and they we should see them going back to the normal margin levels of 10 to 15 that we have set for sale.

Ahmed Pasha: So there will be some lingering ones, but I think the majority will be done between this quarter and the first quarter of 2026.

It should not. This is a temporary situation. Not they might be they might be some in the first quarter of 26 that still have these issues. So there will be some, some lingering ones, but I think the majority will be done by

Speaker 1: Got it. Okay, that is helpful. Just on the domestic supply chain here, wondering if you could provide an update on the ramp-up of AESC's second production line. I think that was expected to come online toward the end of your fiscal 2026. Has that timeline shifted at all given the recent policy developments? Are you considering any alternatives for domestic cell sourcing at this point?

between this quarter and the first quarter of of 206,

Ahmed Pasha: So, yeah, good question. We, as I said, we do not need the second line until early 2027. So that's still to be the case, and that's when you looked at our, we can live with what we have with the one line going forward. We kind of put that line on pause during the OB3. When things were moving up, people now forget, but they don't remember the House came with very strict rules and they've liberalized now. So we kind of put it on. Now we will bring it back on as part of our renegotiation on the FEOC, and it should come, it should come, I will say probably be a little bit later than the first quarter of 2026, but it should meet, it should work with our current volume needs. However, as you know, there are some challenges.

Got it. Okay, that's helpful. And then just on the, uh, the domestic supply chain here, wondering if you could provide an update on the ramp up of aec's second production line. I I think that was expected to come online toward the end of fiscal, 20, your fiscal 26. Uh it has that time learning shifted at all, you know, given the recent policy developments and then, you know, are you considering any alternatives for uh domestic sales sourcing at this point? So,

Good, good question. We you know as you said, we do not need the second line until you know, early, 27. So so that that's still to be the case. And that's where you looked at our we, we can leave with what we have with the 1. L going forward, we kind of put that line on pause during the during the ov3. You know, when things were moving up, people now forget, but they don't remember the house came with very strict rules and the legalized now, so we can

Ahmed Pasha: We're also looking at other options just to ensure we don't play, you know, we don't dance to only one tune. So, we will, we are looking at other options just in case it gets delayed or we get a lot more volume than what we are thinking of, or somehow the negotiations with AESC do not work as we expect for the second line. So.

Speaker 1: Okay. Got it. Thank you.

Kind of put it at home. Now we, we will bring bring it back on as part of our renegotiation on FOC and it should come. It should come, you know, I would say probably be a little bit later, that, that than the first quarter of 26, but it should be. It should, it should work with our current volume this. However, as you know, there are some challenges we're also looking at other options just to ensure we don't play. You know, 1 we don't dance to only 1 tool. So we will we are looking at other options just in case this work gets delayed or or we get a lot more volume, that what we are thinking of or somehow the negotiations with AC do not work as we expect for the second night. So,

Lexington May: Thank you. Your next question is coming from the line of Ameet Thakkar with BMO Capital Markets. Please go ahead.

Thank you. Your next question is coming from the line of Amita car with B BMO Capital markets. Please go ahead.

Ahmed Pasha: Hey, good morning.

Julian Nebreda: Good morning, Julian. Thanks for taking my question. Just real quick on OpEx. You guys had historically tried to grow that at half the rate of revenues. Looks like it is up year-to-date versus the same period last year. I know you guys have embarked on some cost savings initiatives. Can you just give us an update on where that stands and maybe the timing of when we might start to see some progress on that front?

Hey, good morning. Good morning Julian. Um, thanks for taking my question. Um uh just uh real quick on um kind of Opex. Uh you guys did historically try to kind of, I think grow that at half the rate of revenues. Um, looks like it's up kind of year to date versus the same period last year. Um, any kind of um and I know you guys have embarked on some um kind of cost savings initiatives. You just kind of give us an update on on where that stands and and kind of maybe the timing of when we might start to see some progress on that front.

Ahmed Pasha: Okay. So, in terms of OpEx, I think generally long-term, our view is what we have said, keeping our OpEx at half of our growth. However, for next year, most likely we will keep OpEx flat compared to 2025. Why? We were expecting a significant growth in 2025 in revenue that we were not able to deliver. Our cost structure, in a way, reflects part of it. So that is why I think that for next year, it will be essentially flat, but after 2027, it should go back to growing after 2026. From 2027 onwards, it should grow at half the rate of our top-line growth. That is the way you should think about it.

Okay. So I mean in terms of Opex, I think generally long term, our views, what we have said, keeping our Opex at half

Of our 20 of our of our growth.

However, for next year, most likely will keep will keep Opex flat compared to 20 to 25, why?

We were expecting a significantly grow significant growth in 25 in Revenue that we didn't. We're not able to deliver and our cost structure in a way reflects part of it. So that's why I think that for next year it will be essentially flat. But after 20 cents it should go back to Growing after you know after 26 or 27 onwards.

Ahmed Pasha: Just to give you a sense of what we are doing, we are looking at our OpEx, especially taking a deep look at all our costs that are not sales or product development or R&D. We invested in SAP, so we are looking at our financial costs, our control costs, human resources, all of that G&A that is not connected to either sales or R&D, and really taking a good look and taking advantage of our investments in SAP and other systems that I think are helping. So that is what you should see. Flat for 2026, and then going back again at half the rate of the top-line growth at 2027 onward.

Each world would have the rate of our Topline growth, that that's the way YouTube think about it. And just to give you a sense of what we're doing, we are looking at our Opex, especially taking a deep. Look at all our, you know, all our costs that are not sales or product development or R&D. And you know, we we invested on sap. So we're looking at our financial costs, our control costs Human Resources, all of that, you know, GNA that is not connected to either sales or or or R&D and really taking a deep look and taking, you know, advantage of our investments in sap and other systems that I think are helping so that that's that's what you should see flat for 26. And then go growing back again at half the the rate of the Topline growth, at 27, no more.

Julian Nebreda: Thanks for that. Just one quick follow-up. It looks like ASPs were kind of in the low to mid-$300s a KWH during the quarter. If I look at your backlog, it implies something in the lower $200s. I do not think that is necessarily a new phenomenon, but is there any additional revenue that you guys end up booking on the product side that allows you to realize a higher realized ASP versus what is implied by bookings?

Ahmed Pasha: No, it is in line with what we can say.

Oh, thanks for that. And then just 1 quick. Follow-up on looks like, as asps were kind of in the low to kind of mid-30s a dollar, a kwh. Um, during the quarter, if I look at your backlog it implies something in kind of the the lower 200s. Um, I don't think that's necessarily a new phenomenon but like are there any kind of additional kind of Revenue that you guys end up kind of booking on on the product side? Uh that allows you to kind of realize a higher um kind of realized ASP versus what's implied by bookings.

Speaker 1: No, I think if you look at our order intake last year, Ameet, we were in 300. So I think it is a timing lag, if you wish, in the revenue that we are seeing in Q3. Those are the contracts we had signed last year. If you go back last year, we had in that range 300 plus. The only other thing you have to consider is the EPC, the scope of the projects. For example, in Europe, this quarter we have large of our more than 50% of my revenue this year from international business is where I have EPC as part of the scope. That by itself increases the price 20%, 30%.

No, it's in line with what I think. If you look at our order intake last year, I mean, we were at $300 million. So, I think it's a timing lag, if you wish.

in the revenue that you are seeing in Q3, those are the contracts we had signed last year and if you go back last year we had in, uh,

In that range. 300 plus the, only other thing you have to consider is the EPC the scope of the projects. You know, for example, in Europe uh this quarter we have uh

Ahmed Pasha: Yeah, or 20%. It depends on the complexity.

Speaker 1: than the base equipment price, which in the U.S., for example, we normally don't do EPC, just the product.

Large of our more than 50% of my Revenue. This year, was from International businesses where I have EPC as part of the scope. And that by itself, increases the price 2030. Yeah. For 20%, depends on the complex. Then, then the base equipment price, which in the US, for example, we normally don't do EPC just the product.

Ahmed Pasha: Okay. I would like to, I mean, if you have, I am in the promotion mode today, but true. We are being able to follow the ASP reductions in line with whatever, with our competitors. We are signing good projects with good margins at significant lower ASPs. Some of you had concerns over our ability to do it. We have been able to do it with our investments in R&D, I think, in a lot of projects. In a way, clearly, the ASP is a threat, but at the same time, it is an opportunity for us also.

Okay, and I would like to, I mean, if you - I'm in the promotion mode to it, but yeah, that's true. I mean, we are being able to follow the ASP reductions.

You know, in line with whatever we know about our competitors, we are signing good projects with good margins that significantly lower ASP. I mean, some of you had concerns about our ability to do it. We've been able to do it with, you know, our investors, and our R&D are thinking about our projects. So, you know, in a way, clearly the APIs is a threat, but at the same time, it is an opportunity for us. So.

Julian Nebreda: Got it. Thank you all for that.

Ahmed Pasha: Great. Thanks. Thanks, Ameet. Hello.

Got it. Thank you. And as I said,

Yeah, great. Thanks. Thanks. Ah.

Lexington May: Your next question was coming from the line of Chris Danginos with RBC Capital Markets. Please go ahead.

Okay. And your next

Julian Nebreda: Yeah, good morning. Thank you.

Your next question was coming from the line of Chris An. Goes with RBC Capital Markets. Please go ahead.

Ahmed Pasha: Good morning. How are you?

Julian Nebreda: Morning.

Speaker 1: am doing well. I wanted to go back to just kind of some of the manufacturing commentary here. I guess I am curious, are you in a position going forward to support a ramp from AESC? Separately or related, if you do look at a different supplier, can you support the cells coming off that line? If maybe if they are Prismic or Pouch, just trying to understand your flexibility to support a different cell structure if you switch suppliers.

Yeah, good morning. Thank you. Good morning. How are you?

Ahmed Pasha: Yeah. We clearly are currently, our supply chain is designed to integrate the AESC batteries. If we were to bring another supplier with another technology, there will be a little bit of work in bringing it up. It is not a lot of work, but it will require some workflow. However, we do not have any need for new supply during the rest of 2025 or 2026. It will be an early 2027 need so that we will have enough time to adapt to it.

You know are are you in a position? Going forward to support a ramp from I guess aesc. And then type earlier related, if you do look at a different supplier, um can you support the the I guess the cells coming off off that line, you know, if maybe if they're, um, you know, prismic or or pouch and just trying to understand, um, I guess your flexibility to, to support a different cell structure. If you switch suppliers, we clearly are currently our supply chain is designed to integrate the ASC ASC batteries. If we were to bring another supplier with another technology that will be a little bit of a work in, bringing it up, it's not a lot of work but it will require some work so

Speaker 1: Got it. Okay. As a follow-up, maybe just going back to the last question on pricing dynamics. Maybe just broadly, are you, it sounded like in response to a question from Roth that maybe there is pricing increases going on a bit in the U.S. as a result of tariffs. Is that true? Globally, are you still kind of seeing some incremental pricing pressure, or is it kind of dying down? Thanks.

However, we do not have any need for new Supply during 20. The rest of 25 or 26, it will be a early 27th needs that we will have enough time to adapt to it.

Ahmed Pasha: Yeah, good question. I think the U.S. will, over time, see some pressure on cost. However, today, most of the projects that we are looking at are projects that are, you know, safeguarded under the old IRA provision. I do not expect that you will see significant price increases for the next, you know, maybe 6 to 12 months. They will be under the current, under the older system. Generally, I think that we should expect some additional increases going forward. That is the way you should think about it.

Got it. Okay? And then you know, as a follow-up, maybe just going back to the last question on on pricing Dynamics and, you know, maybe just broadly, are you? You know, it's out of like in response to a question from Roth that maybe there's pricing increases going on a bit in the US, as a result of tariffs, I guess. Is that true? And then, um, I guess globally, are you still kind of seeing some, some incremental pricing pressure? Or is it kind of dying down? Thanks. Yeah, good question, I think the us will

Over time will over time will, will will see some pressure on on costs. However today, most of the projects that we are looking at are projects that are you know, Safeguard on the on the the old Ira provision. So I don't expect that you will see significant price increases for the next you know maybe 6 to 2 to 12 months you know they will be under the current on the on the older system. So but generally I think that we should expect some additional increases going forward. Well you know that's the way you should think about.

Julian Nebreda: Thank you.

Lexington May: Thank you. Your final question is coming from the line of Dimple Gasai of Bank of America. Please go ahead.

Ahmed Pasha: Hi, good morning.

Thank you. Your final question is coming from the line of Temple, gasai Bank of America, please go ahead.

Ahmed Pasha: Good morning.

Hi, good morning.

Ahmed Pasha: Thank you. What are you seeing in the market as far as Chinese players front-running FEOC and tariff escalations ahead of the end of 2025? Maybe anything you can add on what customers are saying on that front. Then I have a follow-up.

Ahmed Pasha: We have been selling domestic content production mostly in the U.S. Those are the customers we are working with. The customers who like Chinese equipment, we have not necessarily. I do not know, to tell you the truth, where we are. They do not, Chinese equipment does not compete with our domestic content offering. People are probably front-running it. Maybe they are, but it is for other customers, not the ones we are working with.

Good morning. Thank you. Um, you know what are you seeing in the market? As far as Chinese players, front, running Fiat and tariff escalations, you know, ahead of the end of of 2025 and maybe anything you can add on on what customers are saying on that front. And then I have a, a follow-up

Well, we, you know, we've been selling domestic content.

A production mostly in the US.

Ahmed Pasha: Perfect.

Ahmed Pasha: For projects that are not within our, within our, well, we, the economics of domestic content under the projects that are safeguarded under the IRA and the new projects is very, very strong and continues to be very strong. You know, we feel very, very confident that that market will continue to expand.

So those are the customers we are working with. The customers seem to prefer Chinese equipment. We have not necessarily observed this, so to tell you the truth, I don't know where we stand. Chinese equipment does not compete with our domestic content offering, so, you know, people are probably running it. Maybe they are, but it's for other customers, not the ones we're working with.

Ahmed Pasha: Okay. In the current backlog, what is the tariff sensitivity that perhaps wasn't already baked into the contracts, if any? Are there any potential cancellation risks or mutual terminations that might still be on the cards?

For projects that are not within our within our well. We, we the the economics of domestic content on the the projects that are Safeguard on the the IRA. And the new projects is very very strong and continues to be very strong, you know? And and you know we feel very very confident that that market will continue to expand

Ahmed Pasha: In the U.S., no, we do not see any terminations due to tariffs. I think that we have, as I said, the contracts that we stopped because of the tariff risk and how this thing all reactivated. Now with the 40% tariff this year, and it is going up to 58%, I think everybody kind of, you know, the provisions that we have in the contract work.

Okay. And then, um, in the current backlog, what is the tariff sensitivity that perhaps wasn't already baked into the contracts, if any? And are there any potential cancellation risks or mutual terminations that might still be, you know, on the cards?

In in the U. And I, we don't see any any determinations due to tariffs? I think that we have. As as said the contracts that we we stopped

Speaker 1: We're working to get off the current backlog.

Ahmed Pasha: They are already in our guidance for this year. You should not expect any other additional changes.

Ahmed Pasha: Got it. Thank you.

Because of the Tariff risk and you know how the thing all reactivated and now with the 40 percentile this year and it's going to going up to 58, I think everybody kind of, you know, the the provisions that we are in the in the contract are already taken care of. Yeah. And you know, they already they are in our guidance for this year and, you know, so you shouldn't expect any other additional changes.

Ahmed Pasha: Thank you.

Got it. Thank you.

Thank you.

Lexington May: Thank you. I will now turn the call back over to Lexington May, Vice President of Investor Relations, for closing remarks. Please go ahead.

Thank you. I will now turn the call back over to Lexington May, Vice President of Investor Relations, for closing remarks. Please go ahead.

Lexington May: Thank you for participating on today's call. If you have any questions, feel free to reach out to me. We look forward to speaking with you again when we report our fourth quarter and full-year results. Have a good day.

Thank you for participating in today's call. If you have any questions, feel free to reach out to me. We look forward to speaking with you. Again, when we report our fourth quarter and full year results,

have a good day.

Lexington May: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Brian Lee: Please wait. The conference will begin shortly.

The conference will begin shortly.