Q2 2026 Fluence Energy Inc Earnings Call

May 7, 2026

Operator: Good day, and thank you for standing by. Welcome to the Fluence Energy, Inc. Q2 2026 Earnings Conference Call. I would now like to hand the conference over to your first speaker today, Chris Shelton, Vice President of Investor Relations. Please go ahead.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone; you will then hear an automated message advising your hand is raised.

Speaker #1: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chris Shelton, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Chris Shelton: Good morning, welcome to Fluence Energy's Q2 Earnings Call. Joining me on this morning's call are Julian Nebreda, our President and Chief Executive Officer, and Ahmed Pasha, our Chief Financial Officer. A copy of our earnings presentation, press release, and supplementary metric sheet covering financial results, along with supporting statements, schedules, including reconciliations and disclosures regarding non-GAAP financial measures, are posted on the investor relations section of our website at fluenceenergy.com.

Speaker #2: Good morning, and welcome to Fluence Energy's second quarter earnings call. Joining me on this morning's call are Julian Marquez, our President and Chief Executive Officer, and Ahmed Pasha, our Chief Financial Officer.

Speaker #2: A copy of our earnings presentation press release and supplementary metric sheet covering financial results, along with supporting statements, schedules, including reconciliations and disclosures regarding non-GAAP financial measures, are posted on the Investor Relations section of our website at fluenceenergy.com.

Chris Shelton: During the course of this call, Fluence management may make certain forward-looking statements regarding various matters related to our business, including, but not limited to, statements related to our future financial and operational performance, future market growth and related opportunities, anticipated growth and business strategy, liquidity and access to capital, expectations related to pipeline, order intake, and contracted backlog, future results of operations, the impact of the One Big Beautiful Bill Act, projected costs, beliefs, assumptions, prospects, plans, and objectives of management, and the timing of any of the foregoing. Such statements are based upon current expectations and certain assumptions and are therefore subject to certain risks, uncertainties, and other important factors which could cause actual results to differ materially. Please refer to our SEC filings for more information regarding these risks, uncertainties, and important factors.

Speaker #2: During the course of this call, Fluence Management may make certain forward-looking statements regarding various matters related to our business, including but not limited to statements related to our future financial and operational performance, future market growth, and related opportunities, anticipated growth in business strategy, liquidity and access to capital, expectations related to pipeline, order intake, and contracted backlog, future results of operations, the impact of the one big beautiful bill act, projected cost, beliefs, assumptions, prospects, plans, and objectives of management, and the timing of any of the foregoing.

Speaker #2: Such statements are based upon current expectations and certain assumptions and are therefore subject to certain risks, uncertainties, and other important factors which could cause actual results to differ materially.

Speaker #2: Please refer to our FCC filings for more information regarding these risks, uncertainties, and important factors. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today.

Chris Shelton: You are cautioned not to place undue reliance on these forward-looking statements which speak only as of today. 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, including Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Profit Margin. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is available in our earnings materials on the investor relations website. Following our prepared remarks, we will conduct a question-and-answer session with our team. Thank you very much. I will now turn the call over to Julian.

Speaker #2: 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, including adjusted EBITDA, adjusted gross profit, and adjusted gross profit margin.

Speaker #2: A reconciliation of these non-GAAP measures to the most comparable GAAP measures is available in our earnings materials on the Investor Relations website. Following our prepared remarks, we will conduct a question-and-answer session with our team.

Speaker #2: Thank you very much; I'll now turn the call over to Julian.

Julian Nebreda: Thank you, Chris, and welcome to everyone joining us today. Turning to slide 4. Since our February call, we made meaningful progress on order intake, our US domestic supply chains, and our product roadmap as we position Fluence to capture expanding global demand for energy storage. Our business model keeps us close to customers, so we can anticipate their needs early and respond quickly with the right products, applications, and commercial structures. This morning, I'll highlight our momentum across the business. Ahmed will review our financial results for the quarter and our current fiscal 2026 outlook. Here are the key highlights for the quarter. First, order activity is accelerating versus fiscal 2025. As of today, we've signed approximately $2 billion of orders this year, which is double the amount signed through the same period last year.

Julian Nebreda: Thank you, Chris, and welcome to everyone joining us today. Turning to slide four. Since our February call, we made meaningful progress on order intake, our US domestic supply chains, and our product roadmap as we position Fluence to capture expanding global demand for energy storage. Our business model keeps us close to customers, so we can anticipate their needs early and respond quickly with the right products, applications, and commercial structures. This morning, I'll highlight our momentum across the business. Ahmed will review our financial results for the quarter and our current fiscal 2026 outlook. Here are the key highlights for the quarter. First, order activity is accelerating versus fiscal 2025. As of today, we've signed approximately $2 billion of orders this year, which is double the amount signed through the same period last year.

Speaker #3: Thank you, Grief, and welcome to everyone joining us today. Turning to slide 4, since our February call, we made meaningful progress on order intake, our U.S.

Speaker #3: domestic supply chains, and our product roadmap. As we positioned Fluence to capture spending, global demand for energy storage. Our business model keeps us close to customers.

Speaker #3: So we can anticipate their needs early and respond quickly with the right products, applications, and commercial structures. This morning, I'll highlight our momentum across the business and then Ahmed will review our financial results for the quarter and our current fiscal 26 outlook.

Speaker #3: Here are the key highlights for the quarter. First, order activity is accelerating versus fiscal 25. As of today, we signed approximately $2 billion of orders this year.

Speaker #3: Which is double the amount signed through the same period last year. Our record backlog was 5.6 billion, at the end of the second quarter.

Julian Nebreda: Our record backlog was $5.6 billion at the end of Q2. We expect it to grow further based on execution so far this year. Second, Q2 adjusted gross margin was 11.1%, which is within our full-year expectation of 11% to 13%, a meaningful improvement versus Q1 and more reflective of the disciplined execution we deliver historically. Third, based on our H1 performance and visibility into the remainder of the year, we are reaffirming our fiscal 2026 guidance for revenue, ARR, and Adjusted EBITDA. Fourth, we ended the quarter on 31 March with approximately $900 million of total liquidity, reinforcing a strong financial position. Please turn to slide 5 for more details on order intake. Our expanded commercial effort is translating to stronger conversion into signed orders.

Speaker #3: And we expected to grow further based on execution so far this year. Second, second quarter adjusted gross margin was 11.1%. Which is within our full year expectation of 11% to 13%.

Speaker #3: A meaningful improvement versus Q1, and more reflective of the discipline execution we deliver historically. Third, based on our first half performance, and visibility into the remainder of the year, we are reaffirming our fiscal 26 guidance for revenue, ARR, and adjusted EBITDA.

Speaker #3: And fourth, we ended the quarter on March 31st with approximately $900 million of total liquidity, reinforcing our strong financial position. Please turn to slide 5 for more details on order intake.

Speaker #3: Our spend and commercial effort is translating to stronger conversion into signed orders. During the quarter, higher lithium prices temporarily slowed some customer decisions. But momentum reaccelerated as prices stabilized.

Julian Nebreda: During the quarter, higher lithium prices temporarily slowed some customer decisions, but momentum re-accelerated as prices stabilized. For Q3 to date, we have signed over $600 million of additional orders. For the first 7 months of this fiscal year, order intake totals approximately $2 billion, and we expect the total for all of fiscal 2026 to significantly exceed the level from fiscal 2025. Most of the orders this year have come from our core customer segment, developers and utilities. It is important to note that 50% of our orders this year come from new customers, a signal of the early results from our expanding commercial effort. Please turn to slide 6 as I detail our progress with new customer segments. Since our February call, we executed master supply agreements with 2 major hyperscalers.

Speaker #3: For third quarter to date, we have signed over $600 million of additional orders. For the first seven months of this fiscal year, order intake totals approximately $2 billion.

Speaker #3: And we expect the total for all of fiscal 26 to significantly exceed the level from fiscal 25. Most of the orders this year have come from our core customer segment.

Speaker #3: Developers and utilities. It is important to note that 50% of our orders this year come from new customers. A signal of the early results from our spending commercial effort.

Speaker #3: Please turn to slide 6, as I detail our progress with new customer segments. Since our February call, we executed master supply agreements with two major hyperscalers.

Julian Nebreda: The selection process for both of these MSAs was subject to multiple rounds of review, and in each case, Fluence was chosen after meeting criteria specific for each customer. In one case, the customer's process began with 26 different best vendors, and Fluence was the first to complete all qualifications to sign a global MSA. In the other case, the customer had requirements which made it hard for many competitors to comply with. In both cases, we believe Fluence's understanding of customer requirements, rapid response time, and differentiated products were key in driving this engagement. These MSAs establish Fluence as a qualified supplier, positioning us to bid on expected near-term data center projects for both hyperscalers. With the additional progress with one of these customers over the past few months, we expect to sign the initial order from one of their data center projects within Q3.

Speaker #3: The selection process for both of these MSAs was subject to multiple rounds of review, and in each case Fluence was chosen after meeting criteria specific for each customer.

Speaker #3: In one case, the customer's process began with 26 different best vendors, and Fluence was the first to complete all qualifications to sign a global MSA.

Speaker #3: In the other case, the customer had requirements which made it hard for many competitors to comply with. In both cases, we believe Fluence understanding of customer requirements rapid response time, and differentiated products were key in driving this engagement.

Speaker #3: These MSAs established Fluence as a qualified supplier, positioning us to bid on expected near-10 data center projects for both hyperscalers. With the additional progress with one of these customers over the past few months, we expect to sign the initial order from one of their data center projects within the third quarter.

Julian Nebreda: In addition, since our prior call, we have successfully developed a proprietary solution to handle the extreme power usage fluctuations experienced in data centers. Fluence excels at this based on our deep experience with advanced controls and track record managing fast response systems. Based on our discussion, we believe these capabilities will be an important differentiator for data center customers concerned with quality of power. Finally, we're seeing increasing interest in SmartStack for applications requiring longer duration energy storage. SmartStack density provides a competitive advantage for these applications because of its smaller footprint. Please turn to slide 7 as I discuss our growing pipeline. A key piece of our commercial strategy has been the growth of our pipeline, which has increased by 35% so far this fiscal year.

Speaker #3: In addition, since our prior call, we have successfully developed appropriate solution to handle the stream-powered usage fluctuations experienced in data centers. Fluence excels at this based on our deep experience with advanced controls and track record managing fast response systems.

Speaker #3: Based on our discussion, we believe this capabilities will be an important differentiator for data center customer concern with quality of power. Finally, we're seeing increasing interest in smart stack for applications requiring longer duration energy storage.

Speaker #3: Smart stack density provides a competitive advantage for these applications because of its smaller footprint. Please turn to slide 7, as I discussed our growing pipeline.

Speaker #3: A key piece of our commercial strategy has been the growth of our pipeline, which has increased by 35% so far this fiscal year. We're seeing opportunities in the US market beginning to outpace our other markets.

Julian Nebreda: We're seeing opportunities in the US market beginning to outpace our other markets, with projects concentrated in California and Arizona, as well as the MISO markets in the Midwest. Most of the growth is from our core customer base, as I mentioned earlier, but also in part by new customer segments, including data centers and other large energy users increasingly adopting storage solutions. Since our last call, our data center pipeline has increased by over 30%, including projects from both major hyperscalers I just discussed. We expect data center projects to make an increasing contribution to order intake during Q4 of this year, building on the initial order we expect in the next few weeks. Fluence's business model is intended to keep us close to customers, which we believe puts us in a privileged position to spot evolving needs early and to respond quickly.

Speaker #3: With projects concentrated in California and Arizona, as well as the MISO markets in the Midwest. Most of the growth is from our core customer base, as I mentioned earlier.

Speaker #3: But also in part by new customer segments, including data centers and other large energy users, increasingly adopting storage solutions. Since our last call, our data center pipeline has increased by over 30%, including projects from both major hyperscalers I just discussed.

Speaker #3: We expect data center projects to make an increasing contribution to order intake during the fourth quarter of this year, building on the initial order we expect in the next few weeks.

Speaker #3: Fluence business model is intended to keep us close to customers. Which we believe puts us in a privileged position to spot evolving needs early and to respond quickly.

Julian Nebreda: That insight informs our product design, the applications we support, and the technical, operational, and commercial terms our customers require, backed by a sales organization with deep, long-standing relationships. In short, we have positioned Fluence to be on the leading edge of BESS. We view the components we use as commodities, which we integrate into finished products to meet customer needs. Combined with our long-standing technical expertise and hands-on experience and our deep understanding of different markets around the world, we believe Fluence is uniquely positioned to deliver and help our customers maximize the benefit of investing in battery projects. We have evolved our product to accommodate a growing number of customer demands, including market-leading density, digital solutions optimizing operations and profitability, reduced total cost of ownership, large-scale fire testing, and industry-leading reliability.

Speaker #3: That insight informs our product design, the applications we support, and the technical operational and commercial terms our customers require. Back by a sales organization with deep, long-standing relationships.

Speaker #3: In short, we have a solution Fluence to be on the leading edge of best. We view the components we use as commodities. Which we integrate into finished products to meet customer needs.

Speaker #3: Combined with our long-standing technical expertise, hands-on experience, and our deep understanding of different markets around the world, we believe Fluence is uniquely positioned to deliver and help our customers maximize the benefit of investing in battery projects.

Speaker #3: We have evolved our product to accommodate a growing number of customer demands. Including market-leading density, digital solutions optimizing operations and profitability, reduced total cost of ownership, large-scale fire testing, and industry-leading reliability.

Julian Nebreda: Fluence was also the first to offer a complete US domestic supply chain, an important advantage for our US customers. We offer a one-stop solution from early project development through delivery and installation, and continuing over the full operating life of each project. We combine in-house EPC expertise with a dedicated service organization that optimizes performance and extends asset life, resulting in industry-leading operational metrics. Please turn to slide 9 for an update on SmartStack. Product innovation remains another key differentiator for Fluence. SmartStack sets the industry standard for energy density, enabling customers to fit more than 500 MWh of storage per acre. With additional improvements planned. We designed SmartStack to lower total cost of owners through modular architecture, easier maintenance access, and more than 98% reliability, delivering more electricity and more value to our customers.

Julian Nebreda: Fluence was also the first to offer a complete US domestic supply chain, an important advantage for our US customers. We offer a one-stop solution from early project development through delivery and installation, and continuing over the full operating life of each project. We combine in-house EPC expertise with a dedicated service organization that optimizes performance and extends asset life, resulting in industry-leading operational metrics. Please turn to slide nine for an update on SmartStack. Product innovation remains another key differentiator for Fluence. SmartStack sets the industry standard for energy density, enabling customers to fit more than 500 MWh of storage per acre. With additional improvements planned. We designed SmartStack to lower total cost of owners through modular architecture, easier maintenance access, and more than 98% reliability, delivering more electricity and more value to our customers.

Speaker #3: Fluence was also the first to offer a complete US domestic supply chain, an important advantage for our US customers. We offer a one-stop solution, from early project development through delivery and installation, and continue over the full operating life of each project.

Speaker #3: We combine in-house EPC expertise with a dedicated service organization that optimizes performance and extends asset life, resulting in industry-leading operational methods. Please turn to slide 9 for an update on smart stack.

Speaker #3: Product innovation remains another key differentiator for Fluence. Smart stack sets the industry standard for energy density. Enabling customers to fit more than 500 megawatt-hours of storage per acre, with additional improvements planned.

Speaker #3: We design smart stack to lower total cost of ownership, through modular architecture, easier maintenance access, and more than 98% reliability. Delivering more electricity and more value to our customers.

Julian Nebreda: Its flexible design supports a broad range of cell types across multiple manufacturers, including pouch cells commonly used in electric vehicles. Importantly, SmartStack packaging and modular architecture addresses the density challenges typically associated with pouch format in stationary storage. I'm pleased to report that our first SmartStack has reached substantial completion and commenced commercial operation. Our growing SmartStack backlog reflects this market's strong interest in our product. Please turn to slide 10 for an update on our domestic supply strategy. As I just mentioned, we recognize the importance of our US domestic supply chain early. Today, we have US production for all major components, including battery cells from our supplier in Smyrna, Tennessee, which has been operating since 2025. Building on our existing US supply, as we announced in February, we signed an agreement with another source of domestically produced battery cells beginning in fiscal 2027.

Julian Nebreda: Its flexible design supports a broad range of cell types across multiple manufacturers, including pouch cells commonly used in electric vehicles. Importantly, SmartStack packaging and modular architecture addresses the density challenges typically associated with pouch format in stationary storage. I'm pleased to report that our first SmartStack has reached substantial completion and commenced commercial operation. Our growing SmartStack backlog reflects this market's strong interest in our product. Please turn to slide 10 for an update on our domestic supply strategy. As I just mentioned, we recognize the importance of our US domestic supply chain early. Today, we have US production for all major components, including battery cells from our supplier in Smyrna, Tennessee, which has been operating since 2025. Building on our existing U.S. supply, as we announced in February, we signed an agreement with another source of domestically produced battery cells beginning in fiscal 2027.

Speaker #3: And it's flexible design supports a broad range of cell types, across multiple manufacturers. Including pouch cells, commonly used in electric vehicles. Importantly, smart stack packaging and modular architecture addresses the density challenges typically associated with pouch format in stationary storage.

Speaker #3: And please do report that our first Smart Stack has reached substantial completion and commenced commercial operation. Our growing Smart Stack backlog reflects the market's strong interest in our product.

Speaker #3: Please turn to slide 10 for an update on our domestic supply strategy. As I just mentioned, we recognize the importance of our US domestic supply chain early.

Speaker #3: Today we have US production for all major components, including battery cells, from our supplier in Smyrna, Tennessee. Which has been operating since '25. Building on our existing US supply, as we announced in February, we signed an agreement with another source of domestically produced battery cells, beginning in fiscal '27.

Julian Nebreda: We believe this incremental capacity has strengthened our supply position and supports delivery against our growing order book. We're also evaluating additional supply options to help support Fluence growth beyond 2027. Our current position gives us flexibility as additional proposed US supply comes online. Based on our experience, converting EV battery production to BESS cells can take 1 year or more. When exploring additional proposed supply lines, we plan to evaluate each facility's timeline to first production, its ramp speed, its technical characteristics, and how its location could strengthen and optimize our current US domestic supply network. Let me also update you on FEOC compliance for our cell supply in Smyrna, Tennessee. AFC closed a deal to sell a majority interest of its facility to Fix Energy, a subsidiary of Longmore Capital.

Speaker #3: We believe this incremental capacity strengthens our supply position and supports delivery against our growing order book. We're also evaluating additional supply options to help support Fluence growth beyond '27.

Speaker #3: Our current position gives us flexibility as additional proposed US supply comes online. Based on our experience, converting EV battery production to best cells can take a year or more.

Speaker #3: When exploring additional proposed supply lines, we plan to evaluate each facility's timeline to first production, its run speed, its technical characteristics, and how its location could strengthen and optimize our current US domestic supply network.

Speaker #3: Let me also update you on PFE compliance for our cell supply in Smyrna, Tennessee. ASC closed a deal to sell a majority interest of its facility to fixed energy, a subsidiary of Lombor Capital.

Julian Nebreda: Ownership changed hand on 31 March 2026, and the facility continues to produce cells that qualify for tax credits under the One Big Beautiful Bill Act. We moved quickly to establish a relationship with the new owner and have signed a new supply agreement covering the next few years. We are confident in their plan to sustain the strong production level we've seen this year. Looking ahead, we believe we're well-positioned to benefit from growing diversity in US cell supply and the impact additional capacity may have on battery pricing. Internationally, we competed in markets that have seen meaningful declines in average sales prices for several years, and those lower prices expanded demand by enabling new applications. It's reasonable to expect similar dynamics in the US. Importantly, we have executed successfully through the inflationary pricing cycles before.

Speaker #3: Ownership changed hands on March 31st, '26, and the facility continues to produce cells that qualify for tax credits under the One Big Beautiful Bill Act.

Speaker #3: We move quickly to establish a relationship with the new owner, and have signed a new supply agreement are confident in their plan to sustain the strong production level we've seen this year.

Speaker #3: Looking ahead, we believe we're well positioned to benefit from growing diversity in US cell supply. And the impact additional capacity may have on battery pricing.

Speaker #3: Internationally, we competed in markets that have seen meaningful declines in average cell prices for several years. And those lower prices expanded demand by enabling new applications.

Speaker #3: It's reasonable to expect similar dynamics in the US. Importantly, we have executed successfully through the Flashionary Pricing Cycles before. With an approximate 50% decline in ASPs over the past two years, we more than double adjusted gross margin.

Julian Nebreda: With an approximate 50% decline in ASPs over the past 2 years, we more than double our adjusted gross margin. Although, we expect ASPs to continue to decline for the balance of fiscal 2026, we are forecasting approximately 50% revenue growth with adjusted gross margins in the range of 11% to 13%, reflecting the strength of our execution and operating model. To conclude, we're seeing accelerating demand, improving execution, and expanding opportunity across both our core and emerging customer segments. With a record backlog, a strengthening US domestic supply position, and a differentiated product platform, we are committed to delivering for customers and creating long-term value for shareholders. With that, I'll turn the call over to Ahmed Pasha to discuss our financial results.

Speaker #3: Although we expect ASPs to continue to decline for the balance of fiscal '26, we are forecasting approximately 50% revenue growth with adjusted gross margins in the range of 11% to 13%.

Speaker #3: Reflecting the strengths of our execution and operating model. To conclude, we're seeing accelerating demand, improving execution, and expanding opportunity across both our core and emerging customer segments.

Speaker #3: With a record backlog, a strengthening US domestic supply position, and a differentiated product platform, we are committed to delivering for customers and creating long-term value for shareholders.

Speaker #3: With that, I'll turn the call over to Ahmed to discuss our financial results.

Ahmed Pasha: Good morning, everyone. Since our previous earnings call, we have continued to capitalize on strong demand trends in our industry while maintaining a disciplined focus on delivering on our fiscal year 2026 commitments. We also maintain a strong liquidity that provides us flexibility to execute on our growth expectations. More specifically, starting with slide 12, we generated Q2 2026 revenue of $465 million, up 8% year over year. Approximately $80 million of revenue was pushed into Q3 due to two issues. Specifically, roughly half was attributable to a customs issue in Vietnam, with the remainder due to shortage of loading equipment in Spain. Both issues have since been resolved. The delayed shipments have been received, and we are current on the quarter's deliveries with no further delays.

Speaker #2: Good morning, everyone. Since our previous earnings call, we have continued to capitalize on strong demand trends in our industry, while maintaining a disciplined focus on delivering on our fiscal year 2026 commitments.

Speaker #2: We also maintain a strong liquidity that provides us flexibility to execute on our growth expectations. More specifically, starting with slide 12, we generated Q2 2026 revenue of $465 million.

Speaker #2: Up 8% year over year. Approximately $80 million of revenue was pushed into Q3 due to two issues. Specifically, roughly half was attributable to a customs issue in Vietnam.

Speaker #2: With the remainder due to shortage of loading equipment in Spain. Both issues have since been resolved. The delayed shipments have been received and we are current on the quarter's deliveries with no further delays.

Ahmed Pasha: To confirm, we do not have any material exposures to the Middle East conflict, as none of our shipments utilize the Strait of Hormuz. Our Adjusted Gross Profit for the quarter was $51 million, representing an Adjusted Gross Margin of 11.1%. This result is within our full year expectations of 11% to 13% and reflects a meaningful improvement from the Q1 level as well as comparable quarter for fiscal 2025. The primary driver of the improvement was consistent execution and operational discipline across our portfolio. Adjusted EBITDA for the Q2 was -$9 million, an improvement of $21 million compared to the Q2 of last year. The improvement reflects higher gross margin, lower operating cost, and $6 million gain from unwinding an FX derivative.

Speaker #2: Also, to confirm, we do not have any material exposures to the Middle East conflict as none of our shipments utilized the state of Hormuz.

Speaker #2: Our adjusted gross profit for the quarter was $51 million. Representing an adjusted gross margin of 11.1%. This result is within our full year expectations of 11% to 13% and reflects a meaningful improvement from the first quarter level as well as comparable quarter for fiscal 2025.

Speaker #2: The primary driver of the improvement was consistent execution and operational discipline across our portfolio. Adjusted EBITDA for the second quarter was negative $9 million.

Speaker #2: An improvement of 21 million compared to the second quarter of last year. The improvement reflects higher gross margin, lower operating cost, and $6 million gain from unwinding an FX derivative this offset is $6 million loss on the same FX derivative recorded in the first quarter of 2026 with no net year-to-date impact.

Ahmed Pasha: This offset a $6 million loss on the same FX derivative recorded in Q1 2026, with no net year-to-date impact. Turning to slide 13 for an update on our Adjusted Gross Margin progression and how disciplined execution translates to returns for our stakeholders. As you can see, our rolling 12 months Adjusted Gross Margin is 12.4%, marking 2 full years of consistent double-digit returns. We believe this progression underscores the durability of our margin profile, even in the dynamic pricing environment. Importantly, it reflects the product, commercial, and supply chain actions we have taken across the portfolio. These actions position us for continued margin improvement beyond this year. Turning to slide 14 for an update on our liquidity position.

Ahmed Pasha: This offset a $6 million loss on the same FX derivative recorded in Q1 2026, with no net year-to-date impact. Turning to slide 13 for an update on our Adjusted Gross Margin progression and how disciplined execution translates to returns for our stakeholders. As you can see, our rolling 12 months Adjusted Gross Margin is 12.4%, marking two full years of consistent double-digit returns. We believe this progression underscores the durability of our margin profile, even in the dynamic pricing environment. Importantly, it reflects the product, commercial, and supply chain actions we have taken across the portfolio. These actions position us for continued margin improvement beyond this year. Turning to slide 14 for an update on our liquidity position.

Speaker #2: Turning to slide 13 for an update on our adjusted gross margin, progression, and how disciplined execution translates to returns for our stakeholders. As you can see, our rolling 12-month adjusted gross margin is 12.4%, marking two full years of consistent double-digit returns.

Speaker #2: We believe this progression underscores the durability of our margin profile, even in the dynamic pricing environment. Importantly, it reflects the product, commercial, and supply chain actions we have taken across the portfolio.

Speaker #2: These actions position us for continued margin improvement beyond this year. Turning to slide 14 for an update on our liquidity position. We ended the second quarter with total liquidity of approximately $900 million.

Ahmed Pasha: We ended the Q2 with total liquidity of approximately $900 million, which includes approximately $430 million in total cash. During the quarter, we invested $220 million in inventory to support deliveries that underpin our H2 fiscal 2026 revenue. In addition, we will invest approximately $100 million in inventory during Q3 to support H2 deliveries. Liquidity is expected to return to $900 million levels by the fiscal year-end, driven by execution on our backlog and new orders. Bottom line, our liquidity position fully supports delivery of our fiscal 2026 commitments. Turning to slide 15 for our fiscal year 2026 guidance. We are reaffirming our guidance ranges for revenue, ARR, and Adjusted EBITDA, reflecting our strong visibility into the year and continued momentum we see across our business.

Speaker #2: Which includes approximately $413 million in total cash. During the quarter, we invested $220 million in inventory to support deliveries that underpin our second half fiscal 2026 revenue.

Speaker #2: In addition, we will invest approximately $100 million in inventory during Q3 to support second half deliveries. Liquidity is expected to return to $900 million levels by the fiscal year end.

Speaker #2: Driven by execution on our backlog and new orders. Bottom line, our liquidity position fully supports delivery of our fiscal 2026 commitments. Turning to slide 15 for our fiscal year 2026 guidance.

Speaker #2: We are reaffirming our guidance changes for revenue, ARR, and adjusted EBITDA, reflecting our strong visibility into the year and continued momentum we see across our business.

Ahmed Pasha: More specifically, we expect revenue in the range of $3.2 to 3.6 billion, with a midpoint of $3.4 billion. We expect approximately 70% in H2, consistent with the weighting of revenue last year. We expect roughly 30% of H2 revenue in Q3 and the remainder in Q4, again, consistent with last year. With all equipment ordered and production tracking as planned, we are confident in delivering on our customer commitments and our full year revenue goals. We expect annual recurring revenue or ARR to reach approximately $180 million by the end of fiscal 2026, up from $148 million in fiscal 2025. We continue to expect Adjusted EBITDA in the range of $40 to 60 million for the full year.

Speaker #2: More specifically, we expect revenue in the range of $3.2 to $3.6 billion, with a midpoint of $3.4 billion. We expect approximately 70% in the second half, consistent with the weighting of revenue last year.

Speaker #2: We expect roughly 30% of second half revenue in Q3 and the remainder in Q4. Again, consistent with last year. With all equipment ordered and production tracking as planned, we are confident in delivering on our customer commitments and our full year revenue goals.

Speaker #2: We expect annual recurring revenue or ARR to reach approximately 2026. Up from $148 million in fiscal 2025. And we continue to expect adjusted EBITDA in the range of $40 to $60 million for the full year.

Ahmed Pasha: In summary, we are committed to achieving full revenue and profitability outlook for fiscal 2026. We remain laser-focused on ensuring disciplined execution for our customers and delivering value to our shareholders. With that, I will now turn the call back to Julian for his closing remarks.

Speaker #2: In summary, we are committed to achieving full revenue and profitability outlook for fiscal 2026. We remain laser-focused on ensuring disciplined execution for our customers and delivering value to our shareholders.

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

Julian Nebreda: Thanks, Ahmed. Let me close with a few key takeaways. First, strong execution. Our Q2 performance, record $5.6 billion backlog, and on-track production levels support our confidence in our fiscal 2026 guidance. We ended the quarter with approximately $900 million of liquidity, which we believe provides us with the flexibility to fund growth. Second, order momentum accelerating. Order intake has doubled year to date, led by orders from both new and existing customers, an indication of strong demand in the US and the positioning of our business. Third, expanding customer base. We are in an excellent position to capture a portion of the rapidly expanding data center demand with the signing of MSAs with two major hyperscalers.

Speaker #1: Thanks, Ahmed. Let me close with a few key takeaways. First, strong execution. Our second quarter performance record 5.6 billion backlog and on-track production levels support our confidence in our fiscal 26 guidance.

Speaker #1: We ended the quarter with approximately $900 million of liquidity, which we believe provides us with the flexibility to fund growth. Second, order momentum accelerated.

Speaker #1: Order intake has doubled year to date. Led by order from both new and existing customers. An indication of strong demand in the US and the positioning of our business.

Speaker #1: And third, spending customer base. We are in an excellent position to capture a portion of the rapidly spending data center demand. With the signing of MSAs with two major hyperscalers.

Julian Nebreda: After meeting all of their commercial and technical requirements, we expect to execute the first purchase order with one of these customers within Q3.

Speaker #1: After meeting all of their commercial and technical requirements. We expect to execute the first purchase order with one of these customers within the third quarter.

Julian Nebreda: In conclusion, we are positioning our company to continue profitable growth and to deliver value to our customers and shareholders. With that, we are now prepared to take your questions. Thank you.

Speaker #1: In conclusion, we are positioning our company to continue profitable growth and to deliver value to our customers and shareholders. With that, we are now prepared to take your questions.

Speaker #1: Thank you.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by. Our first question comes from George Gianarikas from CG. Your line is now open.

Speaker #3: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker #3: To withdraw your question, please press star 11 again. Please stand by. Our first question comes from George Giannaricis from CG. Your line is now open.

George Gianarikas: Hi, everyone.

Julian Nebreda: Good morning, George.

Speaker #4: Hi, everyone. Good morning. Thank you. Thank you for my questions. My first one is on the competitive landscape. How are you viewing the recent trend of some cell manufacturers vertically integrating and specifically how are you looking at their push for market share and any impact on pricing?

George Gianarikas: Good morning.

Julian Nebreda: Good morning.

George Gianarikas: Thank you for taking my questions. My first one is on the competitive landscape. You know, how are you viewing the recent trend of some cell manufacturers vertically integrating, and specifically, you know, how are you looking at their push for market share and any impact on pricing? Thanks.

Speaker #4: Thank ank you.

Julian Nebreda: We have seen both CATL and BYD become, you know, come and integrate vertically. We have not worked in the past with BYD, but we have worked with the CATL. It hasn't really changed the intensity of the market, if you tell the truth. The value, the ability to meet customer needs at a reasonable price hasn't changed effectively. So we continue. We're growing our backlog. We're growing our winning projects the same as we are. So we feel confident it hasn't really made a big difference in the competitive environment. So we, you know, we brought-attracted 50% are new sales are new customers. So I'll see it as a challenge. It's nothing new, by the way. I mean, it has happened in the past.

Speaker #1: We have seen both CATL and BYD become common and integrate vertically. We have not worked in the past with BYD, but we have worked with the CATL.

Speaker #1: It hasn't really changed the intensity of the market, if you tell me the truth. The ability to meet customer needs at a reasonable price hasn't changed effectively.

Speaker #1: So we continue; we're growing our backlog. We're growing our winning projects the same as we are. So we feel confident it hasn't really made a big difference in the competitive environment.

Speaker #1: So we attracted 50% of our new cells, our new customers. So we are I don't see it as a challenge. It's not so new, by the way.

Speaker #1: I mean, it has happened in the past. The change of CATL was big, but not a major change in the competitive landscape. From our point of view.

Julian Nebreda: The change of CATL was big, but not a major change in the competitive landscape from our point of view.

George Gianarikas: Thank you. Maybe as a follow-up, first, you know, congrats on the two hyperscaler MSAs. You know, if you could pull back the curtain a bit on the mechanics of those wins. You know, what did specifically, what did the validation process look like, and what do you think was the primary differentiator for you that allowed you to win those? Thank you.

Speaker #4: Thank you. And maybe as a follow-up, first, congrats on the two hyperscaler MSAs. If you could you did this a little bit, but if you could pull back the curtain a bit on the mechanics of those wins.

Speaker #4: What did specifically what did the validation process look like? And what do you think was the primary differentiator for you that allowed you to win those?

Julian Nebreda: Yeah. Two things. We went through a very strict commercial and operational and technical say, evaluation. In one of the cases, there were 26 players. I will say the majority will not make it, you know. There's a limited number of people who could, or companies that could meet these very stringent requirements. Our ability, our deep knowledge, our, you know, deep experience managing fast response systems in Europe especially, and having the infrastructure and the technology capability to prove their case to them very, very quickly is what made a difference. You know, we have the lab, we have the technicians. We do this every day. We know how the applications work, we understand how the grid codes work globally, That made a big difference that we were the first ones.

Speaker #4: Thank you.

Speaker #1: Yeah. Two things. We went through a very strict commercial and operational and technical evaluation. In one of the cases, there were 26 players. I would say the majority would not make it.

Speaker #1: So it was a limited number of people who could or companies that could meet these very stringent requirements. Our ability our deep knowledge our deep experience managing fast response systems in Europe, especially.

Speaker #1: And having the infrastructure and the technology capability to prove their case to them very, very quickly is what made a difference. We had the labs.

Speaker #1: We have the technicians. We do this every day. We know how the applications work. We understand how the grid codes work globally. And that made a big difference that we were the first one.

Julian Nebreda: I think that could be, and we believe that will continue to be what will keep us ahead of the market. Because we are now, you know, some of our competitors are still trying to figure out how to meet the criteria. We're thinking how to exceed their, you know, what they need and trying to offer them more value and more capabilities, and that's what we bring to the table.

Speaker #1: So I think that continued and we believe that will continue to be what will keep us ahead of the market because we are now some of our competitors are still trying to figure out how to meet the criteria.

Speaker #1: We're thinking about how to exceed what they need, and trying to offer them more value and more capabilities. And that's what we bring to the table.

George Gianarikas: Thanks.

Speaker #4: Thanks.

Operator: Thank you.

Julian Nebreda: Thank you, George.

Speaker #3: Thank you.

Speaker #1: Thank you, George.

Operator: Our next question comes from Julien Dumoulin-Smith from Jefferies. Your line is open.

Speaker #3: Our next question comes from Julian Dumoulin-Smith from Jefferies. Your line is open.

Julien Dumoulin-Smith: Hey, good evening, guys. Nicely done. I gotta hand it to you guys, really. Kudos here on seeing it through.

Speaker #5: Hey, guys. Nicely done. I got to hand it to you guys, really. Kudos here on seeing it through. In particular, absolutely, Julian. Look, I wanted to ask you in particular here as it pertains to hyperscaler orders, what specific product are they following up with you guys with?

Julian Nebreda: Thank you.

Julien Dumoulin-Smith: Absolutely, Julian. Look, I wanted to ask you in particular here, as it pertains to hyperscaler orders, what specific product are they following up with you guys with? You know, I know there's been some ambiguity in the marketplace as to whether or not you have the right product and the product positioning for the hyperscalers. To get this kind of confirmation with two, as you guys just flagged in particular, is quite notable. Can you speak to the specific deployment permutation that they're using you guys with? You know, is it a BTM/FTM? Is it a capacity support, load shifting? Then also, how do they think about the domestic content for FEOC compliance? You know, is that another nuance that we should consider?

Speaker #5: I know there's been some ambiguity in the marketplace as to whether or not you are the right product and the product positioning for the hyperscalers to get this kind of confirmation with two, as you guys just flagged in particular, is quite notable.

Speaker #5: Can you speak to the specific deployment permutation that they're using you guys with? Is it a BTM, FTM? Is it a capacity support, load shifting?

Speaker #5: And then also, how do they think about the domestic contents or fiat compliance? Is that another nuance that we should consider? Can you speak to the product and more broadly in these wins?

Julien Dumoulin-Smith: Just can you speak to the product and more broadly in these wins?

Julian Nebreda: Yeah

Julien Dumoulin-Smith: Whether this is a leading indicator for further orders like this in coming quarters?

Speaker #5: And whether this is a leading indicator for further orders like this in coming quarters?

Julian Nebreda: Yeah. In terms of what they're asking for, different than what I said in the last call when we're looking at portfolio that was a little bit more mixed. Now that we're concentrated in these hyperscalers, their main need is quality of power, helping them manage the fluctuation of the data centers, and helping us do it quickly and effectively. That's what they need, and that's what we prove with our advanced controls and our products. We can prove very quickly to them that we can do it, I will say, you know, if I can brag, better than anyone else, you know? That's what is driving this.

Speaker #1: Yeah. In terms of what they're asking for, different than what I said in the last call when we had we're looking at portfolio that was a little bit more mixed.

Speaker #1: Now that we concentrated in these hyperscalers. Their main need is quality of power, helping them manage the fluctuation of the data centers. And helping us do it quickly and effectively.

Speaker #1: And that's what they need. And that's what we proved with our advanced controls and our products. We can prove very, very quickly to them that we can do it.

Speaker #1: I would say if I can brag better than anyone else. And that's what is driving this. If you go beyond the hyperscalers into kind of the developers and world, it seems to be that or it seems to be what we have experienced, more of speed to power and meeting grid codes and it's a little bit more it's a little bit more mixed.

Julian Nebreda: If you go beyond the hyperscalers into kind of the developers world, it seems to be that they, or not seems to be what we have experienced, more of, you know, speed to power and meeting, you know, grid codes and it's a little bit more mixed. With these two hyperscaler has been quality of power the main ask. In terms of domestic content, it wasn't a requirement from them or something they were specifically looking at. We clearly are selling it, and I think that as we have explained to them the competitive position of domestic content. The, you know, value it can create, and the tremendous branding opportunity of having a product that is built here by American, for America here, especially as these two hyperscalers move their business in the US.

Speaker #1: But we these two hyperscalers have been quality of power the main ask. In terms of domestic content, it wasn't a requirement from them or something they were specifically looking at.

Speaker #1: We clearly are selling it. And I think that as we have explained to them the competitive position of domestic content. The value you can create.

Speaker #1: And the tremendous branding opportunity of having a product that is built here by American for America here especially as these two hyperscalers most of the business in the US I think they are seriously considering as part of it.

Julian Nebreda: I think they are, you know, seriously considering that part. Their objectives were meeting their quality of power, meeting their technical and commercial objectives, and that's where they concentrated on, and that's how we're moving. In terms of these two MSAs, they have behind, you know, significant pipeline that we expect that within the next year will convert into, you know, the orders. We won't necessarily win them all, but it will be a significant amount of demand that we see behind this that we will convert. Having these MSAs gives us, you know, will put us in a very, very good position to capture it. This is a hurdle in order to compete.

Speaker #1: But their objectives were meeting the quality of power, meeting their technical and commercial objectives. And that's where they concentrated on. And that's how we move it.

Speaker #1: In terms of these two MSAs, they have behind significant pipeline. That we expect that within the next year, we'll convert into the orders, not we won't necessarily win them all, but it will be a significant amount of demand that we see behind this.

Speaker #1: That we will convert having these MSAs gives us it puts us in a very, very good position to capture. This is a hurdle in order to compete.

Julian Nebreda: Not many people can do it, and I think gives us a stamp of approval that when we make an offer, they know that we will deliver what we're promising.

Speaker #1: Not many people can do it. And I think it gives us a stamp of approval that when we make an offer, they know that we will deliver what we're promising, so.

Julien Dumoulin-Smith: Awesome, guys. Quickly, Ahmed Pasha, can you speak to the slide has this interesting commentary that says, you know, you're gonna invest additional in inventory during Q3, but you're gonna rebuild liquidity towards $900 million by fiscal year-end. When you say rebuilding liquidity, is that from the capital raise in some ways or is that just kind of organic cash flow?

Speaker #4: Awesome, guys. And quickly, Ahmed, can you speak to the slide has this interesting commentary that says, "You're going to invest additional inventory during the third quarter, but you're going to rebuild liquidity towards 900 million by fiscal year-end." When you say rebuilding liquidity, is that from the capital raise in some ways, or is that just kind of organic cash flow?

Ahmed Pasha: Julian, I would not read too much in between the lines there. I think it was more as we invest because we have roughly $2.5 billion of revenue in H2, so we will be delivering that and building up the inventory. As we deliver the inventory, we'll be collecting. At the end of the day, our liquidity will be back at $900 million levels by the end of the year, consistent with what we told you when we gave our guidance for the year. That was the intent there.

Ahmed Pasha: Julien, I would not read too much in between the lines there. I think it was more as we invest because we have roughly $2.5 billion of revenue in H2, so we will be delivering that and building up the inventory. As we deliver the inventory, we'll be collecting. At the end of the day, our liquidity will be back at $900 million levels by the end of the year, consistent with what we told you when we gave our guidance for the year. That was the intent there.

Speaker #2: Julian, I would not read too much in between the lines there. I think it was more, as we invest, because we have roughly $2.5 billion of revenue in the second half.

Speaker #2: So we will be delivering that. We're building up the inventory. But as we deliver the inventory, we'll be collecting. So at the end of the day, our liquidity will be back at 900 million dollars levels by the end of the year, consistent with what we told you when we gave our guidance for the year.

Speaker #2: So that was the intent there.

Julien Dumoulin-Smith: Awesome. Just to clarify from earlier, how many other supplier MSAs have you guys?

Speaker #4: Awesome. And just to clarify from earlier, how many other suppliers MSAs with you guys?

Julian Nebreda: I mean, very, very selective, Julian. They will fit in my hand, I think, and I'll have fingers left, you know? We don't.

Julian Nebreda: I mean, very, very selective, Julien. They will fit in my hand, I think, and I'll have fingers left, you know? We don't.

Speaker #1: Yeah. I mean, very, very selective, Julian. They all fit in my hand, I think. And I have fingers left. So we don't have the specific information.

Julien Dumoulin-Smith: Okay

Julian Nebreda: We don't have the specific information, but we understand they are very, very selective. Very, very few people have been able to do it today. They might, you know, they're probably working on it, but let's see if they get there.

Speaker #1: But we understand they are very, very selective, very, very few people. I've been able to do it today. They might. They're probably working on it.

Speaker #1: But let's see if they get there.

Julien Dumoulin-Smith: Got it. All right. Awesome. I'll leave it there. Congrats again, guys. Speak to you soon.

Speaker #4: Got it. All right. Awesome. I'll leave it there. Congrats again, guys. Speak to you soon.

Julian Nebreda: Thank you. Thank you, Julian.

Speaker #1: Thank you. Thank you, Julian.

Ahmed Pasha: Thank you.

Operator: Thank you. Our next question comes from Brian Lee from Goldman Sachs. Please go ahead.

Speaker #3: Thank you. Our next question comes from Brian Lee from Goldman Sachs. Please go ahead.

Julian Nebreda: Hey, Brian. Good morning.

Speaker #1: Hey, Brian. Good morning.

Brian Lee: Hey, Julian. Good morning. Thanks for taking the questions. Congrats on the strong backlog here and the hyperscaler updates. I had a couple questions, I guess, on hyperscaler MSAs. Not sure how much you can provide, but would love to, you know, maybe get some detail around, you know, quantification of the size of the deals, how many megawatts, over what years. Is it over multiple sites that are already identified, maybe? Just if you could elaborate a bit more on kind of the scope of these two MSA deals and how meaningful they are in terms of, you know, quantitative impact.

Speaker #6: Hey, Julian. Good morning. Thanks for taking the questions. Congrats. On the strong backlog here in the hyperscaler updates. I had a couple of questions, I guess, on the hyperscaler MSAs.

Speaker #6: Not sure how much you can provide, but would love to maybe get some detail around quantification of the size of the deals, how many megawatts over what years, and is it over multiple sites that are already identified?

Speaker #6: Maybe just if you could elaborate a bit more on kind of the scope of these two MSA deals and how meaningful they are in terms of quantitative impact.

Julian Nebreda: I'll tell you the majority or the great majority of our pipeline is, you know, it's supported by deals that are behind these two MSAs. These deals are and that pipeline is several different data centers around, that they have around the US mostly. That's what it is. In terms of a financial, you know, our current pipeline is 12 gigas, that gives you a sense. We're not providing the financial numbers around it as it's too early and we're competing as you know, we are not providing those numbers today.

Speaker #1: Yeah. So I'll tell you the majority or the grand majority of our pipeline is supported by deals that are behind these two MSAs. And these deals will and that pipeline is several different data centers around that they have around the US mostly.

Speaker #1: So that's what it is. In terms of financial and our current pipeline is 12 giga. So that gives you a sense. We're not providing the financial numbers around it as it's too early and we're competing as you know.

Speaker #1: So we are not providing those numbers today. But my expectation is that as we end the fourth quarter and bring hopefully a good number of these projects and I can offer numbers in a included in everything and do not necessarily be providing commercial, I will provide you more financial metrics on this.

Julian Nebreda: My expectation is that as we end Q4 and bring hopefully a good number of these projects, then I can offer numbers in a, you know, in a, the, including everything and though not necessarily be providing commercial, I will provide you more financial metrics of this.

Brian Lee: Okay. Fair enough. Yeah, we'll look forward to that. Then maybe just, you know, zooming out a little bit, 'cause this is a new business for you and obviously very, very high growth potential. What, what's sort of the deployment schedule, I guess? Can you help us kind of visualize as you go into some of these, whether they're RFPs or bake-offs, you know, what's the timeline for submitting your design and your proposal?

Speaker #6: Okay, fair enough. Yeah, we'll look forward to that. And then maybe just zooming out a little bit—because this is a new business for you and obviously has very, very high growth potential.

Speaker #6: What's sort of the deployment schedule? I guess can you help us kind of visualize as you go into some of these whether they're RFPs or bake-offs?

Speaker #6: What's the timeline for submitting your design and your proposal to when one is finalized and then when you get a PO to when you're going to deliver to site?

Brian Lee: You know, when one is, you know, finalized and then when you get a PO to when you're gonna deliver to site, kind of what are the sequence of events and how long is that timeline?

Speaker #6: Kind of what are the sequence of events and how long is that time frame?

Julian Nebreda: Yeah. They are in a hurry generally. Most of these projects, as I said, well, I don't know if I mentioned, but the pipeline we have, we believe will convert into orders during the year, within a year, so quicker than generally we're in a pipeline that comes into our things. Very, very tight schedules for delivery that, you know, we can meet because we, you know, we've been working on our speed for some time.

Speaker #1: They are in a hurry. Generally, most of these projects, as I said, that I don't know if I mentioned it, but the pipeline we have we believe will convert into orders during the year within a year.

Speaker #1: So quicker than generally when a pipeline that comes into our things. And very, very tight schedules for delivery that we can meet because we've been working on our speed for some time.

Julian Nebreda: You know, I cannot give you today a specific rule. This is what I want. Generally, I'll say a lot faster than the conversion rate we have for our order, from pipeline to orders, and a lot faster of the conversion rate from orders to revenue than what we do in our normal utility and developer type. Especially with these two hyperscalers. The case of the developers, and it's a little bit different, as those are more project type that they're looking for permits and stuff, so those will probably take a little longer.

Speaker #1: So I cannot give you today a specific rule. This is what they want. But generally, I'll say a lot faster than the conversion rate we have for our order from pipeline to orders and a lot faster of the conversion rate from orders to revenue.

Speaker #1: That's what we do in our normal utility and developer type of especially with these two hyperscalers. The case of the developers and it's a little bit different as those are more project types that they are looking for permits and stuff.

Speaker #1: So those will probably take a little longer.

Brian Lee: Okay. Understood. Maybe last one, if I could squeeze it in, just on the gross margin bounce back. I know that's been a focus for you guys for a little while, so nice to see it back to the range. Even on the lower volume here in Q2, you know, that was a pretty impressive gross margin rebound. What does that maybe entail for the back half of the year? Is there volume leverage and some of the efficiencies from this quarter that can spill over? Is there any potential upward bias to margins as you kind of move through the rest of the year?

Speaker #4: Okay. Understood. Maybe last one if I could squeeze it in just on the gross margin bounce back. I know that's been a focus for you guys for a little while.

Speaker #4: So nice to see it back to the range. Even on the lower volume here in Q2, that was a pretty impressive gross margin. Rebound.

Joseph Osha: Even on the lower volume here in Q2, you know, that was a pretty impressive gross margin rebound. What does that maybe entail for the back half of the year? Is there volume leverage and some of the efficiencies from this quarter that can spill over? Is there any potential upward bias to margins as you kind of move through the rest of the year?

Speaker #4: What does that maybe entail for the back half of the year? Is there volume leverage and some of the efficiencies from this quarter that can spill over?

Speaker #4: And is there any potential upward bias to margins as you kind of move through the rest of the year?

Julian Nebreda: I'll give Ahmed Pasha to.

Ahmed Pasha: Hey, Brian. In terms of the gross margins, you're right, an 11% gross margin we earned, which is higher than what we had in Q1. In year to go, we just reaffirmed our guidance where we said 11% to 13%. We will be somewhere in the middle of that range for our year to go. I think at least that is our goal is about 12%, we will definitely be better than what we earned in Q2.

Speaker #1: I'll give Ahmed the.

Speaker #2: Hey, Brian. So in terms of the gross margin, you're right in 11% gross margin we earned, which is higher than what we had in Q1.

Speaker #2: In a year to go, we just reaffirmed our guidance. We said 11 to 13 percent. So we will be somewhere in the middle of that range.

Speaker #2: But year to go, I think at least that is our goal is about 12%. So we will definitely be better than what we earned in Q2.

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

Speaker #4: Okay. Thanks, guys. I'll pass it on.

Julian Nebreda: Thank you, Brian. Good morning.

Speaker #1: Thank you, Rick.

Speaker #2: Thank you.

Speaker #1: Brian, good morning.

Operator: Thank you. Our next question comes from Dylan Nassano from Wolfe Research. Please go ahead.

Speaker #3: Thank you. Our next question comes from Dylan Nassano from Wolf Research. Please go ahead.

Julian Nebreda: Hey, Dylan. Good morning.

Speaker #1: Hey, Dylan. Good morning.

Dylan Nassano: Hey, how are you doing? Just wanted to check on the broader data center pipeline. Any updated thinking there in terms of, you know, how much of that kind of fits your previous criteria of pipeline versus leads? I noticed there's this 6 GWh kind of target for what gets included. How did you come up with that number? Any thinking around there would be helpful. Thanks.

Speaker #4: I just wanted to check on the broader data center pipeline. Any updated thinking there in terms of how much of that kind of fits your previous criteria of pipeline versus leads?

Speaker #4: And then I noticed there's this six-gigawatt-hour kind of target for what gets included. Just how did you come up with that number? Any thinking around there would be helpful.

Julian Nebreda: I'll tell you that our numbers for our pipeline and leads. Our pipelines went up like 30% from last quarter. We concentrated a lot on the hyperscalers, and so a good driver of that has been the hyperscalers who are roughly at 12 GW. Our leads are 3x that. You know, generally the same as or close to what, or essentially the same that we had last quarter. We converted some into pipeline, and we were able to replenish. That's the rule. The 6 GW, I don't know what you're referencing to, Dylan, if I'm sorry.

Speaker #4: Thanks.

Speaker #1: So I'll tell you that our numbers for our pipeline and leads our pipeline's rough. It went up like 30% from last quarter. We concentrated a lot on the hyperscalers.

Speaker #1: And so that good driver of that has been the hyperscalers who are roughly at 12 gigas. And our leads are three times that. Generally, the same as close to what essentially the same that we had last quarter.

Speaker #1: We converted some into pipeline, and we were able to replenish. That's the rule. The six gigas—I don't know what you're referring to, Dylan, if I'm—sorry.

Dylan Nassano: Oh, it's on slide six at the bottom. It says, Classified as systems 6 GWh or more.

Speaker #4: Oh, it's on slide six. At the bottom, it says classified assistance, six gigawatt-hours or more.

Julian Nebreda: Let me check. In any event, strong growth, a great opportunity here, and I think that by concentrating on hyperscalers, if I can, you know, while we get the point on this, we are in a market segment that we expect will transact faster and that we will convert into execution quickly.

Speaker #1: Yeah. Let me check. But in any event, strong growth, great opportunities here. And I think that by concentrating on hyperscalers, I can well, we get the point on this.

Speaker #1: We are in a market segment that we expect will transact faster and that we will convert into execution quickly.

Chris Shelton: Yeah, Dylan, that's 6 gigawatt hours, that's, it's not a, it's not a pipeline. That's how we classify an LDES project, so anything over 6 gigawatt hours.

Speaker #2: Yeah. Dylan, that six-gigawatt-hours, that's the it's not a pipeline. That's how we classify an LDES project. So anything over six gigawatt-hours.

Dylan Nassano: Oh, okay. That's it.

Chris Shelton: Sorry.

Speaker #1: Okay. That's right.

Julian Nebreda: Yeah, that's.

Speaker #2: Sorry.

Dylan Nassano: Okay. Thanks for the clarification.

Julian Nebreda: long-duration storage. Yeah, yeah. Those are long-duration storage. They need to be more than 6 hours, you know, to be long duration. That's the definition of long duration for us.

Speaker #1: Yeah. That's for long-duration storage. Yeah. Yeah. Those are long-duration storage. So they need to be more than six hours in order to be long-duration.

Speaker #1: That's the definition of long-duration for us.

Chris Shelton: For us, yeah.

Julian Nebreda: Yeah, so. Six and more.

Speaker #2: For us. Yeah.

Dylan Nassano: Okay. That makes sense.

Speaker #1: Yeah. So six and more. Yeah. I didn't know what it was. Sorry for that.

Julian Nebreda: Yeah. I didn't know what it was. Sorry for that.

Dylan Nassano: My mistake. I mean, it looks like revenue was kind of lower than analyst expectations, even kind of including this $80 million. I just wanted to check, was there any other seasonality in the quarter beyond or other disruptions beyond the shipping stuff that you guys noted?

Speaker #4: Yeah. My mistake. And then just to follow up on the quarter, I mean, it looks like revenue was kind of lower than analyst expectations even kind of including this 80 million.

Speaker #4: So I just wanted to check, was there any other seasonality in the quarter beyond or other disruptions beyond the shipping stuff that you guys noted?

Ahmed Pasha: No, there was none. I think, if you recall, when we gave our guidance Q4, we did say that about one-third of our revenue in H1 and the rest. Given, frankly, we don't give quarterly guidance, I think that was the only reason why there's a difference. Overall, from internal perspective, as I mentioned, you know, the $80 million of this shipping delay was the only reason why we were lower on the revenue for Q2. That we have already, the shipment we have already received, so we feel pretty good on year to go.

Speaker #2: No. I think ink there was none. I think if you recall when we gave our guidance Q4, we did say that about one-third of our revenue in the first half and the rest given, frankly, we don't give quarterly guidance.

Speaker #2: I think that was the only reason why there's a difference. But overall, from internal perspective, as I mentioned, the 80 million dollars of this shipping delay was the only reason why we were lower on the revenue for Q2.

Speaker #2: But that we have already the shipment, we have already received. So we feel pretty good on year to go.

Julian Nebreda: If I can add one point, our indication of where we see revenue divided among quarters is more indicative. You can model it and solve, but it's, you know, we don't run the company on a quarterly basis, to be very clear. We run it on a yearly basis. That's why we intend to meet our yearly numbers. We try clearly to what we indicate to meet it. We do not provide quarterly guidance, Dylan. I know it creates some confusion, it's a way of try to help you model and at the same time get the flexibility to manage things effectively and efficiently within the company.

Speaker #1: And if I can add one point, our indication of where we see revenue divided among quarters is more indicative. So you can model it and such.

Speaker #1: But we don't run the company on a quarterly basis, to be very clear. We run it on a yearly basis. That's what we intend to meet our yearly numbers.

Speaker #1: We try clearly to [say] what we indicate to meet it. But it's not—we do not provide quarterly guidance, Dylan. I know it creates some confusion.

Speaker #1: But it's a way of trying to help you model and at the same time keep the flexibility to manage things effectively and efficiently within the company.

Dylan Nassano: Sounds good. Thank you.

Speaker #4: Sounds good. Thank you.

Julian Nebreda: Thank you, Dylan.

Speaker #1: Thank you, Dylan.

Operator: Thank you. Our next question comes from Joseph Osha from Guggenheim Partners. Please go ahead.

Speaker #3: Thank you. Our next question comes from Joseph Osha from Guggenheim Partners. Please go ahead.

Julian Nebreda: Hey, Joe. How are you?

Speaker #1: Hey, Joe. How are you?

Joseph Osha: Just fine. How are you? Thanks for taking my call.

Speaker #5: Just fine. How are you? Thanks for taking my time. I wanted to drill down a little bit on two product details. Julian, you said that hyperscalers and data centers more broadly tend to be more about product quality or power quality.

Julian Nebreda: Yeah. No worries. Thanks.

Joseph Osha: I wanted to drill down a little bit on two product details. You know, Julian, you said that hyperscalers and data center more broadly tends to be more about product quality or power quality. Is the implication then that we're seeing shorter duration configurations, say, you know, 1 hour or 2 as opposed to 4? That's my first question. The second question, just to confirm, you know, thinking about the inverters, are you generally being asked to deliver a response time of 10 milliseconds or less? Those are my two questions. Thanks.

Joseph Osha: I wanted to drill down a little bit on two product details. You know, Julian, you said that hyperscalers and data center more broadly tends to be more about product quality or power quality. Is the implication then that we're seeing shorter duration configurations, say, you know, 1 hour or two as opposed to 4? That's my first question. The second question, just to confirm, you know, thinking about the inverters, are you generally being asked to deliver a response time of 10 milliseconds or less? Those are my two questions. Thanks.

Speaker #5: So is the implication then that we're seeing shorter duration configurations, say, an hour or two as opposed to four? That's my first question. And then the second question, just to confirm, thinking about the inverters, are you generally being asked to deliver a response time of 10 milliseconds or less?

Speaker #5: Those are my two questions. Thanks.

Julian Nebreda: Yeah, on the first one, they tend to be shorter duration, you're right. They are, you know, we don't provide anything smaller than two hours. Two hours is what we do. Again, that's where the market is trending, but they tend to be shorter than that. Even though our main point to the data centers, and we engage with them and the developer and the hyperscale, is that the, our technology, compared to other technologies that are trying to resolve this, is that we can stack business models on top. We can do quality of power, help them with, you know, doing some of the work of resolving some of the efficiencies of interconnection or backup. We can help them on certain voltage.

Speaker #1: Yeah. And the first one, they tend to be shorter duration. You're right. So they are say, we don't provide anything smaller than two hours.

Speaker #1: So it's two hours is what we do. And in general, that's where the market is trading. But they tend to be shorter than the even though our main point to the data centers that we engage with them and the developer and hyperscalers is that the great beauty of the art technology compared to other technologies that are trying to resolve this is that we can stack business models on top.

Speaker #1: And we can do quality of power, help them with the doing some of the work of resolving some of the deficiencies of interconnection or backup.

Speaker #1: We can help them on voltage. We can help them on many, many fronts. So that's I think that as they're looking at the asset, they are expanding also their view of what this can do.

Julian Nebreda: We can help them on many fronts. That's I think that as they're looking at the asset, they are expanding also their view of what this can do. That was on that point. On the second one, generally I would say that. Sorry, the second one?

Speaker #1: That was on that point. On the second one, generally, I would say that sorry, the second one.

Joseph Osha: Can we check?

Ahmed Pasha: Yeah, it's just.

Ahmed Pasha: Oh, the 10. Yeah, 10 milliseconds. Sorry, sorry. Got it, got it.

Speaker #2: Give me a second.

Speaker #5: Yeah. Just to ask.

Speaker #1: Yeah. 10 milliseconds. Sorry. Sorry. I got it. I got it. Sorry. Got confused. No, the 10 because I was answering there. Yeah. I said we need to or not providing the actual number, but it's very short.

Ahmed Pasha: Yeah.

Julian Nebreda: Sorry, got confused. The tech, because I was answering, we're not providing the actual number, but it's very short, you know? That's the way I would put it. You know, we're not providing the actual number because it is proprietary to the solution and to the people we're working with, but it is very short. Significantly shorter than a 100 milliseconds we tend to do for transmission systems and European qualifications.

Speaker #1: So that's the way I would put it. So we're not providing the actual number because it is proprietary to the solution and to the people we're working with.

Speaker #1: But it is very, very short. Significantly shorter than 100 milliseconds we tend to do for transmission systems and European qualifications.

Joseph Osha: Just to follow up on that very quickly, that would probably, I assume, create the need for inverters with, you know, wide bandgap MOSFETs.

Speaker #5: And just to follow up on that very quickly, that would probably, I assume, create the need for inverters with wide band gap MOSFETs and some of the exotic stuff beyond.

Joseph Osha: Yeah

Joseph Osha: Some of the exotic stuff. Yeah.

Julian Nebreda: Yeah, yeah. You need inverters that can provide That capability is very much dependent on the inverter you use.

Speaker #1: Yeah. Yeah. You need inverters that can provide that capability. It's very much dependent on the inverter you use. We work with inverter companies that do we have done this in Europe for many years.

Joseph Osha: Okay.

Joseph Osha: We work with inverter companies that do. We have done this, you know, in Europe for many years, so we know exactly who leads, how they do it, and their strategy very well. You know, we have that. Our advanced controls work very well with these inverters and have the processing time to ensure the whole system responds on that, not behind the inverter as it's supposed to.

Speaker #1: So we know exactly who do this, how they do it, and their strategy very well. So we have that. And our advanced controls work very well with these inverters and have the processing time to ensure the whole system responds on that, not behind the inverter as it's supposed to.

Joseph Osha: Okay. Thank you, guys. Thank you very much.

Speaker #5: Okay. Thank you, guys. Thank you very much.

Julian Nebreda: Yeah. Welcome.

Speaker #1: Yeah. Pleasure.

Operator: Thank you. Our next question comes from Jon Windham from UBS. Please go ahead.

Speaker #3: Thank you. Our next question comes from John Wyndham from UBS. Please go ahead.

Julian Nebreda: Good morning, Jon.

Jon Windham: Hey, good morning, Julian. David. Nice result. I was wondering if you could talk about the US storage market continues to grow at a rapid pace. Are you able to provide us sort of where you are on being able in sort of capacity in gigawatt hours to provide over the next 12 months? Just sort of thoughts on the roadmap to keeping up with the market growth over the next 2 or 3 years.

Speaker #1: Good morning.

Speaker #4: Hey. Perfect. Thanks for taking hey. Good morning, Julian. Nice result. I was wondering if you could talk about the US storage market continues to grow at a rapid pace.

Speaker #4: Where are you? Are you able to provide a sort of where you are on being able and sort of capacity and gigawatt hours to provide over the next 12 months?

Speaker #4: And then just sort of thoughts on the roadmap to keeping up with the market growth over the next two or three years?

Julian Nebreda: Yeah. Yeah. We see the US market growing, expanding significantly, so that's great. What we have, as you know, our domestic products, our flagship solution in the US. We have the AFC capacity. We enter into with another supplier for additional capacity, and we are looking at additional capacity for 2028 going forward. We have enough capacity to cover our, you know, our pipeline we see and the conversion rate we expected. We don't provide specifically the number, the numbers, but it's multi-giga capacity. We have seen no problems. We are putting the whole infrastructure that delivers that multi-giga operating in the US with our domestic content offering. We can also import equipment if we need to, but our preference is to do the domestic content solution.

Speaker #1: Yeah. Yeah. We see the US market growing, expanding significantly. So that's great. What we have, we have, as you know, we have our domestic products, our flagship solution in the US.

Speaker #1: We have the ASE capacity. We enter into with another supplier for additional capacity. And we are looking at additional capacity for the 28 going forward.

Speaker #1: So we have enough capacity to cover our the pipeline we see and the conversion rate we expected. We don't provide specifically the number. The numbers, but we it's multi-giga capacity.

Speaker #1: And we have seen no problems getting the and we have put in the whole infrastructure that delivers that multi-giga offering in the US with our domestic content offering.

Speaker #1: We can also import equipment if we need to, but our preference is to do the domestic content solution.

Jon Windham: Perfect. Thank you. Maybe just a quick follow-up. There's been a lot of commentary on the gross margin, but historically, some of the issue has been that operating, OpEx, as a percentage of revenue has basically been offsetting the positive gross margin. Just your thoughts on internal initiatives to get the OpEx number.

Speaker #4: Perfect. Thank you. And maybe just a quick follow-up. There's been a lot of commentary on the gross margin. But historically, some of the issue has been that operating OPEX as a percentage of revenue has basically been offsetting the positive gross margin.

Speaker #4: So just your thoughts on internal initiatives to get the OPEX number down to drive bottom-line profitability and free cash flow? Thanks.

Jon Windham: down to drive bottom line profitability and free cash flow. Thanks.

Julian Nebreda: Yeah, the operating costs are a percentage of revenue, is essentially a function of growth of the top line. If you follow it carefully, you'll see that operating revenue goals, you know, it's very much vital. Our costs are very, very stable, and our, you know, how much of our cost represents out of our revenue depends on how much we can grow revenue. We have seen and we have an operating leverage that we believe that we can grow this company, that we can keep our costs down at half the rate of growth of our top line, which adds tremendously value. You'll see it when you look at the numbers. It's very, very clear. It's an operating leverage, you know, formula. Yeah.

Speaker #1: Yeah, the operating costs are a percentage of revenue—essentially, a function of growth, or growth of the top line. So if you follow it carefully, you'll see that the operating revenue goes—it's very much followed.

Speaker #1: Our costs are very, very stable. And our how much of our costs represents out of our revenue depends on how much we can grow revenue.

Speaker #1: So we have seen and we have an operating leverage that we believe that we can grow this company that we can keep our costs down at half the rate of growth of our top line, which will be which adds tremendously value.

Speaker #1: And you'll see it. You'll see it when you look at the numbers. It's very, very clear. It's an operating leverage formula. Yeah. Unfortunately, as you know, last year, we didn't grow.

Julian Nebreda: Unfortunately, as you know, last year we didn't grow, so that's where the operating revenue, the percentage of revenue of cost of revenue was a little higher than what we expected.

Speaker #1: So that's where the operating revenue, the percentage of revenue of costs of revenue was a little higher than what we expected.

Ahmed Pasha: Our goal is.

Jon Windham: Appreciate that.

Ahmed Pasha: Julian, I mean, our goal is that we basically create the operating leverage, and we do have that. As the revenue grows, our cost, we will maintain that cost discipline, and our cost will be reduced, increasing at less than half of the growth in our revenue, as Julian just mentioned. I think that's our key focus from my perspective.

Speaker #2: I've got it.

Speaker #4: I appreciate that.

Speaker #2: I mean, I've got this. I've got this that we basically create the operating leverage. And we do have that as the revenue grows, our costs, we will maintain that cost discipline in a cost will be reduced, increasing at less than half of the growth in our revenue as Julian just mentioned.

Speaker #2: So I think that's our key focus from my perspective.

Jon Windham: Thanks so much.

Speaker #4: Thanks so much.

Julian Nebreda: Thank you.

Speaker #1: Thank you.

Speaker #2: Thank you.

Ahmed Pasha: Thank you.

Operator: Thank you. Our next question comes from Ameet Thakkar from BMO Capital Markets. Please go ahead.

Speaker #3: Thank you. Our next question comes from Amit Sakhar from BMO Capital Markets. Please go ahead.

Julian Nebreda: Hey, Ahmed Pasha. How are you?

Julian Nebreda: Hey, Ameet. How are you?

Speaker #1: Hey, Amit. How are you?

Ameet Thakkar: I'm very well, thank you, Julian. Thanks for taking my questions. It looked like ASPs, if we'll get revenue and kind of your revenue recognition megawatts for the quarter were up pretty nicely, quarter-over-quarter. I was just wondering, was there a lot more EPC work this quarter, or is this kind of maybe the level we should be thinking about for the balance of the year for modeling purposes? I've got one for David.

Speaker #6: I'm very well. Thank you, Julian. Thanks for taking my questions. It looked like ASPs if we'll get revenue and kind of your revenue recognition megawatts for the quarter.

Speaker #6: We're up pretty nicely. Quarter over quarter. And I was just wondering, was there a lot more EPC work this quarter? Or is this kind of maybe the level we should be thinking about for the balance of the year for modeling purposes?

Speaker #6: And I've got one follow-up.

Julian Nebreda: Yeah. Yeah. Thanks, Ameet. As this number, as you said, it moves up and down quarter after quarter based on the mix of the sales. I wouldn't read too much on it, you know? We are assigned to meet our financial objectives independent of where the ASPs go up or down, you know. Our planning assumption is that they will continue coming down. We are designed to make money and make it successful. I'll say even more, when every time we have seen ASPs come down, what happens is that demand spans at a rate that is much bigger than the reduction in revenue that comes out of the lower ASP. You know, I wouldn't read too much on it. I know that that's something that you care about a lot.

Speaker #1: Yeah. Thanks, Amit. This number, as you said, it moves up and down quarter after quarter based on the mix of the cells. So I wouldn't read too much on it.

Speaker #1: We are designed to meet our financial objectives independent of where the ASPs go up or down. And our planning assumptions that they will continue coming down.

Speaker #1: And we are designed to make money and make it successful. And I'll say even more. When every time we have seen ASPs come down, what happens is that demand expands.

Speaker #1: At a rate that is much bigger than the reduction in revenue that comes out of the lower ASP. So I wouldn't read too much on it.

Speaker #1: I know that something that you care about a lot. I mean, the analysts care a lot about. But it is not a big driver of our business financial results.

Julian Nebreda: I mean, the analysts care a lot about, but it is not a big driver of our business financial results.

Ameet Thakkar: Great. Then I know you had mentioned earlier, in answering one of the other kind of questions before, about your pipeline's 12 GW. Yeah, I think you said that the vast majority of that is data center related. Is that right? You know, is it a little bit over half or is it substantially all of that 12 GW pipeline is data center related?

Speaker #6: Great. And then I know you had mentioned earlier, in answering one of the kind of questions before, about kind of your pipeline's 12 gigawatts.

Speaker #6: And yeah, I think you said that the vast majority of that is data center-related. Is that right? Is it a little bit over half?

Speaker #6: Or is it substantially all of that 12-gigawatt pipeline is data center-related?

Julian Nebreda: Oh, yeah. No, we have a 12-gigawatt pipeline of data. All of it is data center related. I said that a great majority was connected to the 2 MSAs that we just signed. The 12 gigawatt hours are all of it is data center related, of which the great majority, so more than 60.

Speaker #1: Oh, yeah. No, we have a 12-gigawatt pipeline of data all of it is data center-related. What I said that a great majority was connected to the two MSAs that we just signed.

Speaker #1: So the 12-gigawatt hours are all of it is data center-related, of which the great majority. So more than 60. Yeah. A good portion of it, I want to give a number, comes from the supports these two MSAs we just signed.

Ameet Thakkar: Okay.

Julian Nebreda: Yeah, or more, you know, a good portion of it, I don't wanna give a number, comes from the supports these two MSAs we just signed.

Ameet Thakkar: Understood. Thank you so much.

Speaker #6: Understood. Thank you so much.

Julian Nebreda: Yeah, yeah.

Speaker #1: Yeah. Yeah.

Operator: Thank you. Our next question comes from David Arcaro from Morgan Stanley. Please go ahead.

Speaker #3: Thank you. Our next question comes from David Arcaro from Morgan Stanley. Please go ahead.

David Arcaro: Hey, thank you.

Julian Nebreda: Hey, David.

David Arcaro: Good morning. I was wondering, are there other MSA opportunities that you're currently working on? Is that something that you would expect most hyperscalers to be, you know, pursuing on the storage front?

Speaker #4: Hey, thank you. Good morning. I was wondering, are there other MSA opportunities that you're currently working on? Is that something that you would expect most hyperscalers to be pursuing on the storage front?

Julian Nebreda: Yeah. We're looking at it. These are the two that had more urgent needs and, you know, so but we're looking to work with all of them, you know. We believe their problems are similar, and that we can, you know, meet their needs, you know, with our capabilities. We hope to work with all of them, yeah.

Speaker #1: Yeah. We're looking at it. These are the two that we had more urgent needs. And so but we're looking to work with all of them.

Speaker #1: So we believe the problems are similar. And that we can meet their needs with our capabilities. So we hope to work with all of them if we can.

David Arcaro: Yeah, makes sense. Any, are there any active now or any sense of timing as to when those opportunities might pop up? It seems like they're all very active on the data center side of things.

Speaker #4: Yeah. Makes sense. Any are there any active now or any sense of timing as to when those opportunities might pop up? It seems like they're all very active on the data center side of things.

Julian Nebreda: Yeah.

David Arcaro: I imagine looking at storage, so is that also?

Speaker #4: And I imagine looking at storage. So is that also a near-term opportunity?

Julian Nebreda: Yes

David Arcaro: you know, a near-term opportunity?

Julian Nebreda: Well, I cannot give you a real sense of timing of when it will happen, as it would depends on where they are and what they're doing. I mean, the two that we have signed are people who are very clear what they need. They're in a hurry to win, and they seem to be ahead of the market, if you ask me. Yeah, so, you know, but we're working with everybody. We are contacting all of them, working with them, and they just these two are ahead.

Speaker #1: I think that it well, I cannot give you a real sense of time when they will happen as it would depends on when they are and what they're doing.

Speaker #1: I mean, the two that we have signed are people who are very clear about what they need. They're in a hurry to win, and they seem to be ahead of the market.

Speaker #1: If you ask me. Yeah. So but we're working with everybody. We are contacting all of them, working with them. And they just these two are ahead.

David Arcaro: Got it. Okay, great. The 50% proportion of new customers I thought was notable. I was just wondering, could you give any characteristics of kind of who those customers are? What type of the customers they are? Is it the traditional profile of developers and utilities that you would see or any specific locations?

Speaker #4: Got it. Okay. Great. And then the 50% proportion of new customers, I thought, was notable. I was just wondering, could you give any characteristics of kind of who those customers are?

Speaker #4: What type of customers they are? Is it the traditional profile of developers and utilities that you would see? Or any specific locations? Curious if it's a new profile.

Julian Nebreda: No

David Arcaro: curious if it's a new profile.

Julian Nebreda: I mean, I'll say this is a result of the great work that Jeff Monday, who joined us as our VP of Growth, has done since he arrived. He really has, you know, invested significantly in business development, identified all these customers, which are, you know, I'll say, were not the typical we used to work before, but are new developers or utilities that we have not contacted in the past, and now we have made significant progress. This is a global effort that we're doing, not only in the US but outside of the US. You know. We, I will say that, as we said during the call, these are customers that are within our normal or our core customer segments, you know, utilities and developers globally.

Speaker #1: I mean, I'll say this is a result of the great work that Jeff Monday, who joined us as our VP of Growth, has done since he arrived.

Speaker #1: He really had invested significantly in business development. Identified all these customers, which are I would say we're not the typical we used to work before, but are developers or utilities that we have not contacted in the past.

Speaker #1: And now he has made significant progress. And this is a global effort—what we're doing, not only in the US but outside of the US.

Speaker #1: So but I would say that, as we said during the call, these are customers that are within our normal or our core customer segments.

Speaker #1: Utilities and developers, globally. But great kudos to our sales organization that has really invested into developing and bringing these new customers. And into the mix.

Julian Nebreda: Great kudos to our sales organization that has really invested into developing and bringing these new customers into the mix.

David Arcaro: Right. Okay, understood. Thanks so much.

Speaker #4: Right. Okay. Understood. Thanks so much.

Julian Nebreda: Yeah. Welcome.

Speaker #1: Yeah. Welcome.

Operator: Thank you.

Operator: Thank you. Our next question comes from Ben Kallo from Baird. Please go ahead.

Speaker #3: Thank you. Our next question comes from Ben Callow from Baird. Please go ahead.

Julian Nebreda: To, to, to a progress-

Operator: Our next question comes from Ben Kallo from Baird. Please go ahead.

Ben Kallo: Hey, thanks for fitting me in here.

Speaker #5: Hey, thanks for putting me in here. Just back on data centers. Hey, good morning. Could you just talk a little bit because of the specific product they're looking for in the size?

Julian Nebreda: Hey, Ben.

Ben Kallo: back on data centers. Hey, good morning. Could you just talk a little bit, you know, because of the specific product they're looking for and the size, if you could talk about just pricing and margin, how we should think about that on these bigger deals? My second question, just, you know, outside of the US, where you see pockets of demand, and then just remind us how, you know, margin compares internationally versus the US. Thanks very much, guys.

Speaker #5: If you could talk about just pricing and margin how we should think about that on these bigger deals. And then also, my second question is just outside of the US, where you see pockets of demand and then just remind us how margin compares internationally versus the US, and thanks very much, guys.

Julian Nebreda: Okay. In terms of data center, I will say, as we said, duration shorter. I will say the margin is in line with our, you know, our guidance of 10% to 15%. That's what we will say. Generally, that's what it is. Most of their needs are quality of power, which we do this for grids globally. We are doing for them here, and I think it works well. It is, you know, very successful. In terms of margins change market per market. Depends on the competitive environment. I said we tend to go within our 10% to 15% range, there are markets that are a little bit more or they go through more competition than others.

Speaker #1: Okay. In terms of data centers, I would say, as we said, duration shorter. And I'll say the margins are in line with our guidance of 10% to 15%.

Speaker #1: That's what we'll say. So generally, that's what it is. And most of their needs are quality of power, which we do this for grids globally.

Speaker #1: We're doing for them here and I think it works well. And very successful. In terms of margins, margins change market for market. Depends on the competitive environment.

Speaker #1: I think we tend we go within our 10 to 15 range. But there are markets that are a little bit more or that go through more competition than others.

Julian Nebreda: I would say that, you know, markets like the US and the US is probably a little bit on the high side, the UK on the lower side. You know, and then so it changes a little bit on changes market per market, but our 10 to 15 range works for all these markets.

Speaker #1: I would say that markets like the US and the US is probably a little bit on the high side. The UK on the lower side.

Speaker #1: And then so it changes a little bit on no, changes market per market. But our 10 to 15 range works for all these markets.

Operator: Okay, thank you. Our next question comes from Maheep Mandloi from Mizuho. Please go ahead.

Speaker #3: Okay. Thank you. Our next question comes from Mahip Mandaloy from Mizuho. Please go ahead.

Julian Nebreda: Hey, Maheep.

Maheep Mandloi: Hey, hey, morning, and thanks for the questions and actually then on the MSAs. A question on the MSAs with the hyperscalers. Do they have any special requirements on the battery types? Is this like the general batteries you have for the BESS industry, or is it high C-rate? Just curious if on the supply side, if you need to make any changes on the cell sourcing for that. Thanks.

Speaker #1: Hey, Mahip.

Speaker #6: Hey, morning and thanks for the questions. And I see that I'm on the MSAs. A question on the MSAs, with the hyperscalers, do they have any special requirements on the battery types?

Speaker #6: Is it like the general batteries you have for the best industry? Or is it a high C rate? Just curious if on the supply side, if you need to make any changes on the cell sourcing for that.

Julian Nebreda: We make any battery grade, you know, as well. We make any battery grade. The battery is a commodity, whatever they need. I think the main driver is energy, sure, and that comes at our packaging, our capability. No real need on. Clearly, LFP to. Nobody goes to the NMC for many reasons. You know, brand or supplier is not relevant for them. Whatever battery we put in our systems, we can make it to BESS.

Speaker #1: We make any battery grade. We make any battery grade. So the batteries is a commodity. Whatever they need. I think the main driver is density.

Speaker #1: And that comes out of our packing and our capability. So no real need on clearly, LFP to nobody does to the MNC for many reasons.

Speaker #1: But brand or supplier is not relevant for them. Whatever battery we put in our systems, we can make it to grade six.

Maheep Mandloi: Thanks. Separately, like, we saw some battery suppliers proposing high C-rate batteries which go inside the data center for 800-volt DC. Is that something of interest, are you exploring?

Speaker #6: And then separately, we saw some battery suppliers proposing high C rate batteries, which go inside the data center for 800-volt DCs. Is that something of interest?

Speaker #6: Are you exploring? Or you guys are looking at outside the data center itself? Thanks.

Julian Nebreda: Yeah

Maheep Mandloi: You guys are looking at, outside the data center? Thanks.

Julian Nebreda: Yeah, yeah. We're looking at it. You know, our product roadmap includes not only this, many other elements that we're looking at to continue improving our offering to data centers and to bring solutions. One option is this high C-rate batteries that will go into data centers. You know, have some limitations, but it's part of our product roadmap that we have for whether it will happen or not, we'll see. It's not anytime soon.

Speaker #1: Yeah. Yeah. We're looking at it. Our product roadmap includes, among not only this, many other elements that we're looking at to continue improving our offering to data centers and to pro solutions.

Speaker #1: One option is this, high C rates batteries that will go into the data centers. Or have some limitations. But it's part of our product roadmap that we have for whether it will happen or not, we'll see.

Speaker #1: But it's not anytime soon.

Maheep Mandloi: Awesome. Thank you.

Speaker #6: Understood. Thank you.

Julian Nebreda: Thanks. That's one more.

Speaker #1: Thanks.

Operator: Thank you. Our next question comes from Moses Sutton from BNP Paribas. Please go ahead.

Speaker #3: Thank you. Our next question comes from Moses Sutton from BNP Paribas. Please go ahead.

Moses Sutton: Thanks for squeezing me in. Congrats on the great update. As these data center opportunities convert into reality, how do we think about the ratio watt for watt, meaning the watts of load to the watts of storage? We've seen examples out there of, you know, a gigawatt data center might need 800MW of batteries.

Speaker #7: Thanks for squeezing me in. Congrats on the great update. At these data center opportunities convert into reality, how do we think about the ratio watt for watt?

Speaker #7: Meaning the watts of load to the watts of storage. We've seen examples out there of gigawatt data center might need 800 megawatts of batteries.

Speaker #7: And examples that could be a fifth of that, right? Depending on their need. So what do these projects start to look like right now as we're connecting sort of a data center TAM in gigawatt terms to the storage opportunity view that you're converting against?

Julian Nebreda: Yeah

Moses Sutton: A fifth of that, right? Depending on their needs.

Julian Nebreda: Yeah

Moses Sutton: A fifth of that, right? Depending on their needs.

Julian Nebreda: Yeah.

Moses Sutton: What do these projects start to look like right now as we're connecting sort of a data center TAM in GW terms to the storage opportunity too, that you're converting against?

Julian Nebreda: Yeah. Too early to give you a rule of thumb that we can calculate. We clearly have some views, but it's too early to give you a too premature to give you a rule of thumb how to think a gigawatt will take this amount of battery. We will. Over time, I think that we'll be able to develop that as it becomes more clear. Today we that we cannot do. What we have, you know, as I said, a 12 giga pipeline ahead of us, of which we wanna convert into orders, a good portion of it within the next 12 months. That's what, you know, that's what we're concentrating on.

Speaker #1: Yeah. Too early to give you a rule of thumb that we can calculate. We clearly have some views. But it's too early to give you a too premature to give you a rule of thumb.

Speaker #1: How do you think a gigawatt will take this amount of batteries? So we will over time, I think that we'll be able to develop that as it becomes more clear.

Speaker #1: But today, that we cannot do. What we have, as I said, is a 12-gigawatt pipeline ahead of us, of which we want to convert a good portion into orders within the next 12 months.

Speaker #1: So that's what that's what we're concentrating on. And as we learn more about this and we see how it develops, the industry develops, we'll provide you a rule of thumb that will give you a better sense of the whole market.

Julian Nebreda: As we learn more about this and we see how the industry develops, we'll provide you a rule of thumb that will give you a better sense of the whole market.

Moses Sutton: Got it. That's helpful. We'll look forward for that.

Speaker #7: Got it. Got it. That's helpful. We'll look forward to that. And then on the MSAs, what's the nature of the exclusivity from what you've won?

Julian Nebreda: Yes.

Moses Sutton: On the MSAs, what's the nature of the exclusivity from what you've won? Like, are there multiple vendors? I couldn't tell if you were answering that in some of the earlier questions. For those hyperscalers, are you one of a few players? Are you exclusive? Is that a geographic-

Speaker #7: Are there multiple vendors? I couldn't tell if you were answering that in some of the earlier questions. So for those hyperscalers, are you one of a few players?

Speaker #7: Are you exclusive? Is that a geographic exclusivity? How do we think of that?

Julian Nebreda: No

Moses Sutton: exclusivity? How do we think of that?

Julian Nebreda: No

Moses Sutton: exclusivity? How do we think of that?

Julian Nebreda: One of a few players. One of a very, very limited number of players. This is a competitive process. You know, these are not, you know, directed somehow, or at least not yet. Maybe we'll be able to take them there at some point. You know, very limited players and a competitive process as we move forward. Thank you, everybody, for participating today. You know, we'll be available. Chris Shelton will be available. I also will be available, and Ahmed Pasha clearly, to answer any questions you may have on this side. Bye-bye.

Speaker #1: One of a few players. One of a very, very limited number of players. But this is a competitive process. These are not these are not directed.

Speaker #1: At least not yet. Maybe we'll be able to take them there at some point. But very good. Very limited players. And a competitive process, as we go forward.

Speaker #1: Thank you, everybody, for participating today. And we'll be available. Chris will be available. Moses will be available. And Ahmed, clearly, to answer any questions you may have.

Speaker #1: Decide. Bye-bye.

Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.