Fluence Energy, Inc. Q1 FY2025 earnings call

• Strong battery storage market with the U.S. as a key cornerstone, leveraging domestic content strategy for competitive advantage.
• Backlog at record $5.1 billion, with over $770 million in order intake during the quarter.
• ARR increased to $106 million, with plans to reach $145 million by year-end.
• Revised fiscal 2025 revenue guidance from $3.1 billion to $3.7 billion (midpoint $3.4 billion), impacted by delays in Australian project contracts.
• Introduced a new product platform launching on February 13, 2025, aiming for industry-leading density, lower cost, and 99% availability.
• Pipeline increased by $500 million to $21.4 billion, with nearly half in the U.S. market.
• U.S. market growth driven by power demand increase, interconnection queues, and favorable policy analysis including trade tariff management and potential IRA changes.
• Addressed cybersecurity advocacy and proactive engagement with the Trump administration regarding grid infrastructure security.

In the first quarter, Fluence Energy generated $187 million in revenue with a 12.5% adjusted gross margin. The backlog reached a record $5.1 billion, including 18.5 gigawatt hours of volume, representing a year-over-year increase of 38% in value and more than double in terms of volume. Annual recurring revenue (ARR) was $106 million, an increase of $6 million from the previous quarter, and is on track to achieve the $145 million ARR target by the end of the fiscal year.

• Fiscal 2025 revenue guidance revised to $3.1 billion to $3.7 billion (midpoint $3.4 billion), a $600 million reduction from prior guidance due to delays in Australian project contracts.
• Gross margin expectations narrowed to 10%-12% from 10%-15% due to competitive pressures and tariffs.
• Adjusted EBITDA midpoint lowered to $85 million, impacted by revenue reduction and competitive pressures, offset by $30 million cost-cutting initiatives.
• Fiscal 2026 revenue expected to grow 30%+ from the revised 2025 midpoint.
• Strong liquidity with $654 million in cash and over $1.1 billion total liquidity, including $458 million available under revolver and supply chain facilities.

• Intense competition from Chinese players putting downward pressure on pricing and margins.
• Delays in signing contracts for three Australian projects affecting 2025 revenue recognition.
• Geopolitical uncertainties and trade tariffs, including potential Section 301 tariffs in 2026, impacting gross margins.
• Competitive pressure particularly acute in international markets, affecting margin performance.

Q: Good morning. Thank you for taking my questions. Maybe first, just to focus on the 2026 revenue guidance that you pointed to in your deck. You mentioned that you expect 30% plus growth there, which is the same as last quarter, despite the fact that you had some three pushouts this year in Australia. Does that mean that you've maybe lost some business or do you just decide not to update that for other reasons?

A: Thanks, George. We've taken a conservative view of 2026. And what we have today and the way we present this kind of a floor or where we see we can do 30% on top of our guidance. And our idea is that as we move forward during the year, we will be able to give you more clarity on these numbers and firm them up. So, today, our best view is a 30-plus – or 30% on top of the midpoint for 2025 and I will provide more – a better view for 2026 as we move along. Today, we have like $1.2 billion here at backlog for 2026, and we need to bring some additional backlog in order to firm that number up. And we hope to and as we move forward. But we have taken up to what happened now, we have taken a more conservative view of 2026 than what we have done.

Q: Good morning everyone. I'm sure you're going to get a lot of them, but I wanted to focus on the margins for a little bit. So, maybe to start off, can you talk about sort of what margins you're seeing on new bookings this quarter as well as these Australia bookings you're expecting later in the year? Like is that all going to be at the lower end of that 10% to 15% range you've targeted overall? Or are you going to be able to start seeing some margin expansion based off the new product and redesign? I'm just trying to understand like how structural and how set are these margins at the lower end of the range for a while? And then is it something you recover in 2026 or does it take longer than that?

A: Very good question. Two points, I think, that are important. First, 2026. We believe that our new product design and our strategy for 2026 will bring us back to our range. So, it will put us in the middle of that range, but these are hopefully better than that, but that's our view. Today, when we looked at the product, what it can do. So, we see this margin reduction as a temporary situation. What do we have for the year? When we looked at – two things are driving this margin point. One, a change of mix, the mix of projects change due to the delays in the Australia projects. And second, the new – our current view of the recent backlog and the backlog that we will need to enter into to support 2025 revenue is that they will come in high single digits. If you do a simple math, when you do the simple math of what we had in our backlog at 12.5% or the high single digits, it comes around this 10% to 12% that we're giving. We think this is temporary. This is something that we are addressing. It comes out of competitive pressure. We're still – we're not that far, but we clearly need to put – we are putting up a plant to get to where we need to and that's conceptual. This is a temporary situation that we will address in the, you know with our investments in technology essentially.