Fluence Energy, Inc. Q4 FY2024 earnings call

• Fiscal year 2024 was the first full-year profit for Fluence, generating free cash flow. • Achieved a record $2.7 billion in revenue with 12.6% gross margin, $78 million adjusted EBITDA. • Annual recurring revenue increased by 80% to $100 million, and Fluence was named the top integrator on the Guidehouse Insight leaderboard for energy storage software. • Backlog grew 55% to $4.5 billion, pipeline increased by $500 million to $21 billion. • Developed a US supply chain with six production facilities, began producing US-made battery modules, and received UL 1973 certification at the module level. • Secured two dedicated battery cell production lines in Tennessee, with plans to ramp up production.

Fluence Energy reported a record $2.7 billion in revenue for fiscal year 2024 with a 12.6% gross margin. Adjusted EBITDA was $78 million, which was almost $140 million higher than fiscal year 2023. Annual recurring revenue (ARR) increased by 80% to $100 million. Backlog grew by 55% to $4.5 billion, and pipeline increased by $500 million to approximately $21 billion. Revenue contribution details: Q4 revenue was $1.2 billion, which was 82% higher than the same quarter last year. Gross profit margin for Q4 was approximately 13%, and adjusted EBITDA for Q4 was $87 million.

• Fiscal 2025 revenue guidance midpoint is $4 billion, representing 50% growth from fiscal 2024. • Adjusted gross profit margin expected to be between 10% and 15%. • Adjusted EBITDA midpoint for 2025 is $180 million. • ARR expected to end fiscal year 2025 at $145 million. • Fiscal 2025 revenue is expected to be back-end loaded, with approximately 20% in the first half and 80% in the second half. • For fiscal 2026, expecting strong growth in line with the energy storage market, approximately 30% plus annually.

• Potential increase in tariffs on Chinese VAT, which could cause short-term market disruptions. • Impact of political changes on the Inflation Reduction Act (IRA) and its manufacturing incentives. • Competition from other energy storage providers, including Chinese companies, which may be more vertically integrated.

Q: Good morning, Julian. How are you? Doing great. Good morning, everyone. Thank you for taking my questions. Maybe just to start off with your guidance for fiscal 2025 and your backlog coverage. Given all the changes in Washington and the back-end loaded nature of your revenue guidance, can you just discuss how cancelable or solid your backlog is just to give some sort of confidence that you can reach this 20/80 split going into next year? Thank you.

A: Thank you, George. So as we said, we have roughly two-thirds of our revenue midpoint guidance in our backlog already. And we are roughly around $1.5 billion in contracts that we're in late stages of negotiations, so we are selected by the customer for the contract. That roughly $1.5 billion, more than half will be revenue that will be covered in 2025. So we feel very confident of our midpoint guidance range. We have some wood to chop. There's some more contracts that we need to sign, but we feel very good with where we are today. In terms of our backlog, as you know, we take a very, very strict view of our backlog situation. And we really look at, in order to have things considered into our backlog, they need to be things that are signed and that we believe we can, you know, that there is a real commitment from our customers to take those projects on time and deliver. So they're binding deals. So we feel very confident that we have seen very little to none, you know, as delay. As you know, we have talked last year, but we have not seen real cancellations of projects on the backlog once we signed it. Essentially, because we take a very, very strict view. As I always said, there are contracts we have signed that are still subject to certain conditions that are in pipeline. They're not in backlog because they're not at a stage where they can be considered at that point. So we feel very confident about the 66% coverage in our backlog. The contracts were in late stage of negotiation or will be selected that will represent around $1.5 billion of backlog or around $800 million of revenue for the year, for 2025. And then, you know, a small portion we need to cover, we believe we will be able to cover from now to March of next year.

Q: Good morning, Julian. How are you?

A: Hello.

Q: Hey, Julian, good morning. I'm doing well. Thanks for taking the questions. I wanted to maybe follow-up on George's question just on the revenue guidance. You have, you know, the parameters you're providing are helpful. Right? This, you know, kind of two-thirds backlog coverage, the late-stage negotiations. But just I just want to kind of rewind a little bit if you think about this time last year, you know, you had a $3 billion revenue midpoint. Some stuff didn't really play out the way you want it in the back half of the year. So you're coming in a little young about 10% shy of what you thought the midpoint was gonna be for fiscal 2024. You're using the same kind of parameters to set the midpoint, it seems like, for 2025. So can you maybe just walk us through, you know, maybe, one, what happened in 2024 to make you miss the initial revenue midpoint that you're expecting coming into the year? Why is that not gonna repeat in 2025? And are there any, you know, parameters in 2025 that look on a year-on-year basis better than 2024 where even with the same backlog coverage coming into the year, you feel even more confident about hitting the midpoint this year versus, you know, maybe not having been able to do so last year?

A: Great. Good question. Thanks. So where are you know, we had similar coverage than we had the last two years. No? So in both in 2023 and 2024, it hasn't changed. Roughly two-thirds by the at the beginning of the year. I think the difference this year is the fact that we have $1.5 billion of contracts in late stages of negotiation where we have been selected. Which gives us, you know, very, very clear line of sight to meeting our number. So that's all I'll tell you if I were to compare last year to this year. Last year so that's the main difference, I think, from where we are, and we have clearly a route a very clear route to reaching our midpoint with projects and, you know, customers who are working on that where we have not been selected yet or where we have filled, you know, competing somehow, but that we believe we didn't normally at normal hit rate, which should be able to get to our midpoint comfortably. So that's what I will say where we are today. You know? I think that way you can last year, as you know, what we had was a project that got delayed. Due to certain issues and, you know, yeah, it could happen again, but if you ask me where I am today, looking at the backlog, looking at the project that we have. We're in late stages. Late stage and looking at the route to meet in the midpoint of Calvera.