Fluence Energy(FLNC) - 2025 Q3 - Quarterly Report

Part I - Financial Information Financial Statements Unaudited statements show increased assets and liabilities, with a nine-month net loss of $92.1 million on $1.22 billion in revenue Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,849,696 | $1,680,443 | | Total Assets | $2,075,150 | $1,902,188 | | Total Current Liabilities | $1,124,834 | $1,258,835 | | Convertible senior notes, net | $390,356 | $— | | Total Liabilities | $1,554,306 | $1,295,049 | | Total Stockholders' Equity | $520,844 | $607,139 | - Key changes from September 30, 2024, include a significant increase in inventory (from $182.6M to $654.3M) and the addition of $390.4M in convertible senior notes, which were not present previously[15] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (Unaudited) | (In thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $602,533 | $483,317 | $1,220,939 | $1,470,414 | | Gross Profit | $89,099 | $83,045 | $152,882 | $183,611 | | Income (loss) before income taxes | $11,471 | $5,304 | $(91,182) | $(36,029) | | Net Income (Loss) | $6,894 | $1,075 | $(92,051) | $(37,357) | | Net income (loss) attributable to Fluence Energy, Inc | $6,252 | $785 | $(66,260) | $(25,127) | | Basic EPS (Class A) | $0.05 | $0.01 | $(0.51) | $(0.20) | | Diluted EPS (Class A) | $0.01 | $— | $(0.51) | $(0.20) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Unaudited) | (In thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(411,281) | $69,156 | | Net cash used in investing activities | $(20,047) | $(13,444) | | Net cash provided by (used in) financing activities | $358,645 | $(5,767) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(58,818) | $50,577 | - The significant cash outflow from operations in the nine months ended June 30, 2025, was primarily driven by a $469.7 million increase in inventory and a $180.8 million decrease in accounts payable, partially offset by $400.0 million in proceeds from issuing convertible senior notes[25] Notes to Condensed Consolidated Financial Statements - The company operates in a single reportable segment, with its Chief Executive Officer identified as the Chief Operating Decision Maker (CODM)[30] - Revenue is primarily generated from the sale of energy storage products and solutions, recognized over time using the percentage of completion (POC) method based on costs incurred[44][45] - As of June 30, 2025, the company had $4.9 billion of remaining performance obligations (backlog), with approximately 49% expected to be recognized as revenue in the next 12 months[88][89] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 17% revenue decrease due to project timing, stable gross margins, and liquidity bolstered by a $400 million notes issuance Key Factors, Trends, and Uncertainties - The utility-scale battery storage industry is experiencing unprecedented growth, driven by the global transition to renewable energy, with a projected market addition of 2,660 GWh between 2024 and 2035 (excluding China)[190] - Government regulations, particularly the U.S. Inflation Reduction Act (IRA) and the One Big Beautiful Bill Act (OBBBA), are key drivers creating both opportunities and compliance risks through new domestic content and FEOC restrictions[196][197] - Significant changes in U.S. tariff policy, including increased Section 301 tariffs and new AD/CV proceedings, have created market uncertainty, leading to paused or delayed customer contracting[200][201] Key Operating Metrics Key Operating Metrics Comparison | Metric (Energy Storage Products) | June 30, 2025 | September 30, 2024 | Change % | | :--- | :--- | :--- | :--- | | Deployed (GW) | 6.3 | 5.0 | 26% | | Contracted Backlog (GW) | 8.2 | 7.5 | 9% | | Pipeline (GW) | 35.7 | 25.8 | 38% | | Services (Assets under Management, GW) | 5.5 | 4.3 | 28% | | Digital (Asset under Management, GW) | 21.6 | 18.3 | 18% | - Order intake for Energy Storage Products and Solutions decreased by 49% for the nine months ended June 30, 2025, compared to the prior year period, reflecting market uncertainty and timing of contracts[231] Results of Operations Comparison of Operating Results | ($ in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | Change % | | :--- | :--- | :--- | :--- | | Total Revenue | $1,220,939 | $1,470,414 | (17)% | | Gross Profit | $152,882 | $183,611 | (17)% | | Gross Profit Margin % | 12.5% | 12.5% | 0% | | Net Loss | $(92,051) | $(37,357) | 146% | - The 17% decrease in revenue for the nine months ended June 30, 2025, was primarily driven by decreased volumes of Gridstack solutions projects fulfilled due to customer schedules and a more backend-loaded revenue expectation for fiscal year 2025[256] - General and administrative expenses decreased by 10% for the nine months ended June 30, 2025, mainly due to a $15.5 million decrease in personnel-related expenses from a reduction in headcount[267] Liquidity and Capital Resources - The company's principal sources of liquidity include cash from operations, IPO proceeds, and various debt arrangements, which management believes are sufficient for at least the next 12 months[277][278] - In December 2024, the company issued $400.0 million in 2.25% convertible senior notes due 2030, receiving net proceeds of $389.4 million and purchasing capped calls for $29.0 million to offset potential dilution[280][281] - On August 6, 2024, the company converted its ABL facility into a $500.0 million senior secured cash flow revolving credit facility, with $342.5 million available as of June 30, 2025[290][294] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk exposure from its fiscal 2024 Annual Report - There have been no material changes with respect to the company's exposure to market risk as disclosed in its 2024 Annual Report[315] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[317] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[318] Part II - Other Information Legal Proceedings The company is involved in an SEC investigation, a class action lawsuit, and derivative actions, none of which are currently expected to be material - The company has been informed that the SEC is conducting a formal investigation regarding its financial reporting following a short-seller report published in February 2024 and is fully cooperating[144] - A consolidated federal securities class action lawsuit has been filed against the company and certain officers, which the company intends to defend vigorously[145] - Two shareholder derivative complaints have been filed and consolidated, with proceedings currently stayed pending the resolution of the securities class action[146] Risk Factors Material risks include dependency on changing government incentives, global trade tariffs, and new indebtedness from its convertible senior notes Government Incentives and Regulations Risk - The business is highly dependent on government incentives, and the One Big Beautiful Bill Act (OBBBA) modification to the IRA has created uncertainty with new domestic content and Foreign Entity of Concern (FEOC) restrictions[326][328] - There is a risk that the company or its suppliers may be unable to meet the new FEOC requirements under the OBBBA, which could jeopardize qualification for key tax credits and impact competitiveness[331] Global Trade and Tariffs Risk - The company faces significant risk from changes in the global trade environment, including new U.S. tariffs on Chinese imports, which are subject to multiple tariff layers including Section 301 tariffs[334][336] - An active anti-dumping/countervailing (AD/CV) duty investigation on Chinese graphite active anode material (AAM) poses a risk of increased costs and supplier impact[339] - Tariff-related uncertainty has caused the company to delay new contracts and pause existing projects with certain customers, adversely impacting business and results of operations[338] Risks Related to 2030 Convertible Senior Notes - The company's $400.0 million of outstanding 2030 Convertible Senior Notes could limit cash flow for operations, make it difficult to obtain additional financing, and require substantial cash for debt service[342][345] - The conditional conversion feature of the notes, if triggered, could require the company to settle the obligation in cash, which would adversely affect liquidity[348] - The company is subject to counterparty risk with the financial institutions involved in the associated capped call transactions, where a default could lead to more dilution than anticipated[360][361] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were made during the quarter that were not previously reported - There were no unregistered sales of equity securities during the quarter ended June 30, 2025, that were not already disclosed in a Current Report on Form 8-K[363] Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter - During the three months ended June 30, 2025, no directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[368] Exhibits This section lists all exhibits filed with the report, including required CEO and CFO certifications - The report includes standard exhibits such as the Amended and Restated Certificate of Incorporation, Bylaws, and certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[371]