Fluence Energy Inc. reported a robust financial performance for the fourth quarter of 2023 during its earnings conference call. The energy storage solutions company reported $673 million in revenue, a 52% increase compared to the same period last year. Fluence also announced the launch of Gridstack Pro, its larger enclosure solution, and secured all its battery needs for fiscal years 2024 and 2025.
Key takeaways from the call include:
- Fluence achieved adjusted EBITDA of $20 million for the quarter, ahead of schedule.
- The company experienced strong demand, with new orders totaling approximately $737 million.
- Fluence launched a new $400 million asset-backed lending facility.
- The company anticipates total revenue for fiscal 2024 to be between $2.7 billion and $3.3 billion, with adjusted EBITDA projected to be between $50 million and $80 million.
- Fluence's pipeline sits at $13 billion, and it has a backlog of $2.9 billion.
- The company aims to generate around $80 million in annual recurring revenue from its combined service and digital businesses by the end of fiscal 2024.
Fluence's strong financial performance in Q4 2023 marks the company's first time achieving profitability and a record-breaking annual revenue. The company's backlog remained consistent at $2.9 billion, and it signed contracts amounting to approximately $400 million just after the quarter ended.
The company also launched its OS7 operating system, designed to handle bigger and more complex projects. Fluence secured a new $400 million ABL facility to manage its working capital and expects its ARR to reach around $80 million by the end of fiscal 2024. The company provided guidance for fiscal 2024, including revenue between $2.7 billion and $3.3 billion, adjusted EBITDA between $50 million and $80 million, and adjusted gross margins between 10% and 12%.
Despite the announcement by competitor Wärtsilä to explore strategic alternatives for its energy storage business, Fluence remains confident in its growth strategy. The company's strategy includes not taking battery price cost risks and transferring any price changes to its customers. The company remains confident in its 10% to 15% margin and sees lower battery prices as an opportunity rather than a risk.
The company's pipeline consists mostly of new renewable energy projects with a smaller portion of retrofit opportunities. Geographically, the majority of the company's backlog and revenue comes from the US, with growth opportunities in Canada, Australia, Germany, and other European markets. The company does not anticipate any cell supply risks in its markets and expects a mix of domestic and imported batteries in the US market.
During the call, Rebecca Boll of Fluence discussed the company's product roadmap, stating that they are currently focused on developing and delivering systems with durations of two, four, and six hours. They are also exploring battery chemistries that allow for longer duration solutions and engaging with suppliers for future prototypes. Julian Nebreda mentioned that around 75% of the current backlog consists of non-related parties, but they aim to reduce this to around 20%.
Fluence concluded the earnings call by stating that it is not currently seeking mergers and acquisitions until it achieves profitability. The company will prioritize using free cash flow to support their growth and technology, rather than distributing dividends or returning capital to shareholders.
InvestingPro Insights
Fluence Energy Inc. (FLNC) has been making headlines with its impressive Q4 2023 performance, and recent data from InvestingPro further illuminates the financial landscape of the company. With a substantial revenue increase of 52% in Q4, as reported in the earnings call, InvestingPro data reveals an even more staggering annual revenue growth of 85.05% for the last twelve months as of Q4 2023. This aligns with the company's announcement of securing all its battery needs for the upcoming fiscal years, reflecting a strong position in the energy storage market.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, indicating a positive outlook on the company's financial trajectory. Additionally, the company's liquid assets exceed short-term obligations, suggesting a solid financial buffer for operational needs and investment opportunities.
Despite these optimistic indicators, it's worth noting that FLNC operates with a negative return on assets of -6.77%, and the stock is currently trading at a high Price / Book multiple of 11.09. While the high Price / Book ratio might raise questions about valuation, the company's robust revenue growth could justify such a premium to some investors.
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Full transcript - Fluence Energy (FLNC) Q4 2023:
Operator: Good day, and thank you for standing by. Welcome to Fluence Energy Inc. Fourth Quarter 2023 Earnings Conference Call. [Operator instructions]. Please be advised that today's call is being recorded. I would now like to turn the call over to you Lexington May, Vice President, Investor Relations. Please go ahead.
Lexington May: Thank you. Good morning, and welcome to Fluence Energy’s fourth quarter 2023 earnings conference call. A copy of our earnings presentation, press release, and supplementary metric sheet covering financial results, along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures, are posted on the Investor Relations section of our website at Fluenceenergy.com. Joining me on this morning’s call are Julian Nebreda, our President and Chief Executive Officer; Manu Sial, our Chief Financial Officer; Rebecca Boll, our Chief Products Officer; and Ahmed Pasha, our incoming Chief Financial Officer. During the course of this call, Fluence’s management may make certain forward-looking statements regarding various matters relating to our business and company that are not historical facts. Such statements are based upon the current expectations and certain assumptions, and are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward-looking statements and for more information regarding certain risks and uncertainties that could impact our future results. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of today. Also, please note that the company undertakes no duty to update or revise forward-looking statements for new information. This call will also reference non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of these non-GAAP measures to the most comparable GAAP measure is available in our earnings materials on the company’s Investor Relations website. Following our prepared comments, we will conduct a question-and-answer session with our team. During this time, to give more participants an opportunity to speak on this call, please limit yourself to one initial question and one follow-up. Also note that while Amed is participating on today's call, he is not going to be participating in the Q&A session. And thus, please direct your questions to the other members of the team. Thank you very much. I'll now turn the call over to Julian.
Julian Nebreda: Thank you, Lex. I would like to start my warm welcome to our investors, analysts, and employees who are participating on today's call. This morning, I'll provide a brief update on our business, and then review our progress and our strategic objective. Following my remarks, Manu will discuss our financial performance for the fourth quarter, and then I will discuss our outlook for fiscal 2024. Before we begin our discussion on the fourth quarter results, I'd like to spend a few moments addressing the announcement we made a few weeks ago. Manu has decided to step down as CFO of Fluence. He has done a remarkable turnaround job here, and as a result, he caught the attention of others. He received an offer he could not refuse, and more importantly, one that we could not match. As such, he will be leaving effective December 31st to become CFO of another company in a different industry. On behalf of the board, I would like to send a sincere thank you to Manu for the value he helped create at Fluence the past 15 months. Additionally, I would like to extend my warm welcome to Ahmed Pasha, our incoming CFO. Ahmed will officially assume this role on January 1, thus ensuring a sufficient transition period. Amed comes to us from AES (NYSE:AES), where he had a 30-year career, most recently serving as the CFO of the Utility Business Unit. I personally have worked with Ahmed for many years and I'm excited to continue that at Fluence. Now, I would like to turn the call over to Ahmed to make a few remarks.
Ahmed Pasha: Thank you, Julian, and good morning, everyone. I am excited to be joining Fluence at a time when energy transition is achieving critical momentum, which presents so much opportunity for the company and for energy storage in general. As some of you may know, I have had some experience working with Fluence during my tenure at AES, including during the IPO process and more currently as CFO of the US Utilities Business, where Fluence is playing a critical role in helping to transform our energy mix. Since the announcement about two weeks ago, I have had the opportunity to meet with some members of Fluence’s team, and I'm very impressed with their experience and commitment to enabling the global energy transition. I look forward to working with them and help Fluence to achieve its ambitious growth and profitability goals, increase shareholders' value, and deliver on its mission to transform the way we power the world. I would like to express my appreciation to Manu for his invaluable contributions to Fluence, particularly the strong foundation he has established to position us for continued success in the future. In the near-term, I will be getting up to speed on things, but I expect to meet with many of our investors and analysts in the coming months. I look forward to hearing their views and sharing how we plan to achieve our key financial and strategic objectives. With that, I will turn the call back to Julian.
Julian Nebreda: Thank you, Ahmed. Beginning on Slide 4 with the key highlights. I'm pleased to report that in the quarter, we recognized $673 million of revenue. We continued to experience strong demand for our products and services, with new orders totaling approximately $737 million, highlighted by our solutions business contracting 2.1 gigawatt hours, our services business adding 1.6 gigawatt hours, and our digital business adding 1.8 gigawatts of new contract. Furthermore, our signed contract backlogs as of September 30, remain at $2.9 billion due to acceleration of select projects ahead of schedule. Turning to adjusted EBITDA, we delivered approximately $20 million for the quarter. This is a tremendous milestone, as we achieve this level ahead of schedule. As you recall, we expected to be close to adjusted breakeven for the fourth quarter. However, we were able to accelerate select projects that resulted in high revenue and margins for the quarter. One of the areas we're concentrated on is our organizational speed, especially reducing our project cycle times. We see a lot of value in reducing our cycle times from the roughly 18 months to closer to 12 months. We believe it will take us at least two years to reduce our cycle times down to 12 months. This quarter’s results are a perfect example of what speed can do to bring increased value to both our customers and our shareholders. Lastly, our services and digital businesses, which together represent our recurrent revenue stream, continued to see traction. Our deployed service attachment rate, which is based on our cumulative active service contracts relative to our deployed storage, remains about 90%. As we have noted previously, we typically see a lag between signing solutions contracts and entering into a service contract, which is why we believe that cumulative attachment rate is important to monitor. Turning to our digital business, we had a very strong quarter as we were able to contract 1.8 gigawatts. More importantly, our digital assets under management increased by more than a gigawatt and the total number reached 15.5 gigawatts as of September 30. Turning to Slide 5, I'd like to highlight some of our accomplishments of the past fiscal year. As you may recall, a year ago we embarked on the transformation of our business. I’m pleased to report that we delivered on our commitments to the market. We grew our annual revenue by 85% and achieved our first profitable quarter. Importantly, we exceeded our original annual revenue guidance by more than $600 million, thanks to improved execution, ease in supply chains, and project timeline acceleration. We burned through almost all our legacy lower margin backlog, and we diversified our supply chain, including securing US-made battery cells with AESC. With the rollout of Fluence OS7, we have integrated Nispera into our hardware solutions on a go forward basis so that now every new store solution cell has Nispera bundle input. We built out our India technology center, and we published our inaugural sustainability report, a successful year that sets the tone for the years to come. Turning to Slide 6, I would like to discuss progress on our five strategic objectives. As you recall, at this time last year, we laid out five strategic objectives that will guide our actions, and markets that our investors who monitor and measure the company performance against. As we generated our first profitable quarter, I'm pleased to say the first phase of our transformation is complete. The second phase is just getting started, which will continue the theme of profitable growth, now measured through the growth of our nominal adjusted EBITDA and annual recurring revenue, or ARR, alongside the other strategic objectives that will continue to guide us on the second phase of our journey. First, on delivering profitable growth, I’m pleased to report that we exceeded our fiscal year 2023 guidance for both revenue and adjusted gross profit. Today, we're initiating guidance for fiscal 2024. We expect total revenue for fiscal 2024 to be between $2.7 billion and $3.3 billion. In line with our commitment from our last call, we're initiating guidance for adjusted EBITDA for fiscal 2024 to be between $50 million and $80 million. Second, we'll continue to develop products and solutions that our customers need. As such, I'm pleased to report that in October, we launched Gridstack Pro, our larger enclosure providing higher density, faster installation, enhanced performance, and industry-leading safety. In conjunction with the launch Gridstack Pro, we also launched Fluence OS7, the latest Fluence operating system designed with enhanced capabilities and fully integrated with the new Fluence Battery Management System, which I will touch on more in a few minutes. Third, I'm pleased to report that we have secured all our battery needs for fiscal 2024 and 2025. Fourth, we'll use Fluence Digital as a competitive differentiator and a margin driver. I'm pleased to report that we're initiating guidance for our annual recurring revenue from our combined service and digital businesses. We expect to generate around $80 million of ARR by the end of fiscal 2024. And finally, our fifth objective, which is to work better. I'm proud to say that just recently, we have launched a new $400 million asset-backed lending facility or ABL. This credit facility is secured by our US inventory, and we expect it will provide us increased flexibility. More importantly, we believe that the ABL facility provides us additional tools to manage our working capital as we continue to grow. Turning to Slide 7, demand for energy storage continues to accelerate. In fact, our pipeline now sits at $13 billion, which is an increase of approximately $600 million from the third quarter, and a 50% increase compared to this time last year. Additionally, as I mentioned, with our backlog remained consistent at $2.9 billion, even after recognizing almost $675 million during the quarter. Importantly, we had several contracts that were signed just subsequent to quarter end, amounting to approximately $400 million, which provides us with strong visibility to achieving our 2024 revenue guidance. This is the eighth consecutive quarter we added more backlog than revenue recognized, further illustrating the growing demand for energy storage. Based on the conversations we are having with our customers and potential customers, we're expecting to see topline year-over-year revenue growth from fiscal 2024 to fiscal 2025 of approximately 35% to 40%, showcasing the robust market for utility and energy storage. Turning to Slide 8, as I mentioned earlier, we launched our Gridstack Pro and OS7 in fiscal year 2024. These product launches are something our stakeholders expect periodically from us, as we continue to innovate and identify new ways to serve our customers’ needs. When you look specifically at our Gridstack Pro solution, this is a much larger product that integrates six battery racks and is designed for the largest and most complex utility scale projects globally. Gridstack Pro will offer our customers an (advanced) product with leading safety measures, faster deployments, first class reliability, and the flexible model of design that defines our product offerings. More importantly, for the US market, the Fluence battery pack will be available with US manufacturer battery sales and modules. This positions Gridstack Pro as one of the first energy store solutions to qualify for the 10% investment tax credit domestic content bonus under the Inflation Reduction Act. In conjunction with Gridstack Pro, we launched OS7, the next generation of our operating system. This iteration is meant to handle bigger and more complex projects, and can reliably control more than one gigawatt hour system, and it's fully integrated with the Fluence Battery Management System. The software also provides a foundation for future enhancements to the architecture and enables component commoditization just as DC-DC converters. It provides new tools targeted to reduce our commissioning times, which as I mentioned earlier, is a key area for the company. And importantly, OS7 comes standard with our Nispera platform already preloaded. This an important feature as we expect to provide all our product deployments with basic Nispera access for a certain amount of time, after which customers will be required to sign a longer term contract if they wish to continue using the APM platform for the best facility or which to upgrade to additional features. Turning to Slide 9, I'm pleased to say that earlier this week, we secured a new $400 million ABL facility. This provides us with an additional tool to help manage our working capital. The new ABL facility features a lower cost of capital relative to our legacy revolving credit facility by approximately 50 basis points, and is secured by a US inventory balance, and is expected to provide us with more flexibility. As our US inventory balance increases, so does our borrowing capacity. This ABL facility replaces our smaller $200 million revolving credit facility that require cash collateralization. As we enter fiscal year 2024, we believe we have a very strong balance and an ample working capital facility necessary to scale our platform and achieve our 2024 guidance. Shifting to Slide 10, we're introducing guidance for our annual recurring revenue, ARR. For our combined digital and business enterprises, our objective is to reach approximately $80 million in ARR by the conclusion of fiscal year 2024, implying a notable increase of 40% from the preceding year. This target is well supported by a robust service attachment rate exceeding 90% and a full 100% attachment rate for Nispera moving forward. Additionally, our strategic efforts are concentrated on advancing our Mosaic offering currently operational in three markets, Australia, CAISO and ERCOT. It's essential to note that we're in the process of refining this platform, with substantial contributions not anticipated before 2025, as previously communicated. In conclusion, I'm pleased with the achievements of the fourth quarter, although we're mindful there's still work to be done. We'll look to continue this momentum as we progress into a new fiscal year. I will now turn the call over to Manu.
Manu Sial: Thank you, Julian. I will begin by reviewing our financial performance for the fourth quarter, and then I will pass it back to Julian to discuss our guidance for fiscal year 2024. Please turn to Slide 12. Our fourth quarter revenue was $673 million, an increase of 52% from the prior year same period, and 25% above the third quarter. We continued to execute well as we were able to accelerate some of our legacy backlog previously anticipated for fiscal year 2024, resulting in higher-than-expected revenue for the fourth quarter. We continue to expect a small portion of our legacy contracts will be recognized in the first quarter of 2024. Looking at our adjusted gross profit for the quarter, we generated approximately $78 million, or approximately 11.6%, in line with the commitment discussed on our third quarter call, and reflects an increase from our third quarter margins of approximately 4.4%. More importantly, this is an increase from the previous fiscal year of 2.8%. I'm pleased to say we have demonstrated cost discipline as our operating expenses, excluding stock cost, as a percentage of revenue, continue to decline and ended up around 9% for the quarter. From a year-over-year comparison, our 2023 OpEx percentage of revenue, excluding stock compensation, came in around 10%, which is below our 2022 results of around 15%, further illustrating our cost discipline. As a result of our strong execution in the fourth quarter, we were able to generate $20 million of adjusted EBITDA, and as Julian mentioned, this signals the first phase of our transformation is complete. As we have now become profitable, our focus will shift to growing our nominal adjusted EBITDA and ARR, which we will discuss further. Turning to our cash balance, I'm pleased to report we ended the fourth quarter with $463 million of total cash, including short-term investments and restricted cash. This represents an increase of more than $45 million from the third quarter. As Julian mentioned, we secured a new $400 million ABL facility. This facility replaces our existing revolving credit facility and upsizes the amount of available borrow, and should enable us to better manage the peak to trough elements of our working capital. When you look at our total cash balance combined with our new ABL facility and supply chain financing, we have ample liquidity, putting us in an excellent shape to capitalize on the massive time in front of us. Please turn to Slide 13. From a cash standpoint, we increased our total cash position by 11% relative to the third quarter. For 2024, we'll continue to invest in technology, resulting in an expected use of cash of approximately $85 million. From a recurring CapEx assumption, a good run rate is between $20 million and $25 million, as this is the level we expect in a steady state environment without large non-recurring investment items such as the technology, IT and systems investments we expect to make in fiscal 2024. As Julian will expand, we expect to generate around $65 million of adjusted EBITDA in fiscal 2024, and we expect to see approximately $65 million to $70 million change in operating cash due to increase in working capital requirements, and includes our deposits for a US manufactured battery cell from AESC. As we mentioned on our last call, our US battery cell supply agreement with AESC called for a downpayment of $150 million to reserve this capacity, which will be paid in installments over fiscal year 2024 and fiscal year 2025, and will be funded by liquidity and customer deposits for these batteries. The first $35 million will be paid in Q1 of fiscal year 2024, and another $35 million will be paid in the second quarter of fiscal year 2024. As Julian and I mentioned earlier, we have a strong balance sheet entering 2024 and have ample cash and facilities to support our 2024 guide and investments that will support multi-year industry growth. We also expect to generate free cash flow in fiscal year 2025. Before I turn the call back to Julian, I would like to express my appreciation to the Fluence board, management team, employees, and shareholders, for their trust. Serving as the CFO of Fluence has been one of the highlights of my career. If I were to participate in the energy transition space today, this would be my preferred spot. I take comfort in knowing Fluence is in an excellent position from a balance sheet perspective as I pass the baton to Ahmed, who will take Fluence into the next chapter. With that, I will turn the call back to Julian.
Julian Nebreda: Thank you, Manu. Turning to Slide 14. As we previously discussed, we're initiating guidance for fiscal 2024 of revenue between $2.7 billion and $3.3 billion. We expect our fiscal 2024 adjusted EBITDA to be between $50 million and $80 million, and we're targeting our ARR to be around $80 million by the end of the fiscal 2024. I'd like to point out that our revenue guidance represents an increase of $300 million when compared to our prior fiscal year 2023 guidance midpoint plus our implied revenue growth of 35% to 40%. We now expect a fiscal 2024 revenue split of 30% in the first half, and 70% in the second half, which is an improvement to what we previously communicated to the market. As a result of this, we do expect our first quarter to produce negative adjusted EBITDA due to lower revenue on the execution of the remaining legacy contracts. From a margin perspective, we expect fiscal 2024 adjusted gross margins to be between 10% and 12%, which is an improvement from the fiscal 2023 adjusted gross margin of nearly 7%. From a cash standpoint, we currently expect to use approximately $85 million of cash in fiscal 2024, mostly funding non-recurring incremental investments in systems and IT infrastructure necessary to support our continuous growth. When looking out to 2025, we expect 35% to 40% year-over-year topline revenue growth. Additionally, we expect to begin generating free cash flow in fiscal 2025. Turning to Slide 15, we established ourselves as the preferred choice for utility scale storage solutions. Our competitive advantage is fortified by being able to offer our customers a full breadth of features, including bankability scale and supply chain management, power electronic engineering, and innovation digital software services, safety and cybersecurity. While some of our competitors may focus on only a couple of these elements, we often win because we aim to excel in all and provide them universally to our customers. This is corroborated by the 2023 S&P Global Battery and Storage Systems Integrator Report, which ranked the top 10 integrators globally based on install and contracted capacity. I’m pleased to say that Fluence was ranked number one both globally and in the US. In conclusion, I want to emphasize the key takeaways from this quarter’s results. Firstly, we had a robust financial performance contributing to a record-breaking annual revenue. Attaining profitability for the first time is a significant milestone, and we aim to capitalize on this achievement in fiscal 2024. Second, we proactively secured our future by solidifying our battery supply for fiscal years 2024 and 2025, thus ensuring our ability to meet our growing demand. Finally, the introduction of our new $400 million ABL facility provides us an additional tool to continue capturing the robust growth of the utility scale. As a reminder, while Ahmed is participating on today's call, he will not be answering any question. This concludes my prepared remarks. Operator, we’re now ready to take questions.
Operator: Thank you. [Operator Instructions] Our first question comes from the line of George Gianarikas with Canaccord Genuity. Your line is now open.
George Gianarikas: Good morning. Thanks for taking my question. So, maybe just to start, a lot has been made of the interest rate environment having an impact on project timing in the general renewable space and economics. Your results sort of speak of themselves for themselves, but what impact, if any, are you seeing on your business from the change in interest rates? Thank you.
Julian Nebreda: Right. Thanks, George. I mean, as we have talked in the past, we work with the top tier developers in the US where this happens. And when you looked at them, they don't really see any problems raising capital, accessing capital, or putting their projects together. So, we have not seen any delays due to cost of capital or access to capital in general. And I'll tell you even more, in our case, because as you all know, our product costs have come down, with battery prices coming down significantly this year. In a way, when you do the math between what our costs, our lower costs compared with the higher, the 100 basis points generally that prices have gone - the cost of money has gone up during the year, essentially it's a wash or maybe actually, you actually can do even better returns than what you do in the past. So, we haven't seen any real effect of today in our customers’ segment. We do get the same information you get from other parties who we tend not to work with, where they had some problems raising money or raising money at competitive rates, well, but we haven't seen it in our group. We’re segmented with a top tier group and that top tier group essentially had no problem of accessing capital. No
George Gianarikas: Thanks. Maybe if I can ask one follow-up. Recently, one of your competitors, Wärtsilä, announced that they're exploring strategic alternatives for their energy storage business. Any thoughts on that and any impact that it could have on your strategy going forward? Thank you.
Julian Nebreda: I was surprised by it because the prior quarter, they say that this was going to be the growth engine. In this quarter, they say that - it's difficult to know. We've been trying to understand where they come from. I prefer not to speculate, no, or at this stage, but I was surprised by this is a market that has offering tremendous growth. It's a tremendous opportunity to create value for shareholders to play in the new energy space. So, why are they revising their view on the market? I have no idea, but I've been reading the investors they call and the rationale, at least it wasn't clear to me, but we'll continue looking at it. We're on the other side of that spectrum and doubling down on this. This is a once in a life opportunity. It doesn't get any better than what this market offers today.
George Gianarikas: Thank you.
Operator: One moment for our next question, please. Our next question comes from the line of Brian Lee with Goldman Sachs (NYSE:GS). Your line is now open.
Brian Lee: Good morning. Thanks for taking the questions. First off, Manu, congrats and best of luck on your new role, and Ahmed, looking forward to working with you more closely going forward. A couple of questions I had was, I guess, appreciate the ARR breakout, $80 million end of this year or end of the fiscal year, 40% growth it seems like versus last year's number. If I look at your bookings, though, in services and digital, it's growing a lot faster. So, can you give us a sense of - I know there's a little bit of a delay, but as we think about your initial 2025 revenue guidance consolidated, like how fast can you grow that ARR balance off of the $80 million, when I kind of look at your bookings volume growing at a much faster rate across services and digital. And then also what’s sort of the margins implied in that ARR balance? I suppose it's - I would presume it's pretty high, but can you give us a sense of what the range is?
Julian Nebreda: I mean, on the growth rate, I do think that our view is that our ARR should grow at a higher rate than our solutions business. No, just the way it works, and the concept is very simple. We will = we have Nispera and Mosaic and our services business. Our services business, 90% of our growth rate of our sale base, Nispera roughly around 100%, and then Mosaic is on top of that. So - not on top of that, but we can add to it. So, I do think that we will see that growth being ahead of it. So, that's conceptually where we are, and you can - we are growing 40% compared to what the 35 to 40 that we have set from last year. In terms of margins, the margins differ. No, I think that for their digital business, they're more on the around 70%, while our service business is between 20% and 30%, depending on the type of service deal that we agree. So, the combined - there's not a combined service = there's not a combined margin, but you just think about it this way. And then in terms of the - today, I think that the grade or the majority of it is services, but I'll see the - our view is that digital will grow at a higher rate than our services business, that you'll see digital becoming a much more relevant part of our ARR as we move forward. So, that's kind of the - that you should think about all of this.
Brian Lee: That's great. Yes, no, appreciate that color. That's super helpful. Second question for me, and I’ll pass it on is, looking at that kind of preliminary fiscal 2025 revenue guidance, 35% to 40%, that's quite robust. It puts you in kind of the $4 billion topline range, assuming you kind of get to the midpoint. Can you - it sounded, Julian, like you were mostly growing off of customer conversations and feedback, but can you give us a sense of beyond that, are there some background?
Julian Nebreda: Brian, I lost you - we're losing you a little bit. I don't know. You mentioned the - you were talking about 2025 robust growth and then somehow you got - can you repeat that?
Brian Lee: Yes, hopefully - maybe that's clear. Sorry, I turned off the Bluetooth. I'm just wondering, what, beyond customer conversations, do you have any MSAs, contracted backlog? Like what else are you able to sort of key off on to get comfortable with the 35% to 40% additional growth into fiscal 2025? And then when you talk about batteries being secured for 2025, I mean, I would assume that is matching up to that revenue growth potential you're looking at. Is it fixed pricing or is it indexed? Are you subject to any kind of cost volatility on the battery side, just having locked in the volume? Maybe, could you remind us where you are on the pricing side of things as well? Thank you.
Julian Nebreda: Yes. So, on the growth, we clearly - I think that the best evidence of our growth capabilities comes out of our pipeline. So, we looked at our pipeline for this last quarter. We grew our pipeline by $600 million roughly, on top of converting $735 million to backlog. So, in reality, we added $1.3 billion into the pipeline this quarter. And that's where - that gives the annual view. And on top of that, something that we don't disclose, we have leads, projects that we're working on with customers that we do not believe today we can consider at a 50% chance of happening within the next two years. When we looked at our leads, when we're talking to our customers, what we're doing gives us a good - we feel very confident that we can do a 35% to 40% for 2025. So, that's essentially where it is. In terms of on that - this number compared to our prices, we built our planning based on our current view of prices or on cost. So, as long as prices stay within what we think, where we are today generally, which is kind of what we think is going to stay for the foreseeable future, I think we should be fine. But what we have also seen, just to be clear, that if prices were continuing to come down, I think that generally what we see is I think volumes increase. So, we don't feel that necessarily the 35% to 40% today, we don't believe that the 35% to 40% growth will be affected by cost coming down or battery costs coming down so much that we won't be able to meet it because of that, because at the end of the day, what happens, a lot of more projects, they - let's say are 50%. More of our pipeline projects convert into a reality because they're easier to meet the economics of the customers. So, I think that's our view on that one. Your second point, sorry, I did not - you had a second point.
Brian Lee: Yes, you covered most of it. I guess my question around cost was whether or not, I guess you have margin risk either up or down based on the security of supply in 2025 on volumes, like how long are (technical difficulty)?
Julian Nebreda: We continue to be to be - our strategy is not to take battery price cost risks. So, we transfer to our customer that, and that - and our view has always been, lead with the RMI. So, our view has always been, as prices of lithium come down, it goes to our customers. If it were to go up, our customers will pay a higher number, and we don't want to become a commodities. There are much better players. There are much better ways of betting on, on the commodity movements than our stock. So, we continue with a strategy that hasn't changed. We feel very, very confident on our 10% to 15% margin. So, I don't think that that will be affected in any way.
Manu Sial: And Brian, the margins have held up, right? The battery prices are materially different today than they were a year back, and are …
Julian Nebreda: Not only how off. They have gone up.
Manu Sial: They've gone up, right. So, from that perspective, I think Julian and I feel fairly comfortable.
Julian Nebreda: That's right. I think the lower battery prices are an opportunity, not a risk. Clearly, we have organized ourselves in a way that it will not be - it does not affect or changes affects our margin, but they are - generally, we see them as an opportunity.
Brian Lee: Thank you. I appreciate that. That’s what I would figure. Thank you, guys.
Operator: Thank you. One moment for our next question, please. Our next question comes from Andrew Crocco with Morgan Stanley (NYSE:MS). Your line is now open.
Andrew Crocco: Great. Thanks so much for taking the question. I guess just to come back to Brian's question, I just want to make sure I understand this correctly. For the 2025 battery supply, have you locked in the pricing with your suppliers on that? I'm just kind of curious, if battery prices continue to fall and you've locked in your pricing for 2025, is it going to be more difficult to sign a 10%, 15% gross margin contract if you have a higher priced battery versus where prices go from here?
Julian Nebreda: I think that I’ll put it this way. We have contracts with our suppliers that aligns with the current market world, in a world where prices are coming down. So, that's generally - so we're not committing to significant volumes or fixed prices that will be out of price. That's conceptually one side of the aspect. No, that's very, very important. Very, very important from our point of view to have very competitive pricing that is better at market or better and the ability, the access to volumes. And I think what we had been able to design our contracts in a way that meets those goals. And in terms of margins, as I said hey, I see this as - I don't think the lower pricing will affect our margins, our 10% to 15% margins going forward. This is more of good news, no more than negative news. And our 10% to 15%, we feel very confident that's the way we do deals. And people might argue, hey, your volumes are going to come down because now you are going to come out of a lower price. But the reality is that, as I said, a lot of more projects meet the return criteria for investors, of our customers. So, the volume more than covers any potential price reduction you might see around. So, this is a - as I said earlier, you cannot dream - if I looked at when I arrived, at $180 per megawatt hour prices to today, not going to say a price, not to be - let my competitors know, but it’s a different world and it doesn't get any better. Well, maybe I'd be surprised the next year will be even better, but …
Andrew Crocco: Understood that. That's super helpful context. And then I guess my follow-up would be, as you look at your backlog or even the pipeline, what percentage of it is new renewable energy projects that are adding battery storage versus maybe a retrofit opportunity? Obviously, the IRA presents an interesting opportunity there for retrofit. So, I'm just kind of curious how that's breaking down as you look at the pipeline and backlog
Julian Nebreda: Today, I would say if you looked at our pipeline, the ones that have more than a 50% is mostly new projects. Retrofits and things of that sort are more in the leads part. So, there's like mostly greenfield, if not essentially all today. However, we do see, as you can see, a lot of our customers are looking at talking to us at retrofits or replacing some coal facilities. So, there are some in our pipeline or in our contra backlog that are - they're building it into a former coal facility, but generally they're greenfield.
Andrew Crocco: Understood. Thank you.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Joseph Osha with Guggenheim Partners. Your line is now open.
Joseph Osha: Hello. Congratulations on the great outcome. I've got a couple of questions. First, looking - you've alluded to the gross margin, but as we look at that FY 2025 guide, I'm wondering how we might think about operating cost absorption and what that implies roughly for the ability of the enterprise to grow EBITDA. I have a couple of other questions, but I'll start with that one.
Julian Nebreda: Joe, good morning. I'll let Manu answer.
Manu Sial: So, look, I think consistent with what you said, as we think about 2025 EBITDA profile, gross margins are probably at the midpoint of the 10% to 15% range. And then we've been very disciplined around operating expense, and we expect to grow operating expense at little bit less than half of our topline growth. And you saw that in 2023, and you expect to see that in 2024 and 2025. Look, we are continuing to invest in the business on the backs of a growing market and $13 billion of pipeline.
Joseph Osha: Okay. Could we begin to see any material benefit from 45x credits in FY 2025, given how cell availability in the US is evolving?
Manu Sial: Yes. I mean, the short answer is yes, but I think - from a modeling perspective, I'd still stick within the lanes I just talked about.
Joseph Osha: Okay. But to be clear, that number you've put out there does not build in any 45xes. Is that correct?
Julian Nebreda: The way we have - our view on the 45x is that they will be within the range, so that we'll see that the 45x will take us outside of the range of the 10% to 15%. That that's the way we think on. Remember, we're building a new line. We're putting it together. We're starting - this, it will require some taking it up to more - if we get - to a very - to get to scale and efficiency, it takes a little while. So, we believe that the 45x will help us pay for some of that learning curve.
Joseph Osha: Sure. I mean, it's early days. I just wanted to clarify. So, it does sound like to the extent that those numbers do flow through the P&L in 2025, it would be additive to that range you're discussing. Is that that kind of what you're saying?
Julian Nebreda: Yes. Well, I mean, I'll put it differently. As I said, I do not - today, where we are, I believe that the 45x will help us bringing our line into - it will cover the cost of the learning curve. That's our view today. We might be able to do this much better than what we expect. But having gone through processes like this, they usually carry some risk and you need to be - so I don't want to overpromise on this one.
Joseph Osha: Okay. And then just the last one from me on business mix, I'm wondering how you're looking in terms of storage only freestanding products versus wind and solar coupled projects. Thanks. And that's it for me. Thank you.
Julian Nebreda: Yes, we see - they're seeing more and more coming into - in the - first, outside of the US, that's the norm, just be clear. In the US, we'll see them come more and more. We signed a few during the year. We see more coming into our lease and into our pipeline. And it will be - I cannot give you an exact number, because I don't have it in the top of my head, but we do see that over time, that will take over - in the US, the US will start looking more like the rest of the world where battery storage are standalone processes, but it will take a little time. These projects they need to be - people were working on projects that were with renewal assets. It will take a little time until they actually got them permitted in the queue and all that process.
Joseph Osha: Okay. Thank you.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Dylan Nassano with Wolfe Research. Your line is now open.
Dylan Nassano: Good morning. Thanks for taking my questions. Welcome, Ahmed, and wishing you the best in your new role, Manu. Just wanted to touch on the domestic content offering. I mean, how are those conversations kind of going with the customers right now? How much volume, I guess, are you seeing it drive within the pipeline, just on the latest IRS rules that came out? Does that kind of give any kind of incremental certainty to move the needle at all?
Julian Nebreda: Like we said, I think there, our volume growth is based on our view of domestic content. We do - as we mentioned it also, there might be an opportunity for margin expansion. We said it in the past. It's too early to say today, but we are working with our customers, and it is going well, but it's too early to say whether we can expand margins based on it. That's our view. But volumes, we already - what we are - the growth we're offering essentially includes what our view on where we see our domestic content offering. And that's generally our view on this. I think that potentially could be a margin expansion, like we said, and as soon as we have visibility, we'll share that with the market to let you know if it changes. Well, that might be a potential upside for our 2025 margins, just to be sure. I don't think you will see any real significant revenue in 2024. It will be a 2025 revenue. So, we'll let you know. As the year progresses and we start signing contracts, we'll give you a view of what we can do. And the regulations were a step forward. I think, like all these regulations, they respond a set of questions and they open a new set of questions, but I think that in general, it was good to see more coming. They're still - we're still waiting for more clarifications, but it was good to see some clarification then. A lot of the issues that they were addressing were not related to our industry, but the ones that were related to our industry, to the battery storage were in line with what we expected, so.
Dylan Nassano: Got it. Thank you. And then just quick follow-up. Can you just talk a little bit about the geographic breakout of the current backlog and where in the pipeline are you maybe seeing incremental opportunities pop up? Thanks.
Julian Nebreda: Yes, I mean, yes, P&L, the same, the same as our revenue, two thirds, the US, one third of the rest. We see - in terms of markets, and I think we talked about this already, Canada has become now a new market where we've been very active and we’ve been doing very well. But besides that, I think that generally we see a lot of growth in Australia and Europe, as in Germany. And Germany, I guess is the other market where we have done the two transmission projects and we are continuing to see growth and movement. So, but very, very strong market all around and the US still leads the pack.
Dylan Nassano: Got it. Thank you. That’s it for me.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Ben Kallo with R.W. Baird. Your line is now open. Just following up on the last question, how do we think about your cell supply matching up with your geographic opportunities? Just being US cell supply or for domestic content, how are you guys thinking about that in 2025, 2026 and beyond with those contracts?
Julian Nebreda: We have - I think we are - besides the US sales, we manage the rest of the world as a global market. So, today, we don't - there's no risks from cells not having supply to any of our markets in a specific deal. Our deal for the US supply is a multi-year deal that will cover a few years, and I will expect that - that becomes a - solidifies, and it will continue for many years. And I will tell you something that I think is important. We do see that the US will have both domestic and import content. Also, we'll have a mix at the end of the day. So, it's not like the US market will become a fully only domestic content market, at least not at the beginning. For a while, you'll see both imported batteries and the domestic content batteries competing here, so.
Ben Kallo: Thank you. In the past, you've made some acquisitions. I'm just wondering about - looking at your Slide 21, the different technologies either on hardware or software, if there's areas that you see opportunities going forward.
Julian Nebreda: We have said from there that we were not going to do any M&A until we had a profitability. So, that continues to be the case. Clearly, this quarter has been good. My view on potential acquisitions is as follows. Clearly, we see M&A as an opportunity, maybe one of our value - ways of offering value to our customers. If we were to do any acquisitions, will be connected most likely to our product development, accelerating our product development. But we have no - we're not working on any acquisitions. There's nothing in the works, or we're not talking to anybody. So, don't be - there's enough work with our current business and for us to make it happen, so.
Ben Kallo: Okay, sounds good.
Julian Nebreda: But if we do anything. It'll be more on the technology side and connected to our product roadmap.
Ben Kallo: Great. Thank you.
Operator: Thank you. One moment for our next question, please. Our next question comes from line of Kashy Harrison with Piper Sandler. Your line is now open.
Kashy Harrison: Hey, good morning. Thank you for taking the questions. So, maybe just a quick follow-up on gross margins. Your fiscal 2024 guidance calls for 10% to 12%, but Manu discussed 10% to 15% as we think about fiscal 2025. And so, just wondering, what are some of the factors that could potentially push you towards the high end of that range, that 15%, versus the low end of the range of 10%?
Julian Nebreda: I think that clearly our execution capabilities move those higher up. But I think something as I mentioned that could be a material - I mean, I say a material driver will be the US content offering, if we can capture higher margins on that offering. So, that's generally - when you looked at it, see it will be a combination of maybe even better execution. So, we can do better than what we expected and the US content offering, which might - the domestic content offering, which might - as I said, this is something that we might see as an opportunity for higher margins.
Kashy Harrison: That's helpful. Thank you. And then just my follow up. Manu said this as well, and just doing the quick math, it's clear that you guys think you're going to be generating free cash flow. As we think about fiscal 2025, I know it's very early, but if you actually do successfully - if Fluence actually successfully begins generating free cash flow, how do you think about capital allocation priorities for that free cash flow? Is it - are you going to look to M&A? Are you going to look to returning capital to shareholders to shore up the balance sheet? Maybe just thoughts on how you want to use free cash flow to create capital to shareholders?
Julian Nebreda: I think my view on it today, I don't know if - supporting our growth. Technology, that's what I think that where we - I don't see us distributing cash flows or distributing dividends or anything of that sort. The growth is so - if the growth continues, as we expect it to continue, and I would see in the world, we will need all those resources to meet our customer needs to create - and that I think will be the best use of money and it will create the most value for shareholders. So, that's our view. It might change over time, but that - if you ask me about 2025, that's the way I think about it.
Kashy Harrison: Got it. Thank you.
Operator: Thank you. One moment for our next question, please. Our next question, our next question comes from line of Julien Dumoulin-Smith with Bank of America (NYSE:BAC). Your line is now open.
Alex Vrabel: Hey, guys, Alex Vrabel on for Julian. Congratulations to you guys. Congrats to you, Manu. We'll miss you in your next journey, but great results here. Maybe my first question just to - you guys obviously a lot of growth guided for next year, and obviously the indication for fiscal 2025 robust as well. I'm curious, just - we think about the bookings cadence to support that. If I look back in time, it seems like you guys see a pretty big step up in the first quarter, and then things seem to be sort of levelized one times or a little bit greater book to bill throughout the rest of the year. Is that what we should look for kind of next year, or is there any kind of gyrations or things we should watch for on cadence around IRA allowing projects to move forward or not that we should think about just as far as getting confidence in 2025?
Julian Nebreda: Yes, maybe what I think will be kind of the next step up will be the domestic content going back to it, so that which it will happen over the year. It's difficult to have a seasonality on order intake, to be very, very sincere with you. It changes over time. So, I cannot give you a guidance and say you should expect much bigger first quarter and then everything kind of staying the same. It's difficult to give you a view on that from where we are today. What we can say is that we feel very, very comfortable about our 2024 and 2025 guidance and with what - when we see how we're converting pipeline into backlog, and when we are in discussions with our customers, we feel that we're going to be able to meet very, very comfortably the 2024 and 2025 volume guidance that we just mentioned, so.
Alex Vrabel: Got it. Super helpful.
Julian Nebreda: That's what I can say it. I don't want - first, I don't want to manage this company by quarter. I've told my team, listen, get the deals, the right deals. Don't worry about meeting a quarter number because in terms of backlog, it doesn’t really matter. As long as we feel confident that we can make it happen, just do it whenever we get it.
Alex Vrabel: Yes. Many of your peers would say you're in the large project business. I know they sort of point to the same. Maybe if I can just ask, obviously a strong environment for storage, obviously sort of a very price elastic product as far as how the returns evolve. But the other thing I want to ask about is how much of this is just - I mean, as far as the volume growth that you guys are able to put up, how much of this is sort of new customers or a higher win rate as opposed to the size of the projects you're seeing are just ballooning in size? Because if we look at the developer side, it seems like we've gone from 200 megawatt hours to two-gigawatt hour projects in a year and a half. And I'm just sort of curious how much of that is really kind of driving the confidence here where it's not just we have to win a bunch of new customers. It's literally just, hey, it's the same customers. The projects are just five times bigger than they used to be two years ago. You can kind of expand on that.
Julian Nebreda: Yes. My view is that all of the above. Clearly, our customers are doing bigger projects, so great. We're also entering new markets like Canada, which are new customers that we didn't have before, and doing more work in Germany. So, I'll say in the US, it's mostly our projects getting bigger. Outside of the US is new customers we're working with. And that's kind of the way I would put it. So, we have a lot of repeated customers constantly all the time, but we're also looking for customers that meet our profile, trying to entice them to come and work with us. So, it's …
Manu Sial: I think in general, as the project sizes get bigger across, at least in the US and also outside the US, given the fact that we are one of the select set of providers that can provide multitude of attributes between great safety records, bankability, supply chain flexibility on attribute management, I think the current customers keep coming back to us and you're starting to see new customers who now want to work with partners who can manage large projects with multiple attributes start to come our way. That's a way to think about how we step up as we grow through the years.
Alex Vrabel: Yes, it's a very fair point. Well again, guys, congrats. Again, Manu, we’ll miss you, but good luck. Good luck.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Chris Ellinghaus with Siebert Williams Shank. Your line is now open.
Chris Ellinghaus: Hey, good morning, everybody. Congrats to Manu and Ahmed. The fourth quarter, the adjusted gross margin was 11.6%. Is that informative for 2024 relative to the guidance, or were there some special circumstances there, particularly related to the legacy contracts?
Julian Nebreda: Yes, I think our guidance is a 10% to 12%. So, midpoint is 11%. In the fourth quarter, there was some change orders that helped. That's what I will say, that helped bring it up beyond, below, above the - and those are difficult to predict. So, that's the way I would put it.
Chris Ellinghaus: Okay. And Julian, you, you talked a lot about battery costs, but there's a bit of a slowdown in EV sales. Are you expecting that to maybe be a tailwind for battery costs in 2024?
Julian Nebreda: I think that today, my view is that I don't think prices will continue coming down. That's our current view. They will stay kind of where they are. They won't go up, but I don't see these prices of batteries and lithium and lithium carbonate coming down below where we are. But if I knew where they were going to trade, I wouldn't be doing this job. I'll be doing something where you make a lot more money, to be very sincere with you. But that's our view, and I think that talking to our suppliers and talking to the markets and our visits to China, we're kind of - that's kind of where things will - we feel comfortable that that's the way to think about it.
Chris Ellinghaus: Thanks, Julian. I appreciate it.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Pavel Molchanov with Raymond James. Your line is now open.
Pavel Molchanov: Yes, thanks for taking the question. As you look to boost your services and software revenue, would you be open to the idea of placing some battery assets on your own balance sheet from the perspective of virtual power plants, peak saving, rate arbitrage, any of these services that new wins could participate in directly?
Julian Nebreda: Yes, no, not really. I mean, my view on this is that it's our customers’ job. They should do it. If I started doing what my customers do is a recipe for disaster. So, no, I'm not planning - we're not planning to get into the storage business or using storage as a service business to third parties.
Pavel Molchanov: Understood. A quick follow up on M&A. As you look at potential software acquisitions and like AMS a couple years ago, is it fair to say that valuation multiples in a private company arena have come down quite a bit since AMS, for example?
Julian Nebreda: Yes, I mean, as I said, we are not actually in the market. So, whether or not, I'm not testing prices, so I cannot give you first evidence of where prices are for potential acquisitions. So, but generally, I heard what you are telling me. What I hear from the banks is that when they come and pitch me stuff, that there's like all these great opportunities around, but as I said, we're not shopping around. We're in the process of capturing growth.
Pavel Molchanov: Okay. Thanks very much.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Ameet Thakkar with BMO Capital Markets. Your line is now open.
Ameet Thakkar: Hi, good morning. Thanks for squeezing me in. Hopefully two quick ones here. It looks like - we talked a lot about ASPs out in 2024, but it looks like in the current quarter for your revenue recognition, megawatts were kind of flat at 600 megawatts, but pretty big revenue increase. I was just wondering what kind of caused that big kind of step up in ASPs? Was it the change orders you mentioned a little while ago, Julian?
Manu Sial: That is correct. I think it's a combination of project mix and change orders.
Ameet Thakkar: So, we should kind of think of that as a little bit of a kind of a one-off?
Manu Sial: Yes, look, remember, as we run off our legacy projects, some of them were signed way back in 2022, early 2023. You should expect the ASPs to kind of reflect what's happening with the battery prices. But as we said, our margins continue to be intact and grow through 2024 and 2025.
Ameet Thakkar: Great, thank you. And then I think in your kind of cash flow guidance, you included the impact of deposits for the AESCS battery US cells. I was wondering if you could kind of give us a little bit of clarity on what the magnitude of that is and when that cash comes back to you.
Manu Sial: Yes, so what we've said is, I think it's $150 million over a two-year period. I think it's roughly half and half between 2024 and 2025. Half of it gets financed through customer deposits, and the other half we get financed through our own liquidity sources. And as you can see, we have ample of them. And then as the product starts coming through, we get it - a little bit as we - as AESC ships the product to us. So, you should start to see some of that deposit come back to us starting end of 2024, 2025, along with the supply of the cells.
Ameet Thakkar: Great. thanks for that and good luck, Manu.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Thomas Curran with Seaport Research Partners. Your line is now open.
Thomas Curran: Thanks for going into overtime here, guys. Manu, kudos on making so many positive contributions in such a short period of time, and best of luck on the private side of the auto parts world. Yes, we were quick to pounce on it. And then, Ahmed, congratulations on stepping into some big shoes. Look forward to collaborating with you. A follow up on how the nature of storage projects have been evolving. It was just touched on about how the size of them has soared over the last 18 to 24 months. We've also seen an uptrend in the average duration of systems being installed. Would you expect that ever longer duration trend to continue? And if so, what are some of the specifics of how you're positioning Fluence to ensure that strategically and technologically and supply chain wise, you're staying ahead of that trend?
Rebecca Boll: Yes, hi, Thomas. It's Rebecca. So, what we see right now and what we're developing and delivering from the product roadmap really is still on that two, four and six-hour duration system. So, kind of in the next 18 to 24 months, we're going to deliver what we deliver, which is not yet the multi-day or longer duration than that. What we're doing from a product roadmap perspective is, we're examining what's out there in the crystal ball of battery chemistries that allow for longer duration solutions. And we're just starting now to engage with those suppliers and put prototyping efforts in place. So, when those things become more viable in the market, we will be ready.
Thomas Curran: Makes sense. Thanks for that, Rebecca. And then just looking to dissect the contracted backlog a bit further, was hoping you could share two percentages with us. First, what's the portion of the current backlog that's non-related parties? And then could you give us a rough estimate for how much of it represents mega projects and storage of the transmission asset combined?
Julian Nebreda: So, on the unrelated party, it's around 75%. As we said, we want to - I want bring it to around 20. So, we're kind of - it will be bumpy. So, it will go up and down because these projects are big. But I think we are - it's been coming down and around 20 will be a number I feel comfortable with. So, today I think it's around 75%. So, kind of in line with what - and our - if you looked at our revenue for the year, I think it was around 29. 29 with related parties, and 61 with, so - and it should tend to go towards the 75% revenue and then at some point get to 80% that I just talked about. And then you were saying on standalone, that was the second part of your question, the …
Thomas Curran: Just trying to get a sense either - if you want to break them out, that would be great, but even if you just want to look at them on a combined basis, the percentage of the contracted backlog that's either a mega project or storage as transmission asset.
Julian Nebreda: Yes, I know. Difficult. Prefer not to go into that so at this stage, but we have a lot of flavors in that pipeline. That's the way I'll put it.
Thomas Curran: Yes, hence my curiosity.
Julian Nebreda: Yes. I know. But hey, I think that - I think it's better to keep it with this view, and that allows us, all of us to work better as we move forward.
Thomas Curran: Fair enough. Thanks for taking my questions.
Julian Nebreda: Thanks for the question. And I think this is one of our successes, the ability to continue growing with none - our own unrelated party transactions that's growing at a much higher rate than the 35% to 40%, as you can see from where our pipeline stands today and where our revenue stands today.
Operator: Thank you for your questions. This concludes today's conference call. Thank you for participating. You may now disconnect everyone. Have a wonderful day.
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