Fluence Energy, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023; comparisons are to FY2022 unless stated otherwise. Fluence provides grid-scale energy storage products and services, operations and maintenance, and optimization software. Its storage assets deployed reached 3.0 GW, with 4.6 GW of contracted product backlog.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $2,218.0 million | $1,198.6 million |
| Gross profit (margin) | $141.0 million (6.4%) | $(62.4) million ((5.2)%) |
| Operating expenses | $253.7 million | $221.2 million |
| Net loss | $(104.8) million | $(289.2) million |
| Adjusted EBITDA | $(61.4) million | $(235.3) million |
| Operating cash flow | $(111.9) million | $(282.4) million |
| Free cash flow | $(114.9) million | $(290.3) million |
Revenue increased 85%, chiefly from higher sales volumes of Gen6 storage systems. Storage products and solutions generated $2,197.6 million; services and digital applications generated $16.0 million and $4.4 million, respectively. The two largest customers accounted for approximately 49% of revenue, and related-party revenue was $653.8 million (about 29%).
At September 30, 2023, cash and cash equivalents were $345.9 million and restricted cash was $106.8 million. Current assets were $1,195.0 million and current liabilities $745.7 million. Borrowings secured by customer notes receivable totaled approximately $50.6 million. The former $200 million revolver had no borrowings outstanding at year-end and $35.9 million of letters of credit. A new $400 million asset-based facility was entered into on November 22, 2023; no borrowings were outstanding as of November 29, 2023.
Changes, outlook and material matters
- Gross profit improved by $203.3 million year over year, reflecting better margins on newer Gen6 projects, approximately $41 million of net favorable cost items, and $9.1 million from consulting services to AES. The $41 million included a $19.5 million battery-vendor settlement and nonrecurring comparisons involving shipping and cargo-loss costs.
- Cash used in operations fell by $170.5 million, but remained substantial. Investing cash flow was $94.4 million, mainly due to maturities of short-term investments; financing cash flow was $52.6 million, mainly from borrowings against customer notes.
- Management expects FY2024 order intake to be seasonally stronger in the third and fourth fiscal quarters than in the first half. Fluence expected production of its own battery packs to begin in mid-2024. No quantified FY2024 revenue or earnings guidance is provided in the supplied filing text.
- Management stated that cash, expected operating cash flows, note-receivable borrowings and available credit were expected to fund requirements for at least 12 months after filing. The company nevertheless reports a history of losses and negative operating cash flow, and says additional financing may be needed if liquidity needs exceed available sources.
- Contractual remaining performance obligations were $2.9 billion; the company expected to recognize approximately 60%–65% as revenue in the next 12 months. Backlog and pipeline are not assured to convert to revenue or profit.
- Battery purchase commitments totaled $4.72 billion through 2029 and thereafter. Off-balance-sheet performance guarantees, letters of credit and surety bonds had stated aggregate maximum exposure of $2.34 billion; this is not presented as an expected loss.
- The auditor gave an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting. A material weakness in controls over estimates at completion used in percentage-of-completion revenue accounting remained unremediated at September 30, 2023; management planned remediation during FY2024.
- Pending matters include a customer dispute over a 2021 facility overheating event, with no specific damages demand disclosed, and a 2022 overheating event at an AES facility; the potential financial impacts were not estimable. In project litigation, Fluence seeks approximately $37 million, while a defendant’s cross-complaint seeks at least $25 million plus disgorgement of approximately $230 million in compensation. Fluence disputes the allegations; the impact is not estimable.
- The company recorded a net warranty liability of $16.6 million after recognizing recoverable supplier warranty costs. It also disclosed that the Siemens redemption could generate estimated future tax savings of $96.5 million, with $82.0 million potentially payable to Siemens under the tax receivable agreement if specified assumptions are met; no liability was recorded because payment was not considered probable.
Key facts for investors to verify
- Progress and independent testing of remediation for the revenue-recognition material weakness, and whether any revisions to project estimates affect reported results.
- Conversion, timing and profitability of contracted backlog and remaining performance obligations, especially given long sales and installation cycles.
- Customer and related-party concentration, customer collections, and performance of major projects.
- Resolution and potential exposure from the project litigation and overheating incidents, plus future warranty claims.
- Ability to meet substantial battery purchase commitments while managing supplier concentration, pricing, provenance and working-capital needs.
- Availability under the borrowing-base facility, liquidity needs, and potential tax receivable agreement payments.