Fluence Energy, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended June 30, 2022. The filing is dated August 15, 2022. Fluence develops and sells battery-based energy storage systems and provides operational services and AI-enabled digital applications. Its fiscal year ends September 30.
Financial results and liquidity
| Metric | Three months ended June 30, 2022 | Nine months ended June 30, 2022 |
|---|---|---|
| Revenue | $239.0 million | $756.6 million |
| Gross loss / margin | $5.2 million / (2.2%) | $73.1 million / (9.7%) |
| Net loss | $60.8 million | $233.0 million |
| Net loss attributable to Fluence Energy, Inc. | $19.3 million | $67.3 million |
| Net cash used in operating activities | Not separately provided for the quarter | $60.9 million |
- Third-quarter revenue declined 14.1% year over year; nine-month revenue increased 53.6%. Nine-month revenue from related parties was $497.8 million, or about 66% of total revenue.
- For the nine months, cost of goods and services rose 65.4% to $829.7 million, outpacing revenue growth. Management cited higher material and shipping costs, project delays and overruns, and COVID-related costs.
- Nine-month adjusted EBITDA, a non-GAAP measure, was a loss of $144.4 million, compared with a loss of $49.4 million a year earlier. Free cash flow, as defined by the company, was negative $63.6 million.
- At June 30, cash and cash equivalents were $677.0 million; restricted cash was $85.1 million, including $10.0 million classified in non-current assets. Total assets were $1.67 billion and total current liabilities were $994.0 million.
- No amounts were drawn on the $200 million revolving credit facility, which matures November 1, 2025. The company reported compliance with applicable covenants. Supplier-financing payables were $93.2 million; AES and Siemens provided $100 million of related guarantees.
Changes, outlook and material items
- Growth was uneven: nine-month revenue rose substantially, while quarterly revenue fell because of project timing and performance-obligation revenue recognition. New energy-storage contracts reached 1,493 MW for the nine months, versus 490 MW a year earlier. Cumulative deployed capacity was 1,580 MW at June 30, 2022.
- Gross losses worsened for the nine-month period versus 2021. Management attributed pressure to shipping constraints and costs, project cost overruns and delays, and the cargo-loss incident. COVID-related costs included $39.1 million for the nine months; management said shipping delays could continue through the rest of fiscal 2022.
- Operating expenses increased, including research and development to $42.2 million and general and administrative expenses to $83.8 million for the nine months. Management expects operating expenses, excluding stock-based compensation, to rise as the business grows and matures as a public company.
- Management stated that IPO proceeds, cash flows from operations and borrowing capacity should be sufficient for at least the next 12 months. The filing does not provide specific revenue or profitability guidance.
- Remaining performance obligations were $2.13 billion; the company expected to recognize 91% as revenue within five years. Customers may defer or terminate contracts, and backlog and pipeline are not guarantees of future revenue.
- In April 2022, Fluence acquired Nispera AG for preliminary consideration of $33.4 million, adding renewable-asset analytics software. The acquired intangible-asset valuations were preliminary.
- Siemens Industry exercised a redemption right on June 30 for 58.6 million LLC interests, settled with Class A shares on July 7. The transaction increased Fluence Energy, Inc.’s ownership interest in Fluence Energy, LLC to 66.08%. A related tax-basis adjustment was estimated to produce $113.6 million in tax savings; Siemens may receive 85%, or approximately $96.5 million, under the tax receivable agreement if specified assumptions are met. No liability was recorded because payment was not considered probable.
- Two customer-facility overheating events were under investigation: a 300 MW facility event in 2021 and a 10 MW AES facility event in Arizona in April 2022. For the earlier event, the customer alleged Fluence liability but had not demanded a specific amount; Fluence denied liability. The company could not estimate financial or reputational impacts for either event.
- Disclosure controls were deemed ineffective due to an unremediated material weakness in revenue-recognition controls, including accounting for in-transit or uninstalled equipment and liquidated damages. Remediation was ongoing.
Important facts for investors to verify
- Whether shipping, supply-chain and project-execution costs abate, and whether gross margins improve.
- Conversion of backlog and pipeline into recognized revenue, given customer concentration, project timing and cancellation or deferral rights.
- Cash burn, working-capital needs, restricted-cash availability, and continued access to supplier financing and revolver capacity.
- Findings and potential claims related to both overheating events, including any effect on product adoption or future costs.
- Progress in remediating the revenue-recognition control weakness and any resulting financial-statement changes.
- Actual timing and amount of tax receivable agreement payments; the disclosed $96.5 million estimate depends on assumptions and was not recorded as a liability.