Release Date: November 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fluence Energy Inc (FLNC, Financial) reported its first-ever full-year profit for fiscal year 2024, demonstrating strong profitable growth at scale.
- The company achieved a record revenue of approximately $2.7 billion with a 12.6% gross margin, exceeding expectations.
- Fluence Energy Inc (FLNC) increased its annual recurring revenue by 80% to $100 million, showing significant progress in its services and digital businesses.
- The company added over $1 billion in order intake for the quarter, growing its backlog by 55% to $4.5 billion, providing strong visibility for future revenue.
- Fluence Energy Inc (FLNC) generated $72 million of free cash flow for the year and ended the quarter with $518 million in cash, highlighting effective margin expansion and working capital management.
Negative Points
- The company anticipates a need for approximately $300 million in additional working capital to support future growth, which may require funding through existing cash, borrowing, or new securities.
- Revenue for fiscal 2025 is expected to be back-end loaded, with 80% anticipated in the second half, which could pose risks if project timelines are delayed.
- Fluence Energy Inc (FLNC) faces competitive pressure from aggressive pricing by Chinese companies in the energy storage market.
- The company has a wide gross margin guidance range of 10% to 15% for fiscal 2025, indicating potential variability in profitability.
- There is a risk of market disruption due to potential increases in tariffs on Chinese battery imports, although the company has taken measures to mitigate this impact.
Q & A Highlights
Q: Can you discuss the solidity of your backlog given the changes in Washington and the back-end loaded nature of your revenue guidance for fiscal '25?
A: Julian Nebreda, President and CEO, explained that two-thirds of the revenue guidance is already in the backlog, with $1.5 billion in contracts at late negotiation stages. More than half of this will convert into revenue for '25. The backlog consists of binding deals, and there have been very few delays or cancellations, providing confidence in the revenue guidance.
Q: How do you feel about maintaining your market share, especially against competitors like Tesla?
A: Julian Nebreda noted that Fluence's market share is generally sustaining, with a competitive offering that wins contracts. The company focuses on innovation and a resilient supply chain to maintain its competitive edge. Despite aggressive competition, Fluence is committed to continuing its success.
Q: What happened in fiscal '24 that led to missing the initial revenue midpoint, and why won't it repeat in '25?
A: Julian Nebreda stated that the difference this year is the $1.5 billion in late-stage contracts, providing a clear line of sight to meeting numbers. Last year, project delays affected revenue, but with the current backlog and late-stage negotiations, there is confidence in achieving the '25 midpoint.
Q: Can you provide more details on the $1.5 billion in late-stage negotiations?
A: Ahmed Pasha, CFO, mentioned that roughly half of the $1.5 billion is in the US and half in Asia. The mix provides a balanced approach to revenue generation for fiscal '25.
Q: How confident are you in the $12 billion pipeline given the deflationary pricing environment?
A: Julian Nebreda assured that the pipeline is constantly adjusted for pricing changes, with 95% reflecting current prices. The pipeline's value is aligned with current market conditions.
Q: Will the upgrade to the 530 AMP power cells be accretive to overall gross margins?
A: Julian Nebreda indicated that while it's difficult to predict exact gross margin impacts, the new technology is expected to be within the 10% to 15% range. The focus is on proving high-quality US manufacturing capabilities.
Q: How are you managing potential tariff impacts on existing contracts?
A: Julian Nebreda explained that about 10% of the US backlog is subject to Chinese tariffs, with some risk-sharing arrangements in place. The impact is not expected to be material, and measures are in place to manage it effectively.
Q: What factors could push you towards the high or low end of the gross margin guidance?
A: Julian Nebreda highlighted that execution and cost management are key drivers. New product introductions in '25 may pose challenges, but the company is committed to maintaining strong performance within the 10% to 15% range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
