Fluence earns US$1.2 billion revenues in 2022 and positive gross profit in fourth quarter

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Fluence has reported its highest quarterly and yearly revenue figures to date and forecast adjusted gross profits of between US$60 million and US$100 million for next year.

The global energy storage technology provider published its financial results yesterday. In the three-month period ending 30 September – the company’s fourth quarter of its financial year – Fluence earned US$442 million revenue, for a total of US$1.2 billion revenues over the full year passed.

That means it beat the US$1.1 billion revenue guidance offered in August, and was within the US$1.1 billion to US$1.3 billion range given before that. Meanwhile its quarterly revenues for Q4 had been forecast at about US$345 million, and GAAP gross margin swung from -2% in Q3 2022 to 2%.

The company has been established for some time as one of the leaders in the energy storage system integrator space and moving towards a role as provider of modular hardware and digital energy asset optimisation.

As such, it has deployed, contracted, or has under management more than 5GW of energy storage, participated in 205 projects and is active in 44 different markets.

However, as noted in September by research analyst James West of Evercore ISI Research, the company’s focus under former CEO Manuel Perez Dubuc was to “land and expand” – i.e., carving out market share in key territories.

Incoming CEO Julian Nebreda, who took over in the middle of that month, would be more focused on turning that head start into profits, West said, a view pretty much confirmed at the time by Fluence’s investor relations VP Lexington May, who said the company was “making a primary focus on profitable growth”.

Commenting on the most recent results, CEO Nebreda said Fluence expected “robust” demand for the company’s products and services in the US to be “amplified” by the impact of the Inflation Reduction Act (IRA), while in Europe the ongoing energy crisis demonstrated “the need for energy security and independence, which provides additional opportunities for energy storage,” Nebreda said.

Fluence CFO: ‘Headwinds now largely behind us’

However, while yearly GAAP gross margin improved considerably from -10% from fiscal year 2021, it was still negative, at -5%. Adjusted gross margin was approximately -0.2% for FY2022, versus 2.2% for last year.

In the previous quarter’s results, Fluence had said industry headwinds continued to be confronted, including logistics issues caused by COVID-19 and the almost equally well-documented supply chain constraints and raw material price rises in the lithium battery industry.

At that time, former CEO Dubuc said those impacts had been tough on the company – and the industry – contributing to a 14% fall in revenues in Q3, but that progress was being made in mitigating headwinds while some of their causes, such as shipping delays, were become less of a problem.

Yesterday CFO Manavendra (Manu) Sial, also recently appointed after being recruited from SunPower, said Fluence was now “confident the impact of the headwinds experienced during 2022 is largely behind us as a result of the improvements made to our supply strategy and overall project execution”.

“During the fourth quarter we showcased our ability to improve our margins into positive territory and ended the quarter with total cash in excess of US$500 million. We will continue to focus on improving near-term margins while positioning Fluence for sustained returns by growing our recurring revenue through our digital and services businesses,” Sial said.

During the fourth quarter, Fluence booked US$560 million of orders, including a contract worth just under half that sum with German transmission operator Transnet BW for a so-called ‘Grid Booster’ project.

A 250MW battery energy storage system (BESS) will essentially play the role of a virtual transmission asset, increasing hosting capacity and redundancy of high voltage transmission lines. The BESS will be commissioned in 2025.

The company also referred to a contract worth about half a billion US Dollars with Danish power company Ørsted that was booked in November, after the reported period ended, as evidence it can provide “highly complex solutions” for customers.

This appears to be the first public mention of the Ørsted deal, although company leadership might elaborate during an earnings call, to be hosted this morning (13 December).

Fluence yesterday initiated revenue guidance for the 2023 financial year in a range of approximately US$1.4 billion to US$1.7 billion, as well as the aforementioned adjusted gross profit guidance for the year of up to US$100 million.

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