Fluence: ‘US the principal driver of unprecedented demand for battery storage’

Both figures are company record amounts, representing 22% and 82% growth year-on-year, respectively. Fluence generated positive net income for the year for the first time since its NASDAQ listing in October 2021, with a GAAP gross profit margin of 12.6% for the full year and 12.8% for the quarter.

In Q3 FY2024, Fluence had offered revenue guidance between US$2.7-2.8 billion for the full year.

Company leadership was buoyant in an earnings call to explain results. CEO Julian Nebreda said the results “demonstrate that we can generate strong profitable growth at scale,” and that Fluence had “met or exceeded our outlook in all key metrics”.

CFO Ahmed Pasha noted that the company has achieved five consecutive quarters of double-digit gross profit margin, and the US$78 million adjusted EBITDA for the FY2024 was “well in excess” of its guidance range of US$55 million to US$65 million.

Pasha attributed the performance, which saw a positive swing of around US$140 million in EBITDA from US$-61.4 million last year, to a focus on project execution, claiming key projects had been delivered on time and under budget.

Activities in the US played a major role, with CEO Nebreda noting that about half of Fluence’s business comes from the US market, where the company has recently started manufacturing modules for its battery energy storage system (BESS) solutions in Utah, using cells sourced from Envision AESC’s production line in Tennessee.

The onshoring manufacturing strategy meant the company is positioned to provide “100% non-Chinese product” for US customers, Fluence claimed, in a market which it believes will drive “unprecedented growth in demand” for battery storage.

While CFO Pasha said revenue had accelerated in Europe and Asia which together now represent 40% of Fluence’s business versus 30% in the last two years, much of the presentation and earnings call emphasised the importance of the US to its growth and profitability strategy.

“In the coming year, nearly half of our US$21 billion pipeline is in the US market and the rest in the international market, with Germany, Australia, Canada and Chile, representing the bulk of it,” Nebreda said.

Fluence investing in US-made 530Ah cells

This included an announcement that while production has begun of 305Ah battery cells at Envision AESC’s factory at a first production line, a second line will be upgraded to make 530Ah cells, which the company claimed will provide superior energy density and better degradation profiles and longer battery life.

“We have made the decision to bring the most state-of-the-art technology to the US,” Nebreda said of the 530Ah cells.

“Something that we want to prove is that you can build these things in the US. You can manufacture these in the US with the same quality, precision, and capability as any other market in the world.”

Fluence has exclusivity as the off-taker for the Tennessee-made cells until the end of 2029 and is negotiating a potential third line with AESC, while the HVAC, inverter, communications equipment and enclosures used on its BESS solutions are all made in various US locations.

“Today, we can offer 100% non-Chinese product, supported by six US production facilities owned and operated by our supply chain partners, five of which are located in states that were won by President Trump and benefit from the Inflation Reduction Act (IRA) manufacturing incentives,” Nebreda said.

Domestic content and Chinese tariffs

Fluence had been moving towards an onshoring and nearshoring strategy even before the IRA. Nonetheless, its domestic production and supply chain enable it to both capture the domestic content tax credits and to ride out the impacts of tariffs placed on imports, the company claimed.

There is now of course great uncertainty over the levels of tariffs on Chinese goods and indeed all imports that the incoming Trump administration might introduce, including the president-elect’s social media post this week that said an extra 10% tariff would be slapped on Chinese goods due to what Trump claimed was a failure by China’s government to crack down on the supply of the illegal drug fentanyl into the US.

The Biden-Harris administration already raised tariffs on Chinese cell imports from the current 7.5% level to 25%, due to come into effect in 2026. Many have speculated that the incoming president might raise them even higher, while the future of the IRA too has been questioned.

Nebreda said Fluence did not see a full repeal of the IRA as likely but said that its US-made strategy would limit its exposure to tariffs and enable it to ride them out. The Fluence module is due to receive its UL1973 certification this month, he said, and a “gradual ramp up” in production is expected over the coming quarters.  

Responding to an analyst’s question, Nebreda and Pasha said the latest 10% tariff hike would be “immaterial,” impacting only about US$150 million of the company’s US$1.6 billion backlog in the US, of a total US$4.5 billion backlog of orders worldwide.

Nebreda explained that some deals with suppliers and customers see the tariff risks shared with the system integrator, and Pasha added that Fluence believed it has the “flexibility to pass on to our customers” the 10% rise.   

FY 2025 guidance

In a September interview with ESN Premium which largely focused on US strategy, Fluence Americas president John Zahurancik said the company was on the trajectory it had planned to be with regard to profitability since its IPO took it public.

“We’ve had pretty substantial investment into the capabilities that we knew we would need to be a large-scale player for the long-term, and our plan was that this year we would start to turn positive on the financial results,” Zahurancik said, speaking with the site at the RE+ clean energy trade show.

Fluence’s shares were trading at US$19.00 as markets closed yesterday, 49.4% down from their high of US$37.52 on late October 2021 just after they listed, but 161.6% up from their lowest recorded price of US$7.30 during the pandemic’s lithium supply crunch in May 2022.

The company initiated 2025 guidance in its results release.

It expects FY2025 revenue of between US$3.6 billion and US$4.4 billion with a US$4 billion midpoint, with 65% of the midpoint covered by its current backlog. Revenues will be heavily weighted to the second half of the year, as was the case in 2023.

Adjusted EBITDA of between US$160 million and US$200 million was guided, with a US$180 million midpoint, while Fluence predicts annual recurring revenue (ARR) of about US$145 million by the end of FY2025.

CFO Pasha said an expected growth of 30% into FY2026 beyond that is in line with the company’s forecasts of global energy storage market growth.

US$300 million capital raise required

The CFO said, however, that Fluence anticipates a need to raise roughly US$300 million in working capital during FY2025, which would support “significant future growth that we are projecting,” including an approximate 50% growth in revenue for the fiscal year.

The funding would be split more or less evenly between working capital to directly support revenue growth and for investment in its US manufacturing capabilities, enabling it to qualify for 100% domestic content requirements and upgrade AESC’s 530Ah cell production line.

Pasha said Fluence had “several options available” for funding, from US$519 million cash reserves as of the end of Q4 FY 2024, and US$444 million available under a revolving credit facility. Fluence currently holds no debt.