00:05 Good day and thank you for standing by. Welcome to the Fluence Energy Fourth Quarter twenty twenty one Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] 00:24 I would now like to hand the conference over to your speaker today, Sam Chong, Treasurer, Investor Relations. Please go ahead.

00:47 Welcome everyone to our earnings call for the fourth quarter of fiscal year twenty twenty one, which ended on September thirty. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of Federal Securities Laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of nineteen ninety five. 01:12 These forward-looking statements are neither promises nor guarantees and are based upon our current estimates and various assumptions and are subject to material risk and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements. These and other risks are described in our filings made with the Securities and Exchange Commission. 01:37 We encourage you to review these filings for a discussion of these factors, including our annual report on Form ten K for the fiscal year ended September thirty, twenty twenty one, which will be filed next week. You are cautioned not to place undue reliance on these forward looking statements, which speak only as of today, and the company disclaims any obligation to update such statements for new information. This call will also reference non-GAAP measures that we view as important in assessing the performance of our business. 02:14 A reconciliation of these non-GAAP measures to the most comparable GAAP measures is available in our earnings materials on the company's Investor Relations page at ir.fluenceenergy.com. 02:31 I will now turn the call over to our CEO, Manuel Perez Dubuc.

02:40 Thank you, Sam. I would like to extend a personal welcome to our investors, research analysts, employees, and customers who are listening to our first analyst call as a publicly traded company. This morning, I'm going to share our market outlook and provide an overview of our business for our new investor base. 03:01 Afterwards, I will give an update on some recent developments and then I will hand the call over to our Fluence CFO, Dennis Fehr, who will discuss the financial performance and as well as provide some high level revenue guidance. Before I jump into the market outlook, I would like to extend a sincere thank you to the entire Fluence team for their passion and commitment to delivering best-in-class products, services, and digital solutions to our customers. 03:38 Our team has demonstrated tremendous strength and resilience during their ongoing pandemic. It is thanks to their contributions that we have successfully completed our IPO generating almost a billion dollars to help track our next phase of growth. 04:01 I will start on slide four on the quarterly earnings presentation with an overview of our business opportunity. Climate change is real and it causes an existential problem. We are finally seeing governments, companies, and citizens take serious steps to address this issue. The electric sector plays great responsibility in leading that effort as the world transitions away from fossil fuels towards renewable energy. 04:34 In fact, renewables are now one of the cheapest sources of electricity further accelerating this monumental shift. This huge transformation is driving three revolutions that are happening at the same time. The first is a decarbonization of our planet and the transition to clean energy to help address climate change. The second is the electric revolution, which is an electrification of everything. 05:04…

22:26 Thank you, Manuel, and good morning to everyone on the call. During today's call, I will recap our fourth quarter and fiscal year twenty twenty one results, discuss our outlook for fiscal year twenty twenty two, and talk through our capital allocation plans. 22:43 As Manuel stated, we delivered a record year of new orders and have been successfully populating our ecosystems from both sides. We achieved record order intake of energy storage products and came out very strong on Fluence IQ orders. 23:01 Turning to slide eleven, talking you through the numbers of its first table. In fiscal year, twenty twenty one, we contracted a record one thousand three hundred eleven megawatt of energy storage products and the record one thousand nine hundred fifty nine megawatt of energy storage services. 23:20 Services megawatt exceeded product megawatt because we successfully sold service contracts on products sold in previous years. Overall, our aggregate attachment rate on services as of September thirty twenty twenty one was approximately a seventy four percent. This attachment rate is very encouraging as it is a continuous proof of our ecosystem strategy and provides us with recurring revenues and visibility to future cash flows. 23:49 As already elaborated, we are seeing very strong demand for our Fluence IQ with a total two thousand seven hundred forty four megawatt contracted, which provides future cross selling opportunities for our products and services. 24:03 Now, moving to the second table. Despite delays and supply chain and temporary site restrictions due to COVID-nineteen, demand of megawatts that we deployed for our energy storage products more than doubled growing one hundred and eleven percent from the prior fiscal year. 24:22 Due to our strong contracting and in part due to the delays, contracted backlog megawatts grew forty three percent. Our product…

31:46 Thank you. [Operator Instructions] Our first question comes from Mark Strouse with JP Morgan. Your line is open.

32:01 Yes, thank you very much for taking our questions, and welcome to the public markets. Can we just dig in to the comments around the project timing? Can you just talk about the – what gives you the confidence in claiming that you think that there will be a rebound in the second half of this fiscal year? Is that just the macro that you're seeing or is that based on specific commentary from your customers?

32:34 Thank you, Mark. And good morning and thanks for welcoming coming us to the public market. Very excited times. Yes, as we mentioned, the shipping delays, we see in some level of stabilization on the shipping and reliability of those. So that, we get into equipment to the side, they have been styled and commissioned. We already mentioned about some of the delays and our cost, but we are confident that there will be progressing. We have the people on the ground and we have – we're understanding where the bottlenecks are. So, we're very confident that we will get those sites in operation fairly soon.

33:26 Okay. Thanks, Manuel. And then just a quick follow-up on the Digital IQ business. There were some pretty impressive metrics that you were providing during your IPO, as far as the customer savings that your customers were experiencing, is there any update to that in the few months that we've had since the IPO? Any other encouraging metrics that you're able to go out to new prospective customers with? And then kind of a quick follow-up to that is, how should we be thinking about the potential revenue sharing upside from those contracts when we think about your guidance for the coming year?

34:11 Thank you, Mark for the question. Yes, indeed we are very, very excited about our latest wins. They all demonstrate that our ecosystem that we create and populate in across the three business line is working well with all those cross selling opportunities and the optimization that we get it from the Fluence IQ platform is very well received, but the market is getting more and more momentum. 34:39 I would like to give a chance to our Chief Digital Officer, Seyed, to give us a little more color on those big wins that we had and we demonstrated.

34:50 Sure. Thank you, Manuel. Seyed, here. Just to answer some of the specifics of your questions, yes, we're seeing a lot of momentum on the platform, KPIs. This is summarized for you and since inception we submitted over two hundred thousand economic bids in different wholesale markets, which is pretty impressive and exciting or [indiscernible] uptime and runtime time is being greater than ninety nine point nine nine percent, which is pretty impressive, and we're also continuing to provide upside to our customers based on their asset class and the geography they are located. 35:27 So, a lot of momentum in terms of the KPIs and the product performance. They just wanted to note that, but in terms of the continuous growth you're absolutely right. We had a pretty strong quarter. You can see some of the diversity of the product applications that we're deploying. The Hazelwood project it being pretty impressive for us, and we can add more color there, but just to go back and tie that to the whole holistic vision that we're pursuing, which is to transform the way we power a world. 35:56 I should note the power of combining smart connected energy storage systems, digital applications, and services, and that's being showcasing itself for the Hazelwood project and many projects to come. So, let me pause there to see if that answers your question. Happy to elaborate further.

36:15 Yes, it does. Thanks Seyed. That's it for us. Thank you very much.

36:20 Thank you, Mark.

36:23 Thank you. Our next question comes from Maheep Mandloi from Credit Suisse. Your line is open.

36:31 Hi, good morning and thanks for taking the questions and welcome to the public markets. One question on the free cash flow, I think just trying to understand, you’ve given a clarity around these delays and the more transitory and expect to realize them in the second half, but does that impact any of your prior free cash flow assumptions for the next year?

37:00 Yes. Thank you very much Maheep for your best wishes. And let me pass to our CFO, Dennis to give you more color on your specific question.

37:14 Right. Good morning also from my side. And thanks for the question. So overall, it does not change our view for entire fiscal year twenty twenty two, but certainly it impacts the timing within the fiscal year twenty twenty two. So, as we are seeing some of these topics being resources in the first half of fiscal year twenty twenty two, we do expect that certainly cash flow will be impacted by that throughout the first half versus in the second half, we will see a stronger recovery there, and then to close out the year as we expected.

37:50 Got it. And then just on the battery supply, I know you previously talked about having in a supply for twenty two and twenty three, but as you, kind of like looking into procuring more batteries for beyond that, are you seeing any challenges in the market? We keep hearing about supply constraints, so just trying to understand your visibility on that?

38:14 Thank you, Maheep. And as we stated, yes, we [battery diagnostic] [ph], we have secured a significant capacity that will cover our immediate needs. We announced our strategic partnership with Northvolt in Europe. 38:33 We're do – we’re talking to top tier battery manufacturers also in the U.S. that eventually will come online. So, we are truly diversifying our supply chain and we're going regional on sourcing for the three large regions and the three large areas where we're doing in business. So, on that regard, that goes exactly in the direction that we design our strategy and we are regionalizing our contract manufacturing and supply chain.

39:08 Appreciate that color as well, and just one last one from me, and then I’ll hop back, and just more housekeeping. The services contracted backlog seems flattish quarter over quarter, I know you added more contracts in the quarter for services as well, so just trying to understand that or sort of missing anything over there? Thanks.

39:30 Yes. Thank you, Maheep. I think that that is not exactly why seeing, but I’m giving Dennis a chance to give you more and more specific numbers on that regard. But actually they're going up.

39:45 Right. Hi, Maheep. So, in [indiscernible], we disclosed one thousand one hundred ninety eight megawatt contracted backlog as of June thirty as we increased it to one thousand nine hundred and eighteen as of September thirty. So, we are seeing basically a sixty percent increase within the quarter in line with the strong contracting which we have seen.

40:07 Perfect. I'll follow up the rest later on. Thank you.

40:12 Thank you. We have a question from James West with Evercore ISI. Your line is open.

40:21 Yes, Thanks guys and good morning. And congrats and welcome again to the public markets. Manuel, I was curious if you could describe the level of demand that you're seeing in the market today, it seems to have hit some type of tipping point in the last six months or so. And over the last time we connected, you were [indiscernible] big time, but you were on a plane that was taking off and so you had to jump off at the end there and it was certainly, you were going to see customers and there seems to be this acknowledgment worldwide of, we need to get going fast on energy storage and so I want to hear your kind of commentary around what's maybe changed in the market? What the tipping point was and how customers are thinking about this now?

41:19 Yes. Thank you very much, James, and thanks for the opportunity to tell what we've seen. It is true. There's a significant demand building up everywhere in the world. The fact that we expand into – we just expanded into a new market in Taiwan. We got record year orders on every single of our three business lines and we are not even counting on additional regulation or any subsidies that might come from the infrastructure B or BBB or any other new regulation in other part of the world. We have seen out of the United Nations Climate Change Conference the very strong commitment for example from India. 42:11 They are announcing a substantial amount of energy storage going to that market. They are expanding the regulation where every renewable project should have energy storage associated with it. So, we are looking at that market. The fact that we are expanding in our three regions. Yes, we see a significant worldwide adoption of the technology and understanding that is impossible to decarbonize the planet at just with renewables. That we need energy storage smart solutions with digital optimization on top of that.

42:57 And then maybe a follow-up here. More a housekeeping item, but the contract manufacturing rollout of additional facilities when should we expect to see some of those come online ex what you've been doing in Vietnam to somewhat distribute your supply chain?

43:17 Yes. Yes thanks for that question, James. Yes, this goes exactly on our strategy direction. We already have selected contract manufacturing in Europe and in the U.S. We are negotiating those terms that it will expand and give us flexibility to our capacity to deliver products to those regions or between regions and significantly reduce our exposure to shipments or any logistic delays. 43:53 Also, it will allow us eventually, if there's some elements of local content that is being required, it will give us the flexibility and the optionality to do that. So, we're moving in exactly in that direction and is very, very much our strategy.

44:12 And do those come on early calendar twenty two?

44:17 Yes. We're saying that that might be up and running by the end of twenty twenty two, perhaps first half of twenty twenty three. Yes.

44:28 Okay, got it. Thanks Manuel.

44:31 Thank you.

44:34 Thank you. Our next question comes from Julien Dumoulin-Smith from Bank of America. Your line is open.

44:43 Hey, good morning team and congratulations indeed again. So, thank you for the time. Just to follow-up here, I'm just thinking through twenty two, how are you thinking about the incremental or the degree to which Hazelwood for instance is an incremental project there or what have you versus how you were thinking about things to the course of year? And really, if you can try to quantify some of the mitigating factors when you alluded to logistics and trying to contract this ahead of time, etcetera, you know order of magnitude, how much could that help offset some of the impacts here? Again, trying to understand some of the puts and takes, maybe degree conservatism reflected in the numbers here?

45:23 Yes, thank you very much Julien, and good morning again. Thanks for your kind words. We’re so happy that you are here with us and following our story and our success. Yes, I mean, what we have seen in the Hazelwood contract and project is exactly what we want to do around the world. 45:51 It’s a very significant customer that is understanding our technology, is taking advantage of it, is entering through a market that they see as [promising] [ph] and financially attractive. And by having this Fluence IQ platform on top of that with revenue sharing type of potential, it really, really brings value to not just to the customer, but our offering and our ecosystem concept. 46:21 On the shipping delays and yes, we have taken short-term measures and long-term measures that I discussed about the long term ones, which is the full regionalization of our supply chain, contract manufacturing, and logistics. On the short-term, yes, we're talking to the top tier free liners to secure capacity and to have a very, very good scalable that is usually a few months ahead of us. 46:48 On the specific numbers, I will allow Dennis to give us more color, but what we can say is that, we've seen a stabilization both in prices and reliability.

47:02 Yeah, let me come back to the Hazelwood item, where Manuel already highlighted and let me highlight again, the tremendous when where we're really able to sell all three items of our ecosystem and therefore, as you may remember Julien from our discussion that we have been very conservative from the regards how we look at the performance contracting side, and we see a tremendous upside on the digital side of the business and that is contract. The products on the services side are basically in line with what we have contemplated in all business plans and we are also quite proud of that that we have achieved that.

47:41 Excellent, guys. Thank you. And just if I can follow-up your nuance here, you talked about some project delays getting pushed from twenty one to twenty two. You provided this calendar year approximate percentage of revenue, but presumably as we think about 1Q twenty two more specifically rather than the generic number that you guys provided here. In theory, the first half should be stronger than the percent revenues that you guys talked about here on, sort of the generic go forward basis, right? I just wanted to sort of clarify the bridge twenty one to twenty two versus this sort of ongoing guidance?

48:13 Right, Julien. So, our seasonality stands was the typical seventy percent in the second half as I also covered in the statement before. We certainly with this delay see a slightly stronger revenue than the normal seasonality in H1, but it's not to the level that we would see that H1 is becoming stronger than H2. So, certainly, there is some higher number there than the typical thirty percent, but not up to a level of fifty percent or more.

48:49 Got it. Alright, excellent. I will leave it there guys. Thank you so much, cheers.

48:53 Thank good, Julien.

48:56 We have a question from Brian Lee with Goldman Sachs. Your line is open.

49:02 Hey guys. Thanks for taking the questions. Good morning. Couple sort of modeling related ones, if I could. If I calculate right, I think the revenue push-out was about one hundred and twenty million dollars or in that ballpark, is that fair? And how many projects were impacted? And you mentioned seeing this all getting recognized in the first half of fiscal twenty twenty two. What's kind of the cadence you're expecting between Q1 and Q2, fifty/fifty or are we going to see more of that revenue on the push outs in one particular quarter versus another?

49:40 Thank you. Thank you, Brian. And again, thanks for – good morning and thanks for your good words about us. And on the specifics, I will pass to Dennis to give us more color on that on your question.

49:54 Right. Hi, Brian, good morning. So, in regards to the push-out, basically, you're right that there has been that push-out from Q4 into Q1 or the first half of fiscal year twenty two. And I think the number of which you mentioned is somewhere in the ballpark range. We would expect a larger portion of that to be recovered in Q2 and probably somewhere in a range of thirty percent to forty percent of that in Q1 fiscal year twenty two.

50:29 Great. That's super helpful color. And then just a second one and I'll pass it on. Nice backlog growth here. I think the last quarter you guys in June had mentioned one point three billion, now you're at one point seven billion contracted backlog, I know you give it on a volume basis, any sense rough ballpark, what the mix is of that one point seven billion on a dollar basis between energy storage products, services and digital? And then, I guess just in that context, seems like the revenue guide one point one to one point three given the backlog at one seven, it would be supportive of higher, so just wondering if you could remind us how you define backlog and kind of comment a bit on the mix to give us some context there as well? Thanks, guys.

51:19 Sure, Brian. So, out of the one point seven billion, we have approximately one point three billion on the product side, and then the remainder is basically on the recurring side of the business that means on the services, as well as of the digital side. So, in that regard when you think about the guidance of one point one billion to one point three billion, and as we also stated in our prepared remarks that we are certainly still looking also about H2 potential delays there and therefore, we have put out the guidance of one point one billion to one point three billion based on what we are seeing in the backlog.

51:58 Okay. And just last one to clarify on the non-storage product portion of the backlog at four hundred million, what's the average duration? It's not twelve month backlog, it's backlog that represents going forward two to five year revenue, could you remind us what you characterize that as on the services and digital?

52:25 Right. So, and typical as of the mixture between the service and the digital sites on services we are seeing somewhere ten to twelve years on the digital side, somewhere in the range of three years to five years. So, in that regard overarching this revenue is up to orders backlog covers up to twelve years. Certainly, it was a bit more forward loaded a pattern here due to the digital side of the mix.

52:51 Yes. If you allow me to elaborate aa little bit on that, there are two elements here that are very significant. The first one is that we got a one hundred percent attachment rate on services in the EMEA region, which is fantastic. Overall, almost seventy five percent, seventy four percent attachment rate overall, which is also a very, very high number. 53:17 So, it brings and it ratifies the confidence that we're seeing from our customers that the whole package, the whole ecosystem that we are offering in the three business line it makes a lot of sense for them and brings value to them. The fact that the Hazelwood probably has a twenty year service contract is the testament of the value that we are creating and providing to them.

53:46 All right, that's great. I'll pass it on. I'll also echo everyone else’s congrats. Thanks guys.

53:52 Thank you very much, Brian.

53:54 We have a question from Stephen Burt with Morgan Stanley. Your line is open.

54:02 Hi. This is Dave Ricker on for Stephen Burt. Thanks so much for taking my question and congrats on the IPO. I was wondering if I could just touch on Fluence IQ, could you give an update on where things stand in the development pipeline for the next set of software apps? And any indications and initial customer conversations as to what the interest level and demand might be for the next round of software?

54:29 Thank you very much and good morning, David. I will pass to Seyed to give us more color on what is happening with the Fluence IQ platform, but overall, very exciting, very positive, very good feedback from our customers.

54:46 Sure. Thank you. And thanks David. So, just a little bit more color in terms of Fluence IQ. So, we are continuing to see strong demand in the markets that we have a presence that the national electricity market in Australia where we own about both a twenty percent of renewable share. So, we expect to continue to grow in that market. 55:08 California is being pretty strong for us. We expect to continue to grow. But unfortunately, what we saw in the recent Texas climate environment, the reason I say unfortunate because there's a lot of public sacrifices that we made. So, our software is going to be centerpiece in that market. So, we are ramping up development of our ERCOT application to be released this year. 55:34 We're seeing a lot of volatility in that market, for example in what we've seen in the Australian market in absence of the centralized capacity team. So, ERCOT market entry is top of the priority for us. We're investing heavily in the software development application to support our market optimization with Fluence IQ and ERCOT market. But to your point, as we kind of talked about during our Analyst Day as well, the goal here is to further, kind of develop applications they built beyond our markets that is addressing dispatch applications for vertically integrated utilities, but we don't see power markets being kind of – we don’t see our presence of [power markets] [ph]. 56:17 And we're also thinking about mid-term portfolio management applications, long-term investment applications. So, all of that would be part of the business plan and the product development in fiscal year twenty two with an aim towards commercialization in fiscal year twenty three. So, we're on track there, making a lot of progress obviously investing in the team and talent to support us with that vision, but things are shaping up good.

56:46 That's really great color. I appreciate that. And maybe just one follow-up on the demand side of things. I was just wondering if you could give some color on geographically, how is the backlog split? Where are you seeing the strongest demand in the different countries that you're operating in maybe heading into to twenty twenty two? Thanks.

57:04 Just to clarify, David, on the Fluence IQ platform or overall?

57:09 I was thinking more overall in terms of the energy storage product portfolio overall, beyond just Fluence IQ.

57:19 Yes. We see – to be honest, we see demand picking up in all markets. The fact that we enter into Taiwan, the fact that we have the record, the largest project in Europe, the fact that we keep rolling very fast in the California market with the Fluence IQ. So, we have examples that contracts being awarded in all three regions with record levels in all of them. So, it is a, sort of a synchronized growth trajectory for all three regions, which is very encouraging.

58:07 That's great to hear. Thanks so much, and congrats again.

58:10 Thank you very much, David.

58:14 Thank you. Our last question comes from Tom Curran with Seaport Research. Your line is open. Tom, please check your mute button.

58:33 Sorry. Good morning and to quote Bruce Willis in Die Hard, ‘welcome to the party’. Curious about how much visibility uncertainty you have on your role within AES as renewable strategy? So, from twenty twenty one through twenty twenty five, we understand that AES is planning to add four gigawatts per annum of solar capacity, what percentage of that do you expect to include storage? And given that represents assured locked in demand for Fluence, how are you modeling those orders internally? Is there an annual floor for AES orders that we can assume?

59:13 Yes. First, thank you. Thank you very much, and good morning, Tom, and thanks for your kind words. We're very excited about this new chapter in our history now being a public company. Yes, indeed, you all know AES is a shareholder, is one of the founders, and I thank them along with Siemens to establish this JV and have the vision that where the market will be going and they proved to be true and to be right on their decision. So, we are very happy and very excited and thankful for that. 60:05 On the specific pipeline, AES has been upgrading their pipeline and the annual commitments. We have a very, very strong and fluent communication with them. This is not new. It has been there for years. So, we're going hand to hand with them. What we expect is, no hundred percent of whatever they are including, a percentage their including their own projects and expansion. 60:39 So, we will be with them. We would be providing our smart solutions services and digital Fluence IQ, along with them and we are very excited. That is part of our project than our plans is part of our business plan and the fact that they are increasing their own numbers is a tailwind for us.

61:05 And Manuel, we can assume that whatever percentage of that new solar capacity they'll be building, if they're going to include storage for that you'll be winning one hundred percent in that, that will exclusively go to Fluence?

61:21 Yes. Yes, that's true.

61:24 And then if I could just squeeze in one more follow-up before we run out of time here. Where are you expecting the energy storage products divisions adjusted gross margin to exit fiscal twenty twenty two at?

61:44 Dennis, you would like to take that one?

61:46 Right. So, basically in line with what we have stated in our model during the IPO process, you can take that as a [proxy] [ph].

61:58 Great. So, still on track for that?

62:01 Yes.

62:04 Thank you for taking my questions.

62:07 Thank you very much, Tom.

62:13 There are no other questions in the queue. I'd like to turn the call back to Manuel Perez for closing remarks.

62:20 Thank you very much, operator. Thanks to everyone, and I would like to thank again and I did it at the beginning of my speech and my words, again, I will like to expand a sincere thank you to the entire Fluence team. They have been extremely passionate, strong committed, they have shown strengths and resilience because all the COVID pandemic. 62:47 So, thank you, everyone. Thanks to our customers, investors, analysts that – they made this possible. And we are so happy that given all the circumstances and the headwinds, we keep growing, we keep beating our own record, and expanding, and truly changing the way that we power our world for a more sustainable future. Thank you. Thanks everyone.

63:20 This concludes today's conference call. Thank you for participating. You may now disconnect.