Good day, and thank you for standing by. Welcome to the Fluence Energy First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question and answer session. [Operator Instructions] Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Sam Chong, Treasurer and Head of Investor Relations. Please go ahead.

I would like to welcome everyone to our earnings call for the first quarter of fiscal year 2022. On the call today are Manuel Pérez Dubuc, our Chief Executive Officer; Dennis Fehr, our Chief Financial Officer; Rebecca Boll, our Chief Products Officer; and Seyed Madaeni, our Chief Digital Officer. 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 1995. The forward-looking statements are neither promises nor guarantees and based upon our current estimates and various assumptions and are subject to material risks 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. We encourage you to review these filings for a discussion of these factors, including our annual report on Form 10-K for the fiscal year ended September 30, 2021, and our other filings with the SEC. 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. 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. I will now turn the call over to Manuel Pérez Dubuc, our CEO. Manuel Pérez Dubuc: Thank you, Sam. I would like to extend a warm welcome to our investors, analysts and employees who…

Thank you, Manuel, and good morning to everyone on the call. As Manuel stated, we delivered a very strong quarter of new orders for our energy storage products. In addition, we were able to execute on some of our near-term strategic initiatives, which position us for continued growth. Turning to Slide 12. We continue to deploy capital in line with our investment framework with a strong focus on supply chain and talent acquisition. In the first quarter, we prepaid $60 million into our supply chain to support capacity buildup for calendar year 2022 and calendar year 2023 battery supplies. And as Manuel already explained in detail. In January, we entered into agreements with ReNew, QuantumScape and Pexapark, which I would like to financially highlight in more detail. Our 50-50 joint venture agreement with ReNew is projected to be aligned with our capitalized approach as we will be licensing our technology to the JV. We anticipate that a JV will be mostly self-funded and operational with nominal amounts of paternal support. While the terms of the transactions are not yet publicly disclosed, this investment and expected results are in line with our previous expectations. The collaboration agreement with QuantumScape will be accounted for as R&D expense and is consistent with our previous expectations. At this juncture, we expect that it will be a few years until we can have a mass-produced, solid-state storage battery. Upon production, we expect that a future solid state-based energy storage product will contribute to achieving our long-term product margin targets. The Pexapark partnership is a validation of commercial relationships being built on our digital platform. As part of the partnership, we have a revenue share agreement in place for sales of Pexapark applications made through our app store. As our previous expectations did not include any…

[Operator Instructions] Our first question comes from James West with Evercore. Your line is open.

Curious, so looking at the order intake for Q1 down year-over-year. But of course, you had the AES order that came in, in January. So kind of how should we think about order intake? Should we be looking at that on a quarterly basis? Or should we look at kind of a rolling 12-month basis? Is it lumpy and seasonal. And so I guess it doesn't seem to spark or concern at all from you guys. From your commentary, it sounds like things are very robust, but just curious how we should be thinking about that as we kind of monitor the business on a quarterly basis? Manuel Pérez Dubuc: Good morning. Thank you very much for your question. First is I see you're looking more at the Fluence IQ platform and not the overall backlog. First is that we are extremely happy and excited that we achieve our goal 7 months ahead of our plan, which is fantastic. The best way to see Fluence IQ is that on a rolling basis. It's a product that we are expanding to other markets. We enter into the California. We're making inroads in that market in Australia. We solidified our presence there with 20% of market share, incorporating additional projects in Australia, California. It's an open market for us. So you will see more coming. And it would take a few months until you -- first, you test and you model the product for the customer. We incorporate the portfolio into the platform. We do some -- Sometimes we do some modeling in parallel, so they can see what is the upside and the revenue uplift potential. And then you sign a contract that usually it's a significant amount of megawatts because the fact that we are just not using Fluence IQ for energy storage, but also for renewables make the market more significant, the addressable market more significant and also the growth is becoming the standard in the market. So the more people, they start testing us. The more people that they see the benefits, they will keep coming. So I would say that very excited. Extremely happy about the outcome, and we keep moving forward and developing new applications. Seyed, you want to share anything?

No, I think that answers the question. As Manuel mentioned, we had great momentum over the past last 12 months. So if you want to think about it as a rolling basis, we're super excited about the progress of the application. As Manuel mentioned, we're very penetrated deeply in Australia, continue to grow in California. You'll see us growing into adjacent markets here in the U.S. And the landscape has been great for us. So if there are any further questions, happy to take them, but I think, Manuel, you covered it.

And then I guess, Manuel, the momentum in the business seems to be exceptionally strong right now. I mean, every time we speak you're on an airplane or heading to an airplane or being similar to the customer. Could you maybe describe kind of how the market is developing? What type of a -- where we are in kind of the land grab for storage and kind of where the customer acceptance and understanding this has been a necessity stands today versus 3, 6, 12 months ago? Manuel Pérez Dubuc: Thank you very much for the question. Yes, I mean, the market is exceptionally strong. Even if you consider all the headwinds that we see in supply chain and some of the concerns in some markets about the capacity to deliver. But the market is there. The more they test the technology, the more they like it. We see a lot of recurring customers coming back to us and repeating their orders and looking at additional applications. Because this is a -- it's a compound effect on growth. First, the sites are becoming bigger and bigger because the technology has been understood and really they see the benefit. So now you see more and more companies, IPPs out there and utilities, they combining renewables with energy storage, but they also replacing traditional fossil fuel generation with energy storage. So then the sites are getting bigger in megawatts in capacity, but also the sites are getting bigger in hours. So the total megawatt hours is a compound is the combination of both. But on top of that, look at what happens with the -- we have been working for some time on the Belton transmission line concept. We developed the architecture, which is extremely complex and a very, very unique -- there are very, very little people that really understand how to do that. We did a test just a pile of 1 megawatt. And immediately when they saw that operational, they came back to us and say, "Well, we need 200 megawatts." So that is 200 times the pilots. So -- and then you see our transmission line bottlenecks everywhere in the world, Germany, Chile, Vietnam. There are so many places where you have offshore and onshore wind that, that energy cannot be delivered to the low centers because transmission constraints. If we can solve that equation without the problem, we all know how difficult to build transmission lab without building new transmission line, that is a whole segment with a higher margins, and we are extremely uniquely positioned to take advantage of that. I don't know, Rebecca, do you want to say something?

Sure, Manuel. Thanks. Again, I think you covered a lot of it. I would summarize it that the market does continue to grow and the buckets of growth are in segments and the transmission opportunity is an example of that kind of segment. Another segment is data centers. So more segments is more upward movement of that total available market. We also see growth in new geographic regions. So regions that didn't -- like India, as an example, regions that previously didn't adopt energy storage and the associated services and digital, and they are now ready to adopt that. So clearly, in our story, we're on top of that with India and actually some other countries as well that we're moving into. Something about the regions is that they move from short duration to long-duration solution. So that helps us grow that total available market as well. And then, of course, to summarize as Manuel said, just the penetration of renewables. I think it's clear in the market right now that to make the renewable story work, we need to pair renewables with battery energy storage, so... Manuel Pérez Dubuc: Allow me just to make a very, very short sample because this is -- we are so happy and so proud that we are part of this story. Last weekend, in Ireland, they broke the all-time record of renewable generation of 89% of renewables in the system last weekend. During a storm, our ultrafast response energy storage solutions in that market. We are the only ones in that market. If you see the performance of our site with ultrafast, which is the only one that is in the market right now, how we absorb the ups and downs of the wind generation and keep the lights on and reliable, 20% of the load -- 20% of the load in Ireland or close to that is data centers. And you know the need of the end of the 5 9s of reliability and availability. And we supported that market. If you look at -- if you go to the statistics and you look the way that the system operated, we are really, really enabling the high penetration of renewables in a sustainable and reliable way.

Our next question comes from Maheep Mandloi with Credit Suisse. Your line is open.

This is [Indiscernible] on behalf of Maheep. Can you talk a little bit -- you talked a little bit about the near-term headwinds that you're seeing. Could you help us think through the impact on margin and cash flow through directive the year?

Yes, absolutely. Let me take this. This is Dennis speaking. So first of all, when we think about especially the second half of the financial year, we look ahead with confidence. When we say confidence, that's stemming from 2 parts. First of all, it's about the measures and the actions which Manuel outlined in his prepared remarks that we are seeing to take them -- have them taking traction. Second and overall, we are seeing that the Omicron wave is going down. So that means why we have seen stronger headwinds from the pandemic before, that's declining. So in that regard, we're looking ahead with confidence. But that now means in terms of the margin development and the cash. So on the profit side, gross profit side, we are seeing that gross profit margins are to be improving and increasing on a quarter-by-quarter basis to come back to the level of our previous expectations by the year-end on a rolling basis. But also just to be clear on that, on a full year basis, considering the full 12 months, we won't be able to recover on what we have debated in the first half. On the cash flow side, in the first quarter, we have made the prepayment to secure battery capacities, which is an important step for us to secure our backlog and the demand until the end of the calendar year 2023. In addition to that, cash flow has been also impacted by the delays and the shifting in the revenue recognition from the first quarter into the second quarter. As we are catching up and looking forward with confidence on that, on the revenue recognition, we will also catch up on the cash side and on the working capital side in the later part of this year.

Switching gears a bit, we're expecting to perhaps see changes in the net metering policy in California, which could potentially drive significant demand for residential batteries. As that market potentially grows at a much faster pace, would it be increase to Fluence to bring your capabilities of manufacturing and modular batteries to residential market?

So we see the same thing in the market that there is potential for residential. I would say shortly that we're evaluating it. So we're not in the market today, but we're evaluating it.

Thank you. Our next question comes from Mark Strouse with JPMorgan. Your line is open.

When thinking about the India market, are there any local manufacturing requirements that we need to be aware of? And how are you planning for that, if so? And how does that impact the potential ramp that we might see in orders in that market? Manuel Pérez Dubuc: Yes. Thank you. India, very, very excited about India. We established the first -- our first pilot of 10 megawatts in India in 2019. We wait for several months or even few years to the right moment to find the right time, the right partner and be ready for such a big market. Because it's not just that we have the technology, it's also that do we have the capacity to ramp up production and to really, really be able to penetrate a market with a reliable and enough resources to fulfill the demand that we might see there. We found the right partner. Very, very happy with the JV we ReNew Power, the leaders in pure renewable projects in India. There's -- Initially, there's no requirement of localizing, but you know how competitive that market is. So eventually, when the time is right, we will be publishing and letting you know about how we are going to be starting to use local suppliers to complement our technology. But the target is just to fully localize the production. We have all this tremendous first mover advantage. Imagine our pilot -- the actual amount of energy storage in India is very, very small. And we represent right now, 50% of that -- of what is already operating in India. They will do a multi-gigawatt demand. We see that coming. The good thing is that the government already did a local tender for battery manufacturing, giving them a price subsidy on energy for those who will want to establish up to 50 gigawatts of energy -- of battery manufacturing. So the government is already thinking about that. In the short term, there will be -- most of the equipment is going to come for abroad. There are some inverters manufacturers in India. We're already talking to them. We are already exchanging some technical specifications with them. I don't know, Rebecca, if you want to give us some color about that. Very exciting right partner, right time, the government is supporting. There's some very, very strong political -- economic and political support, economic incentive. So I think that the time is right for us to enter into that market.

And then you kind of touched on this earlier about the opportunity for more transmission upgrades over time. Just curious, though, is just kind of looking out kind of more near term. Do you have any similar-sized projects in your kind of late-stage pipeline? Manuel Pérez Dubuc: Yes. I cannot disclose exactly who we're working with, but yes, we are working with world-class developers and energy companies actively participating in bidding processes that are already taking place in Europe and in America. There are -- there was more -- certainly, I mean, if we get this right, there will be a very, very good segment for us, opening up with good margins, and we are -- so far, we are the only one, but we have developed so many applications in the past. We'll know that others will follow, but we keep innovating. We keep having this first-mover advantage and creating more and more applications. Rebecca, do you want to say something about the transmission?

Again, I think you summarized it well. There certainly are opportunities that currently exist, particularly in Europe, and we have bids going on right now.

Our next question comes from [Brian Dred] with Goldman Sachs. Your line is open.

Maybe the first one, just going back to the margins. I know there's some pressures here near term. It sounds like they should ease moving through the back of the fiscal year. But it sounds like we should expect sort of steady-state margins by year-end. So Dennis, I think based on your prior model, that would imply like positive mid-single-digit adjusted gross margins by, let's call it, fiscal Q4. First, is that fair? And then maybe can you give us a bit of the bridge here, that's about a 1,500 basis point expansion from today's level over just the next couple of quarters? And then I have a follow-up.

Brian, thanks for the question. So in that regard, I think you like where we started in Q1. So in Q1 has been impacted by the nonrecurring expenses as well as by the cost overruns, which we disclosed on the call. So if you're thinking forward into the second quarter, we will still have some portion of the nonrecurring expenses where we had reconfirmed our outlook of $50 million to $55 million. And then we said we will still have a small amount, a trailing off amount of that cost overrun. So that means in that regard, we will see a reduction in the nonrecurring expenses as well as in the cost or in the second quarter. And then while we are entering in third quarter and into the fourth quarter into the second half of the year, we are seeing that we are moving back towards this previous expectation levels into the mid-single digits as we had previously discussed.

But it's all the nonrecurring going away? Or it seems like there's a bit more to the bridge than just that.

Yes. On the nonrecurring side, let's say, like this, I mentioned before that we have high confidence in the measures which we put out. Nevertheless, we had stated a $50 million to $55 million as a guidance for the first half. At the end, just through quarter one of this year. So -- and therefore, we will give you an update on the -- on potential nonrecurring expenses in our next earnings call.

And then just a second question around this Fluence IQ contract with AES. Congrats on the scale of that. Just wondering, it sounds like, clearly, this is a big deal, the biggest one you guys have ever done over 1 gigawatt. I recall you had like a $3 million or $4 million revenue target for the digital business this year. So if I kind of back into this 1 gigawatt deal is worth maybe $1 million or $2 million annually since it adds about 25% to your assets under management for that piece of the business. Is that the right way to kind of think about the scale of the revenue opportunity every time you're getting like a gigawatt into the IQ business segment?

Yes. I mean, I'll pass it to Dennis in terms of going to some more details about our targets. All I can tell you, it's been a great deal for us, very energizing to see the rate of adoption of Fluence IQ in California. As Dennis mentioned, we've already achieved our expected ARR targets for this year, way ahead of the schedule, and we're building a lot of momentum. I also want to note that I'm really proud and excited about the diversity of our customer base. Obviously, the deal with AES is very exciting. It's over a gigawatt. At but if you look at the 6 gigawatts that we have contracted and the diversity of our customer base, we have utilities, we have community choice aggregators, we're helping communities with Fluence IQ. We have IPPs. We have renewable developers. We have renewable asset managers. And most importantly, we have investment banks involved in Fluence IQ. So a lot of great momentum. Maybe I'll pass it to Dennis, if you want to speak more about the revenue targets?

Right, let me take that, Brian. So what makes this deal so attractive for us are 2 things. So first of all, this has a high share of battery storage. So that means in that regard, I mean, typically going out with Fluence IQ to also go after the renewables side. This year also includes renewable, but it has a high share of the of the energy storage, which brings a higher ASP in terms of dollar per kilowatt. That makes it attractive first. And then the second portion is that it has also a highly attractive performance sharing revenue portion to it, which, as you may recall from previous discussions, we have been very conservative on how we have put that into our model. And so therefore, we are seeing an upside here on our digital side. Manuel Pérez Dubuc: Something that I would like to add because I think it is important is every market is different. I mean just the same proportion by percentage of the portfolio increase. There are markets with higher volatility. There are markets with higher price points. They are in contracts that they include renewables. They are not just renewals. And remember that the revenue uplift potential for just renewables is between 10% to 15%. And but when you have energy storage or you add energy storage, that number goes up to 50%. And if you have the revenue sharing and you know that the uplift is 50%, so that is not -- it's not linear. You actually have an exponential -- the possibility of exponentially higher revenue sharing when you have a higher revenue uplift, I mean, capacity for the AI system or software, but also by the dynamics of the market.

And our next question comes from Julien Dumoulin-Smith with Bank of America. Your line is open.

I'll make it quick here. Just two follow-up questions, if I can. First, on AES, how do you think about the future backlog from AES. And you think about the percent exposure to AES as a counterparty both in the quarter? And then in terms of your future backlog and both in the context of IQ, but also overall in your business, how do you see that evolving here, right? Obviously, things were fairly elevated. We've talked a lot about it on this call, for instance, with the IQ. But how would you frame that '22 onwards from what you know already with your backlog and otherwise? Manuel Pérez Dubuc: Yes. Julien, thanks for your question. And yes, I -- we saw -- you rolled this morning about our call and your first impressions. And you highlighted that in this quarter, we had a high concentration on Fluence IQ on AES. First, let's say that we're extremely happy that AES as one of our sponsors and main shareholders, but also one of our very, very important customers, they are ramping up. They're expanding aggressively their renewable targets. And they have done that in a very solid way. So we're very happy to be linked to them. That's one element. Second, we have customers all over the world. And the fact that California is such an important market for AES, and we will keep capturing market share in California. Well, I mean, AES will be in the mix. There's no way that with the huge portfolio that they have in California, we will not be there. So that's one element. But we will see, and we are expecting that, that number will go back to the traditional long-term numbers that we have seen in the last 3 or 4 years in terms of what is the contribution from AES on the overall ecosystem platform expansion and populating process that we are achieving. So -- and we're very, very excited about AES, and we will see them in California, obviously. But as we expand to other markets on Fluence IQ, well that proportion might change.

Yes, clearly always good to run on the [indiscernible] of the company expanding like AES. All right. No doubt about that. Manuel Pérez Dubuc: Other companies will follow, Julien, you know that.

Yes, totally, totally. Well, so if I can, actually, I'm just curious on -- as you think about the balance of this year, certainly talked about some delays from 4Q from last year here. Can you talk about when you get some of the $130 million back, if you will? Manuel Pérez Dubuc: Yes. Let me take this high level. I want to send a message to you and the rest of our investors and customers out there. First is that the demand is very strong. We're working very close to each one of our customers to overcome those delays, to close the gaps. We've seen already that happening in many of our projects. We developed our technology for the first time, the Gen 6. So it's normal that you will see some things that you need to find. You need to fine-tune. The size of the mega -- the mega sites that we have is a significant step up in the company. We brought in new talent which in these times is really difficult, and we have been able to attract very, very good talent. They like our mission, they like that we are the leaders. So in that sense, things are going in the right direction. We haven't had any cancellation, which is a very, very good sign. And Dennis, do you want to add something?

Yes, Julien, to your question. So we expect to recognize the majority of the $125 million of revenue which shifted over from Q4 '21 in our first half plus being back in line with our historic seasonality of 30% of our annual guidance.

And our next question comes from George Gianarikas with Baird. Your line is open.

First, can you talk about your service attach rate at 69%? Some of the dynamics that went into that and your confidence of that improving over time? Manuel Pérez Dubuc: Yes. First is that you -- First, we are very confident that the attachment rate that we have seen in the past is stable, it's going forward. So it's going to stay there. We -- as you know, Fluence in general, the Fluence services, they lag a bit after the -- you get the signing of the systems and the products for the energy storage and smart solutions. And it will take some time to get those contracts up on sign and then incorporating into our metrics. You saw that in our last earnings call that we had an increase of 750%. So you will probably see that coming. But we look our -- the way that we see it is that around 70%, 75% attachment rate is going to stay at those levels.

And just one follow-up, just to make sure that we all understand your guidance for the year and the context around it. Are you assuming that the world continues to improve from a COVID perspective, that supply chain disruptions get better, and that's how you'll hit your guidance? Or do you assume continued disruption? I just want to make sure we all understand the context around it and what to look for to understand it. Manuel Pérez Dubuc: Yes. My first reaction, and thank you for your question. We cautiously optimist as we see the Omicron variant suiting and we see less port congestions, for example, in the West Coast of United States, as we have most -- A vast majority of our products already in country in the different locations where we have to install and commission for Q2. So we are cautiously optimistic. And we do see an improvement for the second half of the year. But we are also accounting that there might be some still places where things will get a little -- it will delay their process to get back to normal. But we are considering both.

Right. So we maybe internally would call that like considered a new normal. That means like pandemic/post-pandemic kind of level of supply chain reliability. That means not as good as pre-pandemic, but also not as bad as we have seen especially over the end of the last calendar year with the high levels of Omicron. Manuel Pérez Dubuc: I also would like to add that the fact that we are already selected our contract manufacturers for Europe and the U.S. That will also help us on the supply chain and logistics.

Our next question comes from Graham Price with Raymond James. Your line is open.

Just on the newly announced Pexapark partnership. I was wondering if you could talk a little bit about how that expands coverage for the IQ platform and maybe specifically what that does for the addressable market for the bid app side of that?

Yes. Thank you. Great question. So let me take you all back to what we shared during our road show and Analyst Day conversation. So with Fluence IQ, our flagship application as being the bidding application. But we have been contemplating and in the process of developing new applications, but we also noted that an upside for us is to create opportunities for third parties to integrate or get into partnerships with us for additional applications. Now I should also note, none of that was built into our financial models in terms of revenue upside. By the fact that we have actually announced this partnership, we're way ahead of the schedule in terms of creating that momentum around third-party applications. Obviously, Pexapark with their presence of Europe, that gives us a greater insight in the European market and allows us to get into that European market with deeper customer relationships. So all great, ahead of schedule. And let me pause there if there's any follow-ups. But I should say it's very positive momentum in the right direction.

And then I guess quickly on the cost overruns that you saw for the Gen 6 product installations. Just wondering, are those largely due to commodity price inflation, kind of the typical logistics issues? Is there one thing you can point to? Or is it just kind of a combination?

Sure, I'll take that. So we've kind of separated the cost overrun some of the logistics issues. And on the cost overruns, they are temporary, and they are associated with installation and commissioning. So the way that we have addressed that is we have done root cause analysis of either operational issues or technical issues that we could optimize to ensure that those cost overruns get to zero closer to the end of this quarter. We've implemented those fixes either in our field installation manuals or in our factory, and those are in play right now. So we've identified the issues and we've implemented the fixes. We've also hired a significant number of more people to be able to handle the installation and commissioning. So that was one of the lessons learned is that we needed more people, and we have trained those people in the installation procedures and updated our installation manuals.

Our next question comes from Ryan Levine with Citi. Your line is open.

Has the AES-Fluence IQ contract duration compared to the existing portfolio? And are there any material term differences in that agreement versus other contracts that you sign?

So it's actually more on the longer duration side in terms of the contract length, which is more exciting. So that gives us further momentum to really adapt IQ with the dynamics of the California market. And like I said, it's more on the longer duration side.

And then in terms of your hiring ability or trends. Can you update us to your ability to hire new people, both on the engineering and sales force side throughout the organization? Manuel Pérez Dubuc: Yes. As I mentioned, I mean, we're very pleased that in such a difficult market, and we all know that the labor market is -- especially for high-qualified engineers and professionals. It's is very tight. And it has been a quite nice surprise to us that the number of people that they want to come, they want to be a part of Fluence story. They want to -- they like our mission and our purpose. They like what we're doing and our global presence and that we are truly, truly enabling more and more renewables around the world. So we increased our teams in supply chain and manufacturing, logistics by 57%. We hired a significant amount of engineers and control engineers and commissioning engineers. Honestly, the demand has been tremendous. We have extremely high volume, we might call it, growing pains. We are surprised by the amount of demand that we have. So -- and the simultaneously effect that having all those sites being commissioned and installed at simultaneously, it was a big challenge. I think that by the almost 150 people that we added in a very, very tight market is remarkable. So thank you very much for asking. And we -- I mean an opportunity for us to welcome all of them and thank them for all their hard work.

And then just to clarify a comment around fourth quarter, achieving single-digit margin. Is that referring to on a GAAP basis? Or is that on an incremental, contracts signed or incremental sales basis given the revenue recognition that you have throughout your organization?

So that's referring to the in-quarter numbers on a on an adjusted gross profit level.

When do you think you'll be able to achieve single-digit on a GAAP basis?

We will see that same trend on the GAAP basis as on an adjusted basis. As mentioned before, we are a bit early in the year, and we are, therefore, we'll give you a more concrete answer on that one in the next earnings call.

And our last question comes from Steven Fleishman with Wolfe Research. Your line is open.

Just I guess just on the shipping costs and the like, how are you thinking about as we move on, kind of what to consider onetime versus ongoing to the degree that we stay in kind of a higher inflation environment?

Yes. Let me take that. So in general, we think that -- or we are seeing that prices have been stabilized on a high level in the shipping market. And that since Q4 fiscal year '21, we have been including this higher logistic cost into our customer prices. And have been pushing them, therefore, into the market. So that means overall, in terms of the shipping cost side, we are seeing actually a kind of a light at the end of the tunnel. And seeing that this type of nonrecurring expenses are subsiding throughout this fiscal year.

Okay. So we should assume those costs, we shouldn't have nonrecurring shipping costs pulled out as we get later in the year?

That is correct.

And then could you just clarify the comments that you made about Moss Landing? And are you implying that you may disagree with the report that was issued on Moss Landing ? And are you there's plans to build a lot more storage there? Like are you in the running for that or not? Or I just like more clarity on what's going on there. Manuel Pérez Dubuc: Yes. I can -- I just want to repeat what I stated in my initial remarks is that we are conducting. First, we're helping and we are working with Vistra, putting that facility back in operation and fixing the installations. We are conducting our own investigation. And it's too early, once we have the final results, well, we will share that with the market. It's too early to say exactly what it is. And so we will be informing you on the market when that happens.

And that's all the questions we have for today. I'd like to turn the call back to Sam Chong for any closing remarks.

Thank you. We would like to thank everybody before listening to our earnings call today. If you have any further questions, please contact us at investorrelations@fluenceenergy.com. Thank you.

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