Fluence Energy, Inc.

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 speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Sam Chung, Treasurer and Head of Investment 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 Perez Dubuc, our Chief Executive Officer, Dennis Fehr, our Chief Financial Officer, Rebecca Ball, our Chief Products Officer, and Syed Madani, 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 Perez Dubuc, our CEO.

Thank you, Sam. I would like to extend a warm welcome to our investors, analysts, and employees who are participating on today's call. Let's start on slide four on the earnings presentation found on our investor relations website. This morning, I will provide an update of our market outlook, which remains strong and and demonstrate the significant progress we have made since our last earnings call. During the quarter, we have seen a tremendous increase in demand for our energy storage products, as evidenced by our recent contracting activity. The market for energy storage products, service, and digital applications continues to grow at a rapid pace, with Fluence solidifying itself as an industry leader. We expect this strong demand to continue and we are on track to deliver our fiscal year 2022 revenue guidance of 1.1 to 1.3 billion, despite some recent headwinds. Finally, I'm excited to share some additional details with you regarding our recently announced strategic initiatives, including our India joint venture with RenewPower the expansion of our digital ecosystem through our partnership with Pexa Park, and our collaboration with QuantumScape on solid-state battery technology. Moving on to slide five. We continue to contract increasing amounts of megawatts across each of our three business lines. Industry appetite for applications of energy storage remains robust, suggesting continued momentum for orders throughout 2022. As we have seen, energy storage is key to providing clean energy for a sustainable future. I am pleased to report that during the first quarter, we contracted 600 megawatts of energy storage products, which is a 525% increase from a year ago. This amount exceeded our expectations as the first quarter has historically been a seasonally lower one for contracting. We continue to experience very strong demand for energy storage products across the globe as companies and countries seek long-term solutions for grid stability and reliability as more renewables come online, creating challenges for grids around the world. As of December 31st, we deployed or contracted more than 4.2 gigawatts of energy storage products. Turning to our Fluent Services business, we added 250 megawatts of contracts during the first quarter. We also signed 335 megawatts of contracts for our Fluent IQ bidding application. More importantly, after the end of the quarter, we signed an additional 1.1 gigawatts with AES Clean Energy, which represents our single largest Fluence IQ order ever. This contract highlights the value that Fluence IQ can deliver. With this, we have already achieved our fiscal year 22 annual recurring revenue target for Fluence IQ. seven months ahead of schedule. Turning to slide six, I would like to update you on the headwinds that we discussed in our last earnings call and the steps we're taking to mitigate their impact. This mostly stems from supply chain disruptions as a result of COVID-19, as well as some cost overruns in the rollout of our first generation six product installations and commissioning. Our team has acted swiftly to implement corrective actions that provide us the confidence to further execute on our plan. Some of these mitigation efforts include securing shipping capacity for our high volume routes on a two to four month forward looking basis, giving us better visibility to deliver our product to our customers on time. Furthermore, we have increased the size of our supply chain and manufacturing teams by 57% to provide us with the resources necessary to meet the robust demand we see. And finally, we are documenting lessons learned from our teams around the world and providing additional training so they can deliver our Gen 6 product installation and commissioning more effectively. During the second quarter, we will continue to catch up on some of the installations that were delayed in the first quarter. As of today, a vast majority of the products required to fulfill our anticipated Q2 deployments have already made landfall in their respective countries and are going through installation, commissioning, and acceptance testing as we speak. I would also like to address another topic that is a concern for many in our industry. Inflationary pressures and raw material price increases. Our current backlog is hedged through the fixed price contracts we have signed with our suppliers and customers. Given the substantial volatility in commodity prices, we are introducing raw material indices, or RMI-based pricing for future contracts. By implementing RMI on both the supply side and the demand side, we are further minimizing our exposure to future commodity price fluctuations. I would also like to provide a brief update on month's landing. Although we cannot comment on the press release issued by Vistra in late January regarding its alleged technical findings about the overheating event last September, we can say that we continue to work with VISTA on the repair of the facility. Our own technical investigation is still actively in progress, and we will provide you an update once it has concluded. Turning now to slide seven. As I noted earlier, we continue to execute on our business plan during the quarter to position ourselves for long-term success. I will cover a few examples. Let's start with one of our key wins in the new transmission enhancement segment of the market. As you might have seen last year, we were selected to provide a small one megawatt pilot to lead grid in Lithuania. This pilot program was designed to test the concept of utilizing energy storage to an enhanced transmission and distribution network rather than incur the costly expense of installing additional transmission lines. The pilot turned out to be so successful that we were awarded a follow-on 200 megawatts order for virtual transmission lines. This outcome aligns well with our strategic effort to be the leader in this market segment. The transmission and distribution enhancement market requires a highly redundant and resilient technical architecture that supports advanced grid forming applications. This suggests a high margin potential compared to other segments. We continue to be bullish of this growing market segment as there are numerous areas around the world that can benefit from this technology, and we are proud to be among the first companies to bring it to the market. Additionally, we selected our contract manufacturer for our North American and European locations. We are on track to start seeing initial production for our North American facility in our fourth quarter. For our European facility, we expect to see initial production in the first quarter of our fiscal year 2023. Both of these contract manufacturing facilities will alleviate the burden of a single manufacturing location. On the software development side, we made several key additions that further strengthened our deep talent pool. These additions were part of the 139 full-time employees added during the first quarter, providing us with the knowledge and experience to keep the pace with the extraordinary demand we are seeing. Now, I would like to provide you with some color on our recently announced strategic partnerships. Turning to slide eight. In January, we signed a term sheet to enter into a 50-50 joint venture in India with Renew Power, which is one of the largest pure renewable IPPs in the country. Renew Power is a well-respected renewables player, and by establishing a joint venture, we will collectively leverage our first mover advantage in this significant market. India currently has just 24 megawatts of energy storage deployed. Almost half of that comes from an affluence pilot that we built in 2019. Even more importantly, The Indian government has stated that we'll need at least 27 gigawatts by 2030, which provides Fluence a tremendous opportunity to be the industry leader in this significant market. The joint venture will serve as our primary sales outlet in India by licensing Fluence products and services. As a leading IPP, Renew Power will also be a significant customer to the JV, beginning with a recently announced first contract for 150 megawatt hours. Now, turning to slide nine, I would like to highlight the recent expansion of our digital ecosystem. As you may recall, we are developing several in-house applications to complement our flagship digital application, the Beating App. We are paving the way for third parties to build their own applications for the Fluence IQ platform. In January, we entered into a long-term strategic partnership with PexaPark, an award-winning provider of software and advisory services for renewable energy sales and risk management. PexaPark has supported 20 gigawatts worth of renewable PPA transactions and are currently in 18 markets with a large presence in the EMEA region. By partnering with tech support, we will bring together our unique insights that will help investors, IPP, and utilities make better decisions as they navigate merchant markets while trying to maximize revenue. In addition, their significant EMEA presence will also help to accelerate the coverage for our bidding app in that region. This partnership is a significant milestone for Fluence, as it corroborates our vision for our ecosystem. Through this partnership, we will commercially introduce PEG support and its four apps to our customer base via our digital platform. In turn, we expect to receive customer referrals for our products and services from PEXAPART. And finally, turning to slide 10. In January, we entered into a collaboration agreement with QuantumScape, a leader in solid-state battery technology. This agreement strengthens the advancement of solid-state battery technology in stationary storage applications. We will test QuantumScape solid-state technology in Fluence smart energy storage products. This collaboration sets the stage for Fluence and QuantumScape to potentially enter into a large-scale supply agreement once commercialization is determined. We are encouraged by the benefit we see in solid-state battery, specifically around density and performance. And we remain battery technology and committed to providing our customers with the most economic and efficient product possible. I would like to take the opportunity to send our gratitude and admiration to our people during this pandemic. Thank you for your passion, hard work, and commitment. I will now turn the call over to Dennis to cover our financial performance and fiscal year 2022 revenue guidance.