Fluence Energy, Inc.

press release, and supplementary metric sheet covering financial results along with supporting statements and schedules, including reconciliations and disclosures regarding our non-GAAP financial measures, are posted on the investor relations section of our website at FluenceEnergy.com. During the course of this call, Fluence Management may make certain forward-looking statements regarding various matters related to our business and companies that are not historical fact. Such statements are based upon current expectations and certain assumptions that are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward-looking statements and more information regarding certain risks and uncertainties that could impact our future results. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today. Also, please note that the company undertakes no duty to update or revise forward-looking statements for new information. This call will also reference non-GAAP financial 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 website. Following our prepared comments, we will conduct a question and answer session with our team. During this time, to give more participants an opportunity to speak on this call, please limit yourself to one initial question and one follow-up. Thank you very much. I'll now turn the call over to Julian.

Thank you, Chris. I would like to send a warm welcome to our investors, analysts, and employees who are participating in today's call. This morning, I will review the highlights of our fiscal 25 results, the accelerating demand for energy storage, and how Fluence is positioned to lead in this growing market. I will also provide an update on our product roadmap, our domestic content strategy, and progress towards OBBBA compliance. Ahmed will then cover our financial results and 26 outlook. Turning to slide four and our financial performance. First, I am pleased to report that during the fourth quarter, we signed more than $1.4 billion of orders, which represents a record level. This brings our current backlog to 5.3 billion, setting us up for renewed growth in 26 and beyond. Second, full year revenue came in at approximately 2.3 billion, about 300 million below our expectations, mostly due to delays by our contract manufacturer in ramping up our newly commissioned Arizona enclosure manufacturing facility. We have implemented corrective actions, production is improving, and we are confident in meeting delivery commitments and capturing the shortfall during fiscal 26. I will discuss these details further in a moment. Third, despite this revenue impact, We delivered a record of approximately 13.7 adjusted gross margin for the year and approximately 19.5 million of adjusted EBITDA, which was at the top end of our guidance range. These results were the product of good execution on projects and cost efficiency. Fourth, in terms of annual recurring revenue or ARR, We ended fiscal 26 with 148 million, slightly above our original guidance of 145 million. And fifth and finally, we ended the quarter with approximately 1.3 billion in liquidity, which puts us in a strong financial position to fund our plans for growth. Please turn to slide five for details on our order intake and pipeline. Our record 1.4 billion of order intake during the fourth quarter included contributions across all our core markets. Approximately half worth for projects located in Australia. For fiscal 26, we currently expect the U.S. market will be the largest contributor of order intake, as reflected by our pipeline as of year-end. Looking ahead, demand for energy storage solution is accelerating worldwide, driven by both the rapid decline in capital cost of storage and surging demand for electricity for intermittent renewal. data centers, and industrial complexes. We have seen a significant increase in larger deals in our pipeline. That, as of September 30, includes 38 deals of at least one gigawatt hour, more than double the number from last year and nearly five times what we saw two years ago. Please turn to slide six. Earlier this month, we announced a landmark 4 GWh project with LIAC, representing the largest battery project in European history. These projects will use our new SmartStack product and play a key role in Germany's energy transformation. We are very pleased to welcome LIAC as a customer and look forward to supporting additional energy transformation projects across European markets. Please turn to slide 7 for other emerging drivers supporting our pipeline growth. We have seen significant pickup in demand from data center customers. We are currently in discussions with data center projects representing over 30 gigawatt hours. 80% of these engagements have originated since the end of the quarter. Fluence is ready to lead in this emerging market segment with SmartStack industry-leading density, reliability and safety, in addition to its lower cost of ownership. Another set of emerging opportunities is long-duration storage, which is driven by the need for 6-8 hour duration batteries in markets with significant renewable penetrations. such as Europe and California. Specifically, in Europe, regulatory schemes are in place to procure this capacity. Today, we have line of sight into 60 gigawatt hours of long-duration storage tenders. SmartStack is well-suited to compete in this segment due to its flexible architecture and scalable design. Please turn to slide 8 for an update on our team. To capture the opportunities I have just described, we have sharpened our focus on sales and flawless project execution. To that end, we are excited to welcome Jeff Monday as our new Chief Growth Officer. Jeff leads our global sales and marketing team, he brings deep experience from Qualcomm, where he built their global enterprise and channel sales teams. Prior to that, Jeff spent 18 years leading sales teams at Apple. His expertise will help us expand the reach of Fluence brand to new customers and industries, such as the tech sector. In addition, we have also expanded John Zahoransky's role as Chief Customer Success Officer. As one of our company's founders and an industry pioneer, John will leverage our record of successful execution to further differentiate Fluence from our competition. He will also maximize the value of our solutions for our customers with our digital and services offerings. We believe that these internal changes will streamline our customer experience and position us to win a larger portion of our pipeline. Please turn to slide 9 as I discuss our new SmartStack product. We are pleased with the market reception of SmartStack. In addition to its role in winning our LEAC deal, This month, we are deploying the first SmartStack unit in a project site in Taiwan. We design SmartStack with the objective of reducing total cost of ownership for our customers. This means, in addition to a lower sales price, SmartStack offers lower costs to install and maintain the system or its useful life with top-of-the-line operational metrics. SmartStack is the only product available today that offers battery density of 7.5 MWh per unit, letting customers fit over 500 MWh of storage per acre. That means bigger projects, optimized sites, and better economics all else equal. Additionally, SmartStack maintains all elements of fire safety and cybersecurity that have been historically a salient element of our offering. Finally, SmartStack is developed with a flexible system architecture that can adapt to customers' specifications. We expect this will be a key selling point for data centers as technology to reduce system latency evolves and SmartStack's key can be upgraded with new equipment quickly on site. We are engaged with many customers interested in Smart Start and expect it will represent a majority of our orders for this fiscal year. Please turn to slide 10 for an update on our domestic content strategy. Our domestic supply chain is a critical advantage for our business. given that we see the majority of our growth coming from the US market. We have contracted with three key production facilities located in Tennessee, Utah, and Arizona. The Tennessee and Utah facilities produce our battery cells and modules, respectively, and they have successfully met production metrics in line with our expectations at the time of our last earnings call. The Arizona facility which manufactures enclosures has not met its production targets during this period. Without those enclosures, we were unable to deliver our completed products and recognize the corresponding revenue during the fourth quarter. The primary cause of the manufacturing delay has been the slower ramp in staffing the facility, especially for weekend shifts. We have been working with our contract manufacturer to execute a plan to improve staffing levels and further optimize the workflow. As of today, the production rate has improved and staffing levels have in great measure been met. which give us confidence that the manufacturer will meet our desired target rate by the end of this calendar year. We expect to fulfill all of our customer delivery commitments over the course of 26 and book the associated 20 fixed mix revenue. We will continue to work with our U.S. manufacturers to scale production and maintain our leadership position. We are committed to serving our U.S. customers with a competitive, domestically manufactured solution. Please turn to slide 11 for an update on our Prohibited Foreign Entity, or PFE, compliance strategy. A quick refresh. The One Big Beautiful Bill, or OBBBA, included regulations designed to restrict tax credit availability for products manufactured in the U.S., but supported by companies deemed to be PFEs. To that end, our strategy aims to meet a growing volume demand for domestic content from a diverse set of qualified suppliers. I am pleased to report significant progress. More specifically, This month, we have secured a second supplier for domestic battery cells. This manufacturer is compliant with all OBBBA regulations and further the risk of future growth. Turning to our Tennessee facility, we continue to work actively with ASC to find a comprehensive solution to comply with PFE regulations. The three key pieces to achieve non-PFE status include transfer of ownership, IP, and material assistance. Significant progress has been made in addressing all these three items. The option of fluent purchasing the facility from ASC remains under consideration as a possible solution. We continue to view the incremental financing need of a potential transaction as being manageable within our available liquidity. Both parties are motivated, and we continue to expect a constructive resolution in advance of the effective dates specified by the law. I will now turn the call over to Ahmed to discuss our financial results. and fiscal 26 guidance.

Thank you Julian and good morning everyone. Today I will review full year 2025 financial reserves in our liquidity position, followed by a discussion of our fiscal year 2026 guidance. Starting with slide 13, covering fiscal year 2025 performance. Over the course of the year, we generated revenue of around $2.3 billion. As Julian mentioned, this figure falls short of our expectations by $300 billion, largely due to a slower than anticipated ramp up at one of our contract manufacturing facilities in Arizona. While this shortfall was a challenge, I want to highlight that our disciplined execution and operational focus enabled us to deliver on our profitability and bottom line objectives. Regarding production, Most of our US-based contract manufacturing facilities have been operating at their targeted capacities, including both cell and module manufacturing. However, the newly commissioned enclosure facility in Arizona faced some challenges, primarily due to the longer lead time to attract and train the workforce necessary to drive productivity. This was the primary factor behind the lower than expected revenue in the quarter. Working in collaboration with our contractor, we have seen significant production improvements since September. The majority of personnel required to execute our plan have now been hired, and we are on track to achieve our targeted production levels. Our adjusted EBITDA for the year was $19.5 million, which came at the top end of our guidance range, even as revenue fell short of expectation. This outcome underscores our operational excellence and strong execution. Turning to slide 14, we achieved a record level of 13.7% adjusted gross margin for the year, above the top end of our expectations. In addition, our rolling 12-month adjusted gross margin is consistently at or above 13%. This reflects our strong focus on productivity and successfully leveraging our supply chain. Turning to slide 15, we also finished the year with a record of approximately $1.3 billion in liquidity, up $300 million compared to the end of fiscal 2024. This includes more than $700 million in cash, with the rest available through our credit facilities. This strong position gives us confidence to make investments that will grow our business and strengthens Fluence's reputation as a reliable partner. Looking ahead to fiscal 2026, we intend to invest about $200 million in our business. This includes approximately $100 million in our domestic supply chain and the rest in working capital to support 50% revenue growth. Turning to slide 16, today we are introducing our guidance for fiscal year 2026. We expect revenue in the range of $3.2 billion to $3.6 billion. We began this year with 85% of our guidance midpoint already in our backlog. This strong coverage materially de-risks our FY26 revenue compared to the historical level of around 60%. We anticipate realizing one-third of this revenue in the first half of the year and the rest in the second half. We expect our adjusted gross margin to be between 11% and 13%. This range reflects a period of higher costs associated with the rollout of our GridStock Pro product, which will make up 70% of our 2026 revenue. We anticipate margin will improve over time as we continue to leverage our discipline execution and our growing scale. We expect operating expenses to grow at less than half of the base of revenue, consistent with our guidance in prior years. This includes increased spending on sales, marketing, and R&D to support future revenue growth. For adjusted EBITDA, our guidance of $40 to $60 million reflects expected revenue, adjusted gross margin, and higher operating costs from planned investments in sales and product initiatives. With respect to ARR, we are initiating guidance of approximately $180 million by the end of fiscal 26. representing over 20% year-over-year increase. In summary, with our strong liquidity, focused execution, and robust order book, we are well-positioned to deliver on our plan. With that, I would like to turn the call back to Julian for his closing remarks.

Thanks, Simon. Before we take your questions, I would like to conclude with the following five takeaways. Market leadership. Demand for any storage is accelerating globally. Fluence is capitalizing on this environment with notable wins such as the four gigawatt hour LEAD project in Europe and a rapidly growing pipeline of data center customers and other large scale deals. Product leadership. SmartStack is a key differentiator versus a competition. With increased density and a very competitive total cost of ownership, we expect SmartStack to drive a majority of future orders. Operational Execution We have made significant progress to strengthen our domestic supply chain advantage. We have addressed production issues at the Arizona and all our domestic manufacturers are now on track to meet our expectations. Compliance and readiness. We have strengthened our ability to deliver PFE compliant products to customers with the addition of a second domestic battery cell supplier. We continue to make progress towards OBBA compliance with our Tennessee manufacturer and expect resolution ahead of regulatory deadlines. Looking forward, these achievements position us to maximize stakeholder value by consistently meeting our commitments to customers and shareholders, reinforcing our reputation as a trusted industry leader.

Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. As a reminder, in order to accommodate all participants in the queue, please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question coming from the line-up, George Giannourakis with Canaccord. Your line is now open.

Hi, good morning, everyone, and thank you for taking my questions.

Hey, George, good morning.

I'm just curious if you can share any thoughts on what you're seeing in the competitive environment, any changes there in the U.S. and internationally. Thank you.

I mean, internationally, not real change. You know, it's a very competitive market, and, you know, The Chinese players continue to drive the competition in a way. The U.S., the competitive market is changing. We see more and more customers that prefer to use U.S. or non-PFE manufacturers, even if they are not required to do it because the projects are safeguarded under the law or you know, of that provision. So I will say that, but it's an evolving matter that we see coming. So that's kind of today where I see the market.

Thank you. And maybe as a follow-up, Ahmed, I think I heard when you were talking about gross margin or margin guidance for 26 that you expect margins to improve over time. Were you referring to Gross margins moving beyond the 11 to 13% range you got it for next year, say in 27, 28. Thank you. Yes.

Yes, hey, George. Yes, I think our goal is to continue to improve the chart that we have disclosed. I think our goal is to continue to show that chart going forward, to show the trajectory and the difference we are making. Our guidance, as you recall, was 10% to 15% in the past. I think we haven't changed that going forward, so our goal is to continue to improve that trend line.

Thank you. Thanks, George.

Thank you. Our next question coming from the line of Brian Lee with Goldman Sachs. Your line is now open.

Hey, guys. Good morning. Thanks for taking the questions. Kudos on the quarter here. I appreciate all the color, Julian, on the data center sizing. It sounds like that opportunity is coming to fruition here pretty quickly given the timeline you expressed. But Can you maybe help us a little bit understand, first, the sizing of the market? I guess if we take the 30 gigawatt hours of data center projects in the pipeline and leads, that's maybe, if we estimate maybe $6 billion of the total $23 billion pipeline in that neighborhood. Is that kind of the way to think about it? And what do you think the overall TAM is and what Fluence's market share could ultimately end up looking like?

Good question. Let's start with the TAM. Last quarter, we talked about a time of around $8 billion. So I think that it's clearly the reality is proven that the number is significantly higher. The market has still very, very different numbers. We have seen numbers of 10 times the $8 billion or more than 10 times the $8 billion. It's still unclear. We have to, I think, wait a little bit more. But clearly, it's a market that is expanding. the 30 gigas that we talked about as of september 30th only 20 percent of it one small portion of wearing our pipeline the rest were contacts that we started to do with customers since then you know and then uh today if you ask me today this morning and roughly half of the 30 30 gigas are in pipeline the other the other half were working on it and you know What we're looking is, will they happen in the next two years? Do we see our product is suitable to do what they want? Generally, I think we're fine. So what's a big change from telling you a quarter ago, this is an $8 billion market requiring these very, very complex capabilities to today? I think there's a big change in terms of what we can do for what our technology and fluency in particular, can do for data centers. And I would say the way to think about it is that there are three needs. One is what we call interconnection flexibility. The ability to manage the energy demand in a way that you can interconnect easier to the grid and you can manage and the distribution companies or the service provider can manage your demand to keep the data. So that is by itself I will say today the biggest driver, people who want to connect quickly to the grid and want to ensure that the data center meets the availability of the grid and can give the assurances to the grid operator that they will not disrupt it. And we can do that today. That's what works. We have no need for improvements in our technology stack to be able to do it. So great. The second one that is also an arising need or rising need is backup power. Historically, we haven't played that game. But with our costs coming down, as they are, and our density improvement, we can now provide backup power and significantly reduce, I won't say eliminate, but significantly reduce the need for diesel generators. So that's the second need that we're seeing. Accelerating the connection to the grid, and we can reduce some of the cost of the diesel generators by providing backup. The third one is the one we have talked about in our last call, this power quality, this idea that we will have to manage the variability of energy demand by AI data centers. If you ask me today, the first thing is that there are other technologies that I can't address that. That's a front one. The second one is that it is a need that is not as big as we thought it was going to be. So it's probably that eight, you know, around that $8 billion number. And, you know, it is something that data centers, when they looked at what they're doing, their speed to power is a much more important element than this one because the other one they can manage in some other way. We are committed to delivering the three products. the interconnection flexibility to accelerate interconnection, the backup power capabilities, and these two that we can do today. And we're very well positioned to do. SmartStack is the densest project in the world. It is a project that, because of the Pulsar, the way we're designed, provides very good safety. Better than, I would say, very, very good. And then third, you know, our cybersecurity, our total control on software, our ability to ensure that no one else can get in, you know? So the power quality is something we're working on with our inverter manufacturers. We'll get a result quickly, but it is still, you know, it's still a working problem. But we thought that was going to be a gating item. The backup power is going to be a gating item for us to serve this market. That's no longer the case. You know, it is, I would say it's a cherry on the top. If you can deliver the last two, and this one is great, but, you know, it's not a gating idea. So great market, multiples of what we told you in terms of what we do, and we all need to do a major technology. And my last point, we, you know, we don't have a clear view today. This is just our, how much we can capture. But I will say, are very well positioned to do it safety density you know some of our competitors are claiming density which is 20 25 percent less than what we can do so that tells you we can do we can do very very well and we are you know we have we hired jeff jeff comes with knowing how to serve this market he's been you know one of the instructions go and get this done and this is not only happening in the us it's a global phenomenon we have in our pipeline it's mostly us today but we're starting to see pipeline coming both out of Australia and Europe. Sorry for the long answer, but we're excited about this opportunity.

Yeah, no, I can definitely sense that. I appreciate all the color. Maybe just one more question on that topic. From a you know, P&L timing and impact perspective. Can you give us a sense of, you know, the conversion timeline for this data center pipeline? And is any of it embedded in your revenue guide for fiscal 26? And maybe just lastly, margins relative to core margins. Are these going to be higher margins just given the customer subset you're dealing with? Curious on the impact on margins as well.

Thank you, guys. I'll say that of the 30 gigas half hour 26 order intake, half of our 27, give or take, you know, and most likely projects that will be, you know, will convert to new order intake later in the year, no revenue for 26. We have to see how much revenue for 27, it's unclear. In terms of margin, you know, hey, this is a new segment. I don't want to talk about it publicly, but what I will say is that we can provide a lot of value to our customers, a lot of value. We can deliver our product quickly. give them the confidence on our security, the best density. And we are, you know, and so we are, we are very confident that we can create a lot of value to our customers.

That's why we're concentrating.

Thank you.

Our next question coming from the lineup, Dylan Nassano with Wolf Research. Your line is now open.

Hey, good morning, everyone. Thanks for taking my question.

I just want to,

just wanted to go back to the, the Q4 kind of underperformance versus the guide. I know that in the previous quarter, manufacturing delays kind of came up, but it sounded like maybe those were resolved and you were operating on schedule again. So I just want to check, you know, what kind of changed between the last call and now, and like, are these incremental kind of problems that popped up and anything you can give us just to kind of boost confidence going into the quarter that, you know, these are kind of resolved at this point?

So we have, you know, same thing, and, you know, clearly we're disappointed with what happened. No, I mean, first thing, but I don't want to sound apologetic in what I'm telling you. So what do we have? We have our suppliers in the U.S., many, but let's say the three main suppliers. Out of the three main suppliers, two are doing great. I will say even more, the two that have the more complex process, you know, are doing very well. So we're very happy ahead of schedule, doing wonderful, you know, no problem. We have a less complex process, which is enclosure manufacturing. When we met last quarter, we had a plan that was going to be able to, was going to allow the delivery of our revenue for the year, but that it required a major staffing process that I think we underestimated. the ability to staff that facility. I think that today that we have done two things. We have clearly gone out and continued staffing and preparing people. And we're essentially done in terms of staffing. There's still some people, but it is essentially done. And we have made some changes in the way we are, you know, with our contract manufacturer to ensure that we that we need to facilitate the manufacturing process. That's the right word. And I think the two combinations, having staffed the place, and we're talking about a significant number of people. This is roughly 500, 600 people that we needed for that facility to work with three chiefs and all of that. We were essentially fully staffed. And with the changes in operations, we are meeting an No, I think we are, we expect to do, we were doing at the end of last quarter, you know, one and a half enclosures per day. We are already at five and we are ramping up and I don't know if we will be able to meet our numbers very well. So we are very confident today. Unfortunately, we did not meet what we could not deliver on the revenue. We are disappointed, but we learned very quickly. Our operational manufacturing team is very, very good. and they have put in place the correct measures to do this.

Yeah, Dylan, the only thing I would add is I think that from our perspective, as Julian said, yes, because of the labor shortage, we were roughly one and a half containers per day. Fast forward, we added 500 people. We are now running at five containers per day, which is in line with our expectations for the quarter. So we feel pretty good where we are, Equally importantly, I think we pulled all levers to deliver on our profitability commitments. As you saw, the margin and EBITDA, we are in line with our top end of our range.

Got it. Thank you. I appreciate that. And then my follow-up, I just wanted to check on this new cell supplier. Can you just give us any more color around how much incremental capacity this may get you? Um, any, are you prepaying for any cells like similar to what you did with ASC and, and yeah, so mostly just, just curious, like, does this get you net, uh, additional capacity to serve us market?

Yeah, I can take that question. And Dylan, yes, I think this gives us enough capacity to serve our projected loads for the next couple of years. So we feel pretty good what we have signed. And in terms of the deposits, no material deposit commitments.

I think it's just as we get the deliveries, we make those payments.

Thank you.

Our next question, coming from the lineup, Amit Thakkar with BMO Capital Markets. Your line is now open.

Hi. Good morning. Thanks for taking my questions. I just wanted to kind of go back to kind of the implied EBITDA margin for this year versus last year. I mean, it looks like the EBITDA margin is down, and I know the gross margin is also kind of down sequentially, but it looks like the implied AHPs in your bookings are actually positive. pretty significantly, kind of quarter over quarter. I was just wondering if you could kind of walk us through why I guess the gross margin is lower year over year versus kind of over 12 months. Thanks.

so so i think the asps your question is yes i think uh is is down but no surprise i think uh asps are down roughly i think give or take 10 or so uh in terms of the gross margin i think uh we basically are pretty much in line i think the ebitda margin uh As you ask, you know, it's obviously the operating leverage, you know, because volume was less. Last year, our overall revenue was 2.7. This is 2.3. So, yes, I think, but the more important thing, frankly, from our perspective is as we grow the top line, we will benefit from the operating leverage, and our goal is to continue to grow EBITDA. Obviously, that is what the shareholders care. At the end of the day, top line is great, but at the end of the day, that should translate into the bottom line. And that's what we as a management team also are on the same page. So stay tuned. I think our goal is to continue to improve the top line and also the bottom line.

And then I know you kind of talked about a couple of kind of uses of of liquidity for next year. But just in terms of kind of like the kind of the free cash flow expectations relative to that $50 million kind of EBITDA guidance at the midpoint, any kind of kind of, I guess, guideposts there, please?

So, yes, I think the $50 million EBITDA, I talked about the working capital, roughly $100 million, as our revenue is growing from 2.3 to 3.4, so $1 billion or so of additional. If you recall, we said in the past, working capital needs are roughly 10% of our growth in revenue, so about $100 million of working capital needs. And then $100 million of investments in the domestic content, as I mentioned in my remarks. Beyond that, we don't have any material commitments. So I think next year, our goal is to be pre-cash flow positive as our revenue grows and our EBITDA grows. So I think that is the goal. But this year, $50 million is the EBITDA, but then we have working capital needs of $100 million. But I think more importantly or equally importantly is liquidity will remain very robust with this working capital use. So our goal is to continue to strengthen our value sheet with growing cash and our credit facilities. So it feels pretty good where we're going to land at the end of the year.

Thank you very much.

Thank you. Our next question. Coming from the lineup, Jillian Dumoulin-Smith with Jefferies. Your line is now open.

Hey, good morning, team. Thank you guys very much. Nicely done this quarter. Just following up, Ahmed, a little bit about some of the margin commentary and just filtering that back in with AESC. Can you comment a little bit on how you think about margins being tethered to whatever happens with respect to your domestic supply, whether that's with AESC or incremental supply? Is that part of the commentary about margin improvement? And then related, Can you just give a little bit more of a detailed update around AESC specifically? I know that you sort of quote-unquote procured a backup here, if you will, but how is that relationship evolving here? How would you frame out volumes from one side or the other side of that supply range right now at this point?

In terms of margins, in terms of AESC, I mean, any deal we might do with AESC will be accretive, so that's the way you need to think about it. When and if it happens, we'll communicate what it means in terms of margins. And I think that image point was more general. When you looked at our performance, at least things I got here, the company was negative margins of 4%. We're now on a rolling average of top month average. We're now at 13.7. So, you know, my point is we're all here. want to commit to continue showing and growing. That's kind of what we're doing and we're finding ways to do it today and continue to work on it. That was more of that coming in that direction. In terms of ASC, what I would say is that we are, you know, maybe the OB3, OBVA compliance is a complex process. We have been able to make a lot of progress and generally you can look at it from three areas. You need to meet the IP and I think we have a solution that's done and we we can the ip that in that for that production facility meets the criteria of obvba 3 obva or will meet the computer then we have the you know material assistance the need that the suppliers of the facility cannot come from fpf suppliers we have a plan that will deliver that And then we have the ownership. And the ownership is the one where we are still debating. We're making good progress. We're committed to resolve it, but we haven't, you know, we have not, we have not reached a final deal. What we have always said, we're not the only option in town. So, you know, there are other ways that they can resolve this issue. You know, I don't want to, you know, we clearly believe that we are the best option from my point of view, but, you know, they can do something different. So that, and then, you know, on the new supplier, I mean, what it is is, you know, we're generally diversified suppliers. That's a rule of life. We're diversifying suppliers. And the demand we see is very, you know, very big. So we need to continue to meet the growing demand. So, you know, our philosophy of diversified suppliers and, you know, and the growing demand call for the second supplier So that's where we are. We are, you know, we see this as one of our competitive advantages. We are a first mover in this area, and we want to continue being the first mover. So that's a reason for our strategy.

And so just to clarify that real quickly, basically your current plan and current margin expectations assume that you're served with AESC, and would it be improved or detrimental to shift the supply, if I heard you right or understand?

Yeah, and I will say the following. As I said, a potential deal with ASC will be accreted to the current numbers. Got it. All right.

You're already haircutting it. Okay. Understood.

No, I'm not haircutting it. I haven't done the deal yet. Okay.

All right. Got it. Thank you. No, no. That's why I asked. Thank you, guys. I appreciate it. Okay. Thank you.

Thank you. Our next question coming from the line of David Arcaro with Morgan Stanley. Yolanda is now open.

Hey, thanks so much. Good morning. Good morning. In terms of the data center pipeline, I was curious just to get what you're currently seeing. Is this bringing larger project sizes versus your current backlog? Is it more US-heavy in terms of region where you're seeing that demand and would be curious what kind of duration you might be exploring for those types of projects.

Yeah. I'll say that generally, you know, we talked during the call with one of the big drivers of the elasticity of demand, that where you can see the elasticity of demand for our technology as prices come down, has been how projects are getting bigger. And we have today 38 projects that are one gigawatt hour or more. I don't think that the data centers are, you know, bigger, naturally bigger, they're in line with what we have when you look at it. Some are smaller, some are bigger, but generally in line. In terms of where geographically today, you know, I will say the majority come from the U.S., and we have seen some of the Pipeline development in APAC and you know Europe is a little bit behind But you know so as that will see what we will see this as a global market a So that's kind of our view in terms of duration use depends on the use case we see from a tool to you know long duration storage both the whole the whole nothing below two but That's that's what we are

Okay, got it. That's helpful. And then I was just curious about strong order intake in the quarter, in this past quarter. I was wondering if you could talk to whether there's a common driver there that you're seeing. It doesn't seem to be data center growth just yet, if I'm interpreting that correctly. So what are you seeing in terms of what drove the strong order rebound?

You know, it was Australia, the big driver of the strong quarter in 2020, the strong order intake. have these deals in australia as you know that we were delayed in 20 25 you know we signed them all and they all most of them occur late in the year so that that's a big driver of it but you know we see for 26 the us being the big driver and you know and a little bit of a change and we'll see some i expect to see some data center stuff happening in 26 so late in the year mostly

Okay, great. That all makes sense. Thank you so much.

Thank you. Our next question coming from the line of Mark Strauss with JP Morgan. Your line is now open.

Yes, good morning. Thanks for taking our questions. I just wanted to go back to the second domestic content supplier. Ahmed, I think you said that you're Your needs are met for the next couple of years, but I just wanted to clarify, is that capacity available today, or is there kind of a ramp period that we should be expecting?

No, I think the capacity is available, will be available in about the next 10, 11 months. But I think the capacity that we need to serve our load, as we discussed during the call, you know, we have about 85, 90% of our revenue in our backlog, and we have already secured the capacity for that. So we don't need this capacity, but we are now locking in additional capacity to basically secure our future business.

Okay. Okay.

And then on the long-duration side, is SmartStack the only go-to-market solution that you have there? Are you potentially looking to partner up, maybe being a systems integrator for some of the more emerging technologies that are out there? Thank you.

SmartStack is what we're going to do, and we believe that it's very competitive, so it will be SmartStack. Thank you.

Thank you. Our next question coming from the line of Kristin Cho with Barclays. Your line is now open.

Good morning. Thank you for taking the questions. With respect to the data centers, you know, you mentioned the three different ways that you can serve data centers, the interconnection backup and power quality. Would you be able to break down the opportunity set here and maybe rank it? Is half of the opportunity for power quality and backup is the smallest? And for duration, you mentioned two hours is the low end. I'm assuming that's for power quality. Is it similar for those who are interested in getting storage for interconnection purposes?

Yeah. First of all, that's what I would like to highlight. So we have these three needs. What's wonderful about our technology, and now talking about battery storage, not necessarily ourselves, is that we can stack up these three needs with the same technology solution. While the other technology solutions can do one or the other, but they cannot do what we do, which is facilitate interconnection, do backup power, and do quality. And that makes a difference. And I think that's what makes our solution so attractive. to our two data centers, hey, we have resolved three problems with one technology. So that's very, very good. In terms of the two hours, these are, depends on the need of the customer. So I cannot really put out, can tell you this is what drives it, but generally you're right on the view that backup power and interconnection flexibility will tend to be longer duration. Well, power quality will tend to be shorter, but generally that's true. But I think you need to think about this differently, is the ability to serve the three needs with the same infrastructure. That's what we're aiming for, because that's where I think that will make our technology the preferred technology solution to resolve, to address these problems.

Okay. And then if you are able to vertically integrate with AESC, how should we think about what the mix will be between the AESC supply and the second supplier? And with this second supplier, is the contract for a set amount of time? And then lastly, for your international projects, are you also diversifying your cell suppliers there?

We've always been diversified internationally. We're just being diversified locally. My view of this is that we convert any battery into a great technology solution. That's what we do as a company. So the battery supplier is not as relevant. It shouldn't be as relevant. My customers shouldn't care. And my financial... The investor shouldn't care. The real value we bring is the ability to make any battery great, no matter what. So that was my answer to it. I don't know what the mix will be, but as I said, for my customers, it will be irrelevant. From a product delivery and capabilities, what batteries I produce.

But for you, doesn't it matter in that if you are using AESC and you're vertically integrated, it's higher margin for you versus... Yeah, but, you know, I care about my customers.

That's what I do. Yeah, we will figure out that part. But, you know, the important thing is the ability to success or the route to success in meeting your customer needs. You know, that's what drives a company. you're right you know we might be able to get a capture if we were to be vertically integrated you know it will be more marginal one or the other but my real the way to win is meet the customer that's the way to win not you know if you try to optimize something else you get you you lose decide your customer needs and that drives that drives profitability that drives margin that drives area

Thank you.

And our next question coming from the line of Justin and Claire with Roth Capital. Your line is now open.

Hi, good morning. Thanks for the time here. So I just wanted to follow up on the second source of the cell supply here. So I think you mentioned it'll be available in the next 10 to 11 months. So just at the beginning of the year, do you expect to depend on the source of cells from AESC for domestic U.S. projects until that second source is available? And then, so I'm just trying to get at, you know, how important is it for you to resolve the challenges with the FEOC restrictions by early calendar 2026 in terms of, you know, thinking through the outlook for the year?

I mean, very, very important. That's what I will say. We have a plan, and we've been working on it, and it's very, very important to do it. So that's what I can tell you. I mean, we'll get it done.

Okay. Good to hear. And then just a follow-up on the data center opportunity. I was wondering, you know, are you seeing – You know, or could you talk about the ability to kind of successfully accelerate interconnection with storage being added to data centers? Is this being done today, or do you need the regulatory framework to change in order to support this use case? And then wondering, you know, what the timing of orders associated with that use case might be.

We haven't signed any of these contracts yet, so this is a work in progress. But we believe we have the ability to ensure that the data centers meet the interconnection restrictions that they have. So I'll say yes. I don't think you need a major regulatory change. It's just ensuring that you meet whatever the grid is offering. Got it. Okay. Thank you.

Thank you. Ladies and gentlemen, that's all the time we have for our Q&A session. I will now turn it back to Chris for any closing comments.

Thanks, Livia, and thanks to everyone for participating on today's call. We look forward to speaking with you again by first quarter results, if not before then. And please do, looking forward to meeting with everyone as your questions arise.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.