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What changed in Fluence Energy, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Fluence Energy, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+877 added−815 removedSource: 10-K (2024-11-29) vs 10-K (2023-11-29)

Top changes in Fluence Energy, Inc.'s 2024 10-K

877 paragraphs added · 815 removed · 578 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

102 edited+84 added−52 removed33 unchanged
Biggest changeThe Company elected to settle the Siemens Redemption through the issuance of 58,586,695 shares of the Company’s Class A common stock. 3 As of September 30, 2023: • AES Grid Stability owns (1) 58,586,695 LLC Interests, representing approximately 33.0% of the economic interest in Fluence Energy, LLC and (2) 58,586,695 shares of Class B-1 common stock of Fluence Energy, Inc., representing approximately 71.1% of the combined voting power of all of Fluence Energy, Inc.’s common stock; • Siemens beneficially owns 58,586,695 shares of Class A common stock of Fluence Energy, Inc., representing approximately 14.2% of the combined voting power of all of Fluence Energy, Inc.’s common stock and approximately 49.3% of the economic interest in Fluence Energy, Inc.; and • QHL owns 18,493,275 shares of Class A common stock of Fluence Energy, Inc., representing approximately 4.5% of the combined voting power of all of Fluence Energy, Inc.’s common stock and approximately 15.6% of the economic interest in Fluence Energy, Inc.
Biggest changeTherefore, the two Siemens entities collectively represent approximately 13.3% of the combined voting power of all of Fluence Energy, Inc.’s common stock and approximately 28.5% of the economic interest in Fluence Energy, Inc.; and • QHL owns 14,668,275 shares of Class A common stock, representing approximately 3.8% of the combined voting power of all of Fluence Energy, Inc.’s common stock and approximately 8.1% of the economic interest in Fluence Energy, Inc.
Sunstack is built on the same foundation as Gridstack but includes a DC-DC Converter (in addition to the inverter). Sunstack also comes with enhanced Fluence OS market dispatch applications that support specific solar + storage use cases, such as firm solar output and solar energy time shifting. • Edgestack™: Designed for smaller-scale commercial and industrial (C&I) use cases.
Sunstack is built on the same foundation as Gridstack but includes a DC-DC Converter (in addition to the inverter). Sunstack also comes with enhanced Fluence OS market dispatch applications that support specific solar and storage use cases, such as firm solar output and solar energy time shifting. • Edgestack™: Designed for smaller-scale commercial and industrial (C&I) use cases.
We rely primarily on a combination of patent, trademark, copyright, unfair competition, and trade secret laws, as well as confidentiality agreements and procedures and other contractual arrangements with our employees, contractors, and third parties, to establish, maintain, and protect our methods, technology, and our proprietary rights.
We rely primarily on a combination of patent, trademark, copyright, unfair competition, and trade secret laws, as well as confidentiality agreements and procedures and other contractual arrangements with our employees, contractors, and third parties, to establish, maintain, and protect our methods, technology, and proprietary rights.
Manufacturing Our manufacturing strategy is designed to meet certain key objectives: (i) limit capital-intensive and low value-added activities that can be outsourced to other companies, (ii) maintain a capital light business model; minimize labor content where possible, (iii) minimize the amount of assembly our customers are required to do at any project site, and (iv) minimize material movement both from vendors to us and within factories.
Manufacturing Our manufacturing strategy is designed to meet certain key objectives: (i) limit capital-intensive and low value-added activities that can be outsourced to other companies, (ii) maintain a capital light business model, (iii) minimize labor content where possible, (iv) minimize the amount of assembly our customers are required to do at any project site, and (v) minimize material movement both from vendors to us and within factories.
The services market is driven by the growth in installed energy storage products and solutions globally, and its addressable market is comprised of the recurring annual service spend across the entire fleet of energy storage projects, which is continuing to grow through new installations. • Digital applications and software — controls systems and cloud-based software that help asset owners optimize the performance of their systems and portfolios, including asset performance management (APM) software and intelligent bidding software for asset trading.
The services market is driven by growth in installed energy storage solutions globally, and its addressable market is comprised of the recurring annual service spend across the entire fleet of energy storage projects, which is continuing to grow through new installations. • Digital applications and software — controls systems and cloud-based software that help asset owners optimize the performance of their systems and portfolios, including asset performance management (APM) software and intelligent bidding software for asset trading.
Some of the uses we have supported include frequency regulation, generation enhancement, capacity peak power, energy cost control, microgrids/islands, renewable integration, virtual dams, transmission and distribution (T&D) enhancement, and critical power. Energy Storage Products and Solutions We sell highly configurable energy storage products and solutions with integrated hardware, software, and digital intelligence.
Some of the uses we have supported include frequency regulation, generation enhancement, capacity peak power, energy cost control, microgrids/islands, renewable integration, virtual dams, transmission and distribution (T&D) enhancement, and critical power. Energy Storage Solutions We sell highly configurable energy storage solutions with integrated hardware, software, and digital intelligence.
To install and operate energy storage products and solutions on our platform, we, our customers, or our partners, as may be applicable, are required to obtain and maintain applicable permits and approvals from the relevant appropriate governmental or regulatory authorities having jurisdiction to install energy storage products and solutions and to interconnect the products with the local electrical utility.
To install and operate energy storage products and solutions on our platform, we, our customers, or our partners, as may be applicable, are required to obtain and maintain applicable permits and approvals from the relevant governmental or regulatory authorities having jurisdiction to install energy storage products and solutions and to interconnect the products with the local electrical utility.
To qualify for the ITC bonus rate of 30%, an energy storage project will need to satisfy the prevailing wage and apprenticeship requirements. If these requirements are not met, the project will be eligible 11 only for a base rate of 6%.
To qualify for the ITC bonus rate of 30%, an energy storage project will need to satisfy the prevailing wage and apprenticeship requirements. If these requirements are not met, the project will be eligible only for a base rate of 6%.
Our internal Sustainability Program is built upon three key pillars: (i) Reporting & Stakeholder Engagement; (ii) Environmental Stewardship & Compliance; and (iii) Responsible Sourcing & Social Compliance. Fluence’s Sustainability Program is governed by two internal committees – our ESG Council and ESG Steering.
Our internal sustainability program is built upon three key pillars: (i) Reporting & Stakeholder Engagement; (ii) Environmental Stewardship & Compliance; and (iii) Responsible Sourcing & Social Compliance. Fluence’s sustainability program is governed by two internal committees – our ESG Council and ESG Steering Committee.
Additionally, we rely on trade secret protection and confidentiality agreements to safeguard our interests with respect to proprietary know-how and software that is not patented and processes for which patents are difficult to enforce.
Additionally, we rely on trade secret protection and confidentiality agreements to safeguard our interests with respect to proprietary know-how and software that are not patented and processes for which patents are difficult to enforce.
Energy Storage Market Opportunity The energy storage market is comprised of three elements: • Energy storage products and solutions — the components (including batteries), professional services, and labor required to manufacture, assemble, and install battery storage systems.
Energy Storage Market Opportunity The energy storage market is comprised of three elements: • Energy storage solutions — the components (including batteries), professional services, and labor required to manufacture, assemble, and install battery energy storage systems.
Our storage technology lays the foundation for better energy storage products with industry-leading safety, integrated controls systems, and factory-built, highly modular building blocks. By pairing the benefits of mass production with the flexibility of a highly configurable system architecture, we believe we are able to serve the diverse needs of customers around the world from a single, underlying product platform.
Our storage technology lays the foundation for better energy storage solutions with industry-leading safety, integrated controls systems, and factory-built, highly modular building blocks. By pairing the benefits of mass production with the flexibility of a highly configurable system architecture, we believe we are able to serve the diverse needs of customers around the world from a single, underlying product platform.
Other Policies, Regulation, and Legislation Our operations are subject to stringent and complex federal, state and local laws, and regulations governing the occupational health and safety of our employees and wage regulations.
Other Policies, Regulation, and Legislation Our operations are subject to stringent and complex foreign, federal, state, and local laws, and regulations governing the occupational health and safety of our employees and wage regulations.
Employees We believe our workforce is critical to our success and we strive to create a positive, equitable, and safe work environment. To create a culture of transparency, we maintain a regular cadence of communications from the executive leadership team to employees, including emails, all hands meetings, Q&A sessions, and employee resource groups with executive sponsors.
Human Capital We believe our workforce is critical to our success and we strive to create a positive, equitable, and safe work environment. To create a culture of transparency, we maintain a regular cadence of communications from the executive leadership team to our employees, including emails, all hands meetings, Q&A sessions, and employee resource groups with executive sponsors.
Furthermore, we continue to explore disruptive digitally driven business models, including wide-ranging dynamic capacity, virtual storage, asset- and revenue-sharing models, and other offerings. Our Customers As of September 30, 2023, we have deployed energy storage products and solutions in 33 markets in 25 countries.
Furthermore, we continue to explore disruptive digitally driven business models, including wide-ranging dynamic capacity, virtual storage, asset- and revenue-sharing models, and other offerings. Our Customers As of September 30, 2024, we have deployed energy storage products and solutions in 33 markets in 25 countries.
Fluence does not actively sell Edgestack systems to C&I customers, but we are establishing channel and reseller partners who can sell and install the product. • Ultrastack™: Designed to meet the critical system requirements of distribution and transmission networks, including stringent requirements around availability, uptime, and IT security, and advanced controls applications that deliver a suite of highly technical grid services, such as synthetic inertia and power oscillation damping.
Fluence does not actively sell Edgestack systems to C&I customers, but we are continuing to establish channel and reseller partners who can sell and install the product. • Ultrastack™: Designed to meet the critical system requirements of distribution and transmission networks, including stringent requirements around availability, uptime, and IT security, and advanced controls applications that deliver a suite of highly technical grid services, such as synthetic inertia and power oscillation damping.
The IRA adopted in August 2022 contains a number of tax incentive provisions that directly support the adoption of energy storage products and services. Before the enactment of the IRA, the Section 48 ITC did not apply to standalone energy storage projects.
The IRA adopted in August 2022 contains a number of tax incentive provisions that directly support the adoption of energy storage solutions and services. Before the enactment of the IRA, the Section 48 ITC did not apply to standalone energy storage projects.
We believe there are multiple factors driving continued growth in the energy storage sector, including, but not limited to: • The accelerating transition from fossil to renewable generation is expected to require significant increases in energy storage capacity to both offset potential grid instability caused by intermittent renewable resources and enable the use of power from renewable generation assets at times when the natural resource is unavailable.
We believe there are multiple factors driving continued growth in the energy storage sector, including, but not limited to: • The accelerating transition from fossil to renewable generation is expected to continue to require significant increases in energy storage capacity to both offset potential grid instability caused by intermittent renewable resources and enable the use of power from renewable generation assets at times when natural resources may be unavailable.
The information posted on our website is not incorporated by reference into this Annual Report or any of our other securities filings unless specifically incorporated herein by reference. 13
The information posted on our website is not incorporated by reference into this Annual Report or any of our other securities filings unless specifically incorporated herein by reference. 16
It is an integral part of all our energy storage product sales. Fluence OS enables Fluence energy storage products to deliver critical grid services such as primary frequency regulation, secondary frequency response, fast frequency response, peak shaving, voltage regulation, power factor regulation, non-spinning reserves, capacity peak power, solar energy time-shifting, firm solar export, and more.
It is an integral part of all our energy storage solutions. Fluence OS enables Fluence energy storage solutions to deliver critical grid services such as primary frequency regulation, secondary frequency response, fast frequency response, peak shaving, voltage regulation, power factor regulation, non-spinning reserves, capacity peak power, solar energy time-shifting, firm solar export, and more.
We believe most forecasts for the energy storage sector, including BloombergNEF’s, understate the size and market opportunity as forecasts generally only account for spend associated with the physical energy storage asset and do not accou nt for the associated services and digital applications spend. • Service s — recurring operational and maintenance services that energy storage products and solutions require and asset management services that are provided by third parties when asset owners outsource the operations of their systems.
We believe most forecasts for the energy storage sector, including BloombergNEF’s, understate the size and market opportunity as forecasts generally only account for spend associated with the physical energy storage asset and do not accou nt for the associated services and digital applications spend. • Service s — recurring O&M services that energy storage solutions require and asset management services that are provided by third parties when asset owners outsource the operations of their systems.
Governments across the globe have announced and implemented various policies, regulation, and legislation to support the transition from fossil fuels to low-carbon forms of energy including through the development and deployment of energy storage.
Governments across the globe have announced, implemented, and continue to consider implementation of various policies, regulation, and legislation to support the transition from fossil fuels to low-carbon forms of energy, including through the development and deployment of energy storage.
It includes the same core components as Gridstack, but with a select number of small, pre-defined product cores.
Edgestack includes the same core components as Gridstack, but with a select number of small, pre-defined product cores.
We may refer to our energy storage products as “energy storage solutions” and use this term interchangeably as it is more reflective of the full offering available and provided to our customers. We have repeatedly pioneered new use cases for grid-scale energy storage.
We may refer to our energy storage products as “energy storage solutions” and use this term interchangeably as it is more reflective of the full offering available and provided to our customers. We may also refer to battery energy storage systems, systems and cubes interchangeably. We have repeatedly pioneered new use cases for grid-scale energy storage.
Among other things, the IRA introduced an ITC for standalone energy storage, which is anticipated to lower capital cost of equipment. The IRA also contains provisions with incentives for grid modernization equipment, including domestic battery cell manufacturing, battery module manufacturing and its components as well as various upstream applications.
Among other things, the IRA introduced an investment tax credit (“ITC”) for standalone energy storage, which is anticipated to lower capital cost of equipment. The IRA also contains provisions with incentives for grid modernization equipment, including domestic battery cell manufacturing, battery module manufacturing and its components as well as various upstream applications.
For example, the United States rejoined the Paris Agreement effective February 19, 2021, an international climate change agreement among almost 200 nations and the European Union, that established a long-term goal of keeping the increase in global average temperature well below 2°C above pre-industrial levels and which calls for countries to set their own GHG emissions targets and be transparent about the measures each country will use to achieve these targets.
Greenhouse Gas Emission Related Policies, Regulation and Legislation The United States rejoined the Paris Agreement effective February 19, 2021, an international climate change agreement among almost 200 nations and the European Union, that established a long-term goal of keeping the increase in global average temperature well below 2°C above pre-industrial levels and which calls for countries to set their own GHG emissions targets and be transparent about the measures each country will use to achieve these targets.
Department of Energy (DOE) selected twenty companies to receive $2.8 billion to boost production of the advanced batteries that are critical to the clean energy industry, including energy storage and which intended to support the creation of new domestic manufacturing facilities for batteries and cell components and to support research and development for recycling, reclaiming and adding materials back into the battery supply chain, which further creates the demand and market for energy storage solutions here in the United States.
Department of Energy (DOE) selected twenty companies to receive $2.8 billion to boost production of the advanced batteries that are critical to the clean energy industry, including energy storage and which intended to support the creation of new domestic manufacturing facilities for batteries and cell components and to support research and development for recycling, reclaiming and adding materials back into the battery supply chain, all of which is anticipated to help increase the demand and market for energy storage solutions here in the United States.
In addition, each of our products comes with our proprietary controls software, Fluence OS, which enables asset owners to operate the storage system directly with pre-set modes and market dispatch applications or integrate directly with external ISO and EMS signals. Fluence OS provides real-time information through multiple systems views, alarm notifications, and dashboards.
In addition, each of our energy storage solutions comes with our proprietary energy management system, Fluence OS, which enables asset owners to operate the storage system directly with pre-set modes and market dispatch applications or integrate directly with external ISO and EMS signals. Fluence OS provides real-time information through multiple systems views, alarm notifications, and dashboards.
The existing energy ITC will be replaced by a Clean Electricity Investment Tax Credit (CEITC) or “tech neutral” regime, which is available for any investment in a qualified storage facility that is placed in service after calendar year 2024 (prevailing wage and apprenticeship requirements will still apply).
The existing energy ITC as well as the Production Tax Credit (PTC) for renewable energy projects will be replaced by a Clean Electricity Investment Tax Credit (CEITC) or “tech neutral” regime, which is available for any investment in a qualified storage facility that is placed in service after calendar year 2024 (prevailing wage and apprenticeship requirements will still apply).
In April 2021, the Philippines committed to a projected GHG emissions reduction and avoidance of 75%, of which 2.71% is unconditional, for the period 2020 to 2030 for the sectors of agriculture, wastes, industry, transport, and energy.
In April 2021, the Philippines committed to a projected GHG emissions reduction and avoidance of 75%, of which 2.71% is unconditional, for the period 2020 to 2030 for the sectors of agriculture, wastes, industry, transport, and energy. U.S. Energy Storage Regulation and Legislation The U.S.
For more information about the potential risks of adoption or changes to such policies, legislation and regulations, see Item 1A. Risk Factors. Permits and Approvals Each of our installations or customer installations must be designed, constructed, and operated in compliance with applicable federal, state, and local laws, regulations, codes, standards, and guidelines.
For more information about the potential risks of adoption or changes to such policies, legislation and regulations, see Part I, Item 1A. “Risk Factors.” Permits and Approvals 15 Each of our installations or customer installations must be designed, constructed, and operated in compliance with applicable international, federal, state, and local laws, regulations, codes, standards, and guidelines.
The energy storage products and solutions market is driven by the deployment of new energy storage products and solutions globally, and its addressable market is comprised of the annual spend associated with the manufacturing, deliv ery, and installation of new energy storage products and solutions.
The energy storage solutions market is driven by the deployment of new energy storage solutions globally, and its addressable market is comprised of the annual spend associated with the manufacturing, deliv ery, and install ation of new energy storage solutions.
Our Products and Services Our offerings include energy storage products and solutions, delivery services, recurring operational services and digital applications and solutions for energy storage and other power assets.
Our Products and Services Our offerings include energy storage products and solutions, delivery services, recurring O&M services, and digital applications and solutions for energy storage and other power assets.
We pursue intellectual property protection that is aligned and advantageous to our business objectives and we require our customers and business partners to enter into confidentiality agreements before we disclose any sensitive aspects of our technology or business plans.
We pursue intellectual property protections that are aligned and advantageous to our business objectives and we require our customers and business partners to enter into confidentiality agreements before we disclose sensitive aspects of our technology or business plans.
These are cross functional leadership teams responsible for gathering alignment and support across the organization to advance our ESG initiatives. The ESG Council is made up of leadership representing key internal stakeholders (including individuals with subject-matter expertise in environment, supply chain, human resources, health and safety, legal, marketing, finance, and ethics).
These are 8 cross functional leadership teams responsible for gathering alignment and support across the organization to advance our ESG initiatives. The ESG Council is made up of leadership representing key internal stakeholders (including stakeholders from the environment, supply chain, human resources, health and safety, legal, marketing, finance, and ethics teams).
The ESG Council reports to our ESG Steering, which is comprised of five management leaders (our Chief Executive Officer, Chief Financial Officer, Chief Human Resources Officer, Chief Supply Chain and Manufacturing Officer, and General Counsel).
The ESG Council reports to our ESG Steering Committee, which is comprised of five management leaders (our Chief Executive Officer, Chief Financial Officer, Chief Human Resources Officer, Chief Supply Chain and Manufacturing Officer, and Chief Legal and Compliance Officer).
Environmental, Social, and Governance We are a purpose-built, purpose-driven company on a mission to transform the way we power our world for a more sustainable future. The Company’s energy storage products and solutions, services, and digital software offerings are intended to enable more sustainable, reliable, and resilient electric grids and infrastructure in a repeatable, scalable way.
Environmental, Social, and Governance We are a purpose-built, purpose-driven company on a mission to transform the way we power our world for a more sustainable future. The Company’s offerings are intended to enable and promote more sustainable, reliable, and resilient electric grids and infrastructure in a repeatable, scalable way.
Greenhouse Gas Emission Related Policies, Regulation and Legislation Governments across the globe have announced and implemented various policies, regulation, and legislation to support the transition from fossil fuels to low-carbon forms of energy and the infrastructure around that transition.
Government Regulation and Compliance Governments across the globe have announced and implemented various policies, regulation, and legislation to support the transition from fossil fuels to low-carbon forms of energy and the infrastructure around that transition.
In August 2022, India revised its previous pledge to achieve a 33 – 35% reduction in emissions intensity by 2030 and has committed to reduce emissions intensity by 45% of 2005 GHG levels by 2030 and to achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030 as well as achieve net-zero carbon emissions by 2070.
In August 2022, India committed to reduce emissions intensity by 45% of 2005 GHG levels by 2030 and to achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030 as well as achieve net-zero carbon emissions by 2070.
We have not experienced any employment-related work stoppages, and we consider relations with our employees to be good. As of September 30, 2023, women represent 31% of our total workforce. Fluence is committed to cultivating a diverse and inclusive culture.
We have not experienced any employment-related work stoppages, and we consider relations with our employees to be good. As of September 30, 2024, women represent 29% of our total workforce. Fluence is committed to cultivating an inclusive culture for our workforce.
We believe that competitive factors in the energy storage market include, but are not limited to: • safety, reliability and quality; • stability in supply chain; • performance of energy storage products and solutions, services and digital applications; • historical customer track record (as the market and industry continues to grow); • experience in the battery energy storage system market (both of the Company and key members of leadership); • technological expertise and innovation; • comprehensive solutions and offerings from a single provider; • brand recognition; • certain government initiatives, legislation, regulations, and policies; • ease of integration; and • seamless hardware and software-enabled service offerings.
We believe that competitive factors in the energy storage market include, but are not limited to: • safety, reliability and quality; • ability to obtain financing; • our ability to issue performance guarantees, credit support, and product warranties; • density and duration of our products and solutions; • shortened delivery, installation, and commissioning time; • stability in supply chain; • performance of energy storage products and solutions, services and digital applications; • historical customer track record (as the market and industry continues to grow); • experience in the battery energy storage system market (both of the Company and key members of leadership); • technological expertise and innovation; • comprehensive solutions and offerings from a single provider; 11 • brand recognition; • certain government initiatives, legislation, regulations, and policies; • ease of integration; and • seamless hardware and software-enabled service offerings.
As of September 30, 2023, we had approximately 1,112 full-time employees across 16 different countries. None of our employees in the United States are represented by a labor union. As of September 30, 2023, approximately 102 of our employees in Germany were represented by a works council.
As of September 30, 2024, we had approximately 1,595 full-time employees across 14 different countries. None of our employees in the United States are represented by a labor union. As of September 30, 2024, approximately 179 of our employees in Germany were represented by a works council.
Sixth-Generation Technology Fluence’s sixth generation energy storage products are built on more than 14 years of development in prior generations, and reflecting, among other things, ongoing safety and design improvements. Fluence’s energy storage products make it simpler for customers to deploy storage faster and more cost effectively without sacrificing quality and configurability.
Fluence’s energy storage solutions are built on more than 15 years of development in prior generations, and reflecting, among other things, ongoing safety and design improvements. We believe that Fluence’s energy storage solutions make it simpler for customers to deploy storage faster and more cost effectively without sacrificing quality and configurability.
It includes more stringent deadlines and has adjusted processes that had previously created barriers to battery projects obtaining interconnection and improves interconnection procedures with elements such as more accurate operational modeling of energy storage in interconnection studies. Energy storage products require interconnection agreements from the applicable authorities having jurisdiction to operate.
It includes more stringent deadlines and has adjusted processes that had previously created barriers to battery projects obtaining interconnection and improves interconnection procedures with elements such as more accurate operational modeling of energy storage in interconnection studies.
As of September 30, 2023, our global operational and maintenance (“O&M”) services team was providing services for 2.8 GW of energy storage assets, with a further 2.9 GW of contracted backlog.
As of September 30, 2024, our global operational and maintenance (“O&M”) services team was providing services for 4.3 GW of energy storage assets, with a further 4.1 GW of contracted backlog.
For example, in August 2022, the United States passed the Inflation Reduction Act of 2022 (the “IRA”), which includes a number of government incentives that support the adoption of energy storage products and solutions and services which are anticipated to benefit the Company and its operations.
For example, in August 2022, the United States passed the Inflation Reduction Act of 2022 (the “IRA”), which includes a number of incentives that support the adoption of energy storage solutions and services.
In almost all cases, interconnection agreements are standard form agreements that have been pre-approved by the local public utility commission or other regulatory body with jurisdiction over interconnection agreements. As such, no additional regulatory approvals are typically required once interconnection agreements are signed.
Energy storage products and solutions require interconnection agreements from the applicable authorities having jurisdiction to operate. In almost all cases, interconnection agreements are standard form agreements that have been pre-approved by the local public utility commission or other regulatory body with jurisdiction over interconnection agreements. As such, no additional regulatory approvals are typically required once interconnection agreements are signed.
As of September 2023, we held over 150 granted patents worldwide and had over 60 patent applications pending with domestic and foreign patent offices. As of September 2023, we also had over 95 registered trademarks with domestic and foreign trademark offices.
As of September 2024, we held over 179 granted patents worldwide and had over 82 patent applications pending with domestic and foreign patent offices. As of September 2024, we also had over 108 registered trademarks with domestic and foreign trademark offices.
Such government policies and programs are becoming increasingly instrumental in stimulating adoption of energy storage solutions across different markets through a variety of methods, including by providing financial support, facilitating grid integration, supporting research and development, and establishing favorable regulatory regimes. Refer to the “Government Regulation and Compliance” section below for further discussion.
Such government policies, regulations, legislation, and programs are becoming increasingly instrumental in stimulating adoption of energy storage solutions across different markets through a variety of methods, including by providing financial support and incentives, facilitating grid integration, supporting research and development, and establishing favorable regulatory regimes.
Except where the content clearly indicates otherwise, any reference in this Annual Report to “Fluence,” “we,” “us,” “our” or “the Company” refers to Fluence Energy, Inc. and all of its direct and indirect subsidiaries, including Fluence Energy, LLC.
Except where the content clearly indicates otherwise, any reference in this Annual Report to “Fluence,” “we,” “us,” “our” or “the Company” refers to Fluence Energy, Inc. and all of its direct and indirect subsidiaries, including Fluence Energy, LLC. Overview Fluence is a global market leader delivering intelligent energy storage and optimization software for renewables and storage.
The digital applications and solutions sector is driven by the growth in installed energy storage products and solutions and renewable and conventional generation assets, and its addressable market is comprised of the total global installed fleet of energy storage products and solutions and renewable and conventional generation assets.
Cloud-based software applications can be deployed on both energy storage assets and renewable assets. The digital applications and solutions sector is driven by the growth in installed energy storage solutions and renewable assets, and its addressable market is comprised of the total global installed fleet of energy storage solutions and renewable assets.
We utilize our digital software offerings as a competitive advantage by offering energy storage hardware that can be combined with our digital capabilities to optimize revenue and lower the total cost of ownership thus providing our customers with incremental value.
We believe that our digital applications provide us a competitive advantage by offering digital capabilities that can be combined with our energy storage solutions and services to optimize revenue and lower the total cost of ownership and thereby provide our customers with incremental value.
We currently offer five energy storage products and solutions built on our common storage platform, which are optimized for common customer use cases but can be configured for specific customer needs: • Gridstack Pro: Fluence’s latest energy storage product for large-scale front-of-the-meter applications.
We currently offer five 6 energy storage solutions built on our common storage platform, which are optimized for common customer use cases but can be configured for specific customer needs: • Gridstack Pro: energy storage solution for large-scale front-of-the-meter applications. Gridstack Pro is sold to independent power producers (IPPs), developers, utilities, and other generators.
ITEM 1. BUSINESS Inception and Organization Fluence Energy, Inc., a Delaware corporation (the “Company”), was formed on June 21, 2021. We conduct our business operations through Fluence Energy, LLC and its direct and indirect subsidiaries. Fluence Energy, LLC was formed on June 30, 2017 as a joint venture between Siemens Industry, Inc.
ITEM 1. BUSINESS Inception and Organization Fluence Energy, Inc., a Delaware corporation (the “Company”), was initially formed on June 21, 2021 and on November 1, 2021, Fluence Energy, Inc. completed its initial public offering (the “IPO”). We conduct our business operations through Fluence Energy, LLC and its direct and indirect subsidiaries.
As of September 30, 2023, we had an aggregate of 15.5 GW of renewable energy assets using Fluence IQ Platform and 6.8 GW of contracted backlog related to renewable and energy storage assets. Refer to “Item 7.
As of September 30, 2024, we had an aggregate of 18.3 GW of renewable energy assets using Fluence digital offerings and 10.6 GW of contracted backlog related to renewable and energy storage assets using Fluence digital offerings. Refer to “Item 7.
Additionally, SaaS products for renewables and storage are critical for helping asset owners and managers navigate increasing market complexities. As portfolios of renewable and storage assets quickly scale across the globe, asset owners and managers will require SaaS products that optimize the performance of those assets to maximize their revenues and lower their overall cost of ownership.
As portfolios of renewable and storage assets quickly scale across the globe, asset owners and managers will require SaaS products that optimize the performance of those assets to maximize their revenues and lower their overall cost of ownership. A significant market opportunity is utilizing storage-as-a-transmission asset (SATA).
As of September 30, 2023, we had a gross global pipeline of 50.3 GWs, of which includes 25.9 GWs for energy storage products and services.
As of September 30, 2024, we had a gross global pipeline of 115.9 GWs, which includes 51.4 GWs for energy storage solutions and services.
We believe that enhancing our product-focused model and supply chain leverage will support our global growth objectives and result in superior unit economics. We have entered contracts with third party regional manufacturers for the assembly and production of our Fluence Cube, a key component of our energy storage products.
We believe that enhancing our product-focused model and supply chain leverage will support our global growth objectives and result in superior unit economics. We have established relationships with third party regional manufacturers for the fabrication, manufacture, assembly and integration of Fluence's proprietary battery energy storage systems.
Fluence Nispera helps customers monitor, analyze, forecast, and optimize the performance and value of renewable energy assets. Its flagship offering is an AI-driven utility-scale asset performance management platform that supports portfolios of energy storage, solar, and wind assets.
Fluence Nispera is an AI-driven utility-scale asset performance management platform that supports portfolios of energy storage, solar, and wind assets.
The addition of this contract manufacturing facility expands our assembly and production beyond Asia to meet increasing global demand and allow Fluence to better serve regional markets. We intend to expand manufacturing capabilities to sites in India and Europe. We intend to continue to select strategic contract manufacturers that have global presence to maintain continuity in our business model.
The addition of this contract manufacturing facility expands our assembly and production beyond Asia to meet increasing global demand and allow Fluence to better serve regional markets. We continue to explore opportunities to expand manufacturing capabilities to additional sites in APAC and EMEA.
Of the energy storage products and services global pipeline, United States customers composed the largest portion at 7.5 GWs or approximately 32%, with Australia following at 5.3 GWs or 23% and the United Kingdom at 2.5 GWs or 11%.
Of the energy storage solutions and services global pipeline, United States customers composed the largest portion of our pipeline at 14.5 GWs or approximately 28%, with Australia customers following at 8.6 GWs or 17%, and Germany customers at 7.2 GWs or 14%.
We also offer comprehensive engineering and delivery services to support the deployment of our energy storage products and solutions. Customers can select from a range of delivery services, from project design to full-wrap turnkey installation.
We also offer comprehensive engineering and delivery services to support the deployment of our energy storage solutions. Customers can select from a range of delivery services, from project design to full-wrap turnkey installation. Fluence-designed Battery Pack Gridstack Pro is designed to leverage our Fluence-designed Battery Packs for optimized system performance and supply chain agility.
Services Operational and Maintenance Services In addition to energy storage products and solutions, our offerings include delivery services and recurring operational and maintenance services. Our recurring operational and maintenance services are designed around customer business needs, in-house capabilities, performance requirements, and risk profiles.
Energy Storage Regulation and Legislation” elsewhere in this section for more information about anticipated impact under the IRA. 7 Services Operational and Maintenance Services In addition to energy storage solutions, our offerings include delivery services and recurring operational and maintenance services. Our recurring operational and maintenance services are designed around customer business needs, in-house capabilities, performance requirements, and risk profiles.
Safety We believe that Fluence stands out as a leader in progressive health, safety, and environmental management, underpinned by our commitment to reducing hazards and minimizing risks. Our safety management system, anchored in a plan-do-check-act methodology, is intended to encourage the active involvement of stakeholders. Incorporated into our framework are our Fluence Code of Conduct and a stop work authorization.
Our safety management system, anchored in a plan-do-check-act methodology, is intended to encourage the active involvement of stakeholders. Incorporated into our framework are our Fluence Code of Conduct and Ethics and a stop work 9 authorization.
Additional information regarding the tax incentives contained in the IRA are set forth below in “Energy Storage Regulation and Legislation”. These types of regulations incentivize the adoption of renewable energy technologies, including energy storage products. 10 Non-U.S.
Additional information regarding the tax incentives contained in the IRA are set forth below in “U.S. Energy Storage Regulation and Legislation”. Non-U.S.
We help safeguard customer asset revenue potential over project life with degradation, capacity, and availability guarantees. Preventive and reactive maintenance services maintain equipment and optimal operating conditions, backed by 24/7 support and what we believe to be the most experienced team in the industry. Digital Applications Our team is continuously expanding the digital applications we offer to customers.
We help safeguard customer asset revenue potential over project life with degradation, capacity, and availability guarantees. Preventive and reactive maintenance services maintain equipment and optimal operating conditions, backed by 24/7 support and an experienced team of service professionals.
Fluence Mosaic is an intelligent bidding software for utility-scale storage and renewable assets, enabling customers to optimize asset trading in wholesale electricity markets. Fluence Mosaic is currently available in the NEM (Australia), CAISO (California), and ERCOT (Texas) markets. Fluence Nispera is our asset performance management (APM) software, which we acquired in 2022.
Fluence Mosaic is currently available in the NEM (Australia), CAISO (California), and ERCOT (Texas) markets. Fluence Nispera is our asset performance management (APM) software, which we acquired in 2022. Fluence Nispera helps customers monitor, analyze, forecast, and optimize the performance and value of renewable energy assets.
In fiscal year 2023, we published our Forced Labor Commitment letter that sets forth our stance as a company on forced labor. 7 We have been certified against the ISO 14001 standard at our office in Erlangen, Germany and w e are now working to expand our ISO 14001 certification with the ultimate goal of certifying all relevant Fluence facilities.
Since 2019, we have been certified against the ISO 14001 standard at our testfield in Erlangen, Germany and w e are now working to expand our ISO 14001 certification with the ultimate goal of certifying all relevant Fluence facilities to such standard.
We are also currently exploring opening two additional spare parts third party logistics hubs in the APAC region. Supply Chain We have developed a global supply chain with an evolving regionally focused operational model with the objective of allowing us to assemble products in proximity to major markets to minimize material movement, working capital investment, and costs of goods sold.
We have developed a global supply chain with an evolving regionally focused operational model. Regionalization allows Fluence to assemble products in proximity to major markets to minimize material movement, working capital investment, and costs of goods sold.
In fiscal year 2023, we published our first annual sustainability report, which leveraged several ESG frameworks, such as Sustainability Accounting Standards Board (“SASB”) Fuel Cells & Industrial Batteries standard in addition to those standards promulgated by the Global Reporting Initiative (“GRI”).
In fiscal year 2024, we published our second annual sustainability report, which leveraged multiple ESG frameworks, including the Sustainability Accounting Standards Board, Fuel Cells & Industrial Batteries standard, and the recommendations of the Task Force on Climate-Related Financial Disclosures, in addition to those standards promulgated by the Global Reporting Initiative.
(“Siemens Industry”), an indirect subsidiary of Siemens AG (“Siemens”), and AES Grid Stability, LLC (“AES Grid Stability”), an indirect subsidiary of the AES Corporation (“AES”), and commenced operations on January 1, 2018. We refer to Siemens Industry and AES Grid Stability as the “Founders” in this Annual Report.
Fluence Energy, LLC was formed on June 30, 2017 as a joint venture between Siemens Industry, Inc. (“Siemens Industry”), an indirect subsidiary of Siemens AG (“Siemens”), and AES Grid Stability, LLC (“AES Grid Stability”), an indirect subsidiary of The AES Corporation (“AES”), and commenced operations on January 1, 2018.
It is sold to IPPs, developers, utilities, and other generators to deliver energy, capacity, and ancillary services in both regulated and deregulated electricity markets globally. 5 • Sunstack™: Fluence’s DC-coupled energy storage product for DC-coupled solar + storage projects (Gridstack is used for AC-coupled solar + storage projects).
This solution is sold to IPPs, developers, utilities, and other generators to deliver energy, capacity, and ancillary services in both regulated and deregulated electricity markets globally.
A significant emerging market opportunity is utilizing storage-as-a-transmission asset (SATA). We believe the world’s operators of transmission and distribution networks face a once-in-an-industry challenge as the rapid growth of distributed resources and renewable generation increase intermittency and congestion and weaken system stability.
We believe the world’s operators of transmission and distribution networks face a once-in-an-industry challenge as the rapid growth of distributed resources and renewable generation increase intermittency and congestion and weaken system stability. These operators must maintain complete power system reliability even as generation technologies, power flows, and operational procedures undergo fundamental change.
Our service offerings include delivery services and recurring operational services, as well as financing structuring services, such as energy-storage-as-a-service. As of September 30, 2023, we had 3.0 gigawatts (“GW”) of energy storage assets deployed and 4.6 GW of contracted backlog across 33 markets in 25 countries with a gross global pipeline of 50.3 GW.
As of September 30, 2024, we had 5.0 gigawatts (“GW”) of energy storage assets deployed and 7.5 GW of contracted backlog across 33 markets in 25 countries with a gross global pipeline of 115.9 GW.
It is meant to incentivize and accelerate the transition to clean energy alternatives and aims to increase the security of energy supply by building and connecting more renewable generation to the grid. In March 2023, the European Commission launched their proposal for the Net Zero Industrial Plan (NZIA), which aims to improve the competitiveness of the European clean tech industry.
It is meant to incentivize and accelerate the transition to clean energy alternatives and aims to increase the security of energy supply by building and connecting more renewable generation to the grid.
Fluence is also internationally certified to ISO 45001, an occupational health and safety standard which requires certain proactive measures to promote employee safety and reduce workplace risks. Fluence’s corporate headquarters is certified to SA8000, which demonstrates our commitment to the elimination of unethical and discriminatory labor practices, while affirming workers’ rights, livable wages, and treating all people with dignity.
Fluence’s corporate headquarters is certified to SA8000, which demonstrates our commitment to the elimination of unethical and discriminatory labor practices, while affirming workers’ rights, livable wages, and treating all people with dignity. Safety Fluence promotes progressive health, safety, and environmental management in our operations. We are committed to reducing hazards and minimizing risks.
As a result, legislation and regulations with more stringent limitations on GHG emissions may potentially increase the demand for energy storage products and related services. U.S. Energy Storage Regulation and Legislation The U.S.
As a result, legislation and regulations with more stringent limitations on GHG emissions may potentially increase the demand for energy storage solutions and related services. Some of the key legislation, policies, regulations, and guidelines that has and may in the future impact our business and demand for our offerings are set forth below. U.S.
We sell our products to a wide range of customers around the world, including utilities and load-serving entities, IPPs, developers, conglomerates, and C&I customers. In fiscal year 2023, our two largest customers represented approximately 49% of our revenues. In addition, as of September 30, 2023, approximately 29% of our revenue was with related parties, primarily AES and its affiliates.
We sell our energy storage solutions, services, and digital applications to a wide range of customers around the world, including utilities and load-serving entities, IPPs, developers, conglomerates, and C&I customers. In fiscal year 2024, our two largest customers represented approximately 50% of our revenues.
The Fluence-designed Packs combine state-of-the-art battery modules, management systems, and monitoring equipment into a unified product architecture designed to improve operations through advanced thermal and state of charge (SOC) management, which we intend to give us greater control over our global supply chain and increase standardization across products.
The Fluence-designed Battery Packs combine state-of-the-art battery modules, management systems, and monitoring equipment into a unified product architecture designed to improve operations through advanced thermal and state of charge (SOC) management, which is intended to promote consistent product performance and safety at the system level.
Energy storage will be essential in managing variations in renewable electricity output. • Growing capacity constraints on existing power grids that were not designed to support distributed and renewable generation infrastructure or technologies, such as electric vehicles, are positioning energy storage assets as a key solution. • Environmental responsibility has become a priority for companies and investors, with over 400 member companies having pledged to source 100% of their energy from renewables as part of the RE100, a global corporate renewable energy initiative. • Governments across the globe have announced legislation, policies, and initiatives to support the transition from fossil fuels to low-carbon forms of energy and to support specifically energy storage deployment and development, including the United States through the passage of the IRA.
Energy storage will be essential in managing variations in renewable electricity output. • Growing capacity constraints on existing power grids that were not designed to support distributed and renewable generation infrastructure or technologies, such as electric vehicles, are positioning energy storage assets as a key solution. • Environmental responsibility has become a priority for companies and investors.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSee “Cautionary Statement Regarding Forward-Looking Statements.” Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations, financial results and future prospects, plans and objectives of the Company and the trading price of our Class A common stock: • our limited operating and revenue history as an independent entity and the nascent clean energy industry; • our history of net losses, we anticipate increasing expenses in the future, and our ability to achieve or maintain prolonged profitability; • risks relating to delays, disruptions, and quality control problems in our manufacturing operations; • potential difficulties in establishing mass manufacturing capacity and estimating potential cost savings and efficiencies from anticipated improvements to our manufacturing capabilities; • risks relating to dependence on our existing suppliers and supply chain competition and, in some instances, have entered into long-term supply agreements that could result in insufficient inventory; • supplier concentration and limited supplier capacity; • interruption of flow and/or availability of components and materials from international vendors; • significant changes in the cost of raw materials and product components; • failure by vendors and suppliers to use ethical business practices and comply with applicable laws and regulations; • loss of one or more of our significant customers or their inability to perform under their contracts; • risks relating to competition for our offerings from established and new competitors and our ability to attract new customers and retain existing customers; • ability to effectively manage our recent and future growth and expansion of our business and operations; • ability to maintain and enhance our reputation and brand recognition; • our growth depends in part on the success of our relationships with third parties; • ability to attract and retain highly qualified personnel, including senior management; • risks associated with construction, utility interconnection, commissioning and installation of our energy storage products, cost overruns, and delays, including those related to obtaining government authorizations and permits and other contingencies that may arise in the course of completing installations; • risks related to defects, errors, vulnerabilities and/or bugs in our products and technology; • risks relating to estimation uncertainty related to our product warranties; • risks relating to compromises, interruptions, or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent; • fluctuations in currency exchange rates; • risks related to our current and planned foreign operations; • risks relating to lengthy sales and installation cycle for our products and services and ability to timely close sales; • amounts included in our pipeline and contracted backlog may not result in actual revenue or translate into profits; • risks related to estimates of useful life for our products and related services or failure by our component OEM suppliers to meet service and performance warranties and guarantees; • risks related to acquisitions we have made or that we may pursue; • events and incidents relating to storage, delivery, installation, operation, maintenance and shutdowns of our products; • actual or threatened health epidemics, pandemics or similar public health threats; • risks relating to whether renewable energy technologies are suitable for widespread adoption or if sufficient demand for our hardware and software-enabled services does not develop or takes longer to develop than we anticipate; • estimates on size of our total addressable market; • barriers arising from current electric utility industry policies and regulations and any subsequent changes; • risks relating to the cost of electricity available from alternative sources; • risk relating to interest rates or a reduction in the availability of tax equity or project debt capital in the global financial markets and corresponding effects on customers’ ability to finance energy storage systems and demand for our products; • potential changes in tax laws or regulations; • risks relating to environmental, health, and safety laws and potential obligations, liabilities and costs thereunder; 14 • reduction, elimination, or expiration o f government incentives or regulations regarding renewable energy; • decline in public acceptance of renewable energy, or delay, prevent, or increase in the cost of customer projects; • severe weather events; • restrictions set forth in our ABL Credit Agreement (as defined below); • risks relating to uncertain future capital needs and potential need to raise additional funds in the future; • ability to obtain, maintain and enforce proper protection for our intellectual property, including our technology; • threat of lawsuits by third parties alleging intellectual property violations; • ability to effectively protect data integrity of our information technology infrastructure and other business systems; • use of open-source software; • failure to comply with third party license or technology agreements; • inability to license rights to use technologies on reasonable terms; • failure to comply with data privacy and data security laws, regulations and industry standards; • risks relating to increased attention to, and evolving expectations regarding, ESG matters; • risks related to ownership of our Class A common stock; • risks related to us being a “controlled company” within the meaning of the NASDAQ rules; • risks relating to the terms of our amended and restated certificate of incorporation; • risks relating to our relationship with our Founders; • we depend on distributions from Fluence Energy, LLC to pay our taxes and expenses and Fluence Energy, LLC’s ability to make such distributions may be limited or restricted in certain scenarios; • risks arising out of the Tax Receivable Agreement; • unanticipated changes in effective tax rates or adverse outcomes resulting from examination of tax returns; • risks relating to improper and ineffective internal control over reporting to comply with Sarbanes-Oxley Act; • risks relating to potential future legal proceedings, regulatory disputes, and governmental inquiries; • risks relating to changes in accounting principles or their applicable to us; and • risks relating to estimates or judgments relating to our critical accounting policies.
Biggest changeRisk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations, financial results and future prospects, plans and objectives of the Company and the trading price of our Class A common stock: • our relatively limited operating and revenue history as an independent entity and the nascent clean energy industry; • anticipated increasing expenses in the future and our ability to maintain prolonged profitability; • fluctuations of our order intake and results of operations across fiscal periods; • potential difficulties in maintaining manufacturing capacity and establishing expected mass manufacturing capacity in the future; • risks relating to delays, disruptions, and quality control problems in our manufacturing operations; • risks relating to quality and quantity of components provided by suppliers; • risks relating to our status as a relatively low-volume purchaser as well as from supplier concentration and limited supplier capacity; • risks relating to operating as a global company with a global supply chain; • changes in the cost and availability of raw materials and underlying components; • failure by manufacturers, vendors, and suppliers to use ethical business practices and comply with applicable laws and regulations; • significant reduction in pricing or order volume or loss of one or more of our significant customers or their inability to perform under their contracts; • risks relating to competition for our offerings and our ability to attract new customers and retain existing customers; • ability to maintain and enhance our reputation and brand recognition; • ability to effectively manage our recent and future growth and expansion of our business and operations; • our growth depends in part on the success of our relationships with third parties; • ability to attract and retain highly qualified personnel; • risks associated with engineering and construction, utility interconnection, commissioning and installation of our energy storage products, cost overruns, and delays; • risks relating to lengthy sales and installation cycle for our energy storage solutions; • risks related to defects, errors, vulnerabilities and/or bugs in our products and technology; • risks relating to estimation uncertainty related to our product warranties; • fluctuations in currency exchange rates; • risks related to our current and planned foreign operations; • amounts included in our pipeline and contracted backlog may not result in actual revenue or translate into profits; • risks related to acquisitions we have made or that we may pursue; • events and incidents relating to storage, delivery, installation, operation, maintenance and shutdowns of our products; • actual or threatened health epidemics, pandemics or similar public health threats; • ability to obtain financial assurances for our projects; • risks relating to whether renewable energy technologies are suitable for widespread adoption or if sufficient demand for our offerings do not develop or takes longer to develop than we anticipate; • estimates on size of our total addressable market; • risks relating to the cost of electricity available from alternative sources; • macroeconomic uncertainty and market conditions; • risk relating to interest rates or a reduction in the availability of tax equity or project debt capital in the global financial markets and corresponding effects on customers’ ability to finance energy storage systems and demand for our energy storage solutions; • decline in public acceptance of renewable energy, or delay, prevent, or increase in the cost of customer projects; • severe weather events; • increased attention to ESG matters; • restrictions set forth in our current credit agreement and future debt agreements; • uncertain ability to raise additional capital to execute on business opportunities; • ability to obtain, maintain and enforce proper protection for our intellectual property, including our technology; 17 • threat of lawsuits by third parties alleging intellectual property violations; • adequate protection for our trademarks and trade names; • ability to enforce our intellectual property rights; • risks relating to our patent portfolio; • ability to effectively protect data integrity of our technology infrastructure and other business systems; • use of open-source software; • failure to comply with third party license or technology agreements; • inability to license rights to use technologies on reasonable terms; • risks relating to compromises, interruptions, or shutdowns of our systems; • barriers arising from current electric utility industry policies and regulations and any subsequent changes; • reduction, elimination, or expiration o f government incentives or regulations regarding renewable energy; • changes in the global trade environment; • potential changes in tax laws or regulations; • risks relating to environmental, health, and safety laws and potential obligations, liabilities and costs thereunder; • failure to comply with data privacy and data security laws, regulations and industry standards; • risks relating to potential future legal proceedings, regulatory disputes, and governmental inquiries; • risks related to ownership of our Class A common stock; • risks related to us being a “controlled company” within the meaning of the NASDAQ rules; • risks relating to the terms of our amended and restated certificate of incorporation and amended and restated bylaws; • risks relating to our relationship with our Founders and Continuing Equity Owners; • risks relating to conflicts of interest by our officers and directors due to positions with Continuing Equity Owners; • risks related to short-seller activists; • we depend on distributions from Fluence Energy, LLC to pay our taxes and expenses and Fluence Energy, LLC’s ability to make such distributions may be limited or restricted in certain scenarios; • risks arising out of the Tax Receivable Agreement; • unanticipated changes in effective tax rates or adverse outcomes resulting from examination of tax returns; • risks relating to improper and ineffective internal control over reporting to comply with Sarbanes-Oxley Act; • risks relating to changes in accounting principles or their applicability to us; and • risks relating to estimates or judgments relating to our critical accounting policies.
Compromises, interruptions, or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations.
Compromises, interruptions, and shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations.
We have encountered and could encounter in the future project delays and resulting liquidated damages claims from customers due to impacts arising from or related to actual or threatened health epidemics, pandemics or similar public health threats on suppliers, customers, or others.
We have encountered and could encounter in the future project delays and resulting liquidated damages claims from customers due to impacts arising from or related to actual or threatened health epidemics, pandemics, similar public health threats on suppliers, customers, or others.
If our existing patents expire or are not maintained, our pending patent applications are not granted or our patent rights are contested, circumvented, invalidated or limited in scope, we may not be able to prevent others from selling, developing or exploiting competing technologies, products, services or digital applications, which could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows.
If our existing patents expire or are not maintained, or our pending patent applications are not granted or our patent rights are contested, circumvented, invalidated, or limited in scope, we may not be able to prevent others from selling, developing or exploiting competing technologies, products, services, or digital applications, which could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows.
Failure to comply with data privacy and data security laws, regulations and industry standards could have a material adverse effect on our reputation, results of operations or financial condition or have other adverse consequences . We are subject to various laws, related regulations, and industry standards involving data privacy and information security.
Failure to comply with data privacy and data security laws, regulations, and industry standards could have a material adverse effect on our reputation, results of operations, financial condition or have other adverse consequences . We are subject to various laws, related regulations, and industry standards involving data privacy and information security.
Our amended and restated certificate of incorporation provides (A) (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended or restated) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Our amended and restated certificate of incorporation provides (A) (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee, or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended or restated) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
No adjustments to the redemption or exchange ratio or price for LLC Interests and corresponding shares of Class B-1 or Class B-2 common stock will be made as a result of any cash distribution by us or any retention of cash by us.
No adjustments to the redemption or exchange ratio or price for LLC Interests and corresponding shares of Class B-1 or Class B-2 common stock will be made as a result of any cash distribution or retention of cash by us.
To the extent we are unable to make timely payments under the Tax Receivable Agreement for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
To the extent we are unable to make timely payments under the Tax Receivable Agreement for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
These provisions provide for, among other things: • the ability of our board of directors to issue one or more series of preferred stock; 40 • advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; • certain limitations on convening special stockholder meetings; • prohibit cumulative voting in the election of directors; • that certain provisions of amended and restated certificate of incorporation may be amended only by the affirmative vote of at least 66 2/3% of the voting power represented by our then-outstanding common stock; • the right of each of the AES Related Parties, Siemens Related Parties, and the QIA Related Parties (each as defined in the Stockholders Agreement) to nominate certain of our directors; • the shares of our Class B-1 common stock held by AES entitle them to five votes per share on all matters presented to our stockholders generally; and • the consent rights of the Continuing Equity Owners in the Stockholders Agreement.
These provisions provide for, among other things: • the ability of our board of directors to issue one or more series of preferred stock; • advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; • certain limitations on convening special stockholder meetings; • prohibit cumulative voting in the election of directors; • that certain provisions of amended and restated certificate of incorporation may be amended only by the affirmative vote of at least 66 2/3% of the voting power represented by our then-outstanding common stock; • the right of each of the AES Related Parties, Siemens Related Parties, and the QIA Related Parties (each as defined in the Stockholders Agreement) to nominate certain of our directors; • the shares of our Class B-1 common stock held by AES entitle them to five votes per share on all matters presented to our stockholders generally; and • the consent rights of the Continuing Equity Owners in the Stockholders Agreement.
If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions, continues, and given the complex and evolving nature of EEA and UK privacy laws, this may lead to substantial costs, require significant systems changes, may lead customers to demand certain standards due to strict privacy laws, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities and there can be no assurances that we will be successful in our compliance efforts.
If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions, continues, and given the complex and evolving nature of EEA and UK privacy laws, this may lead to additional costs, require significant systems changes, may lead customers to demand certain standards due to strict privacy laws, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities and there can be no assurances that we will be successful in our compliance efforts.
FERC’s PURPA reforms include modifications (1) to how regulators and electric utilities may establish avoided cost rates for new contracts; (2) that reduce from 20 MW to 5 MW, the capacity threshold above which there is a rebuttable presumption that a renewable-energy qualifying facility has nondiscriminatory market access, thereby removing the requirement for utilities to purchase its output; (3) that require regulators to establish criteria for determining when an electric utility incurs a legally enforceable obligation to purchase from a PURPA facility; and (4) that reduce barriers for third parties to challenge PURPA eligibility.
FERC’s PURPA reforms include modifications (1) to how regulators and electric utilities may establish avoided cost rates for new contracts; (2) that reduce from 20 MW to 5 MW, the capacity threshold above which there is a rebuttable presumption that a renewable-energy qualifying facility has nondiscriminatory market access, thereby removing the requirement for certain utilities to purchase its output; (3) that require regulators to establish criteria for determining when an electric utility incurs a legally enforceable obligation to purchase from a PURPA facility; and (4) that reduce barriers for third parties to challenge PURPA eligibility.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • allocation of expenses to and among different jurisdictions; • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; 47 • costs related to intercompany restructurings; • changes in tax laws, tax treaties, regulations or interpretations thereof; or • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • allocation of expenses to and among different jurisdictions; • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, tax treaties, regulations or interpretations thereof; or • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
As a result, an increase in interest rates or a reduction in the supply of project debt or tax equity financing could reduce the number of customer projects that receive financing or otherwise make it difficult for our customers or their customers to secure the financing necessary to construct a renewable energy system on favorable terms, or at all, and thus lower demand for our products, which could limit our growth or reduce our net sales.
As a result, an increase in interest rates or a reduction in the supply of project debt, project finance, or tax equity financing could reduce the number of customer projects that receive financing or otherwise make it difficult for our customers or their customers to secure the financing necessary to construct a renewable energy system on favorable terms, or at all, and thus lower demand for our products, which could limit our growth or reduce our net sales.
In particular, our international operations and the markets in which we operate or that we may operate in in the future expose us to risks, including: • compliance with multiple, potentially conflicting and changing laws, regulations and permitting processes, including trade, labor, environmental, health, safety, banking, employment, privacy and data protection and privacy laws and regulations, such as the EU Data Privacy Directive, as well as tariffs, export quotas, customs duties and other trade restrictions; • compliance with U.S. and foreign anti-bribery laws, including the Foreign Corrupt Practices Act of 1977, as amended; • compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and applicable U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws and potentially adverse tax consequences due to changes in such tax laws; • limited or unfavorable intellectual property protection and practical difficulties associated with enforcing our legal rights abroad; 25 • geopolitical or economic conditions or uncertainty, which may include war, political instability or unrest, or terrorism, and natural disasters and pandemics; • increased management, travel, infrastructure, and legal compliance costs associated with having operations in many countries; • increased financial accounting and reporting burdens and complexities; • changes in diplomatic and trade relationships, including political risk and customer perceptions based on such changes and risks; • heightened risks of unfair or corrupt business practices in certain geographies that may impact our financial results and result in restatements of our consolidated financial statements; • restrictions on the repatriation of earnings; • different customer and sales practices including longer sales cycles, warranty expectations, and product return policies; • differing technical standards, existing or future regulatory and certification requirements, and required features and functionality as well as different cost, performance, and compatibility requirements; and • fluctuations in the value of foreign currencies and global inflation.
In particular, our international operations and the markets in which we operate or that we may operate in in the future expose us to risks, including: • compliance with multiple, potentially conflicting and changing laws, regulations, and permitting processes, including trade, labor, environmental, health, safety, banking, employment, privacy and data protection laws and regulations, as well as tariffs, export quotas, customs duties, and other trade restrictions; • compliance with U.S. and foreign anti-bribery laws, including the Foreign Corrupt Practices Act of 1977, as amended; • compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and applicable U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws and potentially adverse tax consequences due to changes in such tax laws; • limited or unfavorable intellectual property protection and practical difficulties associated with enforcing our legal rights abroad; • geopolitical or economic conditions or uncertainty, which may include war, political instability or unrest, or terrorism, and natural disasters and pandemics; • increased management, travel, infrastructure, and legal compliance costs associated with having operations in many countries; • increased financial accounting and reporting burdens and complexities; • changes in diplomatic and trade relationships, including political risk and customer perceptions based on such changes and risks; • heightened risks of unfair or corrupt business practices in certain geographies that may impact our financial results and result in restatements of our consolidated financial statements; • restrictions on the repatriation of earnings; • different customer and sales practices including longer sales cycles, warranty expectations, and product return policies; • differing technical standards, existing or future regulatory and certification requirements, and required features and functionality as well as different cost, performance, and compatibility requirements; and • fluctuations in the value of foreign currencies and global inflation.
We cannot guarantee that future cyberattacks, if successful, will not have a material effect on our business or financial results. 37 In 2023, the SEC issued final rules related to cybersecurity risk management, strategy governance and incident disclosure, which may further increase our regulatory burden and the cost of compliance in such events.
We cannot guarantee that future cyberattacks, if successful, will not have a material effect on our business or financial results. In 2023, the SEC issued final rules related to cybersecurity risk management, strategy governance, and incident disclosure, which may further increase our regulatory burden and the cost of compliance in such events.
Under these rules (which generally are effective for taxable years beginning after December 31, 44 2017), subject to certain exceptions, audit adjustments to items of income, gain, loss, deduction, or credit of an entity (and any holder’s share thereof) are determined, and taxes, interest, and penalties attributable thereto, are assessed and collected, at the partnership level.
Under these rules (which generally are effective for taxable years beginning after December 31, 2017), subject to certain exceptions, audit adjustments to items of income, gain, loss, deduction, or credit of an entity (and any holder’s share thereof) are determined, and taxes, interest, and penalties attributable thereto, are assessed and collected, at the partnership level.
We cannot predict whether the countries in which our components and materials are sourced, or may be sourced in the future, will be subject to new or additional trade restrictions imposed by the United States or other foreign governments, including the likelihood, type, effect, or magnitude of any such restrictions and their overall impact on our business and our operating results.
We cannot predict whether the countries in which our components and materials are sourced, or may be sourced in the future, will be subject to new or additional tariffs and trade restrictions imposed by the United States or other foreign governments, including the likelihood, type, effect, or magnitude of any such restrictions and their overall impact on our business and our operating results.
Our energy storage products, which are complex, could contain defects, and/ or may not operate at expected performance levels, which may cause us to incur warranty expenses beyond current estimates and could adversely affect our business and results of operations. We offer standard limited assurance type product warranties, as well as extended service type warranties.
Our energy storage products and solutions, which are complex, could contain defects, or may not operate at expected performance levels, which may cause us to incur warranty expenses beyond current estimates and could adversely affect our business and results of operations. We offer standard limited assurance type product warranties, as well as extended service type warranties.
As part of undertaking an acquisition, we may also significantly revise our capital structure or operational budget, including through issuing common stock that would dilute the ownership percentage of our stockholders, assuming liabilities or debt, utilizing a 27 substantial portion of our cash resources to pay for the acquisition, or significantly increasing operating expenses.
As part of undertaking an acquisition, we may also significantly revise our capital structure or operational budget, including through issuing common stock that would dilute the ownership percentage of our stockholders, assuming liabilities or debt, utilizing a substantial portion of our cash resources to pay for the acquisition, or significantly increasing operating expenses.
Under the terms of the Fluence Energy LLC Agreement, Fluence Energy, LLC is obligated, subject to various limitations and restrictions, including with respect to our debt agreements, to make tax distributions to holders of LLC Interests, including us, although tax distributions may not be paid in whole or in part in certain circumstances, including if Fluence Energy, LLC does not have available cash to make such distributions.
Under the terms of the Fluence Energy LLC Agreement, Fluence Energy, LLC is obligated, subject to various limitations and restrictions, including with respect to our debt agreements, to make tax distributions to holders of LLC Interests, although tax distributions may not be paid in whole or in part in certain circumstances, including if Fluence Energy, LLC does not have available cash to make such distributions.
In addition, our failure to maintain appropriate quality assurance processes could result in increased product failures, loss of customers, increased warranty reserve, or increased production and logistics costs, delays and liquidated damages to our customers. Any of these developments could have a material adverse effect on our business, results of operations, financial condition, and our future prospects.
In addition, our failure to maintain appropriate quality assurance processes could result in increased product failures, loss of customers, increased warranty reserve, and increased production and logistics costs, delays, and liquidated damages to our customers. Any of these developments could have a material adverse effect on our business, results of operations, financial condition, and future prospects.
If our assumptions change or if actual circumstances differ 49 from our assumptions, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If our assumptions change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Any change in our processes could cause one or more production errors, requiring a temporary suspension or delay in our production line until the errors can be researched, identified, and properly addressed and rectified. This may occur particularly as we introduce new products, modify our engineering and production techniques, and/or expand our capacity.
Any change in our manufacturing processes could cause one or more production errors, requiring a temporary suspension or delay in our production line until the errors can be researched, identified, and properly addressed and rectified. This may occur particularly as we introduce new products, modify our engineering and production techniques, and expand our capacity.
Certain persons, associations and groups could oppose renewable energy projects in general or our customers’ projects specifically, citing, for example, misuse of water resources, landscape degradation, land use, food scarcity or price increase, and harm to the environment. Moreover, regulation may restrict the development of renewable energy plants in certain areas.
Certain persons, associations, and groups could oppose renewable energy projects in general or our customers’ projects specifically, citing, for example, misuse of water resources, landscape degradation, land use, food scarcity or price increase, and harm to the environment. Moreover, regulation may restrict the development of renewable energy plants or facilities in certain areas.
In order to develop a renewable energy project, our customers are typically required to obtain, among other things, environmental impact permits or other authorizations and building permits, which in turn require environmental impact studies to be undertaken and public hearings and comment periods to be held during which any person, association, or group may oppose a project.
In order to develop a renewable energy project, our customers are typically required to obtain, among other things, environmental impact permits and other authorizations and building permits, which in turn require environmental impact studies to be undertaken and public 34 hearings and comment periods to be held during which any person, association, or group may oppose a project.
If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.
If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
For example, if a taxing authority in one country where we operate were to reallocate income from another country where we operate, and 30 if the taxing authority in the second country did not agree with the reallocation asserted by the first country, then we could be subject to tax on the same income in both countries, resulting in double taxation.
For example, if a taxing authority in one country where we operate were to reallocate income from another country where we operate, and if the taxing authority in the second country did not agree with the reallocation asserted by the first country, then we could be subject to tax on the same income in both countries, resulting in double taxation.
Royalty or licensing agreements, if required or desirable, may be unavailable on commercially reasonable terms that are acceptable to us, or at all, and may require significant royalty payments and other expenditures. We may also be required to develop alternative non-infringing technology, which could require significant time and expense and diversion of resources.
Royalty or licensing agreements, if required or desirable, may require significant royalty payments and other expenditures, or, they may be unavailable on commercially reasonable terms that are acceptable to us, or at all. We may also be required to develop alternative non-infringing technology, which could require significant time and expense and diversion of resources.
The corporate governance requirements and, specifically, the independence standards are intended to ensure directors who are considered independent are free of any conflicting interest that could influence their actions as directors. 41 Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq rules.
The corporate governance requirements and, specifically, the independence standards are intended to ensure directors who are considered independent are free of any conflicting interest that could influence their actions as directors. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq rules.
Such estimates are inherently uncertain and changes to our historical or projected experience, especially with respect to energy storage products which are still in development and which we expect to produce at significantly greater volumes than our past products, may cause material changes to our warranty reserves in the future.
Such estimates are inherently uncertain and changes to our historical or projected experience, especially with respect to energy storage products solutions are still in development and which we expect to produce at significantly greater volumes than our past products, may cause material changes to our warranty reserves in the future.
Risks Related to Our Business Our limited operating and revenue history as an independent entity and the nascent clean energy industry in which we operate makes evaluating our business and future prospects difficult. We were established in January 2018 as a joint venture between Siemens and AES.
Risks Related to Our Business Our relatively limited operating and revenue history as an independent entity and the nascent clean energy industry in which we operate makes evaluating our business and future prospects difficult. We were established in January 2018 as a joint venture between Siemens and AES.
While we have in past, and expect in future to continue, engaged in voluntary initiatives (such as voluntary disclosures, certifications, or goals, among others) to improve the ESG profile of our Company and/or products or to respond to stakeholder expectations, such initiatives may be costly and may not have the desired effect.
While we have in past engaged, and expect in future to continue to engage, in voluntary initiatives (such as voluntary disclosures, certifications, or goals, among others) to improve the ESG profile of our Company and/or products or to respond to stakeholder expectations, such initiatives may be costly and may not have the desired effect.
Our business depends on our ability to implement improvements to and properly maintain and protect the continuous operation and data integrity of our information technology infrastructure and other business systems and the inability to do so may have a material adverse effect on our reputation and harm our business prospects, financial conditions, and operating results.
Our business depends on our ability to implement improvements to and properly maintain and protect the continuous operation and data integrity of our technology infrastructure and other business systems and the inability to do so may have a material adverse effect on our reputation and harm our business prospects, financial conditions, and operating results.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition. We are subject to taxes by the U.S. federal, state, local, and foreign tax authorities.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition. We are subject to taxes by U.S. federal, state, local, and foreign tax authorities.
Such claims and litigation may involve patent holding companies or other adverse intellectual property rights holders who have no relevant product revenue, and therefore our own pending patents and other intellectual property rights may provide little or no deterrence to these rights holders in bringing intellectual property rights claims against us.
Such claims and litigation may involve patent holding companies or other adverse intellectual property rights holders who have no relevant product revenue, and therefore our own pending patents and other intellectual property rights may provide little or no deterrence to these rights holders in bringing intellectual property right claims against us.
This could make it difficult for us to stop the misappropriation, dilution, infringement, or other violation of certain of our intellectual property rights. Accordingly, we may choose not to seek protection in certain countries, and we will not have the benefit of intellectual property protection in such countries.
This could make it difficult for us to stop the misappropriation, dilution, infringement, or other violation of certain of our intellectual property rights. Accordingly, we may choose not to seek protection in certain countries, and thus, we will not have the benefit of intellectual property protection in such countries.
Our work with contractors or their subcontractors may result in us being required to comply with additional rules (including rules unique to our customers), working conditions, site remediation, and other union requirements, which can add costs and complexity to a project.
Our work with contractors or their subcontractors may result in us being required to comply with additional rules and policies (including rules unique to our customers), working conditions, site remediation, and other union requirements, which can add costs and complexity to a project.
Furthermore, an adverse outcome of a dispute may result in an injunction and could require us to pay substantial monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property rights.
Furthermore, an adverse outcome of a dispute may result in an injunction and could require us to pay substantial monetary damages, including treble damages and attorneys’ fees, if we are found to have infringed a party’s intellectual property rights.
In addition, our Founders’ reduction of their ownership of our company may cause some of our existing agreements and licenses to be terminated. Third parties may seek to hold us responsible for liabilities of our Founders, which could result in a decrease in our income. Third parties may seek to hold us responsible for our Founders’ liabilities.
In addition, our Founders’ reduction of their ownership of the Company may cause some of our existing agreements and licenses to be terminated. Third parties may seek to hold us responsible for liabilities of our Founders, which could result in a decrease in our income. Third parties may seek to hold us responsible for our Founders’ liabilities.
The accounting for our business is subject to change based on the evolution of our business model, interpretations of relevant accounting principles, enforcement of existing or new regulations, and changes in policies, rules, regulations, and interpretations, of accounting and financial reporting requirements of the SEC or other regulatory agencies.
The accounting for our business is subject to change based on the evolution of our business model, interpretations of relevant accounting principles, enforcement of existing or new regulations, and changes in policies, rules, regulations, and interpretations, of accounting 56 and financial reporting requirements of the SEC or other regulatory agencies.
We rely on a combination of patent, trademark, trade-secret, and copyright laws as well as internal confidentiality procedures and contractual provisions to establish, maintain, and protect our intellectual property rights in our internally developed technology and other intellectual property.
We rely on a combination of patent, trademark, trade-secret, copyright, and other intellectual property protection laws as well as internal confidentiality procedures and contractual provisions to establish, maintain, and protect our intellectual property rights in our internally developed technology and other intellectual property.
The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be 36 forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental investigations and inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
Acquisitions involve numerous risks and challenges, including but not limited to the following: • integrating the companies, assets, systems, products, sales channels, and personnel that we acquire; • higher than anticipated acquisition and integration costs and expenses; • reliance on third parties to provide transition services for a period of time after closing to ensure an orderly transition of the business; • growing or maintaining revenues to justify the purchase price and the increased expenses associated with acquisitions; • entering into territories or markets with which we have limited or no prior experience; • establishing or maintaining business relationships with customers, vendors, and suppliers who may be new to us; • overcoming the employee, customer, vendor, and supplier turnover that may occur as a result of the acquisition; • disruption of, and demands on, our ongoing business as a result of integration activities including diversion of management’s time and attention from running the day to day operations of our business; • unfavorable tax or accounting treatment; • inability to implement uniform standards, disclosure controls and procedures, internal controls over financial reporting, and other procedures and policies in a timely manner, if at all; • inability to realize the anticipated benefits of or successfully integrate with our existing business the businesses, products, technologies or personnel that we acquire; • failure to appropriately and holistically identify all the problems, liabilities, risks, or other challenges of any acquisition, technology or solution at the time of closing; • known and unknown liabilities including contract, tax, regulatory or other legal, and other obligations incurred by the acquired business or fines or penalties, for which indemnity obligations, escrow arrangements or insurance may not be available or may not be sufficient to provide coverage; and • potential post-closing disputes.
Acquisitions involve numerous risks and challenges, including but not limited to the following: • integrating the companies, assets, systems, internal controls, products, sales channels, and personnel that we acquire; • inability to successfully manage acquisition-related strain on our management, operations and financial resources; • higher than anticipated acquisition and integration costs and expenses; • reliance on third parties to provide transition services for a period of time after closing to ensure an orderly transition of the business; • growing or maintaining revenues to justify the purchase price and the increased expenses associated with acquisitions; • entering into territories or markets with which we have limited or no prior experience; • establishing or maintaining business relationships with customers, vendors, and suppliers who may be new to us; • overcoming the employee, customer, vendor, and supplier turnover that may occur as a result of the acquisition; • disruption of, and demands on, our ongoing business as a result of integration activities including diversion of management’s time and attention from running the day to day operations of our business; • unfavorable tax or accounting treatment; • inability to implement uniform standards, disclosure controls and procedures, internal controls over financial reporting, and other procedures and policies in a timely manner, if at all; • inability to realize the anticipated benefits of or successfully integrate with our existing business the businesses, products, technologies, or personnel that we acquire; • failure to appropriately and holistically identify all the problems, liabilities, risks, or other challenges of any acquisition, technology or solution at the time of closing; • known and unknown liabilities including contract, tax, regulatory or other legal, and other obligations incurred by the acquired business or fines or penalties, for which indemnity obligations, escrow arrangements or insurance may not be available or may not be sufficient to provide coverage; and • potential post-closing disputes.
Any defects or errors in our product, service, or digital applications offerings, or the perception of such defects or errors, or other performance problems could result in any of the following, each of which could adversely affect our business, financial condition, and results of operations: 23 • expenditure of significant financial and product development resources, including recalls, in efforts to analyze, correct, eliminate, or work around errors or defects; • significant re-engineering costs; • loss of existing or potential customers or partners; • interruptions or delays in sales; • delayed or lost revenue; • delay or failure to attain market acceptance; • delay in the development or release of new functionality or improvements; • negative publicity and reputational harm; • sales credits or refunds; • security vulnerabilities, data breaches, and exposure of confidential or proprietary information; • diversion of development and customer service resources; • breach of warranty claims; • legal claims and regulatory actions under applicable laws, rules, and regulations; and • the expense and risk of litigation.
Any defects or errors in our offerings, or the perception of such defects or errors, or other performance problems could result in any of the following, each of which could adversely affect our business, financial condition, and results of operations: • expenditure of significant financial and product development resources, including recalls, in efforts to analyze, correct, eliminate, or work around errors or defects; • significant re-engineering costs; • loss of existing or potential customers or partners; • interruptions or delays in sales; • delayed or lost revenue; • delay or failure to attain market acceptance; • delay in the development or release of new functionality or improvements; • negative publicity and reputational harm; • sales credits or refunds; • security vulnerabilities, data breaches, and exposure of confidential or proprietary information; • diversion of development and customer service resources; • breach of warranty claims; • legal claims and regulatory actions under applicable laws, rules, and regulations; and • the expense and risk of litigation.
Failure by our vendors and suppliers to use ethical business practices and comply with applicable laws and regulations, including labor and environmental laws, may adversely affect our business. We do not control our vendors or suppliers nor their business practices.
Failure by our manufacturers, vendors, and suppliers to use ethical business practices and comply with applicable laws and regulations, including labor and environmental laws, may adversely affect our business. We do not control our vendors or suppliers nor their business practices.
Our business depends on internally developed technology or other internally developed intellectual property, including hardware, software, databases, systems, confidential information and know-how, the protection of which is crucial to the success of our business.
Our business depends on internally developed technology or other internally developed intellectual property, including software, databases, systems, confidential information, and know-how, the protection of which is crucial to the success of our business.
Termination by the licensor would cause us to lose valuable rights, and could prevent us from selling our products and services, or adversely impact our ability to commercialize future solutions and services.
Termination by the licensor would cause us to lose valuable rights, and could prevent us from selling our products and services, or adversely impact our ability to commercialize current and future solutions and services.
Any claim that we have violated intellectual property or other proprietary rights of third parties, with or without merit, and whether or not it results in litigation, is settled out of court or is determined in our favor, could be time-consuming and costly to address and resolve, and could divert the time and attention of management and technical personnel from our business and the day-to-day operations.
Any claim that we have violated intellectual property or other proprietary rights of third parties, with or without merit, and whether or not it results in litigation, settlement out of court, or is determined in our favor, could be time-consuming and costly to address and resolve, and could divert the time and attention of management and technical personnel from our business and the day-to-day operations.
In addition, there could be potential trademark infringement claims brought by owners of other registered or unregistered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.
In addition, there could be potential trademark infringement claims 38 brought by owners of other registered or unregistered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.
Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the 38 licensed intellectual property is found to be invalid or unenforceable, if the licensed intellectual property expires or if we are unable to enter into necessary licenses on acceptable terms.
Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing 41 third parties, if the licensed intellectual property is found to be invalid or unenforceable, if the licensed intellectual property expires or if we are unable to enter into necessary licenses on acceptable terms.
To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts generally will be deferred and will accrued interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
Although we have contractual protections, including warranty disclaimers and limitation of liability provisions, in many of our agreements with customers, resellers, and other business partners, such protections may not be uniformly implemented in all contracts and, where implemented, may not fully or effectively protect from claims by customers, resellers, business partners or other third parties.
Although we have contractual protections, including indemnification, warranty disclaimers and limitation of liability provisions, in many of our agreements with customers, resellers, and other business partners, such protections may not be uniformly implemented 28 in all contracts and, where implemented, may not fully or effectively protect from claims by customers, resellers, business partners, or other third parties.
Any factor that diminishes our reputation or that of our management, including failing to meet the expectations of or provide quality products and services to our customers on a timely basis, or any adverse publicity or litigation, could make it substantially more difficult for us to attract new customers and to maintain our existing customers.
Any factor that diminishes our reputation or that of our management, including failing to meet the expectations of or provide quality products and services to our customers on a timely basis, or any adverse publicity, litigation, or regulatory proceeding, could make it substantially more difficult for us to attract new customers and to maintain our existing customers.
Risks Related to Our Intellectual Property, Data Privacy and Technology If we are unable to obtain, maintain and enforce adequate protection for our intellectual property or if the scope of our intellectual property protection is not sufficiently broad, others may be able to develop and commercialize technology and intellectual property substantially similar to ours, and our ability to successfully commercialize our technology or intellectual property may be adversely affected.
Risks Related to Our Intellectual Property and Technology If we are unable to obtain, maintain, and enforce adequate protection for our intellectual property or if the scope of our intellectual property protection is not sufficiently broad, others may be able to develop and commercialize technology and intellectual property substantially similar to ours, and our ability to successfully commercialize our technology or intellectual property may be adversely affected.
If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition may be adversely affected. Our failure to achieve and/or maintain prolonged profitability could negatively impact the value of our Class A common stock and the value of our business.
If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations, and financial condition may be adversely affected. Our failure to maintain prolonged profitability could negatively impact the value of our Class A common stock and the value of our business.
A prolonged depression in our stock price could make it difficult for us to retain our key members of management and other employees and recruit additional qualified personnel and we may have to pay additional compensation to employees to incentivize them to join or stay with us.
A prolonged depression in our stock price could make it difficult for us to retain our key members of management and other senior employees and recruit additional qualified personnel and we may have to pay 25 additional compensation to employees to incentivize them to join or stay with us.
Any insurance coverage or indemnification obligations of suppliers may not adequately cover all such claims or cover only a portion of such claims. A successful product liability, warranty, or other similar claim could have an adverse effect on our business, financial condition, and operating results.
Any insurance coverage or indemnification obligations of suppliers may not adequately cover all such claims or cover only a portion of such claims. A successful product liability, warranty, or other similar claim could have an adverse effect on our business, financial condition, and results of operations.
Any changes to government, utility, or electric market regulations or policies that favor electric utilities or other market participants could reduce the competitiveness of battery energy storage products and cause a significant reduction in demand for our products and services and adversely impact our growth.
Any changes to government, utility, or electric market regulations or policies that favor electric utilities or other market participants could reduce the competitiveness of battery energy storage products or our digital offerings and cause a significant reduction in demand for our products and services and adversely impact our growth.
From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources. Uncertainty may result from changes in intellectual property laws as a result of new legislation and from new interpretations of intellectual property laws by applicable courts and agencies throughout the world.
We may also have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources. Uncertainty may result from changes in intellectual property laws as a result of new legislation and from new interpretations of intellectual property laws by applicable courts and agencies throughout the world.
We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. We and Fluence Energy, LLC intend to conduct our operations so that we will not be deemed an investment company.
We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act. 55 We and Fluence Energy, LLC conduct our operations and intend to continue to conduct our operations so that we will not be deemed an investment company.
Changes, or in some cases a lack of change, in any of the laws, regulations, ordinances, or other rules that apply to customer installations and new technology could make it more costly for our customers to install and operate our energy storage products on particular projects sites, and in turn, could negatively affect our ability to deliver cost savings to customers for the purchase of electricity, thereby making our energy storage products less appealing to current customers and potential customers.
Changes, or in some cases a lack of change, in any of the laws, regulations, ordinances, or other rules that apply to customer installations and new technology could make it more costly for our customers to install and operate our energy storage products on particular projects’ sites, and in turn, could negatively affect our ability to deliver cost savings to customers for the purchase of electricity, thereby making our energy storage solutions less appealing to current and potential customers.
There are a number of patents and pending patent applications owned by competitors exist in the fields in which we have developed and are developing our technology. Many of these existing patents and patent applications might have priority over our patent applications and could subject our patents to invalidation or our patent applications to rejection.
There are a number of patents and pending patent applications owned by competitors that exist in the fields in which we have developed and are developing our technology. These existing patents and patent applications might have priority over our patent applications and could subject our patents to invalidation or our patent applications to rejection.
Information about our pipeline and contracted backlog included in this Annual Report is based on numerous assumptions and limitations, calculated using our internal data which may not provide an accurate indication of our future or expected results as we cannot guarantee that our pipeline or contracted backlog will result in actual revenue in the originally anticipated period, if at all, or will result in meaningful revenue or profitability.
Information about our pipeline and contracted backlog included in this Annual Report and our other public disclosures is based on numerous assumptions and limitations, calculated using our internal data which may not provide an accurate indication of our future or expected results as we cannot guarantee that our pipeline or contracted backlog will result in actual revenue in the originally anticipated period, if at all, or will result in meaningful revenue or profitability.
Moreover, Xinjiang is the source of significant amounts of raw and refined materials and components in the global lithium-ion battery supply chain, and there is ongoing 18 scrutiny of this value chain and companies associated therewith, including for human rights and national security concerns.
Xinjiang is the source of significant amounts of raw and refined materials and components in the global lithium-ion battery supply chain, and there is ongoing scrutiny of this value chain and companies associated therewith, including for human rights and national security concerns.
In the continued growth and expansion of the Company, o ur management will also be required to maintain and expand our relationships with customers, suppliers, channel partners, and other third parties and attract new customers and suppliers, as well as manage multiple geographic locations.
In the continued growth and expansion of the Company, o ur management will also be required to maintain and expand our relationships with customers, suppliers, and other third parties and attract new customers and suppliers, as well as manage multiple geographic locations.
If our suppliers provide insufficient inventory at the level of quality or provenance required to meet customer or regulatory requirements, or if our suppliers are unable or unwilling to provide us with the contracted quantities at the contracted prices, or if there are unexpected changes in business conditions, including inflation of raw material costs, labor issues, wars, natural disasters, pandemics, trade and shipping disruptions, and other factors beyond our or our suppliers’ control which affect our supplier’s ability to deliver adequate inventory of components to us, our results of operations could be materially and negatively impacted.
If our suppliers provide insufficient inventory at the level of quality or provenance required to meet customer or regulatory requirements, if our suppliers are unable or unwilling to provide us with the contracted quantities at the contracted prices, or if there are unexpected changes in business conditions, including inflation of raw material costs, labor issues, wars, natural disasters, pandemics, trade and shipping disruptions, changes in tariffs, and other factors beyond our or our suppliers’ control which affect such supplier’s ability to deliver adequate inventory of components to us, our results of operations and relationships with our customers could be materially and negatively impacted.
Any delays in our customers’ ability to connect with utilities, delays in the performance of installation-related services, or poor performance of installation-related services will have an adverse effect on our business and results of operations and could cause our results to vary materially from period to period.
Any delays in our customers’ ability to connect with utilities, delays in the performance of installation-related services, or poor performance of installation-related services may have an adverse effect on our business and results of operations and could cause our results to vary materially from period to period.
See “—Risks related to ownership of our Class A common stock”. 45 As a result of (1) potential differences in the amount of net taxable income allocable to us and to Fluence Energy, LLC’s other equity holders, (2) the lower tax rate applicable to corporations as opposed to individuals, and (3) certain tax benefits that we anticipate from (a) future redemptions or exchanges of LLC Interests from the Founders, (b) payments under the Tax Receivable Agreement and (c) certain other transactions, tax distributions to us may be in amounts that exceed our tax liabilities.
See “ Risks related to ownership of our Class A common stock ”. 52 As a result of (1) potential differences in the amount of net taxable income allocable to us and to Fluence Energy, LLC’s other equity holders, (2) the lower tax rate applicable to corporations as opposed to individuals, and (3) certain tax benefits that we anticipate from (a) future redemptions or exchanges of LLC Interests from the Founders, (b) payments under the Tax Receivable Agreement, and (c) certain other transactions, tax distributions to us may be in amounts that exceed our tax liabilities.
We believe the association with our Founders has previously contributed and continues to contribute to our establishing and building relationships with our customers due to the Founders’ recognized brands and products, as well as resources such as their intellectual property and access to other third parties’ intellectual property.
We believe the association with our Founders has and continues to contribute to our establishing and building relationships with our customers due to the Founders’ recognized brands and products, as well as resources such as their intellectual property and access to other third parties’ intellectual property.
For example, we may ultimately be unable to complete certain initiatives or targets, either on the timelines initially announced or at all, due to technological, legal, cost, or other constraints, which may be within or outside of our control.
We may ultimately be unable to complete certain initiatives or targets, either on the timelines initially announced or at all, due to technological, legal, cost, or other constraints, which may be within or outside of our control.
Further, many of the companies with which we compete for experienced personnel have greater financial resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or the Company has breached certain legal obligations, resulting in a diversion of our time and resources.
Further, many of the companies with which we compete for experienced personnel have greater financial resources than we have. In addition, if we hire employees from competitors or other companies in related industries, their former employers may attempt to assert that these employees or the Company has breached certain legal obligations, resulting in a diversion of our time and resources.
Such regulatory processes may require public hearings concerning our business, which could expose us to subsequent litigation. Litigation and regulatory proceedings may be protracted and expensive, and may divert management attention and resources and the ultimate results may be difficult to predict. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages.
Such regulatory processes may require public hearings concerning our business, which could expose us to subsequent litigation. Generally, litigation, regulatory proceedings, and government investigations may be protracted and expensive, and may divert management attention and resources and the ultimate results may be difficult to predict. Certain of these matters may include speculative claims for substantial or indeterminate amounts of damages.
We have policies and procedures regarding approval of project costs and modifications. In connection with our limited operating history and our significant growth, we have in the past experienced and may in the future experience incurrence of project costs in excess of those budgeted.
We have policies and procedures regarding approval of project costs and modifications. In connection with our operating history and our recent significant growth, we have in the past experienced and may in the future experience incurrence of project costs in excess of those budgeted.
The ABL Credit Agreement limits, and our future debt agreements may similarly limit, our ability to make certain payments, including dividends and distributions on Fluence Energy, LLC’s equity, Fluence Energy, Inc.’s equity and other restricted payments.
The 2024 Credit Agreement limits, and our future debt agreements may similarly limit, our ability to make certain payments, including dividends and distributions on Fluence Energy, LLC’s equity, Fluence Energy, Inc.’s equity and other restricted payments.
Due to the potential for changes to tax laws and regulations or changes to the interpretation thereof (including regulations and interpretations pertaining to recent tax reforms in the United States), the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, the complexity of our intercompany arrangements, uncertainties regarding the geographic mix of earnings in any particular period, and other factors, our estimates of effective tax rate and income tax assets and liabilities may be incorrect and our financial statements could be adversely affected, and the resulting impacts may vary substantially from period to period.
Due to the potential for changes to tax laws and regulations or changes to the interpretation thereof (including regulations and interpretations pertaining to recent tax reforms in the United States), the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, the complexity of our intercompany arrangements, uncertainties regarding the geographic mix of earnings in any particular period, and other factors, our estimates of effective tax rate and income tax assets and liabilities are subject to change and our financial statements could be adversely affected, and the resulting impacts may vary substantially from period to period.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended, or the 1940 Act, including as a result of our ownership of Fluence Energy, LLC, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), including as a result of our ownership of Fluence Energy, LLC, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.
Our customer relationships, business, financial results, and reputation may be adversely impacted due to events and incidents relating to storage, delivery, installation, operation and shutdowns of our energy storage products, including events and incidents outside of our control.
Our customer relationships, business, financial results, and reputation may be adversely impacted due to events and incidents relating to storage, delivery, installation, operation, and shutdowns of our energy storage solutions, including events and incidents outside of our control.
In addition, the rights granted under any issued patents may not provide us with adequate protection or competitive advantages that we anticipate against competitors or other third parties.
In addition, the rights granted under any 39 issued patents may not provide us with adequate or complete protection or competitive advantages that we anticipate against competitors or other third parties.
Our future operations and growth strategy is therefore subject to all of the risks inherent in light of the expenses, difficulties, complications, and delays frequently encountered in connection with the growth of any new business in a nascent industry, as well as those that are specific to our business in particular as which are further described herein.
Our future operations and growth strategy is therefore subject to all of the risks inherent in light of the expenses, difficulties, 18 complications, and delays frequently encountered in connection with the growth of a business in a nascent industry, as well as those that are specific to our business in particular as which are further described herein.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease offices or co-working spaces in Alpharetta, Georgia, San Francisco, California, Irving, California, Needham, Massachusetts, Erlangen, Germany, Berlin, Germany, Zurich, Switzerland, Melbourne, Australia, Sydney, Australia, Amsterdam, Netherlands, New Delhi, India, Bengaluru, India, Singapore, London, United Kingdom, Salerno, Italy, Taipei, Taiwan, and Taguig City, Philippines. Our Erlangen office includes an energy storage testing facility.
Biggest changeWe also lease offices or co-working spaces in Alpharetta, Georgia, Mountain View, California, Irving, California, Houston, Texas, Erlangen, Germany, Berlin, Germany, Zurich, Switzerland, Melbourne and Sydney, Australia, Amsterdam, Netherlands, New Delhi and Bengaluru, India, Singapore, London, United Kingdom, Salerno, Italy, Taipei, Taiwan, and Taguig City, Philippines. Our Erlangen office includes an energy storage testing facility.
In addition to our office and co-working spaces, we also lease operational facilities in Toole, Utah, Kingman, Arizona, Rockville, Maryland, East Huntingdon Township, Pennsylvania, and Long Beach, California. These facilities are primarily for product staging and storage and research and development activities.
In addition to our office and co-working spaces, we also lease other facilities in East Huntingdon Township, Pennsylvania, and Long Beach, California. These facilities are primarily for product staging and storage and research and development activities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we may be involved in litigation relating to claims that arise out of our operations and businesses and that cover a wide range of matters, including, among others, intellectual property matters, contract disputes, insurance and property damage claims, employment claims, personal injury claims, product liability claims, environmental claims and warranty claims.
Biggest changeLEGAL PROCEEDINGS From time to time, we may be involved in legal proceedings relating to claims that arise out of our operations and business that cover a wide range of matters, including, but not limited to, intellectual property matters, commercial and contract disputes, insurance and property damage claims, labor and employment claims, personal injury claims, product liability claims, environmental claims and warranty claims.
However, the results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, we may incur significant costs and experience a diversion of management resources as a result of claims and litigation.
However, the results of any current or future legal proceedings cannot be predicted with certainty, and regardless of the outcome, we may incur significant costs and experience a diversion of management resources as a result of claims and litigation.
For a description of our material pending legal contingencies, please see Note 14 - Commitments and Contingencies , to the consolidated financial statements included elsewhere in this Annual Report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 50 PART II
For a description of our material pending legal contingencies, please see “Note 14 - Commitments and Contingencies”, to the consolidated financial statements included elsewhere in this Annual Report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 58 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur Class B-1 common stock and Class B-2 common stock are not traded in any public market.
Biggest changeOur Class B-1 common stock and Class B-2 common stock are not traded in any public market. Holders As of November 19, 2024, there were approximately nine stockholders of record of our Class A common stock, one holder of our Class B-1 common stock, and no holders of our Class B-2 common stock.
Recent Sales of Unregistered Equity Securities There were no unregistered sales of our equity securities during the fiscal year ended September 30, 2023, that were not otherwise disclosed in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Recent Sales of Unregistered Equity Securities There were no unregistered sales of our equity securities during the fiscal year ended September 30, 2024, that were not otherwise disclosed in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Issuer Purchases of Equity Securities None. 51 Performance Graph The following graph compares the total stockholder return from October 28, 2021, the date on which our Class A common stock commenced trading on the Nasdaq Global Select Market through September 30, 2023 of (i) our Class A common stock, (ii) the NASDAQ Clean Edge Green Energy Index Fund (QCLN), and (iii) the NASDAQ Composite Index.
Issuer Purchases of Equity Securities None. 59 Performance Graph The following graph compares the total stockholder return from October 28, 2021, the date on which our Class A common stock commenced trading on the Nasdaq Global Select Market through September 30, 2024 of (i) our Class A common stock, (ii) the NASDAQ Clean Edge Green Energy Index Fund (QCLN), and (iii) the NASDAQ Composite Index.
Our ability to pay dividends was previously restricted by our Revolving Credit Agreement, dated November 1, 2021, which was terminated effective November 22, 2023, and is currently restricted under our ABL Credit Agreement, dated November 22, 2023, and may similarly be restricted by the terms of any future credit agreement or any future debt or preferred equity securities of us or our subsidiaries.
Our ability to pay dividends was previously restricted by our Revolving Credit Agreement, dated November 1, 2021, which was terminated effective November 22, 2023, was restricted by our ABL Credit Agreement (as defined below), and is currently restricted under our 2024 Credit Agreement, and may similarly be restricted by the terms of any future credit agreement or any future debt or preferred equity securities of us or our subsidiaries.
Dividends We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on our Class A common stock in the foreseeable future.
We currently intend to retain all available funds and any future earnings to fund the development and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on our Class A common stock in the foreseeable future.
Removed
Holders As of November 20, 2023, there was one holder of our Class B-1 common stock, no holders of our Class B-2 common stock, and approximately 630 stockholders of record of our Class A common stock, although we believe that because many of our outstanding shares of Class A common stock are held in accounts with brokers and other institutions, we have more beneficial owners.
Added
The actual number of holders of our Class A common stock is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. Dividends We have never declared or paid any cash dividends on our capital stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe ABL Credit Agreement sets forth that (i) loans comprising each ABR Borrowing (as defined in the ABL Credit Agreement) shall bear interest at the Alternate Base Rate (as defined in the ABL Credit Agreement) plus an additional margin ranging from 2.00% to 2.50%, depending on the Average Excess Availability (as defined in the ABL Credit Agreement) during the applicable determination period, (ii) loans comprising each Canadian Prime Loan Borrowing (as defined in the ABL Credit Agreement) shall bear interest at the Canadian Prime Rate (as defined in the ABL Credit Agreement) plus an additional margin ranging from 1.00% to 1.50%, depending on the Average Excess Availability (as defined in the ABL Credit Agreement) during the applicable determination period, and (iii) the loans comprising each Term Benchmark Borrowing (as defined in the ABL Credit Agreement) shall bear interest at the Adjusted Term SOFR Rate, the Adjusted EURIBOR Rate or Adjusted Daily Compounded CORRA (each as defined in the ABL Credit Agreement), as applicable, plus an additional margin ranging from 2.00% to 2.50%, depending on the Average Excess Availability during the applicable determination period, in each instance subject to customary benchmark replacement provisions including, but not limited to, alternative benchmark rates, customary spread adjustments with respect to borrowings in foreign currencies and benchmark replacement conforming changes.
Biggest changeThe 2024 Credit Agreement sets forth that (i) loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus 2.00%, (ii) loans comprising each Term Benchmark Borrowing shall bear interest at the Term SOFR Rate or the Adjusted EURIBOR Rate, as applicable, plus 3.00%, and (iii) the loans comprising each RFR Borrowing shall bear interest at the Daily Simple RFR plus 3.00%, in each instance subject to customary benchmark replacement provisions including, but not limited to, alternative benchmark rates, customary spread adjustments with respect to borrowings in foreign currencies and benchmark replacement conforming changes.
The payment obligation under the Tax Receivable Agreement is an obligation of Fluence Energy, Inc. and not of Fluence Energy, LLC. We expect to use distributions from Fluence Energy, LLC to fund any payments that we will be required to make under the Tax Receivable Agreement.
The payment obligation under the Tax Receivable Agreement is an obligation of Fluence Energy, Inc. and not of Fluence Energy, LLC. We expect to use distributions from Fluence Energy, LLC to fund any payments that we will be required to make under the Tax Receivable Agreement.
Fluence Energy, Inc. expects to benefit from the remaining 15% of cash tax benefits, if any, it realizes from such tax benefits.
Fluence Energy, Inc. expects to benefit from the remaining 15% of cash tax benefits, if any, it realizes from such tax benefits.
For purposes of the Tax Receivable Agreement, the cash tax benefits will be computed by comparing the actual income tax liability of Fluence Energy, Inc. to the amount of such taxes that Fluence Energy, Inc. would have been required to pay had there been no such tax basis adjustments of the assets of Fluence Energy, LLC or its subsidiaries as a result of redemptions or exchanges and had Fluence Energy, Inc. not entered into the Tax Receivable Agreement.
For purposes of the Tax Receivable Agreement, the cash tax benefits will be computed by comparing the actual income tax liability of Fluence Energy, Inc. to the amount of such taxes that Fluence Energy, Inc. would have been required to pay had there been no such tax basis adjustments of the assets of Fluence Energy, LLC or its subsidiaries as a result of redemptions or exchanges and had Fluence Energy, Inc. not entered into the Tax Receivable Agreement.
Increases in tax basis and tax basis adjustments generated over time may increase (for tax purposes) the depreciation and amortization deductions available to Fluence Energy, Inc. and, therefore, may reduce the amount of U.S. federal, state, and local tax that Fluence Energy, Inc. would otherwise be required to pay in the future, although the IRS may challenge all or part of the validity of that tax basis, and a court could sustain such a challenge.
Increases in tax basis and tax basis adjustments generated over time may increase (for tax purposes) the depreciation and amortization deductions available to Fluence Energy, Inc. and, therefore, may reduce the amount of U.S. federal, state, and local tax that Fluence Energy, Inc. would otherwise be required to pay in the future, although the IRS may 72 challenge all or part of the validity of that tax basis, and a court could sustain such a challenge.
The Form S-3 allows us to offer and sell from time-to-time Class A common stock, preferred stock, depository shares, debt securities, warrants, purchase contracts or units comprised of any combination of these securities for our own account and allows certain selling stockholders to offer and sell 135,666,665 shares of Class A common stock in one or more offerings.
The Form S-3 allows us to offer and sell from time-to-time Class A common stock, preferred stock, depository shares, debt securities, warrants, purchase contracts or units comprised of any combination of these securities for our own account and allows certain selling stockholders to offer and sell up to 135,666,665 shares of Class A common stock in one or more offerings.
Although the timing and extent of future payments could vary significantly under the Tax Receivable Agreement for the factors discussed above, we anticipate funding payments from the Tax Receivable Agreement 67 from cash flow from operations of our subsidiaries, available cash or available borrowings under any future debt agreements, and such payments are not anticipated to be dependent upon the availability of proceeds of the IPO.
Although the timing and extent of future payments could vary significantly under the Tax Receivable Agreement for the factors discussed above, we anticipate funding payments from the Tax Receivable Agreement from cash flow from operations of our subsidiaries, available cash or available borrowings under any future debt agreements, and such payments are not anticipated to be dependent upon the availability of proceeds of the IPO.
To the extent we 66 are unable to make timely payments under the Tax Receivable Agreement for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
To the extent we are unable to make timely payments under the Tax Receivable Agreement for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
Pipeline Pipeline represents our uncontracted, potential revenue from energy storage products, service, and digital software contracts, which have a reasonable likelihood of contract execution within 24 months. Pipeline is an internal management metric that we construct from market information reported by our global sales force.
Pipeline Pipeline represents our uncontracted, potential revenue from energy storage products and solutions, service, and digital software contracts, which have a reasonable likelihood of contract execution within 24 months. Pipeline is an internal management metric that we construct from market information reported by our global sales force.
Key Factors and Trends Affecting our Performance We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part I, Item 1A. “Risk Factors” within this Annual Report.
Key Factors, Trends, and Uncertainties Affecting our Performance We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part I, Item 1A. “Risk Factors” within this Annual Report.
These non-GAAP measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP and may not be comparable to similar measures presented by other entities. Readers are cautioned that these 60 non-GAAP measures should not be construed as alternatives to other measures of financial performance calculated in accordance with GAAP.
These non-GAAP measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP and may not be comparable to similar measures presented by other entities. Readers are cautioned that these non-GAAP measures should not be construed as alternatives to other measures of financial performance calculated in accordance with GAAP.
We do not currently hedge against changes in the price of raw materials as we do not purchase raw materials; instead, we buy the components of energy storage products from our suppliers and we rely on our suppliers to hedge the underlying raw materials.
We do not currently hedge against changes in the price of raw materials as we do not directly purchase raw materials; instead, we buy the components of energy storage products from our suppliers and we rely on our suppliers to hedge the underlying raw materials.
Contracted/Order Intake Contracted, which we use interchangeably with “Order Intake”, represents new energy storage product contracts, new service contracts and new digital contracts signed during each period presented.
Contracted/Order Intake Contracted, which we use interchangeably with “order intake”, represents new energy storage product and solutions contracts, new service contracts. and new digital contracts signed during each period presented.
On June 30, 2022, Siemens Industry, Inc. exercised its redemption right pursuant to the terms of LLC Agreement with respect to its entire holding of 58,586,695 LLC Interests of Fluence Energy, LLC, together with the corresponding cancellation of an equivalent number of shares of Class B-1 common stock of Fluence Energy, Inc., par value $0.00001 per share (the “Siemens Redemption”).
On June 30, 2022, Siemens Industry, Inc. exercised its redemption right pursuant to the terms of LLC Agreement with respect to its entire holding of 58,586,695 LLC Interests of Fluence Energy, LLC, together with the corresponding cancellation of an equivalent number of shares of Class B-1 common stock of Fluence Energy, Inc., par value $0.00001 per share.
The ABL Facility is secured by (i) a first priority pledge of Fluence Energy, Inc.’s equity interests in Fluence Energy, LLC and (ii) first priority security interests in, and mortgages on, substantially all tangible and intangible personal property and material fee-owned real property of Fluence Energy, Inc., Fluence Energy, LLC and Fluence Energy Global Production Operation, LLC, in each case, subject to customary exceptions and limitations.
The ABL Facility was secured by (i) a first priority pledge of Fluence Energy, Inc.’s equity interests in Fluence Energy, LLC and (ii) first priority security interests in, and mortgages on, substantially all tangible and intangible personal property and material fee-owned real property of Fluence Energy, Inc., Fluence Energy, LLC, and Fluence Energy Global Production Operation, LLC, in each case, subject to customary exceptions and limitations.
Pipeline is monitored by management to understand the anticipated growth of our Company and our estimated future revenue related to customer contracts for our battery-based energy storage products and solutions, services and digital software. We cannot guarantee that our contracted backlog or pipeline will result in actual revenue in the originally anticipated period or at all.
Pipeline is monitored by management to understand the anticipated growth of our Company and our estimated future revenue related to customer contracts for our battery-based energy storage products and solutions, services, and digital software. We cannot guarantee that our pipeline will result in actual revenue in the originally anticipated period or at all.
Assets under management serves as an indicator of expected revenue from our customers and assists management in forecasting our expected financial performance. 59 Contracted Backlog For our energy storage products and solutions contracts, contracted backlog includes signed customer orders or contracts under execution prior to when substantial completion is achieved.
Assets under management serves as an indicator of expected revenue from our customers and assists management in forecasting our expected financial performance. 65 Contracted Backlog For our energy storage products and solutions contracts, contracted backlog includes signed customer orders or contracts under execution prior to when substantial completion is achieved.
Non-GAAP Financial Measures This section contains references to certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted Gross Profit (Loss), Adjusted Gross Profit Margin, and Free Cash Flow.
Non-GAAP Financial Measures This section contains references to certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted Gross Profit, Adjusted Gross Profit Margin, and Free Cash Flow.
In April 2023, we aggregated into an additional long term note and transferred an additional $30.9 million in receivables with the same customer to SCB for proceeds of $27.0 million, upon substantially similar terms as the December 2022 transfer and has a maturity date of December 27, 2024.
In April 2023, we aggregated and transferred an additional $30.9 million in receivables into a second long term note with the same customer to SCB for proceeds of $27.0 million, upon substantially similar terms as the December 2022 transfer and with a maturity date of December 27, 2024.
To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and cash requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders.
To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and cash requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilutions to our stockholders.
We believe that order intake provides useful information to investors and management because the order intake provides visibility into future revenues and enables evaluation of the effectiveness of the Company’s sales activity and the attractiveness of its offerings in the market.
We believe that order intake provides useful information to investors and management because the order intake provides visibility into future revenue and enables evaluation of the effectiveness of the Company’s sales activity and the attractiveness of its offerings in the market.
Key Components of Our Results of Operations The following discussion describes certain line items in our consolidated statements of operations and comprehensive loss. 56 Total Revenue We generate revenue from energy storage products and solutions, service agreements with customers to provide operational services related to battery-based energy storage products, and from digital application contracts.
Key Components of Our Results of Operations The following discussion describes certain line items in our consolidated statements of operations and our consolidated statements of comprehensive income (loss). Total Revenue We generate revenue from battery-based energy storage solutions, service agreements with customers to provide operational services related to battery-based energy storage solutions, and from digital application contracts.
Contracted backlog and pipeline may not generate margins equal to our historical operating results. We have only recently begun to track our contracted backlog and pipelines on a consistent basis as performance measures, and as a result, we do not have significant experience in determining the level of realization that we will achieve on these contracts.
Pipeline may not generate margins equal to our historical operating results. We have only recently begun to track our pipeline on a consistent basis as performance measures, and as a result, we do not have significant experience in determining the level of realization that we will achieve on these contracts.
Our customers may experience project delays or cancel orders as a result of external market factors and economic or other factors beyond our control. If our contracted backlog and pipeline fail to result in revenue as anticipated or in a timely manner, we could experience a reduction in revenue, profitability, and liquidity.
Our customers may experience project delays or cancel orders as a result of external market factors and economic or other factors beyond our control. If our contracted backlog fails to result in revenue as anticipated or in a timely manner, we could experience a reduction in revenue, profitability, and liquidity.
All outstanding payments owed under the program are recorded within Accounts payable in our Consolidated Balance Sheets. On August 11, 2023, we filed an automatic shelf registration statement on Form S-3 with the SEC which became effective upon filing and will remain effective for three years from the effectiveness date.
All outstanding payments owed under the program are recorded within “Accounts payable” in our consolidated balance sheets. On August 11, 2023, we filed an automatic shelf registration statement on Form S-3 with the SEC which became effective upon filing and will remain effective for three years from the effectiveness date.
Professional services consist of audit, legal, tax, insurance, information technology, and other costs. Depreciation and Amortization Depreciation consists of costs associated with property, plant, and equipment (“PP&E”) and amortization of intangibles consisting of patents, licenses, and developed technology over their expected period of use.
Professional services consist of audit, legal, tax, insurance, information technology, and other such costs. 62 Depreciation and Amortization Depreciation consists primarily of costs associated with property, plant, and equipment (“PP&E”) and amortization of intangibles consisting of patents, licenses, and developed technology over their expected period of use.
The ABL Credit Agreement limits our ability to make certain payments, including dividends and distributions on Fluence Energy, LLC’s equity, the Company’s equity and other restricted payments.
The 2024 Credit Agreement limits our ability to make certain payments, including dividends and distributions on Fluence Energy, LLC's equity, the Company's equity, and other restricted payments.
The ABL Credit Agreement contains customary covenants for this type of financing, including, but not limited to, covenants that restrict our ability to incur indebtedness; incur liens; sell, transfer, or dispose of property and assets; make investments or acquisitions; pay dividends, make distributions or other restricted payments; and engage in affiliate transactions.
The 2024 Credit Agreement contains customary covenants for this type of financing, including, but not limited to, covenants that restrict our and certain of our subsidiaries’ ability to: incur indebtedness; incur liens; sell, transfer, or dispose of property and assets; make investments or acquisitions; pay dividends, make distributions or other restricted payments; and engage in affiliate transactions.
We will continue to be subject to foreign income taxes with respect to our foreign subsidiaries and our expectations are valuation allowances will be needed in certain tax jurisdictions. In addition to tax expenses, we also will incur expenses related to our operations, as well as payments under the Tax Receivable Agreement, which we expect could be significant over time.
We are also subject to foreign income taxes with respect to our foreign subsidiaries and our expectations are that valuation allowances will be recorded in certain tax jurisdictions. In addition to tax expenses, we also will incur expenses related to our operations, as well as payments under the Tax Receivable Agreement, which we expect could be significant over time.
The Company recognizes revenue over time for our energy storage products and solutions as we transfer control of our product to the customer.
The Company recognizes revenue over time for our energy storage solutions as we transfer control of our product to the customer.
Siemens AG will be entitled to receive payments under the Tax Receivable Agreement equaling 85% of such amount, or $82.0 million; assuming, among other factors, (i) we will have sufficient taxable income to fully utilize the tax benefits; (ii) Fluence Energy, LLC is able to fully depreciate or amortize its assets; and (iii) no material changes in applicable tax law.
Siemens and AES will be entitled to receive payments under the Tax Receivable Agreement equaling 85% of such amount, or $107.4 million; assuming, among other factors, (i) we will have sufficient taxable income to fully utilize the tax benefits; (ii) Fluence Energy, LLC is able to fully depreciate or amortize its assets; and (iii) no material changes in applicable tax law.
After our IPO, we are now subject to U.S. federal and state income taxes with respect to our allocable share of any taxable income or loss of Fluence Energy, LLC, and are taxed at the prevailing corporate tax rates.
Income Tax Expense We are subject to U.S. federal and state income taxes with respect to our allocable share of any taxable income or loss of Fluence Energy, LLC and are taxed at the prevailing corporate tax rates.
As a result of the tax basis adjustment of the assets of Fluence Energy, LLC and its subsidiaries upon the Siemens Redemption and our possible utilization of certain tax attributes, the payments that we may make under the Tax Receivable Agreement will be substantial. The Siemens Redemption will result in future tax savings of $96.5 million.
As a result of the tax basis adjustment of the assets of Fluence Energy, LLC and its subsidiaries upon the Siemens Redemption and our possible utilization of certain tax attributes, the payments that we may make under the Tax Receivable Agreement will be substantial. The Redemptions will result in future tax savings of $126.4 million.
Under the terms of the ABL Credit Agreement, Fluence Energy, LLC and its subsidiaries are currently limited in their ability to pay cash dividends to, lend to, or make other investments in Fluence Energy, Inc., subject to certain exceptions.
Under the terms of the 2024 Credit Agreement, Fluence Energy, LLC and its subsidiaries are currently limited in their ability to pay cash dividends to, lend to, or make other investments in the Company, subject to certain exceptions.
The existence and measurement of liquidated damages may also be impacted by our judgements about the probability of favorable outcomes of customer disputes involving whether certain events qualify as force majeure or the reason for the events that caused project delays. Variable consideration for liquidated damages is estimated using the expected value of the consideration to be received.
The existence and measurement of LDs may also be impacted by our judgments about the probability of favorable outcomes of customer disputes involving whether certain events qualify as force majeure or the reason for the events that caused project delays. Variable consideration for liquidated damages is estimated using the expected value method.
Key Operating Metrics The following tables presents our key operating metrics and order intake for the fiscal years ended September 30, 2023 and 2022. The tables below present the metrics in either Gigawatts (GW) or Gigawatt hours (GWh).
Key Operating Metrics The following tables presents our key operating metrics for the fiscal years ended September 30, 2024 and 2023. The tables below present the metrics in either Gigawatts (GW) or Gigawatt hours (GWh).
This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A. “Risk Factors” or in other parts of this Annual Report.
This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A.
Limitations on the use of Free Cash Flow include (i) it should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures (for example, cash is still required to satisfy other working capital needs, including short-term investment policy, restricted cash, and intangible assets); (ii) Free Cash Flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities; and (iii) this metric does not reflect our future contractual commitments.
Limitations on the use of Free Cash Flow include (i) it should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures (for example, cash is still required to satisfy other working capital needs, including short-term investment policy, restricted cash, and intangible assets); (ii) Free Cash Flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities; and (iii) this metric does not reflect our future contractual commitments. 66 These non-GAAP measures are intended as supplemental measures of performance and/or liquidity that are neither required by, nor presented in accordance with, GAAP.
The Siemens Redemption resulted in increases in the tax basis of the assets of Fluence Energy, LLC and certain of its subsidiaries.
The Siemens and AES Redemptions resulted in increases in the tax basis of the assets of Fluence Energy, LLC and certain of its subsidiaries.
Comparison of the Fiscal Year Ended September 30, 2022 to the Fiscal Year Ended September 30, 2021 For a discussion of our results of operations for the year ended September 30, 2022 compared to fiscal year ended September 30, 2021, please see Item 7.
Comparison of the Fiscal Year Ended September 30, 2023 to the Fiscal Year Ended September 30, 2022 For a discussion of our results of operations for the year ended September 30, 2023 compared to fiscal year ended September 30, 2022, please see Part II, Item 7.
Pursuant to the Credit Support and Reimbursement Agreement, if AES or Siemens Industry agree to provide a particular credit support (which they are permitted to grant or deny in their sole discretion), they are entitled to receipt of a credit support fee and reimbursement for all amounts paid to our lenders or other counterparties, payable upon demand.
Pursuant to the Credit Support and Reimbursement Agreement, if AES or Siemens Industry agree to provide a particular credit support (which they are permitted to grant or deny in their sole discretion), they are entitled to receipt of a credit support fee, reimbursement of actual costs and expenses incurred in having a credit support instrument issued and maintained, and reimbursement for all amounts paid to our lenders or other counterparties, payable upon demand.
These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments. Sales and Marketing Expenses Sales and marketing expenses consist primarily of personnel-related expenses, including salaries, stock-based compensation, and employee benefits.
These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments. Sales and Marketing Expenses Sales and marketing expenses consist primarily of personnel-related expenses, including salaries, stock-based compensation, employee benefits, and related personnel technology costs, and factoring discounts on receivables sold.
Inflationary pressures, supply chain disruptions, geo-political conflicts, government regulations and incentives, and other factors could result in fluctuations in demand for and deployment of renewable energy resources, adversely affecting our revenue and ability to generate profits in the future. See Part I, Item IA. “Risk Factors” of this Annual Report for further discussion on these risks.
Macroeconomic uncertainties, supply chain disruptions, geo-political conflicts, government regulations and incentives, and other factors could result in fluctuations in demand for and deployment of renewable energy resources, adversely affecting our revenue and ability to generate profits in the future. See Part I, Item 1A. “Risk Factors” for further discussion on these risks.
This transfer of control to the customer is supported by clauses in the contracts that provide enforceable rights to payment of the transaction price associated with work performed to date for products that do not have an alternative use to the Company and/or as the project is built and control transfers depending on the contract terms.
This transfer of control to the customer occurs as the project is being built in accordance with the contract or is supported by clauses in the contracts that provide enforceable rights to payment of the transaction price associated with work performed to date for products that do not have an alternative use to the Company.
The customer’s stated findings, however, could also relate to certain scopes of work for which other parties were responsible and/or relate to other causes, including the design and installation of portions of the facility over which Fluence did not have responsibility or control.
The customer’s stated findings, however, could also relate to certain scopes of work for which other parties were responsible and/or relate to other causes, including the design and installation of portions of the facility over which Fluence did not have responsibility or control. The customer has alleged that Fluence is liable for the incident.
Fluence enters into contracts with utility companies, developers, and commercial and industrial customers. We derive the majority of our revenues from selling energy storage products and solutions.
Fluence enters into contracts with utility companies, developers, and commercial and industrial customers. We derive the majority of our revenue from selling battery-based energy storage solutions.
We expect that as we increase both our revenues and the number of our general and administrative personnel, we will invest in additional PP&E to support our growth resulting in additional depreciation and amortization. Interest (Income) Expense, net Interest (income) consists of interest on cash deposits, and interest on customer notes receivables.
We expect that as we increase both our revenues and the number of our general and administrative personnel, we will invest in additional PP&E to support our growth resulting in additional depreciation and amortization. Interest Income, net Interest income, net consists primarily of interest income net of interest expense.
R&D expenses also support three product testing labs located across the globe, including a system-level testing facility in Pennsylvania that is used for quality assurance and the rapid iteration, testing, and launching of new Fluence energy storage technology and products.
R&D expenses also support three product testing labs located across the globe: a system-level testing facility in Pennsylvania that is used for quality assurance and the rapid iteration, testing, and launching of new Fluence energy storage technology and products, a testing facility located in Erlangen, Germany, and a deployment center located in Long Beach, California.
As of September 30, 2023, the aggregate amount of commitments was $200.0 million. The Revolver was originally scheduled to mature on November 1, 2025.
The aggregate amount of commitments was $200.0 million. The Revolver was originally scheduled to mature on November 1, 2025.
Our key operating metrics focus on project 58 milestones to measure our performance and designate each project as either “deployed”, “assets under management”, “contracted” or “pipeline”.
Our key operating metrics focus on project milestones to 64 measure our performance and designate each project as either “deployed”, “assets under management”, “contracted backlog”, or “pipeline”.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, filed with the SEC on December 14, 2022.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on November 29, 2023.
On or about November 10, 2023, Defendant Diablo Energy Storage, LLC filed a cross-complaint against Fluence, seeking a minimum of $25.0 million of alleged damages and disgorgement of all compensation received by Fluence for the project, in the amount of approximately $230.0 million.
On or about November 10, 2023, Defendant Diablo Energy Storage, LLC filed a cross-complaint against Fluence, seeking a minimum of $25.0 million of alleged damages and disgorgement of all compensation received by Fluence for the project, in the amount of approximately $230.0 million. The disgorgement claim was based upon an alleged deficiency in Fluence’s contractor license.
At times Fluence will incur additional costs to execute on the performance of a contract. When this happens, we typically attempt to recover the revenue associated with these costs via a change order with the customer.
Fluence may incur additional costs to execute on the performance of a contract. When this happens, we typically attempt to recover these costs via a change order with the customer.
As of September 30, 2023, AES and Siemens issued guarantees of $50.0 million each, for a total of $100.0 million, to SCF Bank on our behalf. As of September 30, 2023 , three suppliers were actively participating in the supply chain financing program, and we had $30.0 million of payables outstanding subject to the prog ram.
As of September 30, 2024, AES and Siemens each have outstanding issued guarantees of $50.0 million each, for a total of $100.0 million, to SCF Bank on our behalf. As of September 30, 2024 , two suppliers were actively participating in the supply chain financing program, and we h ad $81.3 million of payables outstanding subject to the prog ram.
The market for energy storage is rapidly evolving, and while we believe costs will continue to decline over the long term, there is no guarantee that they will decline at all or decline at the rates we expect.
The market for energy storage continues to rapidly evolve and while we believe lithium-ion battery pack costs will continue to decline over the long term, there is no guarantee that they will decline or decline at the rates we expect.
Revenue for these performance obligations is recognized using the percentage of completion method based on cost incurred as a percentage of total estimated contract costs.
Revenue is recognized using the percentage of completion (“POC”) method based on actual cost incurred as a percentage of total estimated contract costs.
Standard inventory materials (including batteries, enclosures, chillers, and others, which are assembled into “cubes”) that could be used interchangeably on other projects are included in our measure of progress when they are integrated into, or restricted to, the production of the customer’s project.
Standard inventory materials (including batteries, enclosures, chillers, and others, which are assembled into “cubes”) that could be used interchangeably on other projects are included in our measure of progress when they are integrated into, or restricted to a specific customer’s project such that we no longer have the ability to direct their use for other purposes.
Additionally, prior to the IPO, we funded our liquidity through borrowings from AES Grid Stability and Siemens Industry. On August 11, 2021, Fluence Energy, LLC entered into a promissory note with each of Siemens Industry and AES Grid Stability, under which Fluence Energy, LLC received a bridge financing of an aggregate of $50.0 million.
On August 11, 2021, Fluence Energy, LLC entered into a promissory note with each of Siemens Industry and AES Grid Stability, under which Fluence Energy, LLC received a bridge financing of an aggregate of $50.0 million.
If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.
If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations, and financial condition. On November 1, 2021, upon the closing of our IPO, we received net proceeds of $935.8 million.
Gross Profit (Loss) and Gross Profit Margin (Loss) Gross profit increased by $203.3 million or 326%, in the fiscal year ended September 30, 2023, as compared to the fiscal year ended September 30, 2022.
Gross Profit and Gross Profit Margin Gross profit increased by $200.1 million, or 142%, in the fiscal year ended September 30, 2024, as compared to the fiscal year ended September 30, 2023.
Our product costs are affected by the underlying cost of raw materials, including steel and aluminum supply costs, including inverters, casings, fuses, and cable; technological innovation; economies of scale resulting in lower supply costs; and improvements in production processes and automation.
Our product costs are affected by the underlying cost of raw materials, such as lithium-ion, and components to our solutions including inverters. Our product costs are also affected by technological innovation, economies of scale resulting in lower supply costs, and improvements in production processes and automation.
We are currently not able to estimate the impact, if any, that this incident may have on our reputation or financial results, or on market adoption of our energy storage products and solutions. 2023 Project-Related Litigation In October 2023, Fluence filed a complaint in the Superior Court of California, Contra Costa County, against Diablo Energy Storage, LLC, Empire Business Park, LLC, the Bank of New York Mellon and others, seeking approximately $37.0 million in damages arising from the supply and construction of an energy storage facility for the defendants.
To date, we do not believe that this incident has impacted the market’s adoption of our products and solutions. 2023 Project-Related Litigation In October 2023, Fluence filed a complaint in the Superior Court of California, Contra Costa County, against Diablo Energy Storage, LLC, Empire Business Park, LLC, the Bank of New York Mellon and others, seeking approximately $37.0 million in damages arising from the supply and construction of an energy storage facility for the defendants, including for the defendants’ nonpayment of contractual amounts owed.
Adjusted EBITDA is calculated from the consolidated statements of operations using net income (loss) adjusted for (i) interest (income) expense, net, (ii) income taxes, (iii) depreciation and amortization, (iv) stock-based compensation, (v) other income or expenses and (vi) non-recurring income or expenses.
Adjusted EBITDA is calculated from the consolidated statements of operations using net income (loss) adjusted for (i) interest income, net, (ii) income taxes, (iii) depreciation and amortization, (iv) stock-based compensation, and (v) other non-recurring income or expenses. Adjusted EBITDA also includes amounts impacting net income related to estimated payments due to related parties pursuant to the Tax Receivable Agreement.
Since the revenue recognition of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses to completion.
Our judgement on when costs should be included in the measure of progress has a material impact on revenue recognition. Since the revenue recognition of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses to completion.
Segments The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer. The Company’s CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.
The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer. The Company’s CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates in one operating segment, which corresponds to one reportable segment.
Liquidity and Capital Resources Since inception and through September 30, 2023, our principal sources of liquidity were the proceeds from our IPO, our cash and cash equivalents, short-term borrowings, borrowings available under the Revolver, supply chain financing, capital contributions from AES Grid Stability and Siemens Industry, proceeds from the QFH investment and borrowings against note receivables.
Liquidity and Capital Resources Since inception and through September 30, 2024, our principal sources of liquidity were the proceeds from our IPO, our cash and cash equivalents from operations, short-term borrowings, borrowings available under our debt agreements, supply chain financing, capital contributions from AES Grid Stability, Siemens Industry, and proceeds from the investment by QIA Florence Holdings, LLC, an affiliate of QIA in 2021, proceeds from short-term investments, and borrowings against note receivables and proceeds from sale of accounts receivable under the MRPA.
We determined it is not probable payments under the Tax Receivable Agreement would be made, given there is no expectation of future sufficient taxable income over the term of the agreement to utilize deductions in the future. Therefore, the Company has not recognized the liability.
With the exception of the $1.5 million of Tax Receivable Agreement payment recorded as of September 30, 2024, we determined it is not probable additional payments under the Tax Receivable Agreement would be made, given there is no expectation of future sufficient taxable income over the term of the agreement to utilize deductions in the future.
Pr ior to the IPO, the Company had an Uncommitted Line of Credit Agreement (“Line of Credit’) with Citibank, N.A. (“Citibank”) which allowed us to borrow an amount in aggregate not to exceed $50 million, with the expiration date on March 31, 2023. Outstanding borrowings from the Line of Credit were $50.0 million as of September 30, 2021.
(“Citibank”) which allowed us to borrow an amount in aggregate not to exceed $50.0 million, with the expiration date on March 31, 2023. Outstanding borrowings from the Line of Credit were $50.0 million as of September 30, 2021. The weighted average annual interest rate of the borrowing was 2.83% .
Cash flows provided by financing activities in fiscal year 2023 was primarily driven by $48.2 million in proceeds from borrowing against note receivable - pledged as collateral and $7.2 million in proceeds from the exercise of stock options offset by $2.8 million in cash outflows from repurchases of class A common stock placed into treasury.
Net cash flows provided by financing activities in fiscal year ended September 30, 2023 of $52.6 million were primarily driven by $48.2 million in proceeds from the borrowing against note receivable - pledged as collateral and $7.2 million in proceeds from the exercise of stock options, partially offset by $2.8 million in cash outflows related to Class A common stock withheld related to settlement of employee taxes for stock-based compensation awards.
When this fact pattern occurs, it will create a timing difference between when we have incurred the cost versus when we record the revenue as costs are recognized immediately when incurred and the revenue from the change order is recognized as an increase to contract price when it is legally enforceable, which is usually upon signing a respective change order or equivalent document confirming the claim acceptance by customer.
When this fact pattern occurs, it can create a timing difference between when we have incurred the cost versus when we record the proportionate revenue, since costs are recognized immediately when incurred and the revenue is recognized based upon the transaction price, which is usually increased upon signing a respective change order with the customer.
Fiscal year 2023 included $111.7 million from proceeds of short-term investments, offset by $5.0 million in payments for investment in joint ventures, $9.2 million in capital expenditures on software, and $3.0 million purchases of property and equipment.
Net cash flows provided by investing activities were $94.4 million for the fiscal year ended September 30, 2023 which were primarily due to $111.7 million from proceeds from maturities of short-term investments, offset by $5.0 million in payments for purchase of investment in joint venture, $9.2 million in capital expenditures on software, and $3.0 million in purchases of property and equipment.
Credit Support and Reimbursement Agreement We are party to an Amended and Restated Credit Support and Reimbursement Agreement with AES and Siemens Industry whereby they may, from time to time, agree to furnish credit support to us in the form of direct issuances of credit support to our lenders or other beneficiaries or through their lenders’ provision of letters of credit to backstop our own facilities or obligations.
Should we determine that the Tax Receivable Agreement payment is probable, a corresponding liability will be recorded and as a result, our future results of operations and earnings could be impacted as a result of these matters. 73 Credit Support and Reimbursement Agreement We are party to an Amended and Restated Credit Support and Reimbursement Agreement, dated June 9, 2021, with AES and Siemens Industry (the “Credit Support and Reimbursement Agreement”) whereby they may, from time to time, agree to furnish credit support to us in the form of direct issuances of credit support to our lenders or other beneficiaries or through their lenders’ provision of letters of credit to backstop our own facilities or obligations.
Interest (Income) Expense, Net Interest income increased by $5.1 million, or 1552.8%, in the fiscal year ended September 30, 2023, as compared to the fiscal year ended September 30, 2022.
Income Tax Expense Income tax expense increased by $4.7 million, or 102.4%, in the fiscal year ended September 30, 2024, as compared to the fiscal year ended September 30, 2023.
The customer’s stated findings, if ultimately confirmed and proven, could relate to certain scopes of work for which Fluence or its subcontractors could be responsible.
Our customer released initial findings in the second fiscal quarter of 2022 on what it contends is the root cause of the incident. The customer’s stated findings, if ultimately confirmed and proven, could relate to certain scopes of work for which Fluence or its subcontractors could be responsible.
Net Loss Net loss decreased by $184.4 million, or 63.8%, in the fiscal year ended September 30, 2023, as compared to the fiscal year ended September 30, 2022. The decrease is primarily attributable to increase in “gross profit” and increase in “other (income) expense, net”, both as described above, partially offset by increases in operating expenses as described above.
Net Income (Loss) Net income increased by $135.2 million, or 129.0%, in the fiscal year ended September 30, 2024, as compared to the fiscal year ended September 30, 2023. The increase is primarily attributable to increase in “gross profit,” partially offset by increases in operating expenses as described above.
Siemens Industry Redemption On June 30, 2022, Siemens Industry, Inc. exercised its redemption right pursuant to the terms of the Third Amended and Restated Limited Liability Company Agreement of Fluence Energy, LLC (the “LLC Agreement”) with respect to its entire holding of 58,586,695 LLC Interests of Fluence Energy, LLC, together with the corresponding cancellation of an equivalent number of shares of Class B-1 common stock of Fluence Energy, Inc., par value $0.00001 per share (the “Siemens Redemption”).
On December 8, 2023, AES Grid Stability exercised its redemption right pursuant to the terms of the LLC Agreement with respect to 7,087,500 LLC Interests of Fluence Energy, LLC, together with the corresponding cancellation of an equivalent number of shares of Class B-1 common stock of Fluence Energy, Inc., par value $0.00001 per share (the “AES Redemption” and, together with the Siemens Redemptions, the “Siemens and AES Redemptions”).
Fluence Energy, LLC was required to pay to the lenders a commitment fee of 0.55 % per annum on the average daily unused portion of the revolving commitments through maturity, which was originally scheduled to be the four-year anniversary of the closing date of the Revolver.
Fluence Energy, LLC is required to pay to the lenders a commitment fee on the average daily unused portion of the commitments through maturity, which shall accrue at the rate of 0.50% per annum.
Fiscal Year Ended September 30, Change Change % 2023 2022 Energy Storage Products Deployed (GW) 3.0 1.8 1.2 66.7 % Deployed (GWh) 7.2 5.0 2.2 44.0 % Contracted backlog (GW) 4.6 3.7 0.9 24.3 % Pipeline (GW) 12.2 9.3 2.9 31.2 % Pipeline (GWh) 34.2 22.6 11.6 51.3 % (amounts in GW) Fiscal Year Ended September 30, Change Change % 2023 2022 Service Contracts Assets under management 2.8 2.0 0.8 40.0 % Contracted backlog 2.9 2.0 0.9 45.0 % Pipeline 13.7 8.8 4.9 55.7 % (amounts in GW) Fiscal Year Ended September 30, Change Change % 2023 2022 Digital Contracts Assets under management 15.5 13.7 1.8 13.1 % Contracted backlog 6.8 3.6 3.2 88.9 % Pipeline 24.4 19.6 4.8 24.5 % (amounts in GW) Fiscal Year Ended September 30, 2023 2022 Change Change % Energy Storage Products Contracted 2.2 1.9 0.3 15.8 % Service Contracts Contracted 1.8 1.3 0.5 38.5 % Digital Contracts Contracted 6.2 4.9 1.3 26.5 % Deployed Deployed represents cumulative energy storage products and solutions that have achieved substantial completion and are not decommissioned.
The table is presented in Gigawatts (GW): (amounts in GW) Fiscal Year Ended September 30, 2024 2023 Change Change % Energy Storage Products and Solutions Contracted 5.2 2.2 3.0 136.4 % Service Contracts Contracted 3.0 1.8 1.2 66.7 % Digital Contracts Contracted 8.6 6.2 2.4 38.7 % Deployed Deployed represents cumulative energy storage products and solutions that have achieved substantial completion and are not decommissioned.
The customer has alleged that Fluence is liable for the incident but has not yet demanded a specific amount of compensation nor alleged a particular level of responsibility. Fluence has denied liability. No formal legal proceedings have been commenced, but it is reasonably possible that litigation may result from this matter if a resolution cannot be achieved.
At this time, Fluence cannot accept the customer’s stated findings and has denied liability. No formal legal proceedings have been commenced, but it is reasonably possible that litigation may result from this matter if a resolution cannot be achieved.
Our fiscal year begins on October 1 and ends on September 30. References to “fiscal year 2021”, “fiscal year 2022” and “fiscal year 2023” refer to the fiscal years ended September 30, 2021, September 30, 2022 and September 30, 2023, respectively. Presentation of Financial Information Fluence Energy, LLC is the accounting predecessor of Fluence Energy, Inc. for financial reporting purposes.
Our fiscal year begins on October 1 and ends on September 30. References to “fiscal year 2022”, “fiscal year 2023” and “fiscal year 2024” refer to the fiscal years ended September 30, 2022, September 30, 2023 and September 30, 2024, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+7 added−5 removed5 unchanged
Biggest changeWe entered into the Revolver on November 1, 2021, which bears a variable interest rate based on the Adjusted SOFR Rate or the Alternate Base Rate (each as defined in the Revolving Credit Agreement). As of September 30, 2023, we have no borrowings under the Revolver.
Biggest changeEffective August 6, 2024, we entered into the 2024 Credit Agreement, under which borrowings bear a variable interest rate based on the Alternate Base Rate, Term SOFR Rate, Adjusted EURIBOR Rate, or Daily Simple RFR, plus applicable margin (each as defined in the 2024 Credit Agreement).
Currently, management does not anticipate a material adverse effect in our financial position or results of operations as a consequence of counterparty non-performance. We continuously monitor the creditworthiness of all our counterparties. Foreign Currency Risk Our reporting currency is the U.S. dollar, while certain of our current subsidiaries have other functional currencies, reflecting their principal operating markets.
Currently, management does not anticipate a material adverse effect in our financial position or results of operations as a consequence of counterparty non-performance. We continuously monitor the creditworthiness of all our counterparties. 76 Foreign Currency Risk Our reporting currency is the U.S. dollar, while certain of our current subsidiaries have other functional currencies, reflecting their principal operating markets.
In addition, customers are required to make milestone payments based on their project’s progress. We may also, at times, require letters of credit, parent guarantees or cash collateral when deemed necessary. Our overall exposure may be affected positively or negatively by macroeconomic or regulatory changes that impact our counterparties to one extent or another.
In addition, customers are required to make milestone payments based on their project’s progress. We may also, at times, require letters of credit, parent guarantees, cash collateral, or other credit support when deemed necessary. Our overall exposure may be affected positively or negatively by macroeconomic factors or regulatory changes that impact our counterparties to one extent or another.
Effective November 22, 2023, we terminated the Revolver and entered into the ABL Credit Agreement, under which borrowings bear a variable interest rate based on the Adjusted Term SOFR Rate, Alternate Base Rate, Adjusted EURIBOR Rate, or Adjusted Daily Compounded CORRA Rate, plus applicable margin depending on available excess availability (each as defined in the ABL Credit Agreement). 70
Effective November 22, 2023, we terminated the Revolver and entered into the ABL Credit Agreement, under which borrowings bore a variable interest rate based on the Adjusted Term SOFR Rate, Alternate Base Rate, Adjusted EURIBOR Rate, or Adjusted Daily Compounded CORRA Rate, plus applicable margin depending on available excess availability (each as defined in the ABL Credit Agreement).
Interest Rate Risk We were previously exposed to interest rate risk in connection with borrowings under the Revolver, which bore interest at floating rates, and we currently are exposed to interest rate risk in connection with borrowings under the ABL Credit Agreement, which bears interest at floating rates.
Interest Rate Risk During fiscal year 2024, we were exposed to interest rate risk in connection with borrowings under the Revolver and the ABL Facility, which bore interest at floating rates. In addition, we are exposed to interest rate risk in connection with borrowings under the 2024 Revolver, which bears interest at floating rates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market risk is the potential loss that may result from market changes associated with our business or with an existing or forecasted financial transactions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market risk is the potential loss that may result from market changes associated with our business or with an existing or forecasted financial transactions. We are exposed to various market risks in the ordinary course of our business which are discussed below.
Our counterparties for sale of our energy storage products and solutions and delivery service are customers including conglomerates, utilities / load-serving entities, independent power producers, developers, and C&I customers in the United States and other countries.
Credit Risk Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to us. Our counterparties for sale of our energy storage solutions and delivery service are customers including conglomerates, utilities / load-serving entities, independent power producers, developers, and C&I customers in the United States and other countries.
A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment could harm our business and negatively impact revenue, results of operations, and cash flows. Credit policies have been approved and implemented to govern our portfolio of counterparties with the objective of mitigating credit losses.
A loss of one or more of our significant customers, including AES and its affiliates, their inability to perform under their contracts, or their default in payment could harm our business and negatively impact revenue, results of operations, and cash flows.
Removed
We are exposed to various market risks in the ordinary course of our business which are discussed below. 69 Credit Risk Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to us.
Added
We monitor our underlying market risk exposures on an ongoing basis and believe that we can modify or adapt any hedging or related market risk strategies as needed. The disclosures presented in this Item 7A are based upon a number of assumptions; actual effects may differ.
Removed
Our foreign currency derivatives are primarily used to mitigate foreign currency risk related to foreign denominated supply arrangements with the changes in fair value recognized as a component of Cost of Goods and Services. To date, we have not had material exposure to foreign currency fluctuations and have not had material hedging instruments to hedge the foreign currency risks.
Added
The safe harbor provided in Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act shall apply to the disclosures contained in this Item 7A. For further information regarding market risk, see Part I, Item 1A.
Removed
Customer Concentration and Emerging Market Exposure Risk We deliver products and services in developed economies, including the United States, the United Kingdom, Chile, Ireland, Switzerland, Australia, Germany, and other developed countries. We also deliver products and services in the Philippines and India, which represent an aggregate 3% and 6% of revenue for the fiscal year 2023 and 2022, r espectively.
Added
“Risk Factors” titled “ Significant changes in the cost and/or availability of raw materials and components that are incorporated into our energy storage products could adversely affect our business, results of operations, and future prospects,” and “We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results”, and “An increase in interest rates or a reduction in the availability of tax equity or project debt capital or project financing in the global financial markets could make it difficult for end customers to finance the cost of a renewable energy storage system and could reduce the demand for our energy storage solutions”.
Removed
Macroeconomic conditions in developing economies are usually more volatile than in developed economies and entail certain risks and uncertainties. Changes in the United States and other countries’ trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations, or cash flows.
Added
Credit policies have been approved and implemented to govern our portfolio of counterparties with the objective of mitigating credit losses.
Removed
The interruption of the flow of components and materials from international vendors could disrupt our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports.
Added
We use foreign currency forward contracts and may designate these instruments as cash flow hedges to manage our exposure to the foreign currency impact of intercompany sales of inventory to regional entities by our centralized procurement entity.
Added
To date, we have not had material exposure to foreign currency fluctuations, and a hypothetical 10% increase or decrease in the foreign currency exchange rates in comparison to the value of the U.S. dollar would not have a material effect on our operating results.
Added
As of September 30, 2024, there are no cash borrowings under the 2024 Revolver. 77

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