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What changed in Fluence Energy, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Fluence Energy, Inc.'s 2022 and 2023 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 2023 report.

+845 added−711 removedSource: 10-K (2023-11-29) vs 10-K (2022-12-14)

Top changes in Fluence Energy, Inc.'s 2023 10-K

845 paragraphs added · 711 removed · 495 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

94 edited+75 added−63 removed18 unchanged
Biggest changeWe believe there are multiple factors driving continued growth in the energy storage sector, including: • 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. • 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. • As predicted by IHS Markit, a forecasted reduction in the battery cost by 2024 is expected to improve the economics of energy storage and support the development of larger energy storage systems. • Environmental responsibility has become a priority for major companies and investors, with over 300 major 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 policies to support the transition from fossil fuels to low-carbon forms of energy.
Biggest changeEnergy 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.
The digital applications and solutions sector is driven by the growth in installed energy storage products and renewable and conventional generation assets, and its addressable market is comprised of the total global installed fleet of energy storage products and renewable and conventional generation assets.
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.
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. OS provides real-time information through multiple systems views, alarm notifications, and dashboards.
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 September 2020, the FERC issued Order 2222 opening U.S. wholesale energy markets to aggregations of distributed energy resources like rooftop solar, “behind the meter” batteries, and electric vehicles.
In September 2020, FERC issued Order 2222 opening U.S. wholesale energy markets to aggregations of distributed energy resources like rooftop solar, “behind the meter” batteries, and electric vehicles.
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 regulations, codes, standards, guidelines, policies, and laws.
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.
We believe there is an opportunity to not only deploy digital applications and solutions on individual assets but also across entire energy storage fleets and portfolios of generation assets to improve their collective performance and economic output, and to reduce the overall carbon footprint of the electric grid by optimizing the interactions between different asset types.
We believe there is an opportunity to not only deploy digital applications and software solutions on individual assets but also across entire energy storage fleets and portfolios of generation assets to improve their collective performance and economic output, and to reduce the overall carbon footprint of the electric grid by optimizing the interactions between different asset types.
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 is not patented and processes for which patents are difficult to enforce.
The ESG Council reports to our ESG Steering, which is comprised of five executive 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, 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).
Fluence is also internationally certified to ISO 45001, an occupational health and safety standard which requires certain proactive measures to ensure 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 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.
The Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Bill, which was signed into law in November 2021, allocated nearly $7 billion to strengthen the U.S. battery supply chain, which includes producing and recycling critical minerals without new extraction or mining and sourcing materials for domestic manufacturing. Pursuant to this, the U.S.
The Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Bill, which was signed into law in November 2021, allocated nearly $7 billion to strengthen the U.S. battery supply chain, which includes producing and recycling critical minerals without new extraction or mining and sourcing materials for domestic manufacturing. Pursuant to this, in October 2022, the U.S.
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 7 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, energy arbitrage, and more.
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.
Additionally, we believe that the volume of key components we purchase, such as lithium-ion batteries, should provide us leverage to create a competitive advantage on availability, terms and/or pricing from our suppliers. We have a technology co-development and supply agreement with Northvolt that should expand our battery supply chain into Europe.
Additionally, we believe that the volume of key components we purchase, such as lithium-ion batteries, should provide us leverage to create a competitive advantage on availability, terms, and pricing from our suppliers. We have a technology co-development and supply agreement with Northvolt that will expand our battery supply chain into Europe.
Beginning in 2025, 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 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).
Congress passed a spending bill that includes $35 billion in energy research and development programs, a two-year extension of the ITC for solar power, a one-year extension of the Production Tax Credit for wind power projects, and an extension through 2025 for offshore wind tax credits.
Congress passed a spending bill that included $35 billion in energy research and development programs, a two-year extension of the ITC for solar power, a one-year extension of the production tax credit for wind power projects, and an extension through 2025 for offshore wind tax credits.
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 greenhouse gas (“GHG”) emissions targets and be transparent about the measures each country will use to achieve these targets.
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.
To assess and continually improve employee sentiment, we conduct regular employee surveys soliciting feedback on topics such as work/life balance, working remotely, career development, and mentorship. Fluence is internationally certified to ISO 9001, a quality management standard that ensures a commitment to customer satisfaction, purpose-driven leadership, and equitable involvement for all employees.
To assess and continually improve employee sentiment, we conduct regular employee surveys soliciting feedback on topics such as work/life balance, working remotely, career development, and mentorship. Fluence is internationally certified to ISO 9001, a quality management standard focused on commitment to customer satisfaction, purpose-driven leadership, and equitable involvement for all employees.
The digital applications and solutions economic model 6 is primarily structured as (i) $/kilowatt (“kW”) recurring fixed fees, and in some cases (ii) $/kW performance-based incentive fees both calculated based on the GWs of storage and generation assets on which digital applications and solutions service offerings are deployed.
The digital applications and software economic model is primarily structured as (i) $/kilowatt (“kW”) recurring fixed fees, and in some cases (ii) $/kW performance-based incentive fees both calculated based on the GWs of storage and generation assets on which digital applications and software service offerings are deployed.
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. 15
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
We aim to create an optimized production organization, develop mass manufacturing facilities globally, and continue to secure partnerships with key battery suppliers.
We aim to create an optimized production organization, continue to work to develop mass manufacturing facilities globally, and continue to secure partnerships with key battery and component suppliers.
We believe that our purpose-driven culture has fostered a work environment in which employees feel supported, empowered to develop in their careers, and fulfilled in their work. Initiatives driven by this culture include professional development courses made available to all employees, and a partnership with Inova through which we provide free professional and wellness services to employees.
We believe that our purpose-driven culture has fostered a work environment in which employees feel supported, empowered to develop in their careers, and fulfilled in their work. Initiatives driven by this culture include professional development courses made available to employees, and a partnership with Inova through which we provide free professional and wellness services to employees in the United States.
Changes in or adoption of federal, state and local policies and policy initiatives, legislation and regulations as well as changes in or adoption of policies and policy initiatives, regulations and legislation in foreign jurisdictions in which we operate may pose risks or provide opportunities for the Company’s business that may impact our future operations and financial condition.
Changes in or adoption of domestic policies and policy initiatives, legislation and regulations on a federal, state, and local level as well as changes in or adoption of policies and policy initiatives, regulations and legislation in foreign jurisdictions in which we operate may pose risks or provide opportunities for the Company’s business that may impact our future operations and financial condition.
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 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.
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 account for the associated service and digital spend. • Service s — recurring operational and maintenance services that energy storage products require, management services that are provided by third parties when asset owners outsource the operations of their systems, and the provision of ESaaS.
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 are also focused on expanding standardized offerings that are optimized for each of our sales channels and moving to a more localized, regional organizational structure to better support customers and sales channels, improve logistics, and enhance market focus.
We are also focused on expanding standardized offerings that are optimized for each of our sales channels and continuing to move towards a more localized, regional organizational structure to better support customers and sales channels, improve logistics, and enhance market focus.
Manufacturing Our manufacturing strategy is designed to meet our key objectives: limit capital-intensive and low value-added activities that can be outsourced to other companies; maintain a capital light business model; minimize labor content where possible; minimize the amount of assembly our customers are required to do at the site; and 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; 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.
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.
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.
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 expertise in environment, supply chain, human resources, health and safety, legal, marketing, finance, ethics, and logistics). They are responsible for resource allocation and implementation.
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).
Policy Initiatives including Tax Incentives, Cash Grants and Performance Incentives There are varying policy initiatives across the United States and abroad designed to support and accelerate adoption of clean and/or reliable distributed generation technologies. These policy initiatives can come in the form of tax incentives, cash grants, performance incentives, and/or electric tariffs.
Other Policy Initiatives including Tax Incentives, Cash Grants and Performance Incentives There are varying other policy initiatives designed to support and accelerate adoption of clean and/or reliable distributed generation technologies. These policy initiatives can come in the form of tax incentives, cash grants, performance incentives, and/or electric tariffs.
In August 2022, the United States passed the Inflation Reduction Act of 2022 (the “IRA”), which consists of a number of provisions aimed directly at confronting the climate change crisis. The climate-related provisions of the IRA are projected 12 to cut emissions by 40% from 2005 GHG levels in the United States by 2030.
In August 2022, the United States passed the IRA, which consists of a number of provisions aimed directly at confronting the climate change crisis. The climate-related provisions of the IRA are projected to cut emissions by up to 40% from 2005 GHG levels in the United States by 2030.
Energy Storage Market Opportunity The energy storage market is comprised of three components: • Energy storage products — the components (including batteries), professional services, and labor required to manufacture, assemble, and install products.
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.
The energy storage products market is driven by the deployment of new energy storage products globally, and its addressable market is comprised of the annual spend associated with the manufacturing, delivery, and installation of new energy storage products.
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.
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 services and are anticipated to benefit the Company and its operations. Refer to the Government Regulation and Compliance section for further discussion.
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.
FERC Support of Energy Storage 13 In addition, the Federal Energy Regulatory Commission (“FERC”) has taken a number of steps to help to enable the participation of energy storage in wholesale energy markets.
Federal Energy Regulatory Commission (“FERC”) has taken a number of steps to help to enable the participation of energy storage in wholesale energy markets.
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 “Redemption”).
Siemens Industry Redemption On June 30, 2022, Siemens Industry 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 (the “Siemens Redemption”).
We believe we are well positioned to capture incentives contained in the IRA with our forthcoming battery module manufacturing, as we opened contract manufacturing facility in Utah, our second facility globally, to better serve regional delivery and address ongoing supply chain constraints.
We believe we are well positioned to capture incentives contained in the IRA with our forthcoming battery module manufacturing, as we opened a contract manufacturing facility in Utah, our second facility globally, to better serve regional delivery and address ongoing supply chain constraints alongside our supply agreement for U.S. manufactured battery cells with AESC.
We have repeatedly pioneered new use cases for grid-scale energy storage. Some of the uses we have supported include frequency regulation, generation enhancement, capacity peak power, energy cost control, microgrids/islands, renewable integration, virtual dams, T&D enhancement, and critical power. Energy Storage Products We sell highly configurable energy storage products 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 Products and Solutions We sell highly configurable energy storage products and solutions with integrated hardware, software, and digital intelligence.
As noted, several states have an energy storage mandate or policies designed to encourage the adoption of storage, including nine states with specific energy storage targets as of early 202 2.
As noted, several states in the United States have an energy storage mandate or policies designed to encourage the adoption of storage, including eleven states with specific energy storage targets .
When used in a historical context that is prior to the completion of our IPO (defined below) on November 1, 2021, “we,” “us,” “our” or “the Company” refer to Fluence Energy, LLC and its subsidiaries.
When used in a historical context that is prior to the completion of our IPO (defined below) on November 1, 2021, “we,” “us,” “our” or “the Company” refer to Fluence Energy, LLC and its subsidiaries. Overview Fluence is a leading global provider of energy storage products and solutions, services, and optimization software for renewables and storage.
Those applications may include internally developed applications as well as third-party applications offered through the Fluence IQ Digital Platform. Fluence IQ encompasses proprietary artificial intelligence and data science technologies to enable the advanced capabilities of our digital applications. Currently, our Fluence IQ has two applications, Fluence Mosaic Application and Fluence Nispera Application.
Those applications may include internally developed applications as well as third-party applications offered through the Fluence IQ platform. 6 Our Fluence IQ platform encompasses proprietary artificial intelligence (AI) and data science technologies to enable the advanced capabilities of our cloud-based software products, which currently includes Fluence Mosaic and Fluence Nispera.
In the United States, our energy storage products are currently installed or in delivery in Arizona, California, Colorado, Illinois, Indiana, Maryland, Massachusetts, Minnesota, New Mexico, New York, New Jersey, North Carolina, Ohio, Pennsylvania, Texas, Utah and West Virginia, and each state has its own enabling policy framework, which is subject to change.
As of September 30, 2023, in the United States, our energy storage products are installed or in delivery in a number of states, including, but not limited to, Arizona, California, Colorado, Indiana, Maryland, Massachusetts, New York, New Jersey, North Carolina, Ohio, Pennsylvania, Texas, and West Virginia, and each state has its own enabling policy framework, which is subject to change.
To install and operate energy storage products on our platform, we, our customers, or our partners, as applicable, are required to obtain applicable permits and approvals from local authorities having jurisdiction to install energy storage products and to interconnect the products with the local electrical utility. Government Incentives The U.S.
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.
Initial Public Offering and Related Transactions On November 1, 2021, the Company completed an initial public offering (the “IPO”) in which it issued and sold 35,650,000 shares of its Class A common stock, par value $0.00001 per share, at the public offering price of $28.00 per share, which includes the exercise by the underwriters of their option to purchase an additional 4,650,000 shares of the Company’s Class A common stock.
Historical Background Initial Public Offering and Related Transactions On November 1, 2021, the Company completed its initial public offering (the “IPO”) in which it issued and sold 35,650,000 shares of its Class A common stock, par value $0.00001 per share (“Class A common stock”), at the public offering price of $28.00 per share.
For example, Virginia has a mandate for 3.1 GW of energy storage by 2035, California offers a cash rebate for storage installations through the Self Generation Incentive Program, and Massachusetts and New York offer performance-based financial incentives for storage. Other states, including Illinois and Vermont, are studying energy storage deployment policies and there may be further energy storage mandates coming.
For example, Virginia has a mandate for 3.1 GW of energy storage by 2035, California offers a cash rebate for storage installations through the Self Generation Incentive Program, and Massachusetts and New York offer performance-based financial incentives for storage.
We believe that many elements of our manufacturing processes involve proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms, and procedures. 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 believe that many elements of our manufacturing processes involve proprietary know-how, technology, or data that are not covered by patents or patent applications, including technical processes, test equipment designs, algorithms, and procedures.
Additionally, we intend to offer the Nispera application as an add-on feature to our energy storage product sales. Ultimately, we utilize our digital applications as a competitive advantage by offering energy storage hardware that can be combined with our digital applications to optimize revenue and lower the total cost of ownership thus providing our customers with incremental value.
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 offer four operational services packages: Guided Services, Shared Services, Complete Services and Asset Management. These packages provide varying levels of training, maintenance, guarantees, warranties, and support to address our customers’ desired level of active system management. The service levels range from providing comprehensive training for customers to performing full asset operation and management on behalf of the customer.
Our service offerings provide varying levels of training, maintenance, guarantees, warranties, and support to address our customers’ desired level of active system management. Service levels range from providing comprehensive training for customers to performing full asset operation and management on behalf of the customer. Fluence services help secure products with comprehensive warranties and extensive claims support.
Of the energy storage products and services global pipeline, United States customers composed the largest portion at 7.3 GWs or 40%, with Australia following at 4 GWs or 22% and the United Kingdom at 1.6 GWs or 9%.
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%.
Additional information regarding the tax incentives contained in the IRA are set forth below in “----Government Incentives.” Internationally, in June 2021, the European Commission adopted a package of legislative proposals (the “Fit for 55 package”) as part of the European Green Deal, which encompasses a number of wide-scale proposals aimed at reducing European GHG emissions by 55% by 2030 and targeting net-zero emissions by 2050.
Greenhouse Gas Emission Related Policies, Regulation and Legislation Internationally, in June 2021, the European Commission adopted a package of legislative proposals (the “Fit for 55 package”) as part of the European Green Deal, which encompasses a number of wide-scale proposals aimed at reducing European GHG emissions by 55% by 2030 and targeting net-zero emissions by 2050.
Among other things, the IRA introduced an investment tax credit (ITC) for standalone energy storage for the first time, which is anticipated to lower capital cost of equipment. The IRA also contains provisions with incentives for domestic battery manufacturing as well as upstream supply chains.
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.
As of September 30, 2022: • AES owns (1) 58,586,695 LLC Interests, representing approximately 33.8% 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 71.8% of the combined voting power of all of Fluence Energy, Inc.’s common stock; • Siemens owns 58,586,695 shares of Class A common stock of Fluence Energy, Inc., representing approximately 14.4% of the combined voting power of all of Fluence Energy, Inc.’s common stock and approximately 51% of the economic interest in Fluence Energy, Inc.; • QIA 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 16.1% of the economic interest in Fluence Energy, Inc., directly and indirectly through Fluence Energy, Inc.’s ownership of LLC Interests.
The 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.
Fluence also delivers stacking of grid services, allowing storage assets to perform multiple services simultaneously and increase revenue-generating opportunities. We also offer comprehensive engineering and delivery services to support the deployment of our storage products. Customers can select from a range of delivery service, from project design to full-wrap turnkey installation.
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.
Congress is continuously reviewing various climate change proposals, incentives and legislation that may support the energy storage industry, including in the form of tax credits. IRS private letter ruling 201809003 clarified that energy storage is eligible for federal tax credits if charged primarily by qualifying renewable resources. In December 2020, the U.S.
IRS private letter ruling 201809003 clarified that energy storage is eligible for federal tax credits if charged primarily by qualifying renewable resources. In December 2020, the U.S.
As a result, such climate change regulatory and legislative initiatives with more stringent limitations on GHG emissions would potentially increase the demand for energy storage products and related services.
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.
In September 2022, Australia passed climate change legislation containing a targeted 43% reduction in the emissions intensity of its economy of 2005 GHG levels by 2030 and a reduction to net-zero emissions by 2050.
In September 2022, Australia passed climate change legislation containing a targeted 43% reduction in the emissions intensity of its economy of 2005 GHG levels by 2030 and a reduction to net-zero emissions by 2050 and some of its specific states have their own targets, including Victoria’s 95% renewable regeneration by 2035 target and 2.6 GW energy storage by 2030.
The Fluence IQ Digital Platform supports applications to improve revenue generation, system decision-making, asset performance, and operations. Services Operational & Maintenance Services In addition to energy storage products, our offerings include delivery services and recurring operational services. Our recurring O&M services are designed around customer business needs, in-house capabilities, performance requirements, and risk profiles.
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.
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 outsourcing contracts for the assembly and production of our Fluence Cube, which ship directly from our contract manufacturers to job sites or designated warehouses.
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.
Government Regulation and Compliance Greenhouse Gas Emission Related Policies, Regulations 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. The operation of our business and our customers’ use of our products and services are impacted by these various government actions.
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.
The facility is located in Utah and will serve the company’s customers in North America. The addition of this contract manufacturing facility expands our production beyond Asia to meet increasing global demand and allow Fluence to better serve regional markets. We intend to expand manufacturing to sites in Europe.
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.
As a result, the Company consolidates Fluence Energy, LLC and records a non-controlling interest in its consolidated financial statements for the economic interest in Fluence Energy, LLC held by the Founders. Refer to Note 1 - Organization and Operations to the consolidated financial statements included in this Report for more information about the IPO and related transactions.
As a result, Fluence Energy, Inc. consolidates Fluence Energy, LLC and records a non-controlling interest in its consolidated financial statements for the economic interest in Fluence Energy, LLC held by the Founders.
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 which will act as potential catalysts to our growth in the Americas, Europe and Asia.
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.
The services market is driven by the growth in installed energy storage products globally, and its addressable market is comprised of the recurring annual service spend across the entire fleet of energy storage products, which is continuing to grow through new product installations.
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.
Furthermore, we continue to explore disruptive digitally driven business models, including ESaaS, wide-ranging dynamic capacity, virtual storage, asset- and revenue-sharing models, and other offerings.
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.
Following the completion of the Transactions, the Company owned 31.6% of the economic interest in Fluence Energy, LLC and the Founders own 68.4% of the economic interest in Fluence Energy, LLC. As the sole managing member of Fluence Energy, LLC, the Company operates and controls all the business and affairs of Fluence Energy, LLC and its direct and indirect subsidiaries.
As the sole managing member of Fluence Energy, LLC, Fluence Energy, Inc. operates and controls all the business and affairs of Fluence Energy, LLC and its direct and indirect subsidiaries.
These hubs, located in Utah and Ireland, both became operational in fiscal year 2022, and are strategically positioned near large storage markets and customer fleets. 11 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 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.
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.
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.
In fiscal year 2022, we committed to publishing our first annual sustainability report in February/March 2023, which we intend to align with the Sustainability Accounting Standards Board (“SASB”) Fuel Cells & Industrial Batteries standard in addition to those standards promulgated by both the Global Reporting Initiative (“GRI”) and the Task Force on Climate-Related Financial Disclosures (“TCFD”).
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”).
Seasonality We have historically experienced seasonality and see increased order intake in our third and fourth fiscal quarters, driven by demand in the Northern Hemisphere to install energy storage products before the summer of the following year. Combined third and fourth fiscal quarter order intake has historically accounted for 80% or more of our total intake each year.
We may take legal action to prevent third parties from infringing or misappropriating our intellectual property or from otherwise gaining access to our technology. 9 Seasonality We have historically experienced seasonality and see increased order intake in our third and fourth fiscal quarters (April – September), driven by demand in the Northern Hemisphere to install energy storage products and solutions before the summer of the following year.
Fluence also created two spare parts hubs in Europe and the United States to support ongoing operations and maintenance of its customers’ storage assets.
Fluence has also created two spare parts hubs in Europe and the United States to support ongoing operations and maintenance of its customers’ storage assets. These hubs, located in Utah and Ireland, both became operational in fiscal year 2022, and are 8 strategically positioned near large storage markets and customer fleets.
A key differentiator is our ability to identify customer needs and deliver customer-centric products, services, and use cases that can compete in the market either as packages or standalone offerings. We believe we compete favorably based on performance and value-creation, including low total cost of ownership, long-term reliability, varied service options, and convenient and efficient sales and delivery processes.
We believe that a key differentiator for Fluence from our competitors is our ability to identify customer needs and deliver customer-centric products, services, and use cases that can compete in the market either as packages or standalone offerings.
The Fluence Mosaic Application, which we acquired from AMS in 2020, is an artificial intelligence-enabled bidding software for utility-scale storage and renewable and conventional generation assets, enabling customers to optimize asset trading in wholesale electricity markets.
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.
As of September 30, 2022, our global operational and maintenance (“O&M”) services team was providing services for 2.0 GW of energy storage assets, with a further 2.0 GW of contracted backlog. See the “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics” for additional information regarding our deployed assets, contracted backlog and pipeline.
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.
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. As of September 30, 2022, we had approximately 967 full-time employees. None of our employees in the United States are represented by a labor union.
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.
In addition, we are continuously engaging in developing new use cases and opening new market segments, which are often less contested. Our principal competitors include Tesla, Wartsila, and Powin but competition varies by geography, grid service or customer segment.
In addition, we are continuously engaging in developing new use cases and opening new market segments, which are often less contested.
Our Industry and Market Opportunity Climate change is an existential threat. Severe weather events and broader awareness of the financial implications of climate change are driving a systemic global transition away from fossil fuels towards sustainable energy systems.
Our Industry and Market Opportunity Climate change is an existential threat and there is currently an ongoing systemic global transition away from fossil fuels towards sustainable energy systems. A major challenge that is threatening the rapid transition to a green economy is the lack of grid flexibility across the globe.
Our Products and Services Our offerings include energy storage products and delivery services, recurring operational services and digital solutions and applications for energy storage and other power assets. We may refer to our energy storage products as “Solutions” and use this term interchangeably as it is more reflective of offering provided to our customers.
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.
As of September 30, 2022, approximately 85 of our employees in Germany were represented by a works council. We have not experienced any employment-related work stoppages, and we consider relations with our employees to be good.
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.
Current and future legislation or regulations that may be adopted to address climate change could make lower GHG-emitting energy sources, such as solar and wind, more desirable than higher GHG-emitting energy sources, such as coal and natural gas.
Current legislation and regulation addressing climate change is making lower GHG-emitting energy sources, such as solar and wind, increasingly desirable to consumers compared to higher GHG-emitting energy sources, such as coal and natural gas and could continue to do so into the future.
We sell our products to a wide range of customers around the world, including utilities and load-serving entities, independent power producers, developers, conglomerates, and commercial & industrial (“C&I”) customers. In fiscal year 2022, our five largest customers represented approximately 77% of our revenues.
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.
In addition, as of September 30, 2022, approximately 54% of our revenue was with related parties, primarily AES. As of September 30, 2022, we had a gross global pipeline of 37.7 GWs, of which includes 18 GWs for energy storage products and services.
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.
Intellectual Property The success of our business depends, in part, on our ability to maintain and protect our proprietary technologies, information, processes and know-how. We rely primarily on patent, trademark, copyright and trade secret laws, confidentiality agreements and procedures, and other contractual arrangements to protect our technology.
Intellectual Property The success of our business depends, in large part, on our ability to maintain and protect our intellectual property, some of which include patents, patentable ideas, methods, and technologies, proprietary information, trade secrets, trademarks, copyrights, processes and know-how.

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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 and financial results. • our limited operating and revenue history as an independent entity and our nascent and rapidly-evolving industry; • our history of net losses, we anticipate increasing expenses in the future, and our ability to achieve or maintain profitability; • our ability to attract new customers and retain existing customers; • risks relating to delays, disruptions, or quality control problems in our manufacturing operations in part due to our third-party manufacturer concentration; • risks associated with construction, utility interconnection, commissioning and installation of our products, inflationary cost overruns from increased shipping and logistics prices as well as increased prices on raw materials necessary for the production of lithium-ion batteries, and delays, including those related to obtaining government authorizations and permits and other contingencies that may arise in the course of completing installations; • the interruption of the flow and/or availability of components and materials from international vendors could disrupt our supply chain; • significant changes in the cost of raw materials and product components; • risks relating to supply chain competition and, in some instances, have entered into long-term supply agreements that could result in insufficient inventory; • risks relating to competition for our offerings from established and new competitors; • a loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment; • ability to manage our recent and future growth effectively, ability to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges; • 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 related to defects, errors or bugs in our products and technology; • 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; • potential difficulties in establishing mass manufacturing capacity and estimating potential cost savings and efficiencies from anticipated improvements to our manufacturing capabilities; • 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; 16 • 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; • reduction, elimination, or expiration of 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; • restrictions set forth in our revolving credit facility; • risks relating to uncertain future capital needs and potential need to raise additional funds in the future; • ability to obtain, maintain and enforce proper intellectual property protection for our technology rights throughout the world; • ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems; • 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; • the impact of our multiple class structure on the market price of our Class A common stock; • our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” does not apply with respect to any director or stockholder who is not employed by us or our subsidiaries; • potential dilution of stockholder interests through future issuances of additional Class A common stock or common units in connection with our incentive plans, acquisitions or otherwise; • our amended and restated certificate of incorporation limits our Continuing Equity Owners’ and their directors’ and officers’ liability to us or you for breach of fiduciary duty and could also prevent us from benefiting from corporate opportunities that might otherwise have been available to us; • we are controlled by the Continuing Equity Owners, whose interests may differ from those of our public stockholders; • certain of our officers and directors may have actual or potential conflicts of interest because of their positions with our Continuing Equity Owners; • reliance on our access to our Founders’ brands and reputation, some of our Founders’ relationships, and the brands and reputations of unaffiliated third parties; • third parties may seek to hold us responsible for liabilities of 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 our income or other tax returns; • risks relating to proper and effective internal control over financial reporting to comply with the Sarbanes-Oxley Act; and • risks relating to potential future legal proceedings, regulatory disputes, and governmental inquiries.
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.
We expect our aggregate costs will increase substantially in the foreseeable future and our losses will continue as we expect to invest heavily in increasing our customer base, expanding our operations, and operating as a public company.
We expect our aggregate costs will increase substantially in the foreseeable future and our losses will continue as we expect to continue to invest heavily in increasing our customer base, expanding our operations, and operating as a public company.
Our business is highly dependent on maintaining effective information systems as well as the integrity and of the data we use to serve our customers and operate our business.
Our business is highly dependent on maintaining effective information systems as well as the integrity of the data we use to serve our customers and operate our business.
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.
Many factors may influence the widespread adoption of renewable energy generation and demand for our hardware and software-enabled services, including, but not limited to, the cost-effectiveness of renewable energy technologies as compared with conventional and competitive technologies, the performance and reliability of renewable energy products as compared with conventional and non- 28 renewable products, fluctuations in economic and market conditions that impact the viability of conventional and competitive alternative energy sources, increases or decreases in the prices of oil, coal and natural gas, continued deregulation of the electric power industry and broader energy industry, governmental regulations regarding renewable energy generation, and the availability or effectiveness of government subsidies and incentives.
Many factors may influence the widespread adoption of renewable energy generation and demand for our hardware and software-enabled services, including, but not limited to, the cost-effectiveness of renewable energy technologies as compared with conventional and competitive technologies, the performance and reliability of renewable energy products as compared with conventional and non-renewable products, fluctuations in economic and market conditions that impact the viability of conventional and competitive alternative energy sources, increases or decreases in the prices of oil, coal and natural gas, continued deregulation of the electric power industry and broader energy industry, governmental regulations regarding renewable energy generation, and the availability or effectiveness of government subsidies and incentives.
We have experienced and may continue to be exposed to risks associated with construction, utility interconnection, commissioning and installation of our products, inflationary cost overruns from increased shipping and logistics prices as well as increased prices on raw materials necessary for the production of lithium-ion batteries, and delays, including those related to obtaining government authorizations and permits and other contingencies that may arise in the course of completing installations.
We have experienced and may continue to be exposed to risks associated with construction, utility interconnection, commissioning and installation of our products, cost overruns from increased shipping and logistics prices as well as increased prices on raw materials necessary for the production of lithium-ion batteries, and delays, including those related to obtaining government authorizations and permits and other contingencies that may arise in the course of completing installations.
If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our operations and hinder our ability to provide services, establish appropriate pricing for services, establish reserves, report financial results timely and accurately and maintain regulatory compliance, among other things.
If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our operations and hinder our ability to provide services, establish appropriate pricing, establish reserves, report financial results timely and accurately and maintain regulatory compliance, among other things.
In addition, our effective tax rate in any particular quarter may also be impacted by acquisitions. Following the closing of an acquisition, we may also have disputes with the seller regarding contractual requirements and covenants, purchase price adjustments, contingent payments, or for indemnifiable losses. Any such disputes may be time consuming and distract management from other aspects of our business.
In addition, our effective tax rate in any particular quarter may also be impacted by acquisitions. Following the closing of an acquisition, we may also have disputes with the seller regarding contractual requirements and covenants, purchase price adjustments, contingent payments, or indemnifiable losses. Any such disputes may be time consuming and distract management from other aspects of our business.
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.
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.
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 our Founders 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; 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.
The loss of any one of the Company’s significant customers, their inability to perform under their contracts, their default in payment, a significant dispute with one of these customers, a significant downturn or deterioration in the business or financial condition of any of these customers, or any other event significantly negatively impacting the contractual relationship with one of these customers could have a materially adverse effect on the revenues and cash flows of the Company.
The loss of any one of the Company’s significant customers, their inability to perform under their contracts, including their default in payment, a significant dispute with one of these customers, a significant downturn or deterioration in the business or financial condition of any of these customers, or any other event significantly negatively impacting the contractual relationship with one of these customers could have a materially adverse effect on the revenues and cash flows of the Company.
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.
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.
In general, FERC’s PURPA reforms have the potential to reduce prices for the output from certain new renewable generation projects while also narrowing the scope of PURPA eligibility for new projects. These effects could reduce demand for PURPA-eligible battery energy storage products and could harm our business, prospects, financial condition, and results of operations.
In general, FERC’s PURPA reforms have the potential to reduce prices for the output from certain new renewable generation projects while also 29 narrowing the scope of PURPA eligibility for new projects. These effects could reduce demand for PURPA-eligible battery energy storage products and could harm our business, prospects, financial condition, and results of operations.
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 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 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.
The timeliness, thoroughness, and quality of the installation-related services performed by our general contractors and their subcontractors in the past have not always met our expectations or standards and in the future may not meet our expectations and standards, and it may be difficult to find and train third-party general contractors that meet our standards at a competitive cost.
The timeliness, thoroughness, and quality of the installation-related services performed by our general contractors and their subcontractors in the past have not always met our or our customers’ expectations or standards and in the future may not meet our or our customers’ expectations and standards, and it may be difficult to find and train third-party general contractors that meet our standards at a competitive cost.
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.
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.
Our executive officers are not subject to any restrictions that would require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of the members of our senior management team, could harm our business.
Our officers are not subject to any restrictions that would require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of the members of our senior management team, could harm our business.
The failure of our information technology systems and the third-party systems we rely on to perform as designed, or our failure to implement and operate them effectively, could disrupt our business or subject us to liability and thereby have a material adverse effect on our business, financial condition, results of operations, and prospects.
The failure of our information technology systems and the third-party systems we rely on to perform as designed, or our failure to implement and operate them effectively, could disrupt our business or subject us to liability and thereby may have a material adverse effect on our business, financial condition, results of operations, and prospects.
We may be required to pay additional taxes as a result of partnership audit rules under U.S. federal and other applicable income tax law. The Bipartisan Budget Act of 2015 changed the rules applicable to U.S. federal income tax audits of partnerships, including 43 entities such as Fluence Energy, LLC.
We may be required to pay additional taxes as a result of partnership audit rules under U.S. federal and other applicable income tax law. The Bipartisan Budget Act of 2015 changed the rules applicable to U.S. federal income tax audits of partnerships, including entities such as Fluence Energy, LLC.
In addition, our customers could be subjected to claims as a result of such incidents and may bring legal claims against us to attempt to hold us liable. Any of these events could adversely affect our brand, relationships with customers, operating results, or financial condition.
In addition, our customers could be subjected to claims as a result of such incidents and may bring legal claims against us to attempt to hold us liable. Any of these events could adversely affect our brand and reputation, relationships with customers, operating results, or financial condition.
Such capital may not be available on favorable terms, or at all. Furthermore, if we issue equity or debt securities to raise additional capital, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences, and privileges senior to those of our existing stockholders.
Such capital may not be available on favorable terms to us, if at all. Furthermore, if we issue equity or debt securities to raise additional capital, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences, and privileges senior to those of our existing stockholders.
Also, some of our services rely on technologies and software developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.
Some of our services rely on technologies and software developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.
Our capital requirements will depend on many factors, including: • market acceptance of our offerings; • the revenue generated by sales of our offerings; 32 • the costs associated with expanding our sales and marketing efforts; • the expenses we incur in manufacturing and selling our products; • the costs of developing and commercializing new products or technologies; • the cost of filing and prosecuting patent applications and defending and enforcing our patents and other intellectual property rights; • the cost of defending, in litigation or otherwise, any claims that we infringe third-party patents or other intellectual property rights; • the cost of enforcing or defending against non-competition claims; • the number and timing of acquisitions and other strategic transactions; • the costs associated with our planned international expansion; and • unanticipated general and administrative expenses.
Our capital requirements will depend on many factors, including: • market acceptance of our offerings; • the revenue generated by sales of our offerings; • the costs associated with expanding our sales and marketing efforts; • the expenses we incur in manufacturing and selling our products; 33 • the costs of developing and commercializing new products or technologies; • the cost of filing and prosecuting patent applications and defending and enforcing our patents and other intellectual property rights; • the cost of defending, in litigation or otherwise, any claims that we infringe third-party patents or other intellectual property rights; • the cost of enforcing or defending against non-competition claims; • the number and timing of acquisitions and other strategic transactions; • the costs associated with our planned international expansion; and • unanticipated general and administrative expenses.
If we fail to manage our recent and future growth effectively and expansion of our business and operations, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges. We have experienced significant growth in recent periods.
If we fail to effectively manage our recent and future growth and expansion of our business and operations, we may be unable to execute our business plan, maintain high levels of customer service, and/or adequately address competitive challenges. We have experienced significant and rapid growth in recent periods.
We are continuing to evolve the features and functionality of our products and technology platform through updates and enhancements, and as we do, we may introduce additional defects or errors that may not be detected until after deployment to customers through our hardware.
We are continuing to evolve the features and functionality of our products and technology platform through updates and enhancements, and as we do, we may introduce inadvertent additional defects or errors that may not be detected until after deployment to customers through our hardware.
In Europe, we are subject to the European Union General Data Protection Regulation 2016/679 and applicable national supplementing laws (“EU GDPR”) and to the United Kingdom General Data Protection Regulation and Data Protection Act 2018 (“UK GDPR”), (the EU GDPR and UK GDPR together referred to as the “GDPR”).
In Europe, we are subject to data protection laws such as the European Union General Data Protection Regulation 2016/679 and applicable national supplementing laws (“EU GDPR”) and the United Kingdom General Data Protection Regulation and Data Protection Act 2018 (“UK GDPR”), (the EU GDPR and UK GDPR together referred to as the “GDPR”).
See “—Risks related to ownership of our Class A common stock”. 44 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”. 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.
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.
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.
Any perceived loss of our Founders’ scale, capital base and financial strength, or any actual loss or reduction in the Founders’ ownership in the future, may prompt business partners to reprice, modify or terminate their relationships with us.
Any perceived loss of our Founders’ scale, capital base and financial strength, or any actual loss or reduction in the Founders’ ownership of the Company in the future, may prompt business partners to reprice, modify or terminate their relationships with us.
Furthermore, unforeseen delays in the review and permitting process could delay the timing of the installation of our energy storage products and could therefore adversely affect the amount of the recognition of revenue related to the sale of our energy storage products, which could adversely affect our operating results.
Furthermore, unforeseen delays in the review and permitting process could delay the timing of the installation of our energy storage products and could therefore adversely affect the amount revenue recognition related to the sale of our energy storage products, which could in turn adversely affect our operating results.
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; 46 • 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; 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.
Potential issues associated with implementation of 24 these technology initiatives could reduce the efficiency of our operations in the short term. The efficient operation and successful growth of our business depends upon our information technology systems.
Potential issues associated with implementation of these technology initiatives could reduce the efficiency of our operations in the short term. The efficient operation and successful growth of our business depends upon our information technology systems.
Generally, neither our Continuing Equity Owners nor our directors or officers who are also dual persons will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such person 42 pursues or acquires any corporate opportunity for the account of our Continuing Equity Owners or their affiliates, directs, recommends, sells, assigns or otherwise transfers such corporate opportunity to Our Continuing Equity Owners or its affiliates, or does not communicate information regarding such corporate opportunity to us.
Generally, neither our Continuing Equity Owners nor our directors or officers who are also dual persons will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such person pursues or acquires any corporate opportunity for the account of our Continuing Equity Owners or their affiliates, directs, 43 recommends, sells, assigns or otherwise transfers such corporate opportunity to Our Continuing Equity Owners or its affiliates, or does not communicate information regarding such corporate opportunity to us.
In 34 addition, third parties may file for registration of trademarks similar or identical to our trademarks, thereby impeding our ability to build brand identity and possibly leading to market confusion.
In addition, third parties may file for registration of trademarks similar or identical to our trademarks, thereby impeding our ability to build brand identity and possibly leading to market confusion.
Companies that incorporate open-source software into their products have, in the past, faced claims seeking enforcement of open-source license provisions and claims asserting ownership of open-source software 36 incorporated into their product.
Companies that incorporate open-source software into their products have, in the past, faced claims seeking enforcement of open-source license provisions and claims asserting ownership of open-source software incorporated into their product.
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.
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.
Although we will retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the future trading market for the Class A common stock. 45 In certain cases, payments under the Tax Receivable Agreement may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
Although we will retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the future trading market for the Class A common stock. 46 In certain cases, payments under the Tax Receivable Agreement may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
Any defects or errors in product or services 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.
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.
These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. To date, we have financed our operations with equity contributions from AES Grid Stability, Siemens Industry, and QFH, cash and cash equivalents, negative working capital, and short-term borrowings.
These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. To date, we have financed our operations with equity contributions from AES Grid Stability, Siemens Industry, and QHL, cash and cash equivalents, negative working capital, and short-term borrowings.
Although we generally are not regulated as a utility, federal, state, and local government statutes and regulations concerning electricity heavily influence the market for our products and services. These statutes and regulations often relate to electricity pricing, net metering, incentives, taxation, and the rules surrounding the interconnection of customer-owned electricity generation for specific technologies.
Although we generally are not regulated as a utility, federal, state, and local government laws and regulations concerning electricity heavily influence the market for our products and services. These laws and regulations often relate to electricity pricing, net metering, incentives, taxation, and the rules surrounding the interconnection of customer-owned electricity generation for specific technologies.
Many of our employees, consultants, and advisors are currently or were previously employed at other companies in our field, including our competitors or potential competitors.
Many of our employees, consultants, and advisors are currently or were previously employed at other companies in our field, including our competitors or potential future competitors.
Their positions at AES, Siemens, or QIA, their compensation from AES, Siemens or QIA and the ownership of any equity or equity awards in AES, Siemens, or QIA, as applicable, may create the appearance of conflicts of interest when these individuals are faced with decisions that could have different implications for our Continuing Equity Owners than the decisions have for us.
Their positions at AES, Siemens, or QIA or their respective affiliates, their compensation from AES, Siemens or QIA or their respective affiliates and the ownership of any equity or equity awards in AES, Siemens, or QIA or their respective affiliates, as applicable, may create the appearance of conflicts of interest when these individuals are faced with decisions that could have different implications for our Continuing Equity Owners than the decisions have for us.
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. 40 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. 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.
Prospective customers often undertake a significant evaluation process, which may further extend the sales cycle. This lengthy sales cycle is subject to a number of significant risks over which we have little or no control. Because of both the long sales cycle, we may expend significant resources without having certainty of generating a sale.
Prospective customers often undertake a significant internal evaluation process, which may further extend the sales cycle. Because of the long sales cycle, we may expend significant resources without having certainty of generating a sale. This lengthy sales cycle is subject to a number of significant risks over which we have little or no control.
We are required to comply with national, state, local, and foreign laws and regulations regarding the protection of the environment, health, and safety. We may incur expenses, or be subject to liability, related to the transportation, storage, or disposal of lithium-ion batteries, or other materials used in our products.
We are required to comply with federal, state, local, and foreign laws and regulations regarding the protection of the environment, health, and safety. We may incur expenses, or be subject to liability, related to the transportation, storage, or disposal of lithium-ion batteries, or other materials used in our products.
As such, we do not know the degree of future protection that we will have on our technologies, products, and services. In addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of intellectual property rights to the same degree at the United States.
As such, we do not know the degree of future protection that we will have on our technologies, products, services, and digital applications. In addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of intellectual property rights to the same degree at the United States.
Although past incidents have not had a material effect on our business operations or financial performance, to the extent that any disruption or security breach results in a loss or damage to our data, or an inappropriate disclosure of confidential, proprietary or customer information, it could cause significant damage to our reputation, affect our relationships with our customers and strategic partners, lead to claims against us from governments and private plaintiffs, and adversely affect our business.
Although past incidents have not had a material effect on our business operations or financial performance, to the extent that any disruption or security breach results in a loss or damage to our data, or an inadvertent disclosure of confidential, proprietary personal or customer information, it could cause significant damage to our reputation, affect our relationships with our customers and strategic partners, lead to claims against us from governments and private plaintiffs, and adversely affect our business.
If an actual or perceived cybersecurity breach of security measures, unauthorized access to our system or the systems of the third-party vendors that we rely upon, or any other cybersecurity threat occurs, we may incur liability, costs, or damages, contract termination, our reputation may be compromised, our ability to attract new customers could be negatively affected, and our business, financial condition, and results of operations could be materially and adversely affected.
Regardless of our contractual protections, if an actual or perceived cybersecurity breach of security measures, unauthorized access to our system or the systems of the third-party vendors that we rely upon, or any other cybersecurity threat occurs, we may incur liability, costs, or damages, contract termination, our reputation may be compromised, our ability to attract new customers could be negatively affected, and our business, financial condition, and results of operations could be materially and adversely affected.
We sell hardware products and software-enabled services to our customers. Our software-enabled services are essential to the operation of these hardware products. Our pricing of services contracts is based upon the value we expect to deliver to our customers, including considerations such as the useful life of the energy storage product and prevailing electricity prices.
Our software-enabled services are essential to the operation of our hardware products. Our pricing of services contracts is based upon the value we expect to deliver to our customers, including considerations such as the useful life of the energy storage product and prevailing electricity prices.
Competitors may use our technologies in jurisdictions where we have not obtained protection to develop their own products and services and, further, may export otherwise violating products and services to territories where we have protection but enforcement is not as strong as that in the United States.
Competitors may use our technologies in jurisdictions where we have not obtained protection to develop their own products, services, digital applications, and technologies and, further, may export otherwise violating products and services to territories where we have protection but enforcement is not as strong as that in the United States.
This could make it difficult for us to stop the misappropriation or other violation of certain of our other intellectual property rights. Accordingly, we may choose not to seek protection in certain countries, and we will not have the benefit of 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 we will not have the benefit of intellectual property protection in such countries.
Filing, prosecuting, maintaining, defending, and enforcing intellectual property rights on our products, services, and technologies in all countries throughout the world could be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States.
Filing, prosecuting, maintaining, defending, and enforcing intellectual property rights on our products, services, digital applications, and technologies in all countries throughout the world could be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States.
The Tax Receivable Agreement provides that if (1) we materially breach any of our material obligations under the Tax Receivable Agreement and the Continuing Equity Owners elect an early termination of the Tax Receivable Agreement, (2) certain mergers, asset sales, other forms of business combinations or other changes of control were to occur after the consummation of the IPO and the Continuing Equity Owners elect an early termination of the Tax Receivable Agreement, or (3) we elect, at any time, an early termination of the Tax Receivable Agreement, then our obligations, or our successor’s obligations, under the Tax Receivable Agreement to make payments would be based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
The Tax Receivable Agreement provides that if (1) we materially breach any of our material obligations under the Tax Receivable Agreement and the Founders elect an early termination of the Tax Receivable Agreement, (2) certain mergers, asset sales, other forms of business combinations or other changes of control were to occur after the consummation of the IPO and the Founders elect an early termination of the Tax Receivable Agreement, or (3) we elect, at any time, an early termination of the Tax Receivable Agreement, then our obligations, or our successor’s obligations, under the Tax Receivable Agreement to make payments would be based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
If our ground operations at project sites, our manufacturing facilities and our suppliers or vendors are so affected in the future, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations, and customer relationships.
If our ground operations at project sites, our manufacturing facilities and our suppliers or vendors are so affected in the future, our supply chain, manufacturing and product shipments may be delayed, which could adversely affect our business, operations, and customer relationships.
We sell our products and have operations in a number of different countries, including, but not limited to, the United States, the United Kingdom, multiple European Union countries, Chile, Australia, Taiwan, India and the Philippines.
We sell our products and solutions and have operations in a number of different countries, including, but not limited to, the United States, the United Kingdom, multiple European Union countries, Chile, Australia, Taiwan, India, Canada, and the Philippines.
If audits result in additional payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities, and our financial statements could be adversely affected. We may incur obligations, liabilities, or costs under environmental, health, and safety laws, which could have an adverse impact on our business, financial condition, and results of operations.
If audits result in additional payments or assessments, our future results may include unfavorable adjustments to our tax liabilities, and our financial statements could be adversely affected. We may incur obligations, liabilities, or costs under environmental, health, and safety laws, which could have an adverse impact on our business, financial condition, and results of operations.
Proceedings to enforce our intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.
Proceedings to enforce our intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. In addition, our efforts to protect our intellectual property rights in such countries may be inadequate.
Cancellation rates may be impacted by factors outside of our control including an inability to install an energy storage product at the customer’s chosen location because of permitting or other regulatory issues, unanticipated changes in the cost or availability of alternative sources of electricity available to the customer, or other reasons unique to each customer.
Cancellation rates may be impacted by factors outside of our control including an inability to timely install an energy storage product at the customer’s chosen location, if at all, because of permitting or other regulatory issues, unanticipated changes in the cost or availability of alternative sources of electricity available to the customer, or other reasons unique to each customer.
Our customer relationships, business, financial results and reputation may be adversely impacted due to events and incidents relating to storage, delivery, installation, operation, maintenance and shutdowns of our energy storage products. 27 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 products, including events and incidents outside of our control.
In addition, we, Fluence Energy, LLC and the Continuing Equity Owners are party to the Fluence Energy, LLC Agreement under which the Continuing Equity Owners (or certain permitted transferees thereof) have the right (subject to the terms of the Fluence Energy, LLC Agreement) to have their common units redeemed from time to time at our election (determined solely by our independent directors (within the meaning of the rules of the Nasdaq) who are disinterested), newly-issued shares of our Class A common stock on a one-for-one basis or a cash payment from the sale of newly issued shares of Class A common stock equal to a volume weighted average market price of one share of Class A common stock for each common unit so redeemed, in each case, in accordance with the terms of the Fluence Energy, LLC Agreement; provided that, at our election (determined solely by our independent directors (within the meaning of the rules of the Nasdaq) who are disinterested), we may effect a direct exchange by us of such Class A common stock or such cash, as applicable, for such common units.
In addition, we, Fluence Energy, LLC and the Founders are party to the Fluence Energy, LLC Agreement under which Founders (or certain permitted transferees thereof) were granted the right (subject to the terms of the Fluence Energy, LLC Agreement) to have their common units redeemed from time to time at our election (determined solely by our independent directors (within the meaning of the rules of the Nasdaq) who are disinterested), newly-issued shares of our Class A common stock on a one-for-one basis or a cash payment from the sale of newly issued shares of Class A common stock equal to a volume weighted average market price of one share of Class A common stock for each common unit so redeemed, in each case, in accordance with the terms of the Fluence Energy, LLC Agreement; provided that, at our election (determined solely by our independent directors (within the meaning of the rules of the Nasdaq) who are disinterested), we may effect a direct exchange by us of such Class A common stock or such cash, as applicable, for such common units.
Consolidation by industry participants could further increase their resources and result in competitors with expanded market share, larger customer bases, greater diversified product and service offerings and greater technological and marketing expertise, which may allow them to compete more effectively against us.
Consolidation by other industry participants could further increase their resources and result in competitors with expanded market share, larger customer bases, greater diversified product and service offerings and greater technological and marketing expertise, which may allow them to compete more effectively against us in the future.
Risks Related to Our Intellectual Property and Technology If we are unable to obtain, maintain and enforce intellectual property protection for our technology or if the scope of our intellectual property protection is not sufficiently broad, others may be able to develop and commercialize technology substantially similar to ours, and our ability to successfully commercialize our technology may be adversely affected.
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.
The degree of our exposure is dependent on (among other things) the type of materials and components that may be impacted, the proposed rates or rates imposed, and timing of the imposition of such tariffs.
The degree of our exposure is dependent on (among other things) the type of materials and components that may be impacted, the proposed rates imposed, and timing of such tariffs.
Siemens will be entitled to receive payments under the Tax Receivable Agreement equaling 85% of such amount, or $93.1 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 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.
We have benefited and continue to benefit from the industry experience and substantial support AES and Siemens provide, but we have a limited history operating our combined business and generating revenue as an independent entity, and therefore a limited history upon which you can base an investment decision.
We have benefited and continue to benefit from the industry experience and support AES and Siemens have provided and continue to provide, but we have a limited history operating our business and generating revenue as an independent entity, and therefore a limited history upon which you can base an investment decision.
Because of the large amount of data that we collect and manage, it is possible that hardware failures or errors in our systems could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our partners regard as significant.
Because of the large amount of data that we collect and manage, it is possible that hardware failures or errors in our systems could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our customers or other partners may regard as significant.
We license certain intellectual property, including patents, technologies, and software from third parties, including AES and Siemens, that is important to our business, and in the future, we may enter into additional agreements that provide us with licenses to valuable intellectual property or technology.
We license certain intellectual property, including patents, technologies, and software from third parties and related parties, including AES and Siemens, that are important to our business, and in the future, we may enter into additional agreements that provide us with licenses to valuable intellectual property or technology.
Operating results for future periods are subject to a number of uncertainties and we cannot assure you that we will achieve or sustain profitability.
Operating results for future periods are subject to a number of uncertainties and risks and we cannot assure you that we will achieve or sustain prolonged profitability.
Such an event may impair our ability to meet scheduled deliveries of our products to customers, which may cause our customers to cancel orders and subject us to liability, and may materially adversely affect our customer relationships, business, prospects, financial condition and results of operations.
Such an event may impair our ability to meet scheduled deliveries of our products to customers, which may cause our customers to cancel orders and subject us to liability and potential litigation and may materially adversely affect our customer relationships, reputation, business, prospects, financial condition, and results of operations.
We provide installation, construction and commissioning services for our customers that purchase our products. In the past, we have from time to time discovered latent defects in energy storage products and the components thereof and have experienced defects in workmanship and in the future we may face such defects in our products or in workmanship.
We provide installation, construction and commissioning services for our customers that purchase our products. In the past, we have from time to time discovered latent defects in energy storage products and solutions and the components thereof and have experienced defects in workmanship and in the future we may face similar such defects.
The Continuing Equity Owners may exercise such redemption right, subject to certain exceptions, for as long as their common units remain outstanding. For example, in July 2022, Siemens Industry exercised its redemption right with respect to its entire holding of 58,586,695 common units, which we elected to settle through the issuance of 58,586,695 shares of Class A common stock.
The Founders may exercise such redemption right, subject to certain exceptions, for as long as their common units remain outstanding. For example, in July 2022, Siemens Industry exercised its redemption right with respect to its entire holding of 58,586,695 common units, which we elected to settle through the issuance of 58,586,695 shares of Class A common stock.
The assumptions relating to our market opportunity include, but are not limited to, the following: (i) according to BloombergNEF, global energy storage capacity grew 63% per annum between 2015 and 2020 and is expected to grow at a further 21% compound annual growth rate through 2030 based on the Energy Storage Market Outlook dated October 2022 ; (ii) declines in lithium-ion battery costs and in the cost of renewable generation; (iii) growing demand for renewable energy; and (iv) increased complexity of the electrical grid.
The assumptions relating to our market opportunities include, but are not limited to, the following: (i) according to BloombergNEF, global energy storage capacity grew 63% per annum between 2015 and 2020 based on the Energy Storage Market Outlook dated October 2022 and is expected to grow at a further 27% compound annual growth rate through 2030 based on the Energy Storage Market Outlook dated October 2023; (ii) declines in overall lithium-ion battery costs and in the cost of renewable generation; (iii) growing demand for renewable energy; and (iv) increased complexity of the electrical grid.
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 results and could cause operating 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 will have an adverse effect on our business and results of operations and could cause our results to vary materially from period to period.
In addition, the laws of some foreign countries do not protect certain proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant challenges in establishing and enforcing certain of their proprietary rights outside of the United States.
In addition, the laws of some foreign countries do not protect certain proprietary and intellectual property rights to the same extent as the laws of the United States, and many other companies have encountered significant challenges in establishing and enforcing certain of their proprietary and intellectual property rights outside of the United States.
Further, the local electric utility may impose “departing load,” “standby” or other charges on our customers in connection with their acquisition of our energy storage products, the amounts of which are outside of our control and which may have a material impact on the economic benefit of our energy storage products to our customers.
Further, the local electric utility may impose “departing load,” “standby” or other charges on our customers in connection with their acquisition of our energy storage products, the amounts of which are outside of our control and which may have a material impact on the overall economic benefit of our energy storage products to and cost analysis for our customers of our energy storage products.
We have in the past, and may in the future, evaluate and take advantage of opportunities to expand into new geographic markets and introduce new product offerings and services that are a natural extension of our existing business internationally.
We have in the past, and may in the future, evaluate and take advantage of opportunities to expand into new geographic markets and introduce new offerings that are a natural extension of our existing business.
In addition, our lenders, to whom we granted a security interest in substantially all of our assets, would have the right to proceed against such assets we provided as collateral pursuant to the Revolver and related security agreement.
In addition, our lenders, to whom we granted a security interest in substantially all of our assets, would have the right to proceed against such assets we provided as collateral pursuant to the ABL Credit Agreement and related security agreement.
There also can be no assurance that we would be able to develop or license suitable alternative technology, content, or other intellectual property to permit us to continue offering the affected technology, content, or services to our partners or clients.
There also can be no assurance that we would be able to develop or license suitable alternative technology, content, or other intellectual property to permit us to continue offering the affected technology, content, or services to our customers.
Due to the significant resources of our Continuing Equity Owners, including their intellectual property (all of which our Continuing Equity Owners retain and certain of which they license to us under the IP License Agreements), financial resources, name recognition and know-how resulting from the previous management of our business, our Continuing Equity Owners could have a significant competitive advantage over us should it decide to utilize these resources to engage in the type of business we conduct, which may cause our operating results and financial condition to be materially adversely affected.
Due to the significant resources of our Continuing Equity Owners, including their intellectual property (all of which our Continuing Equity Owners retain and certain of which they license to us under applicable intellectual property license agreements), financial resources, name recognition and know-how resulting from the previous management of our business, our Continuing Equity Owners could have a significant competitive advantage over us should any of them decide to utilize these resources to engage in the type of business we conduct, which may in turn cause our operating results and financial condition to be materially adversely affected.
However, in fiscal year 2022, we saw battery prices increase for the first time and as a result, we had to adopt a different contracting strategy to ensure preservation of margin.
However, in fiscal year 2022, we saw battery prices increase for the first time and as a result, we had to evolve and adopt a different contracting strategy to ensure preservation of margin in such instance.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our corporate headquarters are in Arlington, Virginia, and consist of approximately 17,000 square feet of office space. We lease our corporate headquarters. We also have offices in Alpharetta, Georgia; San Francisco, California; Erlangen, Germany; Zurich, Switzerland; Melbourne, Australia; New Delhi, India; 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, 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.
We believe that our existing properties are in good condition and are sufficient and suitable for the conduct of our business for the foreseeable future. To the extent our needs change as our business grows, we expect that additional space and facilities will be available.
We believe that our existing properties are in good condition and are sufficient and suitable for the conduct of our business for the for eseeable future. To the extent our needs change as our business grows, we expect that additional space and facilities will be available.
We have gone through rigorous certification processes at several of our offices and are actively pursuing additional certification at others. The corporate office space and the testing facility in Erlangen are ISO 9001, ISO 14001, and ISO 45001 certified (quality, environmental and safety certifications, respectively). Our Melbourne office is ISO 9001 certified, and our U.S.
We have gone through rigorous certification processes at several of our offices and are actively pursuing additional certification at others. The corporate office space in Arlington is ISO 9001 and ISO 45001 certified and the testing facility in Erlangen is ISO 9001, ISO 14001, and ISO 45001 certified (quality, environmental and safety certifications, respectively).
In addition to our office space, we also lease operational facilities in Rockville, Maryland; East Huntingdon Township, Pennsylvania; and Los Angeles, 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 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.
Arlington office is SA8000 certified which is a standard of ethical and decent working conditions.
Our Melbourne office is ISO 9001 certified and ISO 45001, and our U.S. Arlington office is SA8000 certified which is a standard of ethical and decent working conditions.
Added
ITEM 2. PROPERTIES Our corporate headquarters is in Arlington, Virginia, and consists of approximately 17,000 square feet of office space. We lease our corporate headquarters.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor 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. 48 PART II
Biggest changeFor 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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur ability to pay dividends is restricted by the Revolving 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.
Biggest changeOur 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.
The performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act. 50 ITEM 6.
The performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act. ITEM 6.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol “FLNC.” since October 28, 2021. Prior to that date, there was no public market for our Class A common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol “FLNC” since October 28, 2021. Prior to that date, there was no public market for our Class A common stock.
The stock performance graph assumes an initial investment of $100 on October 28, 2021. The comparison in this performance graph are based on historical data are not intended to be indicative of future performance.
The stock performance graph assumes an initial investment of $100 on October 28, 2021. The comparison in this performance graph is based on historical data and is not intended to be indicative of future performance.
Holders As of November 30, 2022, there was one holder of our Class B-1 common stock, no holders of our Class B-2 common stock, and approximately ten 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.
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.
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, 2022 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. 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.
Recent Sales of Unregistered Equity Securities There was no unregistered sale of our equity securities during the fiscal year ended September 30, 2022, 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.
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.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant. Common Stock Class A Common Stock W e are authorized to issue 1,200,000,000 shares of common stock, with a par value of $0.00001 per share.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant.
Removed
There were 115,865,811 shares of Class A common stock issued and outstanding as the date of this Annual Report. Holders of shares of our Class A common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.
Removed
Holders of shares of our Class A common stock are entitled to receive dividends when and if declared by our board of directors out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed b y the terms of any outstanding preferred stock.
Removed
Upon our dissolution or liquidation, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of our Class A common stock will be entitled to receive pro rata our remaining assets available for distribution.
Removed
Holders of shares of our Class A common stock do not have preemptive, subscription, redemption, or conversion rights. There are no redemption or sinking fund provisions applicable to the Class A common stock. Class B-1 and Class B-2 Common Stock We are authorized to issue 200,000,000 shares of Class B-1 common stock, par value $0.00001 per share.
Removed
There were 58,586,695 shares of our Class B-1 common stock issued and outstanding as the date of this Annual Report. We are authorized to issue 200,000,000 shares of Class B-2 common stock, par value $0.00001 per share. There was no Class B-2 common stock issued and outstanding as the date of this Annual Report.
Removed
Each share of our Class B-1 common stock entitles its holders to five votes per share and each share of our Class B-2 common stock entitles its holders to one vote per share on all matters presented to our stockholders generally. 49 Holders of shares of our Class B-1 and Class B-2 common stock will vote together with holders of our Class A common stock as a single class on all matters presented to our stockholders for their vote or approval, except for certain amendments to our amended and restated certificate of incorporation described below or as otherwise required by applicable law or the amended and restated certificate of incorporation.
Removed
Holders of our Class B-1 and Class B-2 common stock do not have any right to receive dividends or to receive a distribution upon dissolution or liquidation. Additionally, holders of shares of our Class B-1 and Class B-2 common stock do not have preemptive, subscription, redemption, or conversion rights.
Removed
There will be no redemption or sinking fund provisions applicable to the Class B-1 or Class B-2 common stock.
Removed
Any amendment of our amended and restated certificate of incorporation that gives holders of our Class B-1 or Class B-2 common stock (1) any rights to receive dividends or any other kind of distribution, (2) any right to convert into or be exchanged for Class A common stock or (3) any other economic rights will require, in addition to stockholder approval, the affirmative vote of holders of our Class A common stock voting separately as a class.
Removed
Our Articles of Incorporation, our Bylaws, and the applicable statutes of the state of Delaware contain a more complete description of the rights and liabilities of holders of our securities.
Removed
Preferred Stock We are authorized to issue 10,000,000 shares of preferred stock, par value $0.00001 per share. We have no shares of preferred stock outstanding.

Item 7. Management's Discussion & Analysis

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

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Biggest changeSeptember 30, Change Change % 2022 2021 Energy Storage Products Deployed (GW) 1.8 0.9 0.9 100.0 % Deployed (GWh) 5.0 2.2 2.8 127.3 % Contracted Backlog (GW) 3.7 2.7 1.0 37.0 % Pipeline (GW) 9.3 8.0 1.3 16.3 % Pipeline (GWh) 22.6 20.1 2.5 12.4 % Contracted - year to date (GW) 1.9 1.3 0.6 46.2 % (amounts in GW) September 30, Change Change % 2022 2021 Service Contracts Asset under Management 2.0 0.8 1.2 150.0 % Contracted Backlog 2.0 1.9 0.1 5.3 % Pipeline 8.8 6.2 2.6 41.9 % Contracted -year to date 1.3 1.7 (0.4) (23.5 %) (amounts in GW) September 30, Change Change % 2022 2021 Digital Contracts Asset under Management 13.7 3.1 10.6 341.9 % Contracted Backlog 3.6 1.6 2.0 125.0 % Pipeline 19.6 3.3 16.3 493.9 % Contracted - year to date 4.9 2.7 2.2 81.5 % Deployed or Asset Under Management Deployed represents cumulative energy storage products that have achieved substantial completion and are not decommissioned.
Biggest changeFiscal 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 historical financial information of Fluence Energy, Inc. has not been included in this Annual Report prior to the IPO as it was a newly incorporated entity, had no business transactions or activities prior to IPO and had no assets or liabilities during the periods presented prior to the IPO. • Fluence Energy, LLC .
The historical financial information of Fluence Energy, Inc. has not been included in this Annual Report prior to the IPO as it was a newly incorporated entity, had no business transactions or activities prior to the IPO and had no assets or liabilities during the periods presented prior to the IPO. • Fluence Energy, LLC .
Siemens Industry, Inc. effected an internal transfer of its interest in the Shares to Siemens AG at the time of Redemption and as of June 30, 2022, Siemens AG became the beneficial owner of 58,586,695 shares of Class A common stock.
Siemens Industry, Inc. effected an internal transfer of its interest in the Shares to Siemens AG at the time of Siemens Redemption and as of June 30, 2022, Siemens AG became the beneficial owner of 58,586,695 shares of Class A common stock.
We expect to invest in additional resources to support our growth which will increase our operating expenses in the near future. Research and Development Expenses Research and development expenses consist of personnel-related costs across our global R&D centers for engineers engaged in the design and development and testing of our integrated products and technologies.
We expect to invest in additional resources to support our growth which will increase our operating expenses in the near future. Research and Development Expenses Research and development expenses consist of personnel-related costs across our global research and development (R&D) centers for engineers engaged in the design and development and testing of our integrated products and technologies.
Our revenue growth is dependent on continued growth in the amount of battery-based energy storage products projects constructed each year and our ability to increase our share of demand in the geographic regions where we currently compete and plan to compete in the future as well as our ability to continue to develop and commercialize new and innovative products that address the changing technology and performance requirements of our customers.
Our revenue growth is dependent on continued growth in the amount of battery-based energy storage products and solutions projects constructed each year and our ability to increase our share of demand in the geographic regions where we currently compete and plan to compete in the future as well as our ability to continue to develop and commercialize new and innovative products that address the changing technology and performance requirements of our customers.
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.
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.
The Redemption increased the beneficial ownership interest of the Company in Fluence Energy, LLC to 66.08% as of June 30, 2022. The impact of the change in ownership interest did not result in a change in control. The Redemption been accounted for as an equity transaction and the carrying amount of non-controlling interest has been adjusted.
The Siemens Redemption increased the beneficial ownership interest of the Company in Fluence Energy, LLC to 66.08% as of June 30, 2022. The impact of the change in ownership interest did not result in a change in control. The Siemens Redemption has been accounted for as an equity transaction and the carrying amount of non-controlling interest has been adjusted.
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.
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.
Lithium-ion Battery Cost Our revenue growth is directly tied to the continued adoption of energy storage products by our customers. The cost of lithium-ion energy storage hardware has declined significantly in the last decade and has resulted in a large addressable market today.
Lithium-ion Battery Cost Our revenue growth is directly tied to the continued adoption of energy storage products and solutions by our customers. The cost of lithium-ion energy storage hardware has declined significantly in the last decade and has resulted in a large addressable market today.
Seasonality We have historically experienced seasonality and see increased order intake in our third and fourth fiscal quarters (April – September), driven by demand in the Northern Hemisphere to install energy storage products before the summer of the following year.
Seasonality We have historically experienced seasonality and see increased order intake in our third and fourth fiscal quarters (April – September), driven by demand in the Northern Hemisphere to install energy storage products and solutions before the summer of the following year.
When we sell a battery-based energy storage product, we enter into a contract with our customers covering the price, specifications, delivery dates and warranty for the products being purchased, among other things.
When we sell a battery-based energy storage product and solution, we enter into a contract with our customers covering the price, specifications, delivery dates and warranty for the products being purchased, among other things.
Estimating the amount of payments that may be made under the Tax Receivable Agreement is by its nature 63 imprecise, insofar as the calculation of amounts payable depends on a variety of factors.
Estimating the amount of payments that may be made under the Tax Receivable Agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors.
We expect research and development expenses to increase in future periods to support our growth and as we continue to invest in research and development activities that are necessary to achieve our technology and product roadmap goals.
We expect research and development expenses to increase in future periods to support our growth and as we continue to invest in research and 57 development activities that are necessary to achieve our technology and product roadmap goals.
The Company elected to settle the Redemption through the issuance of 58,586,695 shares of the Company’s Class A common stock (the “Shares”). The Redemption settled on July 7, 2022.
The Company elected to settle the Siemens Redemption through the issuance of 58,586,695 shares of the Company’s Class A common stock (the “Shares”). The Siemens Redemption settled on July 7, 2022.
In connection with the bridge financing, Fluence Energy, LLC issued a $25.0 million promissory note to each of Siemens Industry and AES Grid Stability (together, the “Promissory Notes”). The Promissory Notes bear interest at a rate of 2.86%. The Promissory Notes were repaid on November 1, 2021 using proceeds from the IPO.
In connection with the bridge financing, Fluence Energy, LLC issued a $25.0 million promissory note to each of Siemens Industry and AES Grid Stability (together, the “Promissory Notes”). The Promissory Notes bore interest at a rate of 2.86%. The Promissory Notes were repaid on November 1, 2021 using proceeds from the IPO.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our audited consolidated financial statements and results of operations and should be read in conjunction with the financial statements and related notes included elsewhere in this Annual Report.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information that management believes is relevant to an assessment and understanding of our audited consolidated financial statements and results of operations and should be read in conjunction with the financial statements and related notes included elsewhere in this Annual Report.
To date, we do not believe that this incident has impacted the market’s adoption of our products. 2022 Overheating Event at Customer Facility On April 18, 2022, a 10 MW energy storage facility in Chandler, Arizona owned by AES experienced an overheating event.
To date, we do not believe that this incident has impacted the market’s adoption of our energy storage products and solutions. 2022 Overheating Event at Customer Facility On April 18, 2022, a 10 MW energy storage facility in Chandler, Arizona owned by AES experienced an overheating event.
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 “Redemption”).
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”).
The Redemption resulted in increases in the tax basis of the assets of Fluence Energy, LLC and certain of its subsidiaries.
The Siemens Redemption resulted in increases in the tax basis of the assets of Fluence Energy, LLC and certain of its subsidiaries.
Under the terms of the Revolving 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, including among others (i) the ability to make investments of up to the greater of (a) $10,500,000 and (b) 1.5% of the consolidated assets of Fluence Energy, Inc. and its subsidiaries, and (ii) the ability to issue dividends and make other Restricted Payments (as defined in the Revolving Credit Agreement) (a) if after giving pro forma effect to such dividend or other Restricted Payment the Total Liquidity (as defined in the Revolving Credit Agreement) of Fluence Energy, Inc. and its subsidiaries party to the Revolving Credit Agreement is at least $600,000,000, or (b) such dividend or other Restricted Payment is made to reimburse Fluence Energy, Inc. for certain tax distributions under the Fluence Energy LLC Agreement and certain payments under the Tax Receivable Agreement and certain operational expenses incurred in connection with the ownership and management of Fluence Energy, LLC.
Under the terms of the Revolving Credit Agreement, Fluence Energy, LLC and its subsidiaries were limited in their ability to pay cash dividends to, lend to, or make other investments in Fluence Energy, Inc., subject to certain exceptions, including among others (i) the ability to make investments of up to the greater of (a) $10,500,000 and (b) 1.5% of the consolidated assets of Fluence Energy, Inc. and its subsidiaries, and (ii) the ability to issue dividends and make other Restricted Payments (as defined in the Revolving Credit Agreement) (a) if after giving pro forma effect to such dividend or other Restricted Payment the Total Liquidity (as defined in the Revolving Credit Agreement) of Fluence Energy, Inc. and its subsidiaries party to the Revolving Credit Agreement was at least $600,000,000, or (b) such dividend or other Restricted Payment was made to reimburse Fluence Energy, Inc. for certain tax distributions under the Fluence Energy LLC Agreement and certain payments under the Tax Receivable Agreement and certain operational expenses incurred in connection with the ownership and management of Fluence Energy, LLC.
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 “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 “Siemens Redemption”).
Key Operating Metrics The following tables presents our key operating metrics and order intake for the fiscal years ended September 30, 2022 and 2021. 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 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).
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 services. 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 contracted backlog or pipeline will result in actual revenue in the originally anticipated period or at all.
“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, 2021, filed with the SEC on December 14, 2021.
“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.
Fluence Energy LLC was subject to income taxes, including withholding taxes, outside the U.S. and our income tax expense (benefit) 56 on the consolidated statements of operations primarily relates to income taxes from foreign operations, withholding taxes on intercompany royalties and changes in valuation allowances related to deferred tax assets of certain foreign subsidiaries.
Fluence Energy LLC was subject to income taxes, including withholding taxes, outside the U.S. and our income tax expense (benefit) on the consolidated statements of operations and comprehensive loss primarily relates to income taxes from foreign operations, withholding taxes on intercompany royalties and changes in valuation allowances related to deferred tax assets of certain foreign subsidiaries.
Siemens AG will be entitled to receive payments under the Tax Receivable Agreement equaling 85% of such amount, or $93.1 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 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.
The terms of the Revolving Credit Agreement 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 terms of the Revolving Credit Agreement limited 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.
R&D expenses also support three product testing labs located across the globe, including a new system-level testing facility in Pennsylvania that will be 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, 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.
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 at all 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 and pipeline fail to result in revenue as anticipated or in a timely manner, we could experience a reduction in revenue, profitability, and liquidity.
Comparison of the Fiscal Year Ended September 30, 2021 to the Fiscal Year Ended September 30, 2020 For a discussion of our results of operations for the year ended September 30, 2021 compared to fiscal year ended September 30, 2020, please see Item 7.
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.
In addition to the inventory losses, we have incurred and expect to incur incremental expenses related to the incident, primarily consisting of inspection costs, project cost overruns due to logistical changes, legal fees, fees to dispose of the damaged cargo, and additional cost to replace the damaged cargo.
In addition to the inventory losses, we incurred incremental expenses related to the incident, primarily consisting of inspection costs, project cost overruns due to logistical changes, legal fees, fees to dispose of the damaged cargo, and additional cost to replace the damaged cargo.
The transaction price identified is allocated to each distinct performance obligation to deliver a good or service based on the relative standalone selling prices. Generally, our contracts to design and build battery-based storage solutions are determined to have one performance obligation.
The transaction price identified is allocated to each distinct performance obligation to deliver a good or service based on the relative standalone selling prices. Generally, the Company’s contracts to design and build battery-based storage products are determined to have one performance obligation.
Outstanding borrowings from the Line of Credit were $50 million as of September 30, 2021. The weighted average annual interest rate of the borrowing was 2.83%. On November 1, 2021, the $50 million outstanding borrowings from the Line of Credit was paid off using the proceeds from our IPO and the Line of Credit was canceled shortly thereafter.
The weighted average annual interest rate of the borrowing was 2.83% . On November 1, 2021, the $50 million outstanding borrowings from the Line of Credit was paid off using the proceeds from our IPO and the Line of Credit was canceled shortly thereafter.
The Revolver bears interests rate at either (i) the Adjusted LIBOR or Adjusted EURIBO Rate (each as defined in the Revolving Credit Agreement) plus 3.0 % or (ii) the Alternate Base Rate (as defined in the Revolving Credit Agreement) plus 2.0 % (subject to customary LIBOR replacement provisions and alternative benchmark rates including customary spread adjustments with respect to borrowings in foreign currency), at the option of Fluence Energy, LLC.
The Revolver bore interest at either (i) the Adjusted SOFR Rate (each as defined in the Revolving Credit Agreement) plus 3.0 % or (ii) the Alternate Base Rate (as defined in the Revolving Credit Agreement) plus 2.0% (subject to customary LIBOR replacement provisions and alternative benchmark rates including customary spread adjustments with respect to borrowings in foreign currency), at the option of Fluence Energy, LLC.
Fluence Energy, LLC is 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 will be the four-year anniversary of the closing date of the Revolver.
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.
The cumulative effects of revisions of estimated total contract costs and revenues, together with any contract reserves which may be deemed appropriate, are recorded in the period in which the facts and changes in circumstance become known. Due to the uncertainties inherent in the estimation process, it is reasonably possible that these estimates will be revised in a different period.
The cumulative effects of revisions of estimated total contract costs and revenues, together with any contract reserves which may be deemed appropriate, are recorded in the period in which they occur. Due to the uncertainties inherent in the estimation process, it is reasonably possible that these estimates will be revised in a different period.
In addition, we are required to maintain (i) minimum liquidity and gross revenue requirements, in each case, until consolidated EBITDA reaches $150.0 million for the most recent four fiscal quarters and we make an election, and (ii) thereafter, a maximum total leverage ratio and a minimum interest coverage ratio. Such covenants will be tested on a quarterly basis.
In addition, we were required to maintain (i) minimum liquidity and gross revenue requirements, in each case, until consolidated EBITDA reached $150.0 million for the most recent four fiscal quarters and we made an election, and (ii) thereafter, a maximum total leverage ratio and a minimum interest coverage ratio. Such covenants were tested on a quarterly basis.
Fluence served as the energy storage technology provider for the facility, which was completed in 2019, and Fluence currently provides maintenance services for the facility. There were no injuries. The facility has been taken offline as teams from Fluence, AES, and the battery manufacturer investigate the incident.
Fluence served as the energy storage technology provider for the facility, which was completed in 2019, and Fluence previously provided maintenance services for the facility. There were no injuries. The facility has been taken offline as teams from Fluence, AES, and the battery manufacturer continue to investigate the incident.
Other Income (Expense), Net Other income (expense), net consists of income (expense) from foreign currency exchange adjustments for monetary assets and liabilities. Tax Expense Historically, prior to the IPO, Fluence Energy, LLC was not subject to U.S. federal or state income tax.
Other (Income) Expense, Net Other (income) expense, net primarily consists of (income) expense from foreign currency exchange gains and losses on monetary assets and liabilities. Tax Expense Historically, prior to the IPO, Fluence Energy, LLC was not subject to U.S. federal or state income tax.
Engineering competencies include data science, software development, network and cyber security, battery systems engineering, industrial controls, UI / UX, mechanical design, and more.
Engineering competencies include data science, machine learning, software development, network and cyber security, battery systems engineering, industrial controls, UI / UX, mechanical design, power systems engineering, certification, and more.
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.
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. We do not currently hedge against changes in the price of raw materials.
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.
Fluence Energy, LLC used the net proceeds from the sale of LLC Interests to Fluence Energy, Inc. to repay all outstanding borrowings under our existing Line of Credit and the Promissory Notes, and the remainder will be used for working capital and other general corporate purposes.
Fluence Energy, LLC used the net proceeds from the sale of LLC Interests to Fluence Energy, Inc. to repay all outstanding borrowings under the now extinguished Line of Credit and the Promissory Notes. The remainder of the proceeds has been used for working capital and other general corporate purposes.
Prior to the Redemption, we determined it was not probable payments under the Tax Receivable Agreement would be made, given there was no expectation of future sufficient taxable income over the term of the agreement to utilize deductions in the future. Therefore, the Company did not initially recognize the liability.
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.
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. We intend to expand our sales presence and marketing efforts to additional countries in the future.
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.
We expect that as a result of the tax basis adjustment of the assets of Fluence Energy, LLC and its subsidiaries upon the Redemption and our possible utilization of certain tax attributes, the payments that we may make under the Tax Receivable Agreement will be substantial. As a result of the Redemption, we estimate tax savings of approximately $109.6 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 Siemens Redemption will result in future tax savings of $96.5 million.
This continuous 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 and is for products that do not have an alternative use to us and/or the project is built on the customer’s land that is under the customer’s control.
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.
References to “fiscal year 2020”, “fiscal year 2021” and “fiscal year 2022” refer to the fiscal years ended September 30, 2020, September 30, 2021 and September 30, 2022, 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 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.
Liquidity and Capital Resources Since inception and through September 30, 2022, our principal sources of liquidity were our cash and cash equivalents, short-term borrowings, capital contributions from AES Grid Stability and Siemens AG and affiliates, proceeds from the QFH investment and supply chain financing.
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.
BloombergNEF estimates that renewable energy is expected to represent 70% of all new global capacity installations over the next ten years. Energy storage is critical to reducing the intermittency and volatility of renewable energy generation. However, there is no guarantee that the deployment of renewable energy will occur at the rate estimated by BloombergNEF.
BloombergNEF estimates that renewable energy is expected to represent 70% of all new global capacity installations over the next ten years. Energy storage is critical to reducing the intermittency and volatility of renewable energy generation.
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.
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.
Interest Expense Interest expense consists primarily of interest previously incurred on our now extinguished Line of Credit and Promissory Notes (each as defined below), unused line fees related to the revolving credit facility (the “Revolver”) pursuant to a credit agreement by and among Fluence Energy, LLC, as the borrower, Fluence Energy, Inc., as a parent guarantor, the subsidiary guarantors party thereto, the lenders party thereto and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent (the “Credit Agreement”), and amortization of debt issuance costs.
Interest expense consists primarily of interest previously incurred on our now extinguished Line of Credit and Promissory Notes (each as defined below), borrowings against notes receivable pledged as collateral, unused line fees related to the revolving credit facility (the “Revolver”) pursuant to a credit agreement, dated November 1, 2021, by and among Fluence Energy, LLC, as the borrower, Fluence Energy, Inc., as a parent guarantor, the subsidiary guarantors party thereto, the lenders party thereto and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent (the “Revolving Credit Agreement”), which was terminated upon repayment in full of all obligations under the Revolver, effective November 22, 2023, and amortization of debt issuance costs.
The Revolver is secured by a (i) first priority pledge of the equity securities of Fluence Energy, LLC and its subsidiaries 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, LLC, the parent guarantor and each subsidiary guarantor party thereto, in each case, subject to customary exceptions and limitations.
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 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 or decline at the rates we expect, and the short-term increases predicted by BloombergNEF could be larger or last longer than they predict.
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 Company has recorded $13.0 million provision to its inventory as of September 30, 2021 based on the net realizable value of cargo that was destroyed. During fiscal year 2022, $13.0 million of inventory was written off against the provision.
This incident (the “Cargo Loss Incident”) resulted in damage to a portion of our cargo aboard the vessel. The Company recorded $13.0 million provision to its inventory as of September 30, 2021, based on the net realizable value of cargo that was destroyed. During fiscal year 2022, $13.0 million of inventory was written off against the provision.
The Credit Support and Reimbursement Agreement will not provide any credit support from September 30, 2026, provided that either AES or Siemens Industry will be permitted to terminate the agreement upon six months prior notice. Historical Cash Flows The following table summarizes our cash flows from operating, investing, and financing activities for the periods presented.
The Credit Support and Reimbursement Agreement will not provide any credit support from September 30, 2026, provided that either AES or Siemens Industry will be permitted to terminate the agreement upon six months prior notice.
Asset under management for service contracts represents our long-term service contracts with customers associated with our completed energy storage system products. We start providing maintenance, monitoring, or other operational services after the storage product projects are completed.
Deployed is monitored by management to measure our performance towards achieving project milestones. Assets Under Management Assets under management for service contracts represents our long-term service contracts with customers associated with our completed energy storage system products and solutions. We start providing maintenance, monitoring, or other operational services after the storage product projects are completed.
SCF was further increased to $100.0 million on November 3, 2021 when AES and Siemens increased their guarantee to $50.0 million each, for a total of $100 million As of September 30, 2022 , three suppliers were actively participating in the supply chain financing program, and we had $37.4 million of payables outstanding subject to the prog ram.
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.
LDs are accounted for as variable consideration, and the contract price is reduced by the expected penalty or LD amount when recognizing revenue. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved.
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved.
Cash flows provided by financing activities of $817.1 million in fiscal year 2022 was primarily driven by $948.0 of proceeds from issuance of Class A common stock sold in an IPO, net of underwriting discounts and commissions, offset by $50.0 million repayment of promissory notes and $50.0 million repayment of line of credit.
Cash flows provided by financing activities in fiscal year 2022 was primarily driven by $935.8 million of proceeds from issuance of Class A common stock sold in an IPO, net of underwriting discounts and commissions, offset by $50.0 million repayment of promissory notes and $50.0 million repayment of line of credit. 68 Critical Accounting Policies and Use of Estimates Our financial statements have been prepared in accordance with GAAP.
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) equity-based compensation, and (v) other income or expenses. Adjusted EBITDA may in the future also be adjusted for amounts impacting net income related to the Tax Receivable Agreement liability.
Adjusted EBITDA may in the future also be adjusted for amounts impacting net income related to the Tax Receivable Agreement liability. Adjusted Gross Profit (Loss) is calculated using gross profit (loss), adjusted to exclude (i) stock-based compensation expenses, (ii) amortization, (iii) certain other income or expenses, and (iv) non-recurring income or expenses.
Net cash flows used in investing activities was $148.4 million in fiscal year 2022, which included $110.1 million for the purchase of short-term investments, $29.2 million related to cash paid for a business acquisition, and $7.9 million purchases of property and equipment.
Fiscal year 2022 included $110.1 million for the purchase of short-term investments, $29.2 million related to cash paid for a business acquisition, and $7.9 million purchases of property and equipment. Cash flows provided by financing activities was $52.6 million in fiscal year 2023, compared to $817.1 million in fiscal year 2022, representing a decrease of $764.5 million.
However, according to BloombergNEF’s 2021 (issued November 2021) battery price survey, higher raw material costs could push the average price of a lithium-ion battery packs up in the short term, which would mark the first annual increase in price since at least 2010.
However, according to BloombergNEF’s annual battery price survey issued in December 2022, higher raw material costs pushed the average price of lithium-ion battery packs up in calendar year 2022. The 2022 price increase marked the first annual increase in price of lithium-ion battery packs since at least 2010.
We generally expect the ratio of cost of goods and services to revenue to decrease as sales volumes increase due to economies of scale, however, some of these costs, primarily personnel related costs, are not directly affected by sales volume. 55 Gross Profit (Loss) and Gross Profit Margin Gross profit (loss) and gross profit margin may vary from quarter to quarter and is primarily affected by our sales volume, product prices, product costs, product mix, customer mix, geographical mix, shipping method, warranty costs, and seasonality.
We generally expect the ratio of cost of goods and services to revenue to decrease as sales volumes increase due to economies of scale, however, some of these costs, primarily personnel-related costs, are not directly affected by sales volume.
Total Revenue We generate revenue from the sale of energy storage products, service agreements with customers to provide operational services related to battery-based energy storage products, and from digital application contracts. 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.
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.
We received an aggregate of $10.0 million insurance proceeds related to non-disputed claims, $7.5 million of which was collected in October 2021 and the remaining $2.5 million was collected in April 2022. 53 2021 Overheating Event at Customer Facility On September 4, 2021, a 300 MW energy storage facility owned by one of our customers experienced an overheating event.
We received an aggregate of $10.0 million in insurance proceeds related to non-disputed claims, $7.5 million of which was collected in October 2021 and the remaining $2.5 million was collected in April 2022.
The remainder of the proceeds has been used for working capital and other general corporate purposes. 61 Prior 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.
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.
These non-GAAP measures and their reconciliation to GAAP financial measures are shown below. 58 The following tables present our non-GAAP measures for the periods indicated.
These non-GAAP measures and their reconciliation to GAAP financial measures are shown below.
Combined third and fourth fiscal quarter order intake have historically accounted for 80% or more of our total intake each year. However, as we and the market matures we are seeing less seasonality. For fiscal year 2022 third and fourth quarter order intake accounted for only 48% of our total intake for the year.
Combined third and fourth fiscal quarter order intake has historically accounted for 80% or more of our total intake each year prior to fiscal year 2022. However, combined third and fourth fiscal quarter order intake accounted for 48% and 43% of our total annual intake for fiscal year 2022 and 2023, respectively.
Contract costs include all direct material and labor costs related to contract performance. Pre-contract costs with no future benefit are expensed in the period in which they are incurred.
Due to the significance of the costs associated with cubes, our judgement on when such costs should be included in the measure of progress has a material impact on revenue recognition. Contract costs include all direct material and labor costs related to contract performance. Pre-contract costs with no future benefit are expensed in the period in which they are incurred.
Free Cash Flow is calculated from the consolidated statements of cash flows and is defined as net cash provided by operating activities, less purchase of property and equipment made in the period. We expect our Free Cash Flow to fluctuate in future periods as we invest in our business to support our plans for growth.
Adjusted Gross Profit Margin is calculated using Adjusted Gross Profit (Loss) divided by total revenue. Free Cash Flow is calculated from the consolidated statements of cash flows and is defined as net cash provided by (used in) operating activities, less purchase of property and equipment made in the period.
Pipeline is an internal management metric that we construct from market information reported by our global sales force. 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, Adjusted Net Loss, and Free Cash Flow.
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.
Contracted represents new energy storage product contracts, new service contracts and new digital contracts signed during each fiscal year presented. 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 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.
When a loss is forecasted for a contract, the full amount of the anticipated loss is recognized in the period in which it is determined that a loss will occur. 65 Our contracts generally provide our customers the right to liquidated damages (“LDs”) against Fluence in the event specified milestones are not met on time, or equipment is not delivered according to contract specifications.
Our contracts generally provide our customers the right to liquidated damages against Fluence in the event specified milestones are not met on time, or equipment is not delivered according to contract specifications. Liquidated damages are accounted for as variable consideration, and the contract price is reduced by the expected penalty or LD amount when recognizing revenue.
Subsequent to the Redemption, on September 29, 2022 Siemens AG effected an internal transfer of 18,848,631 shares of Class A common stock held by it to Siemens Pension-Trust e.V., an affiliated entity and a permitted transferee under the terms of the Stockholders Agreement. 52 Overview Since our inception on January 1, 2018, we have focused on international growth and developing our energy storage product and delivery services, the operational services, and digital applications.
Subsequent to the Siemens Redemption, on September 29, 2022, Siemens AG effected an internal transfer of 18,848,631 shares of Class A common stock to Siemens Pension-Trust e.V., an affiliated entity and a permitted transferee under the terms of the Stockholders Agreement dated October 27, 2021, by and among Fluence Energy, LLC, Fluence Energy, Inc., and the Stockholders (as defined therein)(the “Stockholders Agreement”).
Assets under management for digital software represents contracts signed and active (post go live). 57 Contracted Backlog and Contracted For our energy storage products 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. 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.
All of our business is conducted through Fluence Energy, LLC, together with its subsidiaries, and the financial results of Fluence Energy, LLC will be consolidated in our financial statements.
All of our business is conducted through Fluence Energy, LLC, together with its subsidiaries, and the financial results of Fluence Energy, LLC are consolidated in our financial statements. Except where the context clearly indicates otherwise, “Fluence,” “we,” “us,” “our” or the “Company” refers to Fluence Energy, Inc. and its wholly owned subsidiaries.
Other (Expense) Income, Net Other expense was $0.3 million in fiscal year 2021, compared to other expense of $2.3 million in fiscal year 2022. The $2.0 million increase, or 744.8%, was mainly a result of foreign currency exchange adjustments for monetary assets and liabilities.
Other (Income) Expense, Net Other (income) expense, net increased by $11.6 million, or 250.3%, in the fiscal year ended September 30, 2023, as compared to the fiscal year ended September 30, 2022. The increase in other income was primarily attributable to favorable foreign currency exchange gains for monetary assets and liabilities.
As a result, our future results of operations and earnings could be impacted as a result of these matters.
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.
The Revolver also provides for up to $200.0 million in letter of credit issuances, which will require customary issuance and administration fees, as well as a fronting fee payable to each issuer thereof and a letter of credit participation fee of 2.75 % per annum payable to the lenders. 62 The Revolving Credit Agreement contains covenants that, among other things, will restrict our ability to incur additional indebtedness; incur liens; sell, transfer, or dispose of property and assets; make investments or acquisitions; make dividends, distributions, or other restricted payments; and engage in affiliate transactions.
The Revolving Credit Agreement contained covenants that, among other things, restricted our ability to incur additional indebtedness; incur liens; sell, transfer, or dispose of property and assets; make investments or acquisitions; make dividends, distributions, or other restricted payments; and engage in affiliate transactions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTo date, we have not had material exposure to foreign currency fluctuations and have not had material hedging instruments to hedge the foreign currency risks.
Biggest changeOur 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.
Fluctuations in currency exchange rates between the U.S. dollar and the Euro, the British pound, the Australian dollar, and the Swiss Franc in our current foreign markets could create significant fluctuations in earnings and cash flows.
Fluctuations in currency exchange rates between the U.S. dollar and the Euro, the British pound, the Australian dollar, the Canadian Dollar, and the Swiss Franc in our current foreign markets could create significant fluctuations in earnings and cash flows.
Macroeconomic conditions in developing economies are usually more volatile than in developed economies and entail certain risks and uncertainties. Changes in the United States trade environment, including the imposition of import tariffs, could adversely affect the amount or timing of our revenues, results of operations or cash flows.
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.
We entered into the Revolver on November 1, 2021, which bears a variable interest rate based on the Adjusted LIBOR, the Adjusted EURIBO Rate or the Alternate Base Rate (each as defined in the Revolving Credit Agreement). As of September 30, 2022, we have no borrowings under the Revolver. 68
We 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.
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, which represent 6% and 20% of revenue for the fiscal year 2022 and 2021, r espectively.
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.
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.
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.
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 products 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.
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.
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. Interest Rate Risk We are exposed to interest rate risk in connection with borrowings under the Revolver, which bears interest at floating rates.
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.
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. 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.
Removed
As of September 30, 2022, the COVID-19 pandemic has not had a material impact on our credit risk exposure to our counterparties. 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.
Added
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
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.
Added
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

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