Fluence Energy Inc.
08/11/2025 | Press release | Distributed by Public on 08/11/2025 14:09
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following analysis provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Fluence and should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q for the period ended June 30, 2025 (this "Report") and in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the U.S. Securities and Exchange Commission (the "SEC") on November 29, 2024 (the "2024 Annual Report"). In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition, and prospects based on current expectations that involve risks, uncertainties, and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed in Part I, Item 1A. "Risk Factors" of the 2024 Annual Report and Part II, Item 1A. "Risk Factors" and the section titled "Cautionary Statement Regarding Forward-Looking Information" included elsewhere in this Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We use words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "potential," "seek," "should," "will," "would," "commit," "target," "contemplate," and similar expressions to identify forward-looking statements.
Fluence Energy, Inc. is a holding company whose sole material assets are the limited liability interests in Fluence Energy, LLC (the "LLC Interests"). 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.
The Company's chief operating decision maker ("CODM") is its Chief Executive Officer. The Company's CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates in one operating segment, which corresponds to one reportable segment.
Our fiscal year begins on October 1 and ends on September 30. References to "fiscal year 2022," "fiscal year 2023," "fiscal year 2024," and "fiscal year 2025" refer to the twelve months ended September 30, 2022, September 30, 2023, September 30, 2024 and ending September 30, 2025, respectively.
Key Factors, Trends, and Uncertainties Affecting our Performance
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part I, Item 1A. "Risk Factors" within our 2024 Annual Report and Part II, Item 1A. "Risk Factors" in this Report.
Industry Outlook
The utility-scale battery storage industry as a whole is witnessing unprecedented growth, fueled by global transitions toward renewable energy, heightened focus on grid resilience, and supportive regulatory frameworks. Deployment of renewable energy resources has accelerated over the last decade. Industry-wide, the push for decarbonization is creating increasing demand for grid-scale energy storage, which is critical to enabling the integration of variable renewable energy sources, reducing the intermittency and volatility of renewable energy generation, and meeting ambitious net-zero targets. BloombergNEF estimated in its 1H 2025 Energy Storage Market Outlook published on April 30, 2025 that the global utility scale market, excluding China, will add approximately 2,660 GWh between 2024 and 2035.
Our revenue growth is directly tied to the continued adoption of energy storage solutions by our customers. One factor that impacts this continued adoption of energy storage solutions is the cost of lithium-ion energy storage hardware. The cost of lithium-ion energy storage hardware has declined significantly in the aggregate in the last decade and has resulted in a large addressable market today. In fiscal year 2022, we saw prices for lithium-ion battery packs increase from prior years, though prices returned to their historical trend of declining year-over-year in fiscal years 2023 and 2024. The market for energy storage continues to rapidly evolve and while we believe lithium-ion battery pack costs will continue to decline over the long term, there is no guarantee that they will decline or decline at the rates we expect. If costs do not continue to decline long term and instead remain steady or increase, as seen in fiscal year 2022, this could adversely affect our ability to increase our revenue, our order intake, and grow our business. Moreover, as discussed below, to the extent our imports of lithium-ion batteries are significantly impacted by tariffs or trade policy or other legislation or regulation, this could have an adverse impact on our business and results of operations.
Our growth strategy includes leveraging our global scale, technology leadership, product development, and market share position to help transform the way we power our world for a more sustainable future. Overall, we believe Fluence is well-positioned to continue to capitalize on the utility-scale battery storage market as we continue to deliver solutions that address the complex needs of a transforming energy landscape. We have and intend in the future to further develop and innovate to provide energy storage solutions and digital software offerings that aim to solve our customers' energy challenges and expand our services with additional value-add offerings. We are also focused on expanding our business with 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. For instance, the Company continues to ramp up use of domestic manufacturing facilities in Arizona, Texas, Tennessee, and Utah, as well as our domestic inverter supplier in South Carolina for our customers and projects in the United States. However, there is no guarantee that the deployment of renewable energy will occur as we expect or at the rate estimated by BloombergNEF or that such renewable energy will rely on lithium-ion battery technology forenergy storage. Economic uncertainties, supply chain disruptions, geo-political conflicts, government regulations and incentives, trade environment, including tariff policy, and other factors could result in fluctuations in demand for and deployment of renewable energy resources and may materially increase inventory costs and costs of goods and services, adversely affecting our revenue, growth, and ability to generate profits in the future. See Part I, Item 1A. "Risk Factors" in our 2024 Annual Report and Part II, Item 1A. "Risk Factors" in this Report for further discussion on these risks.
Market Trends and Uncertainties
Current economic conditions affecting our industry and the global markets more generally, including ambiguity around interest rates, softening labor markets, fluctuations in currency exchange rates, and recent government and policy changes implemented in the United States, the enactment of the IRA and OBBBA (both as defined below) and rapid changes in announced tariff policy, have created uncertainty in the global economy, a level of volatility in the capital markets and recessionary pressures, which have had, and which may in the future have, adverse impacts on our business and our results of operations. If a downturn in our industry or a prolonged economic downturn or recession develops from market uncertainty, it could also result in further adverse impacts to our business and results of operations in the future. We will continue to evaluate the evolving economic environment to take action to mitigate the impact on our business, consolidated results of operations, and financial condition. See Part I, Item 1A. "Risk Factors" in our 2024 Annual Report for further discussion on risks relating to macroeconomic uncertainty and market conditions and Part II, Item 1A. "Risk Factors" in this Report for further discussion on risks related to changes in the trade environment and related impact on general economic uncertainty.
Increased Electricity Demand
According to a publication from the Office of Policy of the U.S. Department of Energy in August 2024, electricity demand is forecasted to grow substantially in the United States over the next decade. We are seeing similar trends of increasing electricity demand in other countries, including those in which we operate. We believe that such increase in electricity demand is helping to, and will continue to help to, increase demand for energy storage solutions globally, including for our energy storage solutions. Electricity demand, and in turn related energy storage demand, is being driven and we believe will continue to be driven, primarily by new data centers, artificial intelligence, new manufacturing facilities, and sector-wide electrification.
Government Regulation and Compliance
Adoption of energy storage solutions, services, and digital application offerings by our customers is also dependent on applicable government regulation, legislation, and policies. Governments across the globe have announced, implemented, and continue to consider implementation of various policies, regulation, and legislation to support the transition from fossil fuels to low-carbon forms of energy, including through the development and deployment of energy storage. For example, in August 2022, the United States passed the Inflation Reduction Act of 2022 (the "IRA"), which included incentives that supported the adoption of energy storage solutions, including a new "technology neutral" Section 48E investment tax credit (the "ITC") and Section 45Y production tax credit (the "PTC"), changes to the previous Section 48 non-"technology neutral" investment tax credit and Section 45 production tax credit, and a new Section 45X advanced manufacturing production tax credit (the "AMPC"). On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was signed into law, which significantly modified certain provisions of the IRA, including those related to energy storage. The OBBBA supports energy storage in the United States, as the bill includes long-term continued availability of the ITC for energy storage projects and the AMPC for cells, modules, and inverters in energy storage systems. Certain tax credits, notably including the ITC for storage, will begin to phase down for projects beginning construction after 2033. The prevailing wage and apprenticeship requirements enacted under the IRA continue to apply under the OBBBA in order for the project owner to receive the full ITC value, and the credit value can be further increased if the project owner also qualifies for a domesticcontent bonus credit and energy communities bonus credit. The OBBBA amended the provisions of the domestic content bonus credit for the ITC such that the project owner now must achieve higher minimum domestic content thresholds. In addition, the OBBBA amended the ITC and AMPC such that there are new foreign entity of concern ("FEOC") requirements to qualify for such tax credits and are intended to deny tax credits to projects that are owned or controlled by certain foreign entities, including Chinese entities, or that source components from or make payments to such entities.
The new FEOC restrictions apply to virtually all key tax credits under the IRA and come in two forms: (i) in tax years beginning after July 4, 2025, the taxpayer taking the tax credit may not be a prohibited foreign entity ("PFE") or under "effective control" by a PFE and (ii) for ITC projects that begin construction after 2025 and AMPC eligible components that are sold in tax years beginning after July 4, 2025, the project must source a certain percentage of material (which increases over time) from non-PFEs (which is otherwise known as the material assistance component). On July 7, President Trump issued an executive order titled "Ending Market-Distorting Subsidies for Unreliable, Foreign Controlled Energy Sources," which, among other things, tasked the U.S. Department of Treasury with promptly implementing the enhanced FEOC restrictions established by the OBBBA to ensure FEOC ownership/control and material assistance restrictions are implemented within the compliance timeframe. In preparation for the potential application of FEOC restrictions being applied to the energy storage tax credits arising out of the IRA, we developed a compliance strategy intended to address and mitigate risks relating thereto. We believe that under the current language of the OBBBA, which is subject to final rules and further guidance, certain of our US domestic suppliers may be impacted by these new FEOC restrictions. We are actively implementing our risk mitigation strategy with our U.S. suppliers utilizing the AMPC and working with such suppliers to achieve compliance with the OBBBA conditions for the AMPC, including the FEOC restrictions, by the applicable compliance deadlines set forth in the OBBBA. See Part II, Item 1A. "Risk Factors" in this Report for further discussion on risks related to regulatory policy on the Company and its operations, including the IRA and OBBBA.
We believe we are well positioned to benefit from both the ITC provisions (including the revised domestic content bonus credit thresholds) and the AMPC, via our battery module manufacturing at our U.S. contract manufacturing facility, our supply agreement for U.S. manufactured battery cells, our supply agreement for U.S. manufactured inverters, and our complete U.S. supply chain of modules, cells, inverters, battery pack, enclosures, and thermal management systems.
Government policies, regulations, legislation, and programs are instrumental in stimulating adoption of energy storage solutions across different markets through a variety of methods, including by providing financial support and incentives, facilitating grid integration, supporting research and development, and establishing favorable regulatory regimes. To the extent that any existing government incentives are modified, reduced, eliminated, or are permitted to expire or there is the potential of such modifications, reductions, eliminations or expirations, or there is determination of inapplicability of such government incentives or regulations relating to or mandating or encouraging use of renewable energy and/or energy storage, there have been and there may in future be adverse effects on customer demand and our business. Refer to the "Government Regulation and Compliance" section in our 2024 Annual Report and Part II, Item 1A. "Risk Factors" in this Report for further details on the IRA, the OBBBA, and other significant government regulations affecting our business and specific discussion of risks to our business from the modification, reduction, elimination, and expiration of government incentives and regulations or potential of such modification, reduction, elimination, and expiration of governmental incentives and regulations relating to or mandating or encouraging use of renewable energy and/or energy storage.
In May 2024, the Biden administration announced a significant shift in the tariff framework for the energy storage industry. Under this structure, the Section 301 tariff rate on lithium-ion non-EV batteries imported from China will increase from the current 7.5% to 25%, effective January 1, 2026. This change specifically targeted "batteries" as defined by U.S. Customs and Border Protection, encompassing battery energy storage systems, modules, and certain types of cells. Under the May 2024 structure announced by the Biden administration, the Section 301 tariff rate on battery "parts"-including separators, electrolytes, cans, and electrodes remains at its current 25% level. In April 2025, the Trump administration enacted additional tariffs on nearly all types of imports (including those used in our energy storage solutions) from countries around the world, including high tariffs on Chinese imports. Some of these additional tariffs have been modified further since they were imposed in April 2025. For example, in May 14, 2025, the United States and China agreed to reduce the reciprocal tariff rates between the countries, with the U.S. dropping the reciprocal tariff rate for Chinese imports to 10%, while maintaining the existing 20% fentanyl tariff on Chinese goods. As of the filing date of this Report, covered imports from China relevant to our energy storage systems are subject to the current 10% China-specific "reciprocal tariff," plus the current China-specific 20% "fentanyl-related tariff", plus the 3.4% base tariff on all countries, plus the applicable Section 301 tariff. Tariffs that have been imposed by the United States government against other countries have and may in the future increase, decrease, or change with little to no advanced notice. The recent tariff policy changes and continued uncertainty relating to U.S. trade policy and the corresponding response from other foreign countries have impacted and may in the future impact the energy storage market, demand for our energy storage solutions by customers, our business, and results of operations as well as those of our customers, partners, and suppliers. The Company has exposure from the imposition of these new tariffs and from the tariff uncertainty in the global markets, as the Company imports components from overseas, including battery cells from China, into the United States for customers and projects in the United States. We have experienced paused and delayed customer contracting activity in response to the tariff-related uncertainty, including as a result of the mutual agreement by the Company with certain customers in the United States to (i) defer entry into new energy storage solutions contracts and (ii) pause active, currently signed contracts under project execution and we may see further impacts to customer contracting activity if there continues to be uncertainty relating to tariffs. This impact to customer contracting behavior from the uncertain trade environment has impacted and may in the future impact our revenue, business, operating metrics, and results of operations.
In addition, currently there are ongoing investigations into certain additional tariffs on specific imports and trade practices that may result in tariffs and/or more restrictive trade duties and restrictions on components for our energy storage solutions that we import into the U.S. from overseas. For example, there is an active anti-dumping/countervailing ("AD/CV") proceeding before the U.S. International Trade Commission and U.S. Department of Commerce (the "DOC") regarding Chinese graphite active anode material ("AAM") imports and downstream imports that utilize graphite AAM, which includes imports utilized in our energy storage systems. On May 20, 2025, there was a preliminary countervailing ("CV") determination by the DOC that assigned a CV duty rate of 11.58%. On July 18, 2025, there was a preliminary antidumping ("AD") determination by the DOC that assigned a "separate" AD tariff of 93.5% to certain entities and an adverse AD tariff of 102.72% to entities that are de facto controlled by the government of China. The AD/CV tariff rate and scope of imports subject to the tariffs may change at the final determination by DOC, which is expected on or by December 5, 2025. We are taking actions to address risks associated with these preliminary increased duties, including by building in such additional costs into our contracting process and exploring alternative sourcing strategies. We are currently assessing the ultimate impact these AD/CV tariffs could have on our suppliers, our business, our suppliers' pricing decisions, and are waiting for the final determination from the DOC to be issued later this calendar year. Due to the uncertainty relating to the final outcome of the various ongoing tariff-related investigations, including the AD/CV proceeding described above, we cannot predict the ultimate impact the outcome of ongoing tariff investigations and any resulting tariffs or other trade actions could have to our business, financial condition, and results of operations.
See Part II, Item 1A. "Risk Factors" in this Report for further discussion on risks related to trade policy and changes in the trade environment.
Competition
The energy storage sector is highly competitive and continuously evolving. Our energy storage products, solutions, services, and digital applications are designed to meet the unique demands of the clean energy industry. The intricacy involved in the design and integration of these offerings underscores their technical complexity. Nevertheless, new companies enter the market continuously and offer products and services that compete with ours. We remain committed to pioneering novel use cases and exploring untapped market segments, many of which present lower levels of competition. We believe that competitive factors in the energy storage market include, but are not limited to:
•safety, reliability, and quality;
•ability to obtain financing;
•integration approach (including if competitor has vertical integration);
•cost of ownership;
•price of energy storage solutions, services, and digital application offerings;
•ability to issue performance guarantees, credit support, and product warranties;
•density and duration of products and solutions;
•shortened delivery, installation, and commissioning time;
•stability in supply chain;
•performance of energy storage products and solutions, services and digital applications;
•historical customer track record (as the market and industry continues to grow);
•experience in the battery energy storage system market (of the respective competitor and the leadership team);
•technological expertise and innovation;
•comprehensive solutions and offerings from a single provider;
•brand recognition;
•ability to take advantage of certain government initiatives and tax credits, including those related to the IRA and OBBBA;
•the impact of legislation, regulations, and policies;
•size of projects companies are competing on;
•ease of integration; and
•seamless hardware and software-enabled service offerings.
The competitive landscape for battery energy storage varies across different geographies, countries, grid services, and customer segments. As the global demand for energy storage products and solutions continues to rise, so does the influx of new and potential entrants into the energy storage sector. Our key competitors currently include, but are not limited to, Tesla, Inc., Wartsila, Sungrow, and Contemporary Amperex Technology Co., Limited. However, we believe we distinguish ourselves from competitors by our adeptness in identifying and addressing customer needs with tailor-made products, services, and use cases. We believe we maintain a competitive edge through our performance and value creation, evidenced by attributes such as low total cost of ownership, long-term reliability, diverse service options, and streamlined sales and delivery processes.
Supply Chain and Manufacturing
Many components and parts of our integrated energy storage solutions are sourced from suppliers and stakeholders from all over the world and are reliant on various raw materials including steel, aluminum, copper, nickel, iron phosphate, graphite, manganese, lithium carbonate, lithium hydroxide, and cobalt. Although we do not rely on any single supplier for the majority of our key components, certain components are still sourced from a limited number of stakeholders. Due to the
specialized and unique nature of the products being purchased, the opportunity cost of changing suppliers is high, and substitution is often time-consuming, and as a result, Fluence has accepted and may in the future also accept terms that are less advantageous, including on pricing.Volatility in our supply chain has in the past impacted and may in the future impact demand from customers and in turn, our order intake and cause corresponding volatility in our results of operations. We have taken steps to diversify our supply chain and continue to explore opportunities to diversify our supply base to mitigate the ever changing regulatory, environmental, social, and geographic conditions as well as the impact from trade policy, including tariffs. As discussed above, we face exposure from the imposition of the tariffs enacted by the Trump administration, as the Company current imports certain components, including battery cells from China, into the United States for customers and projects in the United States.The Company is continuing to ramp up use of domestic manufacturing facilities in Arizona, Texas, Tennessee, and Utah, as well as our domestic inverter supplier in South Carolina. Our product development, manufacturing, and testing protocols are complex and require significant technological and production process expertise. Any manufacturing delay or disruption from our contract manufacturers or any of our suppliers may cause a delay or disruption in our ability to meet commitments to our customers and has and may in the future impact our business and results of operations.
However, while our U.S. centric regionalization strategy is progressing, a large portion of our current suppliers are situated outside of the United States and there is currently uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, and government regulations. Changes to tariffs and trade policy have impacted our supply chain in the past and may impact our supply chain in the future as well as our supply chain strategies, both domestically and internationally, which has had and may in the future have an adverse impact on our results of operations and business. For more information about the potential risks relating to our supply chain and exposure to international pressures, see Part I, Item 1A. "Risk Factors" in our 2024 Annual Report and Part II, Item 1A. "Risk Factors" in this Report for further discussion on risks related to changes in the trade environment.
Permits and Approvals
Each of our installations or customer installations must be designed, constructed, and operated in compliance with applicable international, federal, state, and local laws, regulations, codes, standards, and guidelines. To install and operate energy storage products and solutions on our platform, we, our customers, or our partners, as may be applicable, are required to obtain and maintain applicable permits and approvals from the relevant governmental or regulatory authorities having jurisdiction to install energy storage products and solutions and to interconnect the products with the local electrical utility. We often cannot predict whether or when all permits required for a given customer's project will be granted or whether the conditions associated with the permits will be achievable. Furthermore, unforeseen delays in the review and permitting process has and could in the future delay the timing of the delivery and/or installation of our energy storage products thereby adversely affecting our revenue and operating results. See Part I, Item 1A. "Risk Factors" in our 2024 Annual Report for further discussion on risks related to permits and approvals.
Legal Proceedings and Legal Contingencies
The results of any current or future litigation, government investigations, or other regulatory or legal proceedings to which we are a party cannot be predicted with certainty, and regardless of the outcome, we may incur significant costs and experience a diversion of management resources as a result of claims, litigation, government investigations, and other regulatory or legal proceedings.
For a description of our material pending legal contingencies, please see "Note 14 - Commitments and Contingencies", to the unaudited condensed consolidated financial statements included elsewhere in this Report.
Key Components of Our Results of Operations
The following discussion describes certain line items in our condensed consolidated statements of operations.
Total Revenue
We generate revenue from battery-based energy storage solutions, service agreements with customers to provide operational services related to battery-based energy storage solutions, and from digital application contracts. Fluence enters into contracts with utility companies, developers, and commercial and industrial customers.
We derive the majority of our revenue from selling battery-based energy storage solutions. Generally, we must design the project, as each energy storage solution is customized depending on a customer's energy needs, procure the major equipment, obtain manufacturing slots from our contract manufacturers, coordinate the logistics, and assemble the solution prior to delivery and installation at our customer project sites. The Company recognizes revenue over time for our energy storage solutions as we transfer control of our product to the customer.
Our revenue from selling battery-based energy storage solutions is affected by volume fulfilled, which is dependent on customer schedules and demand, changes in price, which is primarily dependent on the cost of lithium-ion energy storage hardware, and mix of products and solutions purchased by our customers.
Our revenue growth is directly tied to the continued adoption of energy storage solutions by our customers and our ability to increase our share of demand in the geographic regions where we currently compete and plan to compete in the future, which is driven by the demand for our products, geographic mix of our customers, strength of competitors' product offerings, and availability of government incentives to the end-users of our products as well as our ability to continue to develop and commercialize new and innovative solutions that address the changing technology and performance requirements of our customers and that meet applicable regulatory requirements.
Cost of Goods and Services
Cost of goods and services consists primarily of product costs, including purchased materials and supplies, as well as costs related to shipping, customer support, product warranty, and personnel. Personnel costs in cost of goods and services includes both direct labor costs as well as costs attributable to any individuals whose activities relate to the transformation of raw materials or component parts into finished goods or the transportation of materials to the customer. Cost of goods and services are recognized when services are performed or control of goods are transferred to the customers. Standard inventory materials that could be used interchangeably on other projects are included in cost of goods sold when they are integrated into, or restricted to, the production of a customer's project.
Our product costs are affected by the underlying cost of raw materials, such as lithium-ion, and components to our solutions including inverters. Our product costs are also affected by technological innovation, economies of scale resulting in lower supply costs, and improvements in production processes and automation. We do not currently hedge against changes in the price of raw materials as we do not directly purchase raw materials; instead, we buy the components of energy storage products from our suppliers and we rely on our suppliers to hedge the underlying raw materials. 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.
Gross Profit and Gross Profit Margin
Gross profit and gross profit margin may vary from quarter to quarter and are primarily affected by our volume fulfilled, product prices, product costs and project performance.
Operating Expenses
Operating expenses consist of research and development, sales and marketing and general and administrative expenses as well as depreciation and amortization. Personnel-related expenses are the most significant component of our operating expenses and include salaries, stock-based compensation, and employee benefits.
Research and Development Expenses
Research and development expenses consist primarily 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 and costs of materials and services procured for research and development projects. 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. R&D expenses also support three product testing labs located across the globe: a system-level testing facility in Pennsylvania that is used for quality assurance and the rapid iteration, testing, and launching of new Fluence energy storage technology and products, a testing facility located in Erlangen, Germany, and a deployment center located in Long Beach, California. We have established an additional Hardware in the Loop testing facility, which is co-located with our technical team in Bangalore, India. We expect R&D expenses to generally increase in future periods to support our growth and as we continue to invest in R&D activities that are necessary to achieve our technology and product roadmap goals. These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel-related expenses, including salaries, stock-based compensation, employee benefits and factoring discounts on receivables sold. We have and intend to continue to expand our sales presence and marketing efforts to additional countries in the future.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related expenses, including salaries, stock-based compensation, and employee benefits, for our executives, finance, human resources, information technology, engineering and legal organizations that do not relate directly to the sales or research and development functions, as well as travel expenses, facilities costs, bad debt expense, and fees for professional services. Professional services consist of audit, legal, tax, insurance, information technology, and other costs.
Depreciation and Amortization
Depreciation consists of costs associated with property, plant, and equipment ("PP&E") and amortization of intangibles consisting of patents, licenses, developed technology, and capitalized software over their expected period of use. 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 Expense (Income), net
Interest expense (income), net consists primarily of interest income net of interest expense. Interest income consists of interest earned on cash deposits and interest on customer notes receivables. Interest expense consists primarily of interest on borrowings against notes receivable pledged as collateral interest from 2030 Convertible Senior Notes, unused line fees and commitment fees related to credit facilities, and amortization of debt issuance costs.
Other (Income) Expense, Net
Other (income) expense, net primarily consists of expense or income from foreign currency exchange gains and losses on monetary assets and liabilities, factoring income from sale of receivables. and income or expense due to estimated payments to be made to related parties under the Tax Receivable Agreement, dated October 27, 2021, by and among Fluence Energy, Inc., Fluence Energy, LLC, Siemens Industry, Inc. and AES Grid Stability, LLC (the "Tax Receivable Agreement").
Income Tax Expense
We are subject to U.S. federal and state income taxes with respect to our allocable share of any taxable income or loss of Fluence Energy, LLC and are taxed at the prevailing corporate tax rates. We are also subject to foreign income taxes with respect to our foreign subsidiaries and our expectations are that valuation allowances will be recorded in certain tax jurisdictions. In addition to tax expenses, we also will incur expenses related to our operations, as well as payments under the Tax Receivable Agreement, which we expect could be significant over time. We will receive a portion of any distributions made by Fluence Energy, LLC. Any cash received from such distributions from our subsidiaries will be first used by us to satisfy any tax liability and then to make payments required under the Tax Receivable Agreement.
Net Income (Loss)
Net income (loss) may vary from quarter to quarter and is primarily affected by our gross profit and operating expenses as defined above.
Key Operating Metrics
The following tables present our key operating metrics as of June 30, 2025 and September 30, 2024. The tables below present the metrics in either Gigawatts (GW) or Gigawatt hours (GWh). Our key operating metrics focus on project milestones to measure our performance and designate each project as either "deployed", "assets under management", "contracted backlog", or "pipeline".
| June 30, 2025 | September 30, 2024 |
Change
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Change %
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Energy Storage Products and Solutions
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| Deployed (GW) | 6.3 | 5.0 | 1.3 | 26% | ||||||||||||||||||||||
| Deployed (GWh) | 16.7 | 12.8 | 3.9 | 30% | ||||||||||||||||||||||
| Contracted Backlog (GW) | 8.2 | 7.5 | 0.7 | 9% | ||||||||||||||||||||||
| Pipeline (GW) | 35.7 | 25.8 | 9.9 | 38% | ||||||||||||||||||||||
| Pipeline (GWh) | 114.3 | 80.5 | 33.8 | 42% | ||||||||||||||||||||||
| (amounts in GW) | June 30, 2025 | September 30, 2024 | Change | Change % | ||||||||||||||||||||||
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Services
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Assets under Management
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5.5 | 4.3 | 1.2 | 28% | ||||||||||||||||||||||
| Contracted Backlog | 4.9 | 4.1 | 0.8 | 20% | ||||||||||||||||||||||
| Pipeline | 27.9 | 25.6 | 2.3 | 9% | ||||||||||||||||||||||
| (amounts in GW) | June 30, 2025 | September 30, 2024 | Change | Change % | ||||||||||||||||||||||
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Digital Contracts
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Asset under Management
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21.6 | 18.3 | 3.3 | 18% | ||||||||||||||||||||||
| Contracted Backlog | 12.6 | 10.6 | 2.0 | 19% | ||||||||||||||||||||||
| Pipeline | 60.1 | 64.5 | (4.4) | (7%) | ||||||||||||||||||||||
The following table presents our order intake for the three and nine months ended June 30, 2025 and 2024. The table is presented in Gigawatts (GW):
| (amounts in GW) | Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | Change % | 2025 | 2024 | Change | Change % | |||||||||||||||||||||||||||||||||||||||||||
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Energy Storage Products and Solutions
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| Contracted | 0.7 | 1.6 | (0.9) | (56)% | 1.9 | 3.7 | (1.8) | (49)% | ||||||||||||||||||||||||||||||||||||||||||
|
Services
|
||||||||||||||||||||||||||||||||||||||||||||||||||
| Contracted | 1.4 | 0.4 | 1.0 | 250% | 2.0 | 2.0 | - | -% | ||||||||||||||||||||||||||||||||||||||||||
|
Digital
|
||||||||||||||||||||||||||||||||||||||||||||||||||
| Contracted | 0.9 | 0.6 | 0.3 | 50% | 5.4 | 4.0 | 1.4 | 35% | ||||||||||||||||||||||||||||||||||||||||||
Deployed
Deployed represents cumulative energy storage products and solutions that have achieved substantial completion and are not decommissioned. 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. In some cases, services may be commenced for energy storage solutions prior to achievement of substantial completion. This is not limited to energy storage solutions delivered by Fluence. Assets under management for digital software represents contracts signed and active (post go live).
Assets under management serves as an indicator of expected revenue from our customers and assists management in forecasting our expected financial performance.
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. For service contracts, contracted backlog includes signed service agreements associated with our storage product projects that have not been completed and the associated service has not started. For digital applications contracts, contracted backlog includes signed agreements where the associated subscription has not started.
We cannot guarantee that our contracted backlog will result in actual revenue in the originally anticipated period or at all. Contracted backlog may not generate margins equal to our historical operating results. Our customers may experience project delays or cancel orders as a result of external market factors and economic or other factors beyond our control. If our contracted backlog fails to result in revenue as anticipated or in a timely manner, we could experience a reduction in revenue, profitability, and liquidity.
Contracted/Order Intake
Contracted, which we use interchangeably with "order intake", represents new energy storage product and solutions contracts, new service contracts and new digital contracts signed during each period presented. We define "Contracted" as a firm and binding purchase order, letter of award, change order, or other signed contract (in each case an "Order") from the customer that is received and accepted by Fluence. Our order intake is intended to convey the dollar amount and gigawatts (operating measure) contracted in the period presented. We believe that order intake provides useful information to investors and management because the order intake provides visibility into future revenue and enables evaluation of the effectiveness of the Company's sales activity and the attractiveness of its offerings in the market.
Pipeline
Pipeline represents our uncontracted, potential revenue from energy storage products and solutions, service, and digital software contracts, which have a reasonable likelihood of contract execution within 24 months. Pipeline is an internal management metric that we construct from market information reported by our global sales force. Pipeline is monitored by management to understand the anticipated growth of our Company and our estimated future revenue related to customer contracts for our battery-based energy storage products and solutions, services and digital software.
We cannot guarantee that our pipeline will result in actual revenue in the originally anticipated period or at all. Pipeline may not generate margins equal to our historical operating results. 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 pipeline fails to result in revenue as anticipated or in a timely manner, we could experience a reduction in revenue, profitability, and liquidity.
Non-GAAP Financial Measures
This section contains references to certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted Gross Profit, Adjusted Gross Profit Margin, and Free Cash Flow.
Adjusted EBITDA is calculated from the consolidated statements of operations using net income (loss) adjusted for (i) interest income, net, (ii) income taxes, (iii) depreciation and amortization, (iv) stock-based compensation, and (v) other non-recurring income or expenses. Adjusted EBITDA also includes amounts impacting net income related to estimated payments due to related parties pursuant to the Tax Receivable Agreement.
Adjusted Gross Profit is calculated using gross profit, adjusted to exclude (i) stock-based compensation expenses, (ii) depreciation and amortization, and (iii) other non-recurring income or expenses. Adjusted Gross Profit Margin is calculated using Adjusted Gross Profit 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. We expect our Free Cash Flow to fluctuate in future periods as we invest in our business to support our plans for growth. 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 U.S. generally accepted accounting principles ("U.S. GAAP")
financial measures, such as net cash provided by operating activities; and (iii) this metric does not reflect our future contractual commitments.
These non-GAAP measures are intended as supplemental measures of performance and/or liquidity that are neither required by, nor presented in accordance with, GAAP. We believe that such non-GAAP measures, when read in conjunction with our operating results presented under GAAP, can be used to better assess our performance from period to period and relative to performance of other companies in our industry, without regard to financing methods, historical cost basis or capital structure.
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 and their reconciliation to GAAP financial measures are shown below.
The following tables present our non-GAAP measures for the periods indicated.
| ($ in thousands) | Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Net income (loss) | $ | 6,894 | $ | 1,075 | $ | (92,051) | $ | (37,357) | ||||||||||||||||||
| Add: | ||||||||||||||||||||||||||
|
Interest expense (income), net
|
1,083 | (1,300) | 733 | (4,554) | ||||||||||||||||||||||
| Income tax expense | 4,577 | 4,229 | 869 | 1,328 | ||||||||||||||||||||||
| Depreciation and amortization | 8,255 | 4,423 | 18,929 | 10,395 | ||||||||||||||||||||||
|
Stock-based compensation(a)
|
6,400 | 6,140 | 15,542 | 18,405 | ||||||||||||||||||||||
|
Other non-recurring expenses(b)
|
146 | 1,033 | 3,246 | 3,017 | ||||||||||||||||||||||
|
Adjusted EBITDA
|
$ | 27,355 | $ | 15,600 | $ | (52,732) | $ | (8,766) | ||||||||||||||||||
(a) Includes incentive awards that will be settled in shares and incentive awards that will be settled in cash.
(b) Amount for the three months ended June 30, 2025 includes approximately $1.4 million in severance costs related to restructuring, and $1.2 million in income as a result of a reduction of our Tax Receivable Agreement liability. Amount for the three months ended June 30, 2024, includes approximately $1.0 million in severance costs related to restructuring. Amount for the nine months ended June 30, 2025 includes $4.5 million in severance costs related to restructuring and $1.2 million in income as a result of a reduction of our Tax Receivable Agreement liability. Amount for the nine months ended June 30, 2024 includes approximately $1.0 million in severance costs related to restructuring, $1.2 million of costs related to the termination of the Revolving Credit Agreement (as defined below) and $0.8 million in costs related to the December 2023 underwritten public offering.
| ($ in thousands) | Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Total revenue | $ | 602,533 | $ | 483,317 | $ | 1,220,939 | $ | 1,470,414 | ||||||||||||||||||
| Cost of goods and services | 513,434 | 400,272 | 1,068,057 | 1,286,803 | ||||||||||||||||||||||
| Gross profit | 89,099 | 83,045 | 152,882 | 183,611 | ||||||||||||||||||||||
|
Gross profit margin %
|
14.8 | % | 17.2 | % | 12.5 | % | 12.5 | % | ||||||||||||||||||
| Add: | ||||||||||||||||||||||||||
|
Stock-based compensation(a)
|
636 | 824 | 2,154 | 3,204 | ||||||||||||||||||||||
| Depreciation and amortization | 2,734 | 770 | 5,388 | 1,776 | ||||||||||||||||||||||
|
Other non-recurring expenses(b)
|
307 | - | 606 | - | ||||||||||||||||||||||
| Adjusted Gross Profit | $ | 92,776 | $ | 84,639 | $ | 161,030 | $ | 188,591 | ||||||||||||||||||
| Adjusted Gross Profit Margin % | 15.4 | % | 17.5% | 13.2 | % | 12.8% | ||||||||||||||||||||
(a) Includes incentive awards that will be settled in shares and incentive awards that will be settled in cash.
(b) Amount relates to severance costs related to restructuring.
| ($ in thousands) | Nine Months Ended June 30, | |||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
|
Net cash (used in) provided by operating activities
|
$ | (411,281) | $ | 69,156 | ||||||||||||||||
| Less: Purchase of property and equipment | (10,024) | (4,838) | ||||||||||||||||||
|
Free Cash Flow
|
$ | (421,305) | $ | 64,318 | ||||||||||||||||
Results of Operations
Comparison of the three and nine months ended June 30, 2025 and 2024
The following table sets forth our operating results for the periods indicated.
| ($ in thousands) | Three Months Ended June 30, | Change | Change % | Nine Months Ended June 30, | Change | Change % | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 602,533 | $ | 483,317 | $ | 119,216 | 25 | % | $ | 1,220,939 | $ | 1,470,414 | $ | (249,475) | (17) | % | ||||||||||||||||||||||||||||||||||
| Costs of goods and services | 513,434 | 400,272 | 113,162 | 28 | % | 1,068,057 | 1,286,803 | (218,746) | (17) | % | ||||||||||||||||||||||||||||||||||||||||
| Gross profit | 89,099 | 83,045 | 6,054 | 7 | % | 152,882 | $ | 183,611 | (30,729) | (17) | % | |||||||||||||||||||||||||||||||||||||||
| Gross profit margin % | 14.8% | 17.2% | 12.5% | 12.5% | ||||||||||||||||||||||||||||||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | 26,011 | 14,976 | 11,035 | 74 | % | 65,325 | 47,843 | 17,482 | 37 | % | ||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 19,822 | 14,773 | 5,049 | 34 | % | 59,213 | 41,271 | 17,942 | 43 | % | ||||||||||||||||||||||||||||||||||||||||
| General and administrative | 35,603 | 45,106 | (9,503) | (21) | % | 113,722 | 126,901 | (13,179) | (10) | % | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 3,628 | 3,624 | 4 | - | % | 9,386 | 8,589 | 797 | 9 | % | ||||||||||||||||||||||||||||||||||||||||
|
Interest expense (income), net
|
1,083 | (1,300) | 2,383 | NM | 733 | (4,554) | 5,287 | NM | ||||||||||||||||||||||||||||||||||||||||||
|
Other (income) expense, net
|
(8,519) | 562 | (9,081) | NM | (4,315) | (410) | (3,905) | 952 | % | |||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | $ | 11,471 | $ | 5,304 | $ | 6,167 | 116 | % | $ | (91,182) | $ | (36,029) | (55,153) | 153 | % | |||||||||||||||||||||||||||||||||||
| Income tax expense | 4,577 | 4,229 | 348 | 8 | % | 869 | 1,328 | (459) | (35) | % | ||||||||||||||||||||||||||||||||||||||||
|
Net income (loss)
|
$ | 6,894 | $ | 1,075 | $ | 5,819 | 541 | % | $ | (92,051) | $ | (37,357) | (54,694) | 146 | % | |||||||||||||||||||||||||||||||||||
NM - Not meaningful
Total Revenue
Total revenue increased by $119.2 million, or 25%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in total revenue for the three months ended June 30, 2025 was mainly attributable to an increase in revenue from our battery-based energy storage products and solutions which was primarily driven by increased volumes of Gridstack solutions projects fulfilled due to timing based on customer schedules and due to the pronounced backend nature of expected revenue for the fiscal year 2025 compared to the revenue distribution seen in
fiscal year 2024.
Total revenue decreased by $249.5 million, or 17%, for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The decrease in total revenue for the nine months ended June 30, 2025 was mainly attributable to a decrease in revenue from our battery-based energy storage products and solutions which was primarily driven by decreased volumes of Gridstack solutions projects fulfilled due to timing based upon customer schedules and due to the pronounced backend nature of expected revenue for the fiscal year 2025 compared to the revenue distribution seen in
fiscal year 2024.
Costs of Goods and Services
Cost of goods and services increased by $113.2 million, or 28%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in cost of goods and services for the three months ended June 30, 2025 was mainly attributable to the increased volumes of Gridstack solutions projects fulfilled due to timing based on customer schedules as discussed under"Revenue" above.
Cost of goods and services decreased by $218.7 million, or 17%, for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The decrease in cost of goods and services for the nine months ended June 30, 2025 was mainly attributable to the decreased volumes of Gridstack solutions projects fulfilled due to timing based upon customer schedules as discussed under "Revenue" above.
Gross Profit and Gross Profit Margin
Gross profit increased by $6.1 million, or 7%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in gross profit for the three months ended June 30, 2025 was primarily due to increased volumes of Gridstack solutions projects fulfilled. Gross profit margin decreased slightly for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to a net decrease in gross margins on our portfolio of Gridstack solutions projected delivered during the period due to performance.
Gross profit decreased by $30.7 million, or 17%, for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The decrease in gross profit for the nine months ended June 30, 2025 was primarily due to decreased volumes of Gridstack solutions projects fulfilled due to timing based upon customer schedules. Gross profit margin remained relatively consistent from the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024.
Research and Development Expenses
Research and development expenses increased by $11.0 million, or 74%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in research and development expenses for the three months ended June 30, 2025 was primarily attributable to (i) a $8.9 million increase in expenditures for materials and supplies and consulting services related to our U.S. battery module manufacturing and Smartstack and (ii) a $1.9 million increase in salaries and personnel-related expenses, including stock-based compensation, due to an increase in headcount.
Research and development expenses increased by $17.5 million, or 37%, for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The increase in research and development expenses for the nine months ended June 30, 2025 was primarily attributable to (i) a $13.3 million increase in expenditures for materials and supplies and consulting services related to our U.S. battery module manufacturing and Smartstack and (ii) a $3.9 million increase in salaries and personnel-related expenses, including stock-based compensation, due to an increase in headcount.
Sales and Marketing Expenses
Sales and marketing expenses increased by $5.0 million, or 34%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in sales and marketing expenses for the three months ended June 30, 2025 was primarily attributable to (i) a $2.4 million increase in salaries and personnel-related expenses, including stock-based compensation, due to an increase in headcount and (ii) a $1.2 million increase in information technology cost allocations.
Sales and marketing expenses increased by $17.9 million, or 43%, for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The increase in sales and marketing expenses for the nine months ended June 30, 2025 was primarily attributable to (i) a $13.1 million increase in salaries and personnel-related expenses, including stock-based compensation, due to an increase in headcount and (ii) a $2.5 million increase in information technology cost allocations.
General and Administrative Expenses
General and administrative expenses decreased by $9.5 million, or 21%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The decrease in general and administrative expenses was primarily attributable to a $11.0 million decrease in salaries and personnel-related expenses, including stock-based compensation, due to a decrease in headcount.
General and administrative expenses decreased by $13.2 million, or 10%, for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The decrease in general and administrative expenses was primarily attributable to a $15.5 million decrease in salaries and personnel-related expenses, including stock-based compensation, due to a decrease in headcount
Depreciation and Amortization
Depreciation and amortization were relatively flat for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.
Depreciation and amortization increased by $0.8 million, or 9% for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024, primarily attributable to an increases in amortization of capitalized software.
Interest Expense (Income), Net
Interest expense (income), net increased by $2.4 million in the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily attributable to the interest expense of $2.7 million recognized for the 2030 Convertible Senior Notes (as defined below).
Interest expense (income), net increased by $5.3 million in the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024, primarily attributable to the interest expense of $5.9 million recognized for the 2030 Convertible Senior Notes (as defined below).
Other (Income) Expense, Net
Other (income) expense, net increased by $9.1 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in other (income) expense, net for the three months ended June 30, 2025 was attributable to a $9.1 million net increase in favorable foreign currency exchange gains on monetary assets and liabilities period over period.
Other income, net increased by $3.9 million, or 952% for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The increase in other income, net for the nine months ended June 30, 2025 was primarily attributable to a $3.8 million net increase in favorable foreign currency exchange gains on monetary assets and liabilities period over period.
Income Tax Expense
Income tax expense increased by $0.3 million, or 8%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in income tax expense for the three months ended June 30, 2025 was primarily attributable to an increase in pre-tax income in foreign tax jurisdictions without historical losses.
Income tax expense decreased by $0.5 million, or 35%, for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The decrease in income tax expense for the nine months ended June 30, 2025 was primarily attributable to an increase in global pre-tax losses.
Net Income (Loss)
Net income increased by $5.8 million, or 541%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in net income for the three months ended June 30, 2025 was primarily attributable to (i) an increase in "Gross profit," (ii) a decrease in "General and administrative expenses," and (iii) an increase in "Other (income) expense, net," partially offset by an increase in "Research and development expenses," each as described above.
Net loss increased by $54.7 million, or 146%, for the nine months ended June 30, 2025, compared to the nine months ended June 30, 2024. The increase in net loss for the nine months ended June 30, 2025 was primarily attributable to (i) a decrease in "Gross profit," (ii) an increase in "Sales and marketing expenses," and (iii) an increase in "Research and development expenses," each as described above.
Liquidity and Capital Resources
Since inception and through June 30, 2025, our principal sources of liquidity have been the proceeds from our initial public offering ("IPO"), our cash and cash equivalents from operations, short-term borrowings, borrowings available under our debt agreements, proceeds from the issuance of the 2030 Convertible Senior Notes (as defined below), supply chain financing, capital contributions from AES Grid Stability, LLC ("AES Grid Stability") and Siemens Industry, LLC ("Siemens Industry") and proceeds from the investment by QIA Florence Holdings, LLC, an affiliate of Qatar Holding LLC in 2021, proceeds from short term investments, borrowings against note receivables, and proceeds from sale of accounts receivable under the MRPA (as defined below).
We believe our existing cash and cash equivalents, which includes proceeds from our IPO, cash flows from operations, sales of accounts receivable under MRPA, and proceeds from the issuance of the 2030 Convertible Senior Notes, our supply chain financing arrangements, and availability under our 2024 Revolver (as defined below) will be sufficient to meet our expense and capital requirements for at least the next 12 months following the filing of this Report.
Our capital requirements, and ability to generate cash flow, have been and may in the future vary materially from those planned and will depend on many factors, including our rate of revenue growth, the timing and extent of our growth initiatives, our introduction of new products, services, and digital application offerings and related costs and expenses, and overall regulatory and macroeconomic conditions, including, among others, factors relating to inflation, interest rate environment, impacts of tariffs and trade restrictions, labor shortages, supply chain disruptions, changing consumer behavior, increased competition, and pandemics like COVID-19. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and cash requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilutions to our stockholders. The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations, and financial condition.
2030 Convertible Senior Notes
In December 2024, the Company issued $400.0 million aggregate principal amount of 2.25% convertible senior notes due 2030 (the "2030 Convertible Senior Notes"). The 2030 Convertible Senior Notes were issued pursuant to, and are governed by, an indenture, dated as of December 12, 2024, between the Company and UMB Bank, National Association, as trustee (the "Indenture"). The net proceeds from the issuance of the 2030 Convertible Senior Notes were $389.4 million, net of $10.6 million of debt issuance costs.
In connection with the 2030 Convertible Senior Notes, the Company purchased capped calls with certain financial institutions pursuant to capped call confirmations (collectively the "Capped Calls"). The premiums paid for the purchases of the Called Calls were $29.0 million. The Capped Calls have an initial strike price of approximately $21.35 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2030 Convertible Senior Notes. The Capped Calls have an initial cap price of $28.74 per share, subject to certain adjustments substantially similar to those applicable to the corresponding 2030 Convertible Senior Notes.
For further discussion of the 2030 Convertible Senior Notes and the Capped Calls, refer to "Note 12- Convertible Senior Notes, Net" to our condensed consolidated financial statements included elsewhere in this Report.
Supply Chain Financing
We provide certain of our suppliers with access to two different supply chain financing programs through two different third-party financing institutions (each a "SCF Bank"). These supply chain financing ("SCF") programs allows us to seek extended payment terms with our suppliers and allows our suppliers to monetize their receivables prior to the payment due date, subject to a discount. Once a supplier elects to participate in either program and reaches an agreement with the respective SCF Bank, the supplier elects which individual invoices to sell to the respective SCF Bank. We then pay the respective SCF Bank on the applicable due date. We have no economic interest in a supplier's decision to sell a receivable to the SCF Banks. The agreements between our suppliers and the SCF Banks are solely at their discretion and are negotiated directly between them. Under our original supply chain financing arrangement (the "Original SCF Facility"), our suppliers' ability to continue using such agreements is primarily dependent upon the strength of our financial condition and guarantees issued by The AES Corporation and Siemens Corporation, a subsidiary of Siemens AG, pursuant to the terms of the Credit Support and Reimbursement Agreement (as defined below). As of June 30, 2025, The AES Corporation and Siemens Corporation issued guarantees of $50.0 million each, for a total of $100.0 million, to the original SCF Bank on our behalf. Under the new $150.0 million supply chain financing arrangement entered into on August 8, 2025 (the "New SCF Facility"), we are required to maintain a liquidity ratio of 2:1 as of the last day of each calendar month. Liquidity ratio is defined as the ratio of (i) liquidity to (ii) the sum of (x) the aggregate outstanding notional amount of all receivables, bills of exchange or similar negotiable instruments purchased by the original SCF Bank under the Original SCF Facility and (y) the aggregate outstanding notional amount of payables outstanding under this New SCF Facility. Liquidity under the New SCF Facility includes the Company's cash and cash equivalents and aggregate availability under the Company's committed credit facilities, including the 2024 Revolver. Under the New SCF Facility, the Company does not provide secured legal assets or other forms of guarantees under this arrangement, nor does any of the Company's affiliates.
Shelf Registration Statement
On August 11, 2023, we filed an automatic shelf registration statement on Form S-3 with the SEC (the "Form S-3") which became effective upon filing and will remain effective through August 11, 2026, subject to our continued eligibility to use such form. The Form S-3 allows us to offer and sell from time-to-time Class A common stock, preferred stock, depository shares, debt securities, warrants, purchase contracts or units comprised of any combination of these securities for our own account and allows certain selling stockholders to offer and sell 135,666,665 shares of Class A common stock in one or more offerings.
The Form S-3 is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions, and our future capital needs. The terms of any future offering under the Form S-3 will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
Revolving Credit Facility
We entered into a credit agreement for a revolving credit facility (the "Revolver") on 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"). The aggregate amount of commitments was $200.0 million. The Revolver was originally scheduled to mature on November 1, 2025. The Revolving Credit Agreement was terminated effective November 22, 2023, in conjunction with the entry into the ABL Credit Agreement (as further described below), and at such time, the Company prepaid all amounts outstanding under the Revolver and terminated all commitments thereunder. No penalties were required to be paid as a result of the termination.
For further discussion of the Revolver, refer to "Note 11 - Debt" to our unaudited condensed consolidated financial statements included elsewhere in this Report.
Asset-Based Lending Facility
On November 22, 2023, the Company entered into an asset-based syndicated credit agreement (the "ABL Credit Agreement") by and among Fluence Energy, LLC, as parent borrower, Fluence Energy, Inc., as parent, the other borrowers party thereto, the other guarantors party thereto, the lenders party thereto (the "ABL Lenders"), and Barclays Bank PLC, as administrative agent, which was amended from time to time, which provided for revolving commitments in an aggregate principal amount of $400.0 million (the "ABL Facility"). The ABL Facility was secured by (i) a first priority pledge of Fluence Energy, Inc.'s equity interests in Fluence Energy, LLC and (ii) first priority security interests in, and mortgages on, substantially all tangible and intangible personal property and material fee-owned real property of Fluence Energy, Inc., Fluence Energy, LLC, and Fluence Energy Global Production Operation, LLC, in each case, subject to customary exceptions and limitations. Borrowings under the ABL Facility were scheduled to mature, and lending commitments thereunder would terminate, on November 22,2027, which remains the maturity date of borrowings under the 2024 Revolver. As of the time of our entry into Amendment No. 3 to the ABL Credit Agreement (as discussed below), there were no outstanding borrowings under the ABL Facility or letters of credit outstanding.
For further discussion of the ABL Credit Agreement, refer to "Note 11 - Debt" to our consolidated financial statements included elsewhere in this Report.
2024 Revolver
On August 6, 2024, Fluence Energy, Inc. entered into Amendment Number Three ("Amendment No. 3") to that certain ABL Credit Agreement by and among Fluence Energy, LLC, as parent borrower, the Company, as parent, the other borrowers party thereto, the other guarantors party thereto, the lenders party thereto, and Citibank, N.A., as administrative agent (as successor to Barclays Bank PLC) (such agreement, as so amended, the "2024 Credit Agreement") in order to (i) convert the existing ABL Facility to a senior secured cash flow revolving credit facility in an initial aggregate principal amount of up to $500.0 million (the "2024 Revolver"), (ii) replace Barclays Bank PLC as administrative agent under the 2024 Credit Agreement with Citibank, N.A., and (iii) make certain other modifications to the 2024 Credit Agreement as set forth therein. Capitalized terms used in this subsection that are not otherwise defined are defined in the 2024 Credit Agreement.
The 2024 Revolver is secured by (i) a first priority pledge of the Company's equity interests in Fluence Energy, LLC and Fluence Energy Global Production Operation, LLC, (ii) first priority security interests in substantially all tangible and intangible personal property of the Company, Fluence Energy, LLC, Fluence Energy Global Production Operation, LLC and certain of its foreign subsidiaries, in each case, subject to customary exceptions and limitations, and (iii) a pledge of the Company's equity interests in certain of its foreign subsidiaries and security interests in certain assets of such foreign subsidiaries.
The 2024 Credit Agreement sets forth that (i) loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus 2.00%, (ii) loans comprising each Term Benchmark Borrowing shall bear interest at the Term SOFR Rate or the Adjusted EURIBOR Rate, as applicable, plus 3.00%, and (iii) the loans comprising each RFR Borrowing shall bear interest at the Daily Simple RFR plus 3.00%, in each instance subject to customary benchmark replacement provisions including, but not limited to, alternative benchmark rates, customary spread adjustments with respect to borrowings in foreign currencies and benchmark replacement conforming changes. Fluence Energy, LLC is required to pay to the lenders a commitment fee on the average daily unused portion of the commitments through maturity, which shall accrue at the rate of 0.50% per annum. The 2024 Credit Agreement provides for a cash draw sublimit of $150.0 million as well as a letter of credit sublimit in the amount of $500.0 million if certain conditions are met.
The 2024 Credit Agreement contains customary covenants for this type of financing, including, but not limited to, covenants that restrict our and certain of our subsidiaries' ability to: incur indebtedness; incur liens; sell, transfer, or dispose of property and assets; make investments or acquisitions; pay dividends, make distributions or other restricted payments; and engage in affiliate transactions. The 2024 Credit Agreement limits our ability to make certain payments, including dividends and distributions on Fluence Energy, LLC's equity, the Company's equity and other restricted payments. Under the terms of the 2024 Credit Agreement, Fluence Energy, LLC and its subsidiaries are currently limited in their ability to pay cash dividends to, lend to, or make other investments in the Company, subject to certain exceptions. In addition, we are required to maintain (i) through December 31, 2025, Total Liquidity of no less than $150,000,000, (ii) from January 1, 2026 and thereafter, Total Liquidity of no less than $100,000,000 or a Consolidated Leverage Ratio as of the last day of any Measurement Period not to exceed 3.50:1.00, and (iii) certain other financial requirements at each Guarantor Coverage Test Date. Such covenants are tested on a quarterly basis and upon the occurrence of other certain restricted payments, the incurrence of indebtedness, certain dispositions, and other specified transactions. As of June 30, 2025, we were in compliance with all such covenants.
The 2024 Credit Agreement contains customary events of default for this type of financing. If an event of default occurs with respect to a borrower, the lenders will be able to, among other things, terminate the commitments immediately, cash collateralize any outstanding letters of credit, declare anyloans outstanding to be due and payable in whole or in part, and exercise other rights and remedies. The maturity date and the date of termination of lending commitments under the 2024 Credit Agreement both remain unchanged at November 22, 2027. As of June 30, 2025, there are no cash borrowings under the 2024 Revolver, and there are $157.5 million letters of credit outstanding under the 2024 Revolver, with remaining availability of $342.5 million, net of letters of credit issued.
Borrowings Against Note Receivable - Pledged as Collateral
In December 2022, we transferred $24.3 million in customer receivables to Standard Chartered Bank ("SCB") in the Philippines for proceeds of $21.1 million. The receivables all related to our largest customer in that country. The underlying receivables transferred were previously aggregated into a long term note, with interest, and a maturity date of September 30, 2024. In April 2023, we aggregated and transferred an additional $30.9 million in receivables into a second long term note with the same customer to SCB for proceeds of $27.0 million, upon substantially similar terms as the December 2022 transfer and with a maturity date of December 27, 2024. These transactions were treated as secured borrowings as we did not transfer the entire note receivables due from the customer to SCB. We continued to receive quarterly interest income from the customer, while SCB was responsible for collecting payments on the principal balances which represented the initial receivable balances from the customer. We had no other continuing involvement or exposure related to the underlying receivables. On September 16, 2024 and December 27, 2024, $24.3 million and $30.9 million of receivables, respectively, were paid in full, resulting in release of the corresponding notes and borrowings.
Sale of Receivables under Master Receivables Purchase Agreement
On February 27, 2024, Fluence Energy, LLC entered into the Master Receivables Purchase Agreement, by and among Fluence Energy, LLC and any other seller from time to time party thereto, as sellers and servicers, and Credit Agricole Corporate and Investment Bank ("CACIB"), as purchaser, of certain receivables on an uncommitted basis (the "MRPA"). The MRPA provides that the outstanding amount of all purchased receivables under the MRPA will not exceed $75.0 million, with sublimits for each account debtor and for certain kinds of receivables. The MRPA may be terminated by either party at any time by 30 days' prior written notice. Fluence Energy, LLC has granted CACIB a security interest in the purchased receivables, and proceeds thereof, as more fully described in the MRPA, in order to perfect CACIB's ownership interest in the purchased receivables and secure the payment and performance of all obligations of Fluence Energy, LLC to CACIB under the MRPA. The MRPA contains other customary representations and warranties and covenants.
When receivables are sold under the MRPA, they are sold without recourse, and our continuing involvement is limited to their servicing, for which the Company receives a fee commensurate with the service provided and therefore no servicing asset or liability related to these receivables was recognized for any period presented. The fair value of the sold receivables approximated their book value due to their short-term nature.
Credit Support and Reimbursement Agreement
We are party to an Amended and Restated Credit Support and Reimbursement Agreement, dated June 9, 2021, with The AES Corporation ("AES") and Siemens Industry (the "Credit Support and Reimbursement Agreement") whereby they may, from time to time, agree to furnish credit support to us in the form of direct issuances of credit support to our lenders or other beneficiaries or through their lenders' provision of letters of credit to backstop our own facilities or obligations. Pursuant to the Amended and Restated Credit Support and Reimbursement Agreement, if AES or Siemens Industry agree to provide a particular credit support (which they are permitted to grant or deny in their sole discretion), they are entitled to receipt of a credit support fee, reimbursement of actual costs and expenses incurred in having a credit support instrument issued and maintained, and reimbursement for all amounts paid to our lenders or other counterparties, payable upon demand. The Amended and Restated Credit Support and Reimbursement Agreement had an initial expiration date of June 9, 2025 (the "initial expiration date"), but will automatically and indefinitely continue thereafter pursuant to its terms until either AES or Siemens Industry terminates the agreement upon six months' prior notice. No notice of termination has been provided by the time of filing of this Report. Any credit support under the Credit Support and Reimbursement Agreement will remain in effect after any such termination until such credit support has been replaced by the Company.
Currently, the Company has outstanding performance guarantees provided by AES and Siemens Industry and their respective affiliates that guarantee Fluence's performance obligations under certain contracts with Fluence's customers. These performance guarantees are issued pursuant to the terms of the Credit Support and Reimbursement Agreement. Fluence paid performance guarantee fees to its affiliates in exchange for guaranteeing Fluence's performance obligations under certain contracts with Fluence's customers. The guarantee fees are included in "Costs of goods and services" on Fluence's condensed consolidated statements of operations. Guarantees are also issued by AES and Siemens Corporation, pursuant to the terms of the Credit Support and Reimbursement Agreement, in connection with a supplier chain financing program (as described in greater detail above).
Commitments, Contingencies, and Off-Balance Sheet Arrangements
As of June 30, 2025, the Company had outstanding bank guarantees, parent guarantees, letters of credit, and surety bonds issued as performance security arrangements for a large number of customer projects.In addition, we have a limited number of parent company guarantees and letters of credit issued as payment security to certain vendors. The Company also has certain battery purchase obligations and spending requirements under our master supply agreement with suppliers. We are also party to both assurance and service-type warranties for various lengths of time. Refer to "Note 14 - Commitments and Contingencies" to our unaudited condensed consolidated financial statements included elsewhere in this Report for more information regarding our contingent obligations, including off-balance sheet arrangements, and legal contingencies.
Historical Cash Flows
The following table summarizes our cash flows from operating, investing, and financing activities for the periods presented.
| Nine months ended June 30, 2025 | Change | Change % | ||||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | ||||||||||||||||||||||||
|
Net cash (used in) provided by operating activities
|
$ | (411,281) | $ | 69,156 | $ | (480,437) | 694.7 | % | ||||||||||||||||||
|
Net cash used in investing activities
|
$ | (20,047) | $ | (13,444) | $ | (6,603) | 49.1 | % | ||||||||||||||||||
|
Net cash provided by (used in) financing activities
|
$ | 358,645 | $ | (5,767) | $ | 364,412 | (6318.9) | % | ||||||||||||||||||
Net cash flows used in operating activities were $411.3 million for the nine months ended June 30, 2025, compared to net cash provided by operating activities of $69.2 million for the nine months ended June 30, 2024. The $480.4 million increase in net cash used in operating activities period over period was primarily due to a decrease in working capital balances of $422.2 million and an increase in net loss of $54.7 million. Below we describe in more detail the cash flows (used in) provided by operating activities for each period:
•Net cash flows used in operating activities of $411.3 million for the nine months ended June 30, 2025 were primarily due to (i) net loss of $92.1 million, (ii) increases in inventory of $469.7 million due to cash expenditures on inventory, and (iii) decreases in accounts payable of $180.8 million and current accruals and provisions of $118.4 million due to the timing of payments to various vendors. These cash outflows were partially offset by net positive effects of changes in customer contract assets and liabilities. Specifically, deferred revenue, inclusive of related parties, increased in aggregate by $274.1 million and receivables, inclusive of trade, unbilled accounts receivable and receivables from related parties decreased in aggregate by $291.3 million due to timing of various customer project billings and cash collections in accordance with contract milestone payment schedules.
•Net cash flows provided by operating activities of $69.2 million for the nine months ended June 30, 2024 were primarily driven by (i) increases in accounts payable of $256.3 million due to timing of payments to various vendors, and (ii) net positive effects of changes in customer contract assets and liabilities. Specifically, deferred revenue, inclusive of related parties increased by $57.5 million and receivables, inclusive of trade, unbilled accounts receivable and receivables from related parties decreased by $59.5 million due to timing of various customer project billings and cash collections in accordance with contract milestone payment schedules. These cash inflows were partially offset by (i) an increase in inventory, impacting cash flow negatively by $257.9 million, and (ii) net loss of $37.4 million.
Net cash flows used in investing activities were $20.0 million for the nine months ended June 30, 2025, which were due to purchases of property and equipment of $10.0 million and capital expenditures on software of $10.0 million.
Net cash flows used in investing activities were $13.4 million for the nine months ended June 30, 2024, which were due to capital expenditures on software of $8.6 million and to purchases of property and equipment of $4.8 million.
Net cash flows provided by financing activities were $358.6 million for the nine months ended June 30, 2025, which were primarily related to the proceeds received from the issuance of the 2030 Convertible Senior Notes of $400.0 million, partially offset by (i) premiums paid for the purchases of the Capped Calls of $29.0 million and (ii) payments for the debt issuance costs of $12.1 million, primarily related to the 2030 Convertible Senior Notes.
Net cash flows used in financing activities were approximately $5.8 million for the nine months ended June 30, 2024, which were primarily due to $5.0 million in payments related to debt issuances costs, primarily for the ABL Facility, and $3.9 million in payments for a previously acquired company (Nispera), partially offset by $4.4 million of proceeds from the exercise of stock options.
Tax Receivable Agreement
In connection with the IPO, we entered into the Tax Receivable Agreement with Fluence Energy, LLC and Siemens Industry and AES Grid Stability (together, the "Founders"). Under the Tax Receivable Agreement, we are required to make cash payments to the Founders equal to 85% of the tax benefits, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (1) the increases in our share of the tax basis of assets of Fluence Energy, LLC and its subsidiaries resulting from any redemptions or exchanges of LLC Interests from the Founders and certain distributions (or deemed distributions) by Fluence Energy, LLC; and (2) certain other tax benefits arising from payments under the Tax Receivable Agreement. The payment obligation under the Tax Receivable Agreement is an obligation of Fluence Energy, Inc. and not of Fluence Energy, LLC. We expect to use distributions from Fluence Energy, LLC to fund any payments that
we will be required to make under the Tax Receivable Agreement. 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. Fluence Energy, Inc. expects to benefit from the remaining 15% of cash tax benefits, if any, it realizes from such tax benefits. For purposes of the Tax Receivable Agreement, the cash tax benefits will be computed by comparing the actual income tax liability of Fluence Energy, Inc. to the amount of such taxes that Fluence Energy, Inc. would have been required to pay had there been no such tax basis adjustments of the assets of Fluence Energy, LLC or its subsidiaries as a result of redemptions or exchanges and had Fluence Energy, Inc. not entered into the Tax Receivable Agreement.
On June 30, 2022, Siemens Industry, Inc. exercised its redemption right pursuant to the terms of the Third Amended and Restated Limited Liability Agreement of Fluence Energy, LLC, dated October 27, 2021, as may be amended from time to time (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 our Class B-1 common stock, par value $0.00001 per share ("Class B-1 common stock"). On December 8, 2023, AES Grid Stability exercised its redemption right pursuant to the terms of the LLC Agreement with respect to 7,087,500 LLC Interests of Fluence Energy, LLC, together with the corresponding cancellation of an equivalent number of shares of our Class B-1 common stock.
The redemptions resulted in increases in the tax basis of the assets of Fluence Energy, LLC and certain of its subsidiaries. The increases in tax basis and tax basis adjustments increases (for tax purposes) the depreciation and amortization deductions available to Fluence Energy, Inc. and, therefore, may reduce the amount of U.S. federal, state, and local tax that Fluence Energy, Inc. would otherwise be required to pay in the future, although the Internal Revenue Service may challenge all or part of the validity of that tax basis, and a court could sustain such a challenge.
As a result of the tax basis adjustment of the assets of Fluence Energy, LLC and its subsidiaries upon the redemptions and our possible utilization of certain tax attributes, the payments that we may make under the Tax Receivable Agreement will be substantial. The redemptions will result in future tax savings of $137.6 million. The Founders will be entitled to receive payments under the Tax Receivable Agreement equaling 85% of such amount, or $117 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) there are no material changes in applicable tax law. The payments under the Tax Receivable Agreement are not conditioned upon continued ownership of us by the Founders. Although the timing and extent of future payments could vary significantly under the Tax Receivable Agreement, 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.
With the exception of an estimated $0.3 million of Tax Receivable Agreement payment realized as of June 30, 2025, we have determined it is not probable payments under the Tax Receivable Agreement would be made, given the projected inability to fully utilize the related tax benefits over the term of the agreement. Therefore, the Company has not recognized the remaining liability. Should we determine that the additional 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.
Critical Accounting Policies and Use of Estimates
Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these financial statements, we consider an accounting judgment, estimate, or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates, and assumptions could have a material impact on the consolidated financial statements.
During the nine months ended June 30, 2025, there were no significant changes in application of our critical accounting policies or estimation procedures from those described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Use of Estimates" in our 2024 Annual Report and the notes to the audited consolidated financial statements appearing elsewhere in the 2024 Annual Report.
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