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flnc-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-40978

Fluence Energy, Inc.

(Exact name of registrant as specified in its charter)


Delaware			87-1304612
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

4601 Fairfax Drive, Suite 600 Arlington, Virginia			22203
(Address of Principal Executive Offices)			(Zip Code)

(833) 358-3623

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.00001 par value	FLNC	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

As of May 12, 2022, the registrant had 55,170,050 shares of Class A common stock outstanding and 117,173,390 shares of Class B-1 common stock outstanding.

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		Page
Part I - Financial Information		5
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity, Members’ Deficit, and Mezzanine Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40

Part II - Other Information		41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits and F inancial S tatements	42
Signatures		43

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Cautionary Statement Regarding Forward-Looking Information

Certain statements in this Quarterly Report on Form 10-Q (this “ Report”), excluding historical information, contain or may contain forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, including, among others, statements regarding expected growth, future capital expenditures and debt service obligations, are forward-looking statements. In some cases, you may identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “seeks,” “intends,” “targets,” “projects,” “contemplates,” “grows,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

Factors that could cause our actual results to differ materially from those indicated in any forward-looking statements, include, but are not limited to, the following:

•our future financial and operating performance, including our ability to achieve or maintain profitability;

•our ability to successfully execute our business plan and growth strategy;

•the sufficiency of our cash and cash equivalents to meet our liquidity needs;

•our ability to attract and retain customers;

•our ability to develop new offerings and services, including digital applications;

•our ability to optimize existing and future sales channels and market segmentation;

•our ability to compete with existing and new competitors in existing and future markets and offerings;

•our ability to attract and retain talent;

•the impact of economic, social, and political instability in the markets in which we operate;

•changes in inflation, interest rates and foreign currency exchange rates;

•our expectations regarding the size and growth of our existing and future markets in which we compete;

•the continued and potential future impact of the COVID-19 pandemic on our ground operations at project sites, our manufacturing facilities, our customers, our workforce, and our suppliers and our vendors;

•our ability to maintain customer contracts due to events and incidents relating to storage, delivery, installation, operation and shutdowns of our energy storage products, including events and incidents outside of our control;

•our ability to prevent defects, errors, or bugs in hardware or software of our products and technology as well as any defects that may give product liability or other claims;

•the impact of any existing and new laws and regulations on our business and operations;

•our assessment and expectations regarding our global growth;

•our expectations concerning our relationships with third parties;

•our ability to maintain, protect, and enhance our intellectual property;

•the performance of our acquisitions;

•the increased expenses associated with being a public company;

•the continued listing of our securities on the Nasdaq Global Select Market;

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•the significant influence the Founders have over us, including control over decisions that require the approval of stockholders; and

•other factors described in Part I, Item 1A “Risk Factors” in our 2021 Annual Report and Item 1A “Risk Factors” in this Report.

The foregoing factors should not be construed as exhaustive. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Many of the important factors that will determine these results are beyond our ability to control or predict. Accordingly, you should not place undue reliance on any such forward-looking statements. We qualify all forward-looking statements contained in this Report by these cautionary statements. Any forward-looking statement contained in this Report speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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Part I - Financial Information

Item 1. Financial Statements

FLUENCE ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(U.S. Dollars in Thousands, except share and per share amounts)


	March 31, 2022		September 30, 2021
Assets
Current assets
Cash and cash equivalents	$	651,948	$	36,829
Restricted cash	70,740		1,240
Trade receivables, net of allowances ($86 and $90 at March 31, 2022 and September 30, 2021, respectively)	126,234		46,664
Unbilled receivables	81,300		101,975
Receivables from related parties	37,034		33,362
Advances to suppliers	49,270		9,741
Inventory, net	351,985		389,787
Other current assets	47,409		41,917
Total current assets	1,415,920		661,515
Non-current assets
Property and equipment, net	8,496		8,206
Intangible assets, net	34,439		36,057
Goodwill	9,168		9,176
Deferred income tax asset	1,184		1,184
Advances to suppliers	26,250		—
Debt issuance cost	2,954		222
Other non-current assets	2,525		1,315
Total non-current assets	85,016		56,160
Total assets	$	1,500,936	$	717,675
Liabilities, Stockholders’ Equity, Members’ Deficit, and Mezzanine Equity
Current liabilities
Accounts payable	$	121,620	$	158,366
Deferred revenue	222,815		71,365
Borrowing from line of credit	—		50,000
Borrowing from related parties	—		50,000
Personnel related liabilities	15,935		12,861
Accruals and provisions	217,125		186,143
Payables and deferred revenue with related parties	176,673		227,925
Taxes payable	17,275		12,892
Other current liabilities	3,334		1,941
Total current liabilities	774,777		771,493
Non-current liabilities
Personnel related liabilities	397		1,607
Accruals and provisions	305		774


Total non-current liabilities	702		2,381
Total liabilities	775,479		773,874
Commitments and contingencies (See Note 12)
Mezzanine equity (0 and 18,493,275 units issued and outstanding as of March 31, 2022 and September 30, 2021, respectively)	—		117,235
Stockholders’ Equity / Members’ Deficit
Members’ capital contributions			106,152
Preferred stock, $0.00001 per share, 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2022	—		—
Class A common stock, $0.00001 par value per share, 1,200,000,000 shares authorized; 54,143,275 shares issued and outstanding as of March 31, 2022.	—		—
Class B-1 common stock, $0.00001 par value per share, 300,000,000 shares authorized; 117,173,390 shares issued and outstanding as of March 31, 2022	1		—
Class B-2 common stock, $0.00001 par value per share, 300,000,000 shares authorized; no shares issued and outstanding as of March 31, 2022	—		—
Additional paid-in capital	289,428		—
Accumulated other comprehensive loss	(2)		(285)
Accumulated deficit	(47,990)		(279,301)
Total stockholders’ equity attributable to Fluence Energy, Inc./ Members’ deficit	241,437		(173,434)
Non-controlling interest	484,020		—
Total stockholders’ equity and members’ deficit	725,457		(173,434)
Total liabilities, stockholders’ equity, members’ deficit, and mezzanine equity	$	1,500,936	$	717,675

The accompanying notes are an integral part of these statements

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FLUENCE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS (UNAUDITED)

(U.S. Dollars in Thousands, except share and per share amounts)


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Revenue	$	115,798	$	67,886	$	142,852	$	165,714
Revenue from related parties	226,926		30,247		374,759		48,652
Total revenue	342,724		98,133		517,611		214,366
Cost of goods and services	357,472		97,118		585,508		208,552
Gross (loss) profit	(14,748)		1,015		(67,897)		5,814
Operating expenses:
Research and development	13,340		8,367		24,098		12,511
Sales and marketing	6,191		5,180		19,250		9,921
General and administrative	25,237		8,276		56,438		14,998
Depreciation and amortization	1,493		1,162		2,920		2,232
Interest expense	676		386		1,358		475
Other income (expense), net	1,109		(667)		283		(511)
Loss before income taxes	(60,576)		(23,023)		(171,678)		(34,834)
Income tax expense	128		509		486		1,194
Net loss	(60,704)		(23,532)		(172,164)		(36,028)
Net loss attributable to non-controlling interest	$	(41,519)	$	(23,532)	$	(124,174)	$	(36,028)
Net loss attributable to Fluence Energy, Inc.	$	(19,185)	n/a		$	(47,990)	n/a

Weighted average number of Class A common shares outstanding
Basic and diluted	54,143,275		n/a		54,143,275		n/a
Loss per share of Class A common stock
Basic and diluted	$	(0.35)	n/a		$	(0.89)	n/a

Foreign currency translation gain (loss), net of income tax (expense) benefit of $0 in each period	(20)		122		279		(729)

Total other comprehensive income (loss)	(20)		122		279		(729)
Total comprehensive loss	(60,724)		(23,410)		(171,885)		(36,757)
Comprehensive loss attributable to non-controlling interest	$	(41,533)	$	(23,410)	$	(124,103)	$	(36,757)
Total comprehensive loss attributable to Fluence Energy, Inc.	$	(19,191)	n/a		$	(47,782)	n/a

The accompanying notes are an integral part of these statements

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FLUENCE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY, MEMBERS’

DEFICIT, AND MEZZANINE EQUITY (UNAUDITED)

(U.S. Dollars in Thousands, except share/unit amounts)


	Mezzanine Equity		Members’ capital contributions		Class A Common Stock			Class B-1 Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Non-Controlling interest		Total stockholders’ equity and members’ deficit
					Shares	Amount		Shares	Amount
Balance at December 31, 2021	$	—	$	—	54,143,275	$	—	117,173,390	$	1	$	281,347	$	(28,805)	$	4	$	525,553	$	778,100
Net loss	—		—		—	—		—	—		—		(19,185)		—		(41,519)		(60,704)
Activity under stock compensation plan	—		—		—	—		—	—		8,081		—		—		—		8,081
Other comprehensive loss, net of income tax benefit of $0	—		—		—	—		—	—		—		—		(6)		(14)		(20)
Balance at March 31, 2022	$	—	$	—	54,143,275	$	—	117,173,390	$	1	$	289,428	$	(47,990)	$	(2)	$	484,020	$	725,457

Balance at September 30, 2021	$	117,235	$	106,152	—	$	—	—	$	—	$	—	$	(279,301)	$	(285)	$	—	$	(173,434)
Net loss prior to the Transactions	—		—		—	—		—	—		—		—		—		(20,317)		(20,317)
Other comprehensive income prior to the Transactions, net of income tax expense of $0	—		—		—	—		—	—		—		—		175		—		175
Effect of the Transactions	(117,235)		(106,152)		18,493,275	—		117,173,390	1		(24,091)		279,301		75		(31,899)		117,235
Issuance of Class A Common stock in IPO, net of issuance costs	—		—		35,650,000	—		—	—		295,740		—		—		640,022		935,762
Net loss subsequent to the Transactions	—		—		—	—		—	—		—		(47,990)		—		(103,857)		(151,847)
Activity under stock compensation plan	—		—		—	—		—	—		17,779		—		—		—		17,779
Other comprehensive income subsequent to the Transactions, net of income tax expense of $0	—		—		—	—		—	—		—		—		33		71		104

Balance at March 31, 2022	$	—	$	—	54,143,275	$	—	117,173,390	$	1	$	289,428	$	(47,990)	$	(2)	$	484,020	$	725,457


	Limited Members’ Capital			Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Members’ Deficit
	Units	Amount
Balance at December 31, 2020	7,920,000	$	99,872	$	(650)	$	(129,794)	$	(30,572)
Net loss						(23,532)		(23,532)
Other comprehensive income, net of income tax expense of $0				122				122
Balance at March 31, 2021	7,920,000	$	99,872	$	(528)	$	(153,326)	$	(53,982)

Balance at September 30, 2020	7,920,000	$	99,872	$	201	$	(117,298)	$	(17,225)
Net loss	—	—		—		(36,028)		(36,028)
Other comprehensive loss, net of income tax benefit of $0	—	—		(729)		—		(729)
Balance at March 31, 2021	7,920,000	$	99,872	$	(528)	$	(153,326)	$	(53,982)

The accompanying notes are an integral part of these statements

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FLUENCE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. Dollars in Thousands)


	Six Months Ended March 31,
	2022		2021
Operating activities
Net loss	$	(172,164)	$	(36,028)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,920		2,232
Amortization of debt issuance costs	343		—

Stock based compensation expense	27,605		—

Benefit on loss contracts	(6,261)		(1,858)
Changes in operating assets and liabilities:
Trade receivables	(79,570)		(22,287)
Unbilled receivables	20,675		(8,223)
Receivables from related parties	(3,672)		17,402
Advances to suppliers	(65,779)		(13,184)
Inventory, net	37,802		(304,707)
Other current assets	(7,391)		(2,554)
Other non-current assets	135		4
Accounts payable	(30,426)		58,851
Payables and deferred revenue with related parties	(51,252)		95,541
Deferred revenue	151,450		85,060
Current accruals and provisions	37,243		50,232
Taxes payable	4,383		(4,566)
Other current liabilities	373		457
Other non-current liabilities	(1,679)		488
Cash settled for stock based compensation	(5,731)		—
Net cash used in operating activities	(140,996)		(83,140)
Investing activities
Purchase of equity securities	(1,124)		—
Cash paid for business acquisition	—		(18,000)
Purchase of property and equipment	(1,271)		(2,227)
Net cash used in investing activities	(2,395)		(20,227)
Financing activities

Proceeds from issuance of Class A common stock sold in the IPO, net of underwriting discounts	947,991		—
Payment of IPO costs	(10,330)		—
Payment of transaction cost related to issuance of membership units	(6,320)		—

Payment of debt issuance costs	(3,297)		—
Repayment of promissory notes – related parties	(50,000)		—
Borrowing from line of credit	—		38,000
Repayment to line of credit	(50,000)		—
Other	—		2,236
Net cash provided by financing activities	828,044		40,236
Effect of exchange rate changes on cash and cash equivalents	(34)		(791)
Net increase (decrease) in cash and cash equivalents	684,619		(63,922)
Cash, cash equivalents, and restricted cash as of the beginning of the period	38,069		95,051
Cash, cash equivalents, and restricted cash as of the end of the period	$	722,688	$	31,129
Supplemental Cash Flows Information
Interest Paid	$	503	$	271
Cash paid for income taxes	$	614	$	4,124

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Non-cash financing activities
Reclassification of deferred offering costs to additional paid-in capital	$	1,899	$	—

The accompanying notes are an integral part of these statements

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FLUENCE ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Organization and Operations

Fluence Energy, Inc., a Delaware corporation (“the Company”), was formed on June 21, 2021. We conduct our business operations through Fluence Energy, LLC and its direct and indirect subsidiaries. Fluence Energy, LLC was formed on June 30, 2017 as a joint venture between Siemens Industry, Inc. (“Siemens Industry”), an indirect subsidiary of Siemens AG (“Siemens”), and AES Grid Stability, LLC (“AES Grid Stability”), an indirect subsidiary of the AES Corporation (“AES”), and commenced operations on January 1, 2018. We refer to Siemens Industry and AES Grid Stability as the “Founders” in this Quarterly Report on Form 10-Q (this “Report”).

Fluence Energy, LLC, along with its wholly owned subsidiaries, is primarily engaged in the construction and sale of battery-based energy storage products and providing operational services and artificial intelligence (AI)-enabled digital applications (“Fluence IQ”) for renewables and storage throughout the world, including the Americas, EMEA, and Asia Pacific regions. 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 condensed 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.

QFH’s Investment in Fluence Energy, LLC

On December 27, 2020, Fluence Energy, LLC entered into an agreement with QIA Florence Holdings LLC (“QFH” or the “Blocker Company”) for a $125.0 million investment. QFH was issued 18,493,275 Class B units of Fluence Energy, LLC. QFH is an affiliate of the Qatar Investment Authority (“QIA”), the sovereign wealth fund of Qatar, and its subsidiaries and affiliates. At September 30, 2021, the investment was recognized at carrying value within mezzanine equity on the consolidated balance sheets. As part of the transactions related to our initial public offering closed on November 1, 2021, QFH elected to convert their Class B units to the common stock of Fluence Energy Inc., which is a conversion available to all of the holders of Fluence Energy, LLC Class A and Class B units. Accordingly, as of March 31, 2022, no mezzanine equity is recorded on the condensed consolidated balance sheets.

Initial Public Offering and Related Transactions

On November 1, 2021, the Company completed an initial public offering (the “IPO”) and a series of organization transactions (collectively with the IPO, the “Transactions”), in which the Company issued and sold 35,650,000 shares of its Class A common stock, par value $0.00001 per share, at the public offering price of $28.00 per share, which includes the exercise by the underwriters of their option to purchase an additional 4,650,000 shares of the Company’s Class A common stock. The net proceeds to the Company from the IPO were $935.8 million, after deducting underwriting discounts and offering expenses paid by the Company.

Immediately following the consummation of the Transactions:

•Fluence Energy, Inc. became a holding company. As the sole managing member of Fluence Energy, LLC, Fluence Energy, Inc. controls the business and affairs of Fluence Energy, LLC and its direct and indirect subsidiaries;

•Fluence Energy, Inc. owns, directly or indirectly, 54,143,275 LLC Interests in Fluence Energy, LLC, representing approximately 31.6% of the economic interest in Fluence Energy, LLC;

•the Founders own 117,173,390 LLC Interests in Fluence Energy, LLC, representing approximately 68.4% of the economic interest in Fluence Energy, LLC;

•the investors in our IPO own 35,650,000 shares of Class A common stock of Fluence Energy, Inc., representing approximately 65.8% of the economic interest in Fluence Energy, Inc.; Qatar Holding LLC, the owner of the original Blocker Company owns 18,493,275 shares of Class A common stock of Fluence Energy, Inc., representing approximately 34.2% of the economic interest in Fluence Energy, Inc.; and

•the Founders own 117,173,390 shares of Class B-1 common stock of Fluence Energy, Inc.

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Refer to Note 19 - Subsequent Events to the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (“ 2021 Annual Report”) for a detailed discussion on the IPO and related Transactions.

2. Summary of Significant Accounting Policies and Estimates

Principles of Accounting and Consolidation

As the sole managing member of Fluence Energy, LLC, Fluence Energy, Inc. operates and controls all the business and affairs of Fluence Energy, LLC and, through Fluence Energy, LLC and its direct and indirect subsidiaries, conducts the Company’s business. Fluence Energy, LLC is a variable interest entity, of which the Fluence Energy, Inc. beneficially owns a 31.6% interest as of March 31, 2022. For accounting purposes, Fluence Energy, Inc. is considered the primary beneficiary and therefore consolidates the results of Fluence Energy, LLC and its direct and indirect subsidiaries. Prior to the IPO, Fluence Energy, Inc. had no operations and had no asset or liabilities. Accordingly, financial results, balances, and other information included herein for periods prior to the IPO are reflective of Fluence Energy, LLC.

The accompanying condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and under the rules of the U.S. Securities and Exchange Commission (the “SEC”). The accompanying condensed consolidated financial statements include the accounts of Fluence Energy Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Non-Controlling Interest

The non-controlling interest on the condensed consolidated statements of operations and comprehensive loss represents the portion of earnings or loss attributable to the economic interest in Fluence Energy, LLC, held by the Founders. For the six months ended March 31, 2022, the net loss of Fluence Energy, LLC prior to the date of the Transactions has been attributed to the non-controlling interest, and the net loss of Fluence Energy, LLC subsequent to the date of the Transactions has been allocated between Fluence Energy, Inc. and the non-controlling interest based on the respective ownership percentages of Fluence Energy, LLC held by Fluence Energy, Inc. and the Founders. Non-controlling interest on the condensed consolidated balance sheets represents the portion of net assets of the Fluence Energy, LLC attributable to the Founders, based on the portion of the LLC Interests owned by such shareholders. As of March 31, 2022, the non-controlling interest was 68.4%.

Unaudited Interim Financial Information

The accompanying condensed consolidated financial statements as of March 31, 2022, and for the three and six months ended March 31, 2022 and 2021 are unaudited. These financial statements should be read in conjunction with the Company’s audited financial statements included in our 2021 Annual Report. In our opinion, such unaudited financial statements reflect all adjustments, including normal recurring items, that are necessary for the fair statement of the Company’s financial position as of March 31, 2022, the results of its operations for the three and six months ended March 31, 2022 and 2021, and its cash flows for the six months ended March 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three and six months ended March 31, 2022 and 2021 are also unaudited. The results for the three and six months ended March 31, 2022 and 2021 are not necessarily indicative of results for the full year ending September 30, 2022 and 2021, any other interim periods, or any future year or period. The balance sheet as of September 30, 2021 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the interim financial statements.

For a complete description of our significant accounting policies, refer to Note 2 - Summary of Significant Accounting Policies and Estimates to the audited consolidated financial statements included in our 2021 Annual Report. We include herein certain updates to those policies.

Reclassification

Certain prior year amounts have been reclassified from “Cost of goods and services” to “Sales and marketing” and “General and administrative” to conform to current period presentation on the condensed consolidated statements of operations and comprehensive loss.

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Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents include cash on-hand and highly liquid investments readily convertible to cash, with an original maturity of 90 days or less when purchased.

Cash restricted for use as a result of financing or other obligations is classified separately as restricted cash on the Company’s condensed consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as shown in the Company’s condensed consolidated statements of cash flows.


in thousands	March 31, 2022		March 31, 2021
Cash and cash equivalents	$	651,948	$	29,883
Restricted cash	70,740		1,246

Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	722,688	$	31,129

Restricted cash consisted of the following:


in thousands	March 31, 2022		March 31, 2021
Collateral for credit card program	$	1,422	$	925
Collateral for outstanding bank guarantees	69,318		321

Total restricted cash	$	70,740	$	1,246

Fair Value Measurements

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs and to minimize the use of unobservable inputs. The following fair value hierarchy, defined by ASC 820, Fair Value Measurements, is used to classify assets and liabilities based on the observable inputs and unobservable inputs used to value the assets and liabilities:

Level 1—Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2—Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 inputs include those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted prices, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Level 3—Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant. The Company does not have significant recurring Level 3 fair value measurements.

The Company’s cash equivalents include term deposits with original maturity of less than three months and are recorded at amortized cost. Fair value of cash equivalents approximates the carrying amount using Level 2 inputs. The carrying amounts of trade receivables, accounts payable and short-term debt obligations approximate fair values due to their short maturities using Level 2 inputs.

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Loss per Share

Basic net loss per share of Class A common stock is computed by dividing net loss attributable to Class A common stockholders by the weighted average number of shares of Class A common stock outstanding during the period. Diluted net loss per share of Class A common stock is computed by adjusting the net loss available to Class A common stockholders and the weighted-average shares of Class A common stock outstanding to give effect to potentially dilutive securities. Shares of our Class B-1 and Class B-2 common stock are not entitled to receive any distributions or dividends and have no rights to convert into Class A common stock. When a common unit of Fluence Energy, LLC is exchanged for, at the Company’s election, cash or Class A common stock by a Founder who holds shares of our Class B-1 or Class B-2 common stock, such Founder will be required to surrender a share of Class B-1 or Class B-2 common stock, as the case may be, which we will cancel for no consideration. In the event of cash settlement, the Company is required to issue new shares of Class A common stock and use the proceeds from the sale of these newly-issued shares of Class A common stock to fully fund the cash settlement. Therefore, we did not include shares of our Class B-1 or Class B-2 common stock in the computation of basic loss per share. As we have incurred losses for all periods presented, diluted loss per share is equal to basic loss per share because the effect of potentially dilutive securities would be antidilutive. The potentially dilutive securities that were excluded consist of 117,173,390 Class B-1 common shares, 11,286,991 outstanding stock options, 2,167,290 outstanding phantom units, and 979,608 outstanding restricted stock units as of March 31, 2022.

All earnings prior to and up to November 1, 2021, the date of completion of the IPO, were entirely allocable to non-controlling interest and, as a result, loss per share information is not applicable for reporting periods prior to this date. Consequently, only the net loss allocable to Fluence Energy, Inc. from the period subsequent to November 1, 2021 is included in the net loss attributable to the stockholders of Class A common stock for the six months ended March 31, 2022. Basic and diluted net loss per share of Class A common stock for the three and six months ended March 31, 2022, respectively, have been computed as follows:


In thousands, except share and per share amounts	Three Months Ended March 31, 2022		Six Months Ended March 31, 2022
Net loss	$	(60,704)	$	(172,164)
Less: Net loss attributable to the non-controlling interest	(41,519)		(124,174)
Net loss attributable to Fluence Energy, Inc.	$	(19,185)	$	(47,990)

Weighted average number of Class A common shares outstanding, basic and diluted	54,143,275		54,143,275
Loss per share of Class A common stock, basic and diluted	$	(0.35)	$	(0.89)

Recent Accounting Standards Adopted

No new accounting standards were adopted during the six months ended March 31, 2022.

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Recent Accounting Standards Not Yet Adopted

The following table presents accounting standards not yet adopted:


Standard	Description	Required date of adoption	Effect on the financial statements and other significant matters
ASU 2016-02, Leases (Topic 842)	In February 2016, the Financial Accounting Standard Board (“FASB”) issued ASU 2016-02, which supersedes existing guidance on accounting for leases in ASC 840, Leases. This standard requires all leases to be recognized on the consolidated balance sheet. FASB has issued several amendments to ASU 2016-02, including ASU 2018-11, Leases (Topic 842): Targeted Improvements that introduced an additional transition method permitting an entity to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 includes optional practical expedients intended to reduce the cost and complexity to implement the new lease standard, such as an option to maintain the current lease classification for all existing lease arrangements and the option to use hindsight in evaluating lessee options to extend or terminate a lease. Early application is permitted.	As an emerging growth company (an “EGC”), the Company is permitted to defer adoption until the non-public company adoption date, i.e., annual periods starting after December 15, 2021.	The Company’s existing lease population is mainly comprised of operating leases for office space. The Company is currently evaluating the impact of adoption on its consolidated financial statements.
ASU 2016-13, Financial Instruments—Credit Losses (Topic 326)	In February 2016, FASB issued ASU 2016-13, which updates the impairment model for financial assets measured at amortized cost, known as the Current Expected Credit Loss (“CECL”) model. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. There are various transition methods available upon adoption. Early adoption is permitted.	As an EGC, the Company is permitted to defer adoption until the non-public company adoption date, i.e., annual periods starting after December 15, 2022.	The Company is currently evaluating the impact of adoption on its consolidated financial statements.

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Standard	Description	Required date of adoption	Effect on the financial statements and other significant matters
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	In December 2019, FASB issued ASU 2019-12, which removes certain exceptions related to the approach for intraperiod tax allocations, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also clarifies and simplifies other areas of ASC 740. Certain amendments must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. Early adoption is permitted.	As an EGC, the Company is permitted to defer adoption until the non-public company adoption date, i.e., annual periods starting December 15, 2021, and for interim periods beginning after December 15, 2022.	The Company is currently evaluating the impact of adoption on its consolidated financial statements.
ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)	In March 2020, FASB issued ASU 2020-04, which provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.	The ASU is effective as of March 12, 2020 through December 31, 2022.	The Company is currently evaluating transactions or contract modifications occurring as a result of reference rate reform and determining whether to apply the optional guidance on an ongoing basis. The ASU is currently not expected to have a material impact on our consolidated financial statements.

3. Revenue from Contracts with Customers

Our revenue is primarily derived from sales of our energy storage products. The following table presents the Company’s revenue disaggregated by geographical region. Revenues are attributed to regions based on location of customers.


In thousands	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Americas (North, Central and South America)	$	257,492	$	67,965	$	399,325	$	112,117
APAC (Asia Pacific)	21,250		25,540		38,059		87,938
EMEA (Europe, Middle-East and Africa)	63,982		4,628		80,227		14,311
Total	$	342,724	$	98,133	$	517,611	$	214,366

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Deferred Revenue

Deferred revenue represents the excess billings over the amount of revenue recognized to date. Deferred revenue from related parties is included in payables and deferred revenue with related parties on the Company’s condensed consolidated balance sheets. The following table provides information about deferred revenue from contracts with customers:


In thousands	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Deferred revenue beginning of period	$	145,765	$	154,450	$	71,365	$	123,841
Additions	138,135		120,473		191,562		167,988
Revenue recognized related to amounts that were included in beginning balance of deferred revenue	(61,085)		(66,022)		(40,112)		(82,928)
Deferred revenue end of period	$	222,815	$	208,901	$	222,815	$	208,901


In thousands	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Deferred revenue from related parties beginning of period	$	200,085	$	44,281	$	220,122	$	11,425
Additions	120,097		70,903		153,078		103,831
Revenue recognized related to amounts that were included in beginning balance of deferred revenue	(148,716)		(3,105)		(201,734)		(3,177)
Deferred revenue from related parties end of period	$	171,466	$	112,079	$	171,466	$	112,079

Customer and Supplier Concentration

For the six months ended March 31, 2022, the Company had one customer that accounted for approximately 70% of total revenue.

For the six months ended March 31, 2021, our top three customers, in the aggregate, accounted for approximately 77% of total revenue.

The Company has a limited number of suppliers of batteries, which is a major component of energy storage products.

Remaining Performance Obligations

The Company’s remaining performance obligations (“backlog”) represent the unrecognized revenue value of its contract commitments, which include deferred revenue and amounts that will be billed and recognized as revenue in future periods. The Company’s backlog may vary significantly each reporting period based on the timing of major new contract commitments and the backlog may fluctuate with currency movements. In addition, the Company’s customers have the right, under some circumstances, to terminate contracts or defer the timing of its services and their payments to the Company.

As of March 31, 2022, the Company had a total of $2,150.1 million of remaining performance obligations related to our contractual commitments, of which we expect to recognize 91% in revenue in the next five years and the remainder after five years.

Variable Consideration

As of March 31, 2022 and September 30, 2021, the transaction prices of our active energy solution contracts have been reduced to reflect variable consideration of $52.1 million and $52.8 million, respectively.

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4. Business Combinations

During October 2020, the Company acquired the assets and assumed the liabilities of a US based software and digital intelligence platform. The acquisition has offered new capabilities, amplified and extended the Company’s energy storage product line, enabling customers to maximize the value of energy storage and renewables while accelerating grid decarbonization. The acquisition price of $18.0 million was fully paid with cash, and was adjusted for an immaterial amount to account for changes in net working capital adjustments. The acquisition represents a business combination under ASC 805 Business Combinations. The Company has included the financial results of the acquisition in its consolidated financial statements from the date of acquisition. Transaction costs associated with the acquisition were not significant and were expensed as incurred. The following table summarizes the aggregate fair values and estimated useful lives of the assets acquired and liabilities assumed, as of the date of the acquisition.


In thousands	Fair Value		Estimated Useful Life
Intangible assets - Developed technology	$	12,600	12 years
Intangible assets - Customer relationships	780		6 years
Property and equipment	171		Various
Goodwill	4,449
Cash paid for acquisition	$	18,000

The fair value of developed technology was determined using the multi-period excess earnings method as developed technology is considered to be the primary revenue-generating identifiable intangible asset acquired in the acquisition. The fair value assigned to assets acquired and liabilities assumed are based on management’s estimates and assumptions.

The goodwill is primarily attributed to the expanded market opportunities when integrating the acquired entity’s technology with the Company’s technology and the assembled workforce. The excess of the acquisition price over the fair value of assets acquired and liabilities assumed was recorded to goodwill. The Company expects such goodwill to be deductible for income tax purposes. Purchase accounting adjustments related to the acquisition have been completed.

5. Inventory, Net

Inventory consisted of the following:


In thousands	March 31, 2022						September 30, 2021
	Cost		Provision		Net		Cost		Provision		Net
Cubes, batteries, and other equipment (a)	$	345,650	$	(31)	$	345,619	$	402,157	$	(12,980)	$	389,177
Shipping containers and spare parts	7,493		(1,127)		6,366		1,857		(1,247)		610
Total	$	353,143	$	(1,158)	$	351,985	$	404,014	$	(14,227)	$	389,787

(a) Provision at September 30, 2021 included a $13.0 million loss recognized during fiscal year 2021 for inventory damaged in transit related to the 2021 cargo loss incident. During the six months ended March 31, 2022, $13.0 million of inventory was written off against the provision. Refer to Note 12 - Commitments and Contingencies for a detailed discussion of the 2021 cargo loss incident.

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6. Other Current Assets

Other current assets consisted of the following amounts:


In thousands	March 31, 2022		September 30, 2021
Taxes recoverable	26,574		14,049
Prepaid expenses	2,874		2,480
Advance payments	4,919		3,601
Receivable from insurance (a)	2,500		10,000
Deferred equity issuance costs	—		7,103
Prepaid insurance	4,190		—
Other	6,352		4,684
Total	$	47,409	$	41,917

(a) Receivable from insurance represents insurance recoveries that are probable of collection related to the 2021 cargo loss incident. The Company collected $7.5 million receivable from insurance during the six months ended March 31, 2022. Refer to Note 12 - Commitments and Contingencies for a detailed discussion of the 2021 cargo loss incident.

7. Intangible Assets, Net

Intangible assets are stated at amortized cost and consist of the following:


In thousands	March 31, 2022						September 30, 2021
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Patents and licenses	$	33,003	$	(10,444)	$	22,559	$	32,982	$	(9,207)	$	23,775
Developed technology (a)	12,600		(1,575)		11,025		12,600		(1,050)		11,550
Other (a)	1,093		(238)		855		894		(162)		732
Total	$	46,696	$	(12,257)	$	34,439	$	46,476	$	(10,419)	$	36,057

(a) The developed technology intangible assets and other intangible assets included $12.6 million and $0.8 million, respectively, related to the business acquisition discussed in Note 4 - Business Combinations.

Intangible assets are amortized over their estimated useful lives on a straight-line basis. Total amortization expense for the three months ended March 31, 2022 and 2021 was $0.9 million and $0.9 million, respectively. Total amortization expense for the six months ended March 31, 2022 and 2021 was $1.8 million and $1.7 million, respectively.

8. Goodwill

No impairment was recognized for the six months ended March 31, 2022 and 2021, respectively. The following table presents the goodwill activity:


In thousands	Six Months Ended March 31,
	2022		2021
Goodwill, Beginning of the period	$	9,176	$	4,731
Foreign currency adjustment	(8)		19
Acquisition related goodwill (a)	—		4,449
Goodwill, End of the period	$	9,168	$	9,199

(a) Refer to Note 4 - Business Combination for a further discussion of acquisition related goodwill.

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9. Current Accruals and Provisions

Accruals mainly represent not yet invoiced milestones for inventory such as batteries, cubes, and inverters. According to master supply agreements between the Company and suppliers of the inventory, vendor bills are issued according to contracted billing schedules with some milestones invoiced after delivery, upon full installation and commissioning of the equipment at substantial completion and final completion project stages. Current accruals and provisions consisted of the following:


In thousands	March 31, 2022		September 30, 2021
Accruals	$	193,262	$	155,963
Provisions for expected project losses	23,863		30,180

Total	$	217,125	$	186,143

10. Short-term Debt

Revolving Credit Facility

On November 1, 2021, we entered into a revolving credit facility (the “Revolver”), 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 Revolver is secured by a (i) first priority pledge of the equity securities of Fluence Energy, LLC and its subsidiaries and (ii) first priority security interests in, and mortgages on, substantially all tangible and intangible personal property and material fee-owned real property of Fluence Energy, LLC, the parent guarantor and each subsidiary guarantor party thereto, in each case, subject to customary exceptions and limitations. The initial aggregate amount of commitments is $190.0 million from the lenders party thereto including JP Morgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., Bank of America, N.A., Barclays Bank PLC, and five other banks. The maturity date of the Revolver is November 1, 2025.

The interest rate is either (i) the Adjusted LIBOR or Adjusted EURIBO Rate (each as defined in the Revolver) plus 3.0% or (ii) the Alternate Base Rate (as defined in the Revolver) plus 2.0% (subject to customary LIBOR replacement provisions and alternative benchmark rates including customary spread adjustments with respect to borrowings in foreign currency), at the option of Fluence Energy, LLC. Fluence Energy, LLC is required to pay to the lenders a commitment fee of 0.55% per annum on the average daily unused portion of the revolving commitments through maturity. The Revolver also provides for up to $190.0 million in letter of credit issuances, which will require customary issuance and administration fees, as well as a fronting fee payable to each issuer thereof and a letter of credit participation fee of 2.75% per annum payable to the lenders.

The Revolver contains customary covenants for these types of financing, including, but not limited to, covenants that restrict our ability to incur additional indebtedness; incur liens; sell, transfer, or dispose of property and assets; make investments or acquisitions; make dividends, distributions or other restricted payments; and engage in affiliate transactions. The Revolver limits our ability to make certain payments, including dividends and distributions on Fluence Energy, LLC’s equity, Fluence Energy, Inc.’s equity and other restricted payments. In addition, we are required to maintain (i) minimum liquidity and gross revenue requirements, in each case, until consolidated EBITDA reaches $150.0 million for the most recent four fiscal quarters and we make an election, and (ii) thereafter, a maximum total leverage ratio and a minimum interest coverage ratio. Such covenants will be tested on a quarterly basis. As of March 31, 2022, we were in compliance with all such covenants or maintained availability above such covenant triggers.

As of March 31, 2022, we had no borrowings under the Revolver.

Line of Credit

Prior to the IPO, the Company had an Uncommitted Line of Credit Agreement (“Line of Credit’) with Citibank, N.A. (“Citibank”) which allowed us to borrow an amount in aggregate not to exceed $50.0 million, with the expiration date on March 31, 2023. Outstanding borrowings from the Line of Credit were $50.0 million as of September 30, 2021. The weighted average annual interest rate of the borrowing was 2.83%. On November 1, 2021, the $50.0 million outstanding borrowings from the Line of Credit was paid off using the proceeds from our IPO, and the Line of Credit was canceled shortly thereafter.

Refer to Note 13 — Related-Party Transactions for borrowings from related parties.

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11. Income Taxes

The Company’s provision for income taxes is based on the estimated annual effective tax rate, plus discrete items.

Income tax expense was $0.1 million and $0.5 million for the three months ended March 31, 2022 and 2021, respectively. The effective tax rate for the three months ended March 31, 2022 and 2021 was (0.2)% and (2.2)%, respectively. For the three months ended March 31, 2022, the Company’s effective tax rate differs from the U.S. statutory tax rate of 21% primarily due to flow-through losses incurred prior to the IPO on November 1, 2021, flow-through losses attributable to the Founders, and valuation allowances. For the three months ended March 31, 2021, the Company’s effective tax rate differs from the U.S. statutory tax rate primarily due to foreign tax rate differentials, losses incurred by the partnership that flow through to the members, valuation allowances recorded on foreign deferred tax assets and foreign withholding taxes on royalties.

Income tax expense was $0.5 million and $1.2 million for the six months ended March 31, 2022 and 2021, respectively. The effective tax rate for the six months ended March 31, 2022 and 2021 was (0.3)% and (3.4)%, respectively. For the six months ended March 31, 2022, the Company’s effective tax rate differs from the U.S. statutory tax rate of 21% primarily due to flow-through losses incurred prior to the IPO on November 1, 2021, flow-through losses attributable to the Founders, and valuation allowances. For the six months ended March 31, 2021, the Company’s effective tax rate differs from the U.S. statutory tax rate primarily due to foreign tax rate differentials, losses incurred by the partnership that flow through to the members, valuation allowances recorded on foreign deferred tax assets and foreign withholding taxes on royalties.

The Company does not believe it has any significant uncertain tax positions and therefore has no unrecognized tax benefits as of March 31, 2022 and September 30, 2021, that if recognized, would affect the annual effective tax rate.

As of March 31, 2022 and Septemb