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flnc-20221231

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 December 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. x

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 February 5, 2023, the registrant had 116,187,222 shares of Class A common stock outstanding and 58,586,695 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’ Equity (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	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43

Part II - Other Information		44
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	46
Signatures		47

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Cautionary Statement Regarding Forward-Looking Information

Certain statements in this Quarterly Report on Form 10-Q for the three-months ended December 31, 2022 (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, introduction of new products and services, 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 revenue may be affected by any disruptions in asset deployment caused by supply, construction or utility delays;

•our ability to manage our supply chains and distribution channels, including our ability to secure inventory from suppliers to meet customer demand and source materials in line with our expectations;

•risk associated with fluctuations in the market prices of commodity raw materials, including steel, aluminum, lithium carbonate, and cobalt, that are used in the components from suppliers, such as lithium-ion batteries, that are used in our energy storage products and solutions;

•our ability to attract and retain talent;

•the impact of economic, social, and political instability in the markets in which we operate and other regions of the world, including any impacts arising out of the ongoing conflict in Ukraine;

•changes in levels of inflation, interest rates, and foreign currency exchange rates and related actions taken by government authorities in connection therewith;

•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 and solutions, including events and incidents outside of our control;

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•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 rise to claims of product liability or other potential legal claims;

•our ability to manage information technology related risks;

•the impact of compliance with any existing and future applicable laws, regulations, sanctions, or tariffs on our business and operations;

•the status and implementation of government and economic incentives for energy storage products and solutions and/or services;

•our assessment and expectations regarding our global growth;

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

•our ability to recognize anticipated synergies from strategic initiatives and/or acquisitions by the Company;

•the increased expenses associated with being a public company;

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

•the significant influence that Siemens AG and AES Grid Stability, LLC 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 Annual Report on Form 10-K for the fiscal year ended September 30, 2022, filed with the Securities and Exchange Commission (“SEC”) on December 14, 2022 (the “2022 Annual Report”).

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. 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 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

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


	Unaudited
	December 31, 2022		September 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	286,735	$	357,296
Restricted cash	55,233		62,425
Short-term investments	109,862		110,355
Trade receivables	108,591		86,770
Unbilled receivables	224,484		138,525
Receivables from related parties	56,678		112,027
Advances to suppliers	55,191		54,765
Inventory, net	1,083,607		652,735
Other current assets	29,747		26,635
Total current assets	2,010,128		1,601,533
Non-current assets:
Property and equipment, net	15,167		13,755
ROU Asset - Operating Leases	2,004		2,403
Intangible assets, net	51,482		51,696
Goodwill	25,816		24,851
Deferred income tax asset	2,571		3,028
Advances to suppliers	—		8,750
Debt issuance cost	2,590		2,818
Note receivable - pledged as collateral	24,330		24,330
Other non-current assets	17,839		12,490
Total non-current assets	141,799		144,121
Total assets	$	2,151,927	$	1,745,654
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	505,620	$	304,898
Deferred revenue	469,098		273,073
Personnel related liabilities	14,410		21,286
Accruals and provisions	160,187		183,814
Payables and deferred revenue with related parties	358,064		306,348
Taxes payable	7,898		11,114
Current portion of operating lease liabilities	1,636		1,732
Other current liabilities	9,441		7,198
Total current liabilities	1,526,354		1,109,463
Non-current liabilities:
Operating lease liabilities, net of current portion	668		1,011
Deferred income tax liability	3,467		4,876
Borrowings against note receivable - pledged as collateral	21,142		—
Other non-current liabilities	1,279		1,096
Total non-current liabilities	26,556		6,983
Total liabilities	1,552,910		1,116,446
Stockholders’ Equity:
Preferred stock, $0.00001 per share, 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2022 and September 30, 2022	—		—
Class A common stock, $0.00001 par value per share, 1,200,000,000 shares authorized; 116,645,242 shares issued and 116,072,991 shares outstanding as of December 31, 2022; 115,424,025 shares issued and 114,873,121 shares outstanding as of September 30, 2022	1		1
Class B-1 common stock, $0.00001 par value per share, 200,000,000 shares authorized; 58,586,695 and 58,586,695 shares issued and outstanding as of December 31, 2022 and September 30, 2022, respectively	—		—
Class B-2 common stock, $0.00001 par value per share, 200,000,000 shares authorized; no shares issued and outstanding as of December 31, 2022 and September 30, 2022	—		—
Treasury stock, at cost	(5,301)		(5,013)
Additional paid-in capital	554,924		542,602
Accumulated other comprehensive income	410		2,784
Accumulated deficit	(129,186)		(104,544)
Total stockholders’ equity attributable to Fluence Energy, Inc.	420,848		435,830
Non-Controlling interests	178,169		193,378
Total stockholders’ equity	599,017		629,208
Total liabilities and stockholders’ equity	$	2,151,927	$	1,745,654

The accompanying notes are an integral part of these condensed 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 December 31,
	2022		2021
Revenue	$	209,454	$	27,054
Revenue from related parties	101,006		147,833
Total revenue	310,460		174,887
Cost of goods and services	298,420		228,036
Gross (loss) profit	12,040		(53,149)
Operating expenses:
Research and development	19,162		10,758
Sales and marketing	8,792		13,059
General and administrative	31,267		31,201
Depreciation and amortization	2,424		1,427
Interest expense	816		682
Other income (expense), net	12,614		(826)
Loss before income taxes	(37,807)		(111,102)
Income tax expense (benefit)	(614)		358
Net loss	$	(37,193)	$	(111,460)
Net loss attributable to non-controlling interest	$	(12,551)	$	(82,655)
Net loss attributable to Fluence Energy, Inc.	$	(24,642)	$	(28,805)

Weighted average number of Class A common shares outstanding
Basic and diluted	115,393,437		54,143,275
Loss per share of Class A common stock
Basic and diluted	$	(0.21)	$	(0.53)

Foreign currency translation gain (loss), net of income tax expense of $0.3 million in 2022, and $0 in 2021	(3,585)		299
Total other comprehensive income (loss)	$	(3,585)	$	299
Total comprehensive loss	$	(40,778)	$	(111,161)
Comprehensive loss attributable to non-controlling interest	$	(13,761)	$	(82,570)
Total comprehensive loss attributable to Fluence Energy, Inc.	$	(27,017)	$	(28,591)

The accompanying notes are an integral part of these condensed statements

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FLUENCE ENERGY, INC.

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

EQUITY (DEFICIT), AND MEZZANINE EQUITY (UNAUDITED)

(U.S. Dollars in Thousands, except Shares/Units)


	Class A Common Stock			Class B-1 Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Non-Controlling interest		Total stockholders’ equity and members’ deficit
	Shares	Amount		Shares	Amount								Shares	Amount
Balance at September 30, 2022	114,873,121	$	1	58,586,695	$	—	$	542,602	$	(104,544)	$	2,784	550,904	$	(5,013)	$	193,378	$	629,208
Net loss	—	—		—	—		—		(24,642)		—		—	—		(12,551)		$	(37,193)
Stock-based compensation expense and related vesting	180,684	—		—	—		8,477		—		—		—	—		—		$	8,477
Repurchase of Class A common stock placed into Treasury	(21,347)	—		—	—		—		—		—		21,347	(288)		—		$	(288)
Effect of remeasurement of non-controlling interest due to other share transactions	—	—		—	—		1,447		—		—		—	—		(1,447)		$	0
Proceeds from exercise of stock options	1,040,533	—		—	—		2,398		—		—		—	—		—		$	2,398
Foreign currency translation gain (loss), net of income tax (expense) benefit of $(0.3) million	—	—		—	—		—		—		(2,374)		—	—		(1,211)		$	(3,585)
Balance at December 31, 2022	116,072,991	$	1	58,586,695	$	—	$	554,924	$	(129,186)	$	410	572,251	$	(5,301)	$	178,169	$	599,017


	Mezzanine Equity		Members’ capital contributions		Class A Common Stock			Class B-1 Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Non-Controlling interest		Total stockholders’ equity and members’ deficit
					Shares	Amount		Shares	Amount
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 gain prior to the Transactions, net of income tax benefit of $0	—		—		—	—		—	—		—		—		175				$	175
Effect of the Organization 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 cost	—		—		35,650,000	—		—			295,740						640,022		$	935,762
Net loss subsequent to the transactions	—		—		—			—					(28,805)		—		(62,338)		$	(91,143)
Activity under stock-based compensation plan	—		—		—			—			9,698				—				$	9,698
Other comprehensive gain subsequent to the Transactions, net of income tax expense of $0	—		—		—			—			—				39		85		$	124
Balance at December 31, 2021	$	—	$	—	54,143,275	$	—	117,173,390	$	1	$	281,347	$	(28,805)	$	4	$	525,553	$	778,100

The accompanying notes are an integral part of these condensed statements

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FLUENCE ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. Dollars in Thousands)


	Three Months Ended December 31,
	2022		2021
Operating activities
Net loss	$	(37,193)	$	(111,460)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	2,424		1,427
Amortization of debt issuance costs	229		137
Inventory provision	(330)		3,517
Stock-based compensation expense	8,477		24,877
Deferred income taxes	(951)		—
Provision (benefit) on loss contracts	(2,720)		5,668
Changes in operating assets and liabilities:
Trade receivables	(21,821)		(9,472)
Unbilled receivables	(85,959)		15,042
Receivables from related parties	55,349		(15,026)
Advances to suppliers	8,033		(30,845)
Inventory, net	(430,541)		(56,086)
Other current assets	(3,507)		(134)
Other non-current assets	375		(35,371)
Accounts payable	200,722		(59,244)
Payables and deferred revenue with related parties	51,716		(21,904)
Deferred revenue	196,026		74,400
Current accruals and provisions	(20,907)		23,027
Taxes payable	(3,216)		4,872
Other current liabilities	(4,806)		(4,794)
Other non-current liabilities	(298)		(182)
Net cash used in operating activities	(88,898)		(191,551)
Investing activities
Proceeds from maturities of short-term investments	1,178		—
Payments for purchase of investment in joint venture	(5,013)		—
Purchase of property and equipment	(2,496)		(870)
Net cash used in investing activities	(6,331)		(870)
Financing activities
Proceeds from issuance of Class A common stock sold in an IPO, net of underwriting discounts and commissions	—		947,991
Payment of IPO costs	—		(5,465)
Payment of transaction cost related to issuance of Class B membership units	—		(6,320)
Payment of debt issuance costs	—		(2,719)
Repurchase of class A common stock placed into treasury	(288)		—
Proceeds from exercise of stock options	2,398		—
Repayment of promissory notes – related parties	—		(50,000)
Repayment of line of credit	—		(50,000)
Proceeds from borrowing against note receivable - pledged as collateral	21,142		—
Net cash provided by financing activities	23,252		833,487
Effect of exchange rate changes on cash and cash equivalents	(5,776)		280
Net (decrease) increase in cash and cash equivalents	(77,753)		641,346
Cash, cash equivalents, and restricted cash as of the beginning of the period	429,721		38,069
Cash, cash equivalents, and restricted cash as of the end of the period	$	351,968	$	679,415
Supplemental Cash Flows Information
Interest paid	$	274	$	503
Cash paid for income taxes	$	284	$	9

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Non-cash financing activities
Reclassification of deferred offering costs to additional paid-in capital	—	6,764
IPO costs included in accounts payable	—	4,865

The accompanying notes are an integral part of these condensed 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”).

Upon the completion of our initial public offering (“IPO”) on November 1, 2021, Fluence Energy, Inc. became a holding company whose sole material assets are the limited liability company interests (the “LLC Interests”) in Fluence Energy, LLC. All of our business is conducted through Fluence Energy, LLC, together with its subsidiaries, and the financial results of Fluence Energy, LLC will be consolidated in our financial statements. Fluence Energy, LLC is taxed as a partnership for federal income tax purposes and, as a result, its members, including Fluence Energy, Inc. will pay income taxes with respect to their allocable shares of its net taxable income. As of December 31, 2022, Fluence Energy, LLC had subsidiaries operating in Germany, Australia, Philippines, Chile, the Netherlands, the United States, India, Singapore, and Switzerland. Except where the context clearly indicates otherwise, “Fluence,” “we,” “us,” “our” or the “Company” refers to Fluence Energy, Inc. and all of its direct and indirect subsidiaries, including Fluence Energy, LLC. When used in a historical context that is prior to the completion of the IPO, “we,” “us,” “our” or “the Company” refers to Fluence Energy, LLC and its subsidiaries.

Our fiscal year begins on October 1 and ends on September 30. References to “fiscal year 2021” and “fiscal year 2022” refer to the fiscal years ended September 30, 2021 and September 30, 2022, respectively.

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.

2. Summary of Significant Accounting Policies and Estimates

Principles of Accounting and Consolidation

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

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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 Fluence Energy, Inc. beneficially owns a 66.46% interest as of December 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 assets or liabilities. Accordingly, financial results, balances, and other information included herein for periods prior to the IPO are reflective of Fluence Energy, LLC. The table below summarizes the ownership structure at end of each respective period:


	December 31, 2022		September 30, 2022
Controlling Interest Ownership	66.46	%	66.22	%
Non-Controlling Interest Ownership (AES)	33.54	%	33.78	%

Unaudited Interim Financial Information

The accompanying condensed consolidated financial statements as of December 31, 2022, and for the three months ended December 31, 2022 and 2021 are unaudited. These financial statements should be read in conjunction with the Company’s audited financial statements included in our 2022 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 December 31, 2022, the results of its operations for the three months ended December 31, 2022 and 2021, and its cash flows for the three months ended December 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three months ended December 31, 2022 and 2021 are also unaudited. The results for the three months ended December 31, 2022 and 2021 are not necessarily indicative of results for the full year ending September 30, 2023 and 2022, any other interim periods, or any future year or period. The balance sheet as of September 30, 2022 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 2022 Annual Report. We include herein certain updates to those policies.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Items subject to such estimates and assumptions include: the relative fair value allocations to contingencies with multiple elements, the carrying amount and estimated useful lives of long-lived assets; impairment of goodwill, intangible assets, and long-lived assets; valuation allowances for inventories; deferred tax assets; revenue recognized under the percentage-of-completion method; accrued bonuses; and various project related provisions including but not limited to estimated losses, warranty obligations, and liquidated damages.

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. If the purpose of restricted cash relates to acquiring a long-term asset, liquidating a long-term liability, or is otherwise unavailable for a period longer than one year from the balance sheet date, the restricted cash is included in other long-term assets. Otherwise, restricted cash is included as a separate line item on the Company’s consolidated balance sheets.

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


in thousands	December 31, 2022		September 30, 2022
Cash and cash equivalents	$	286,735	$	357,296
Restricted cash	55,233		62,425
Restricted cash included in “Other non-current assets”	$	10,000	10,000
Total cash, cash equivalents and restricted cash	$	351,968	$	429,721

Restricted cash consisted of the following:


in thousands	December 31, 2022		September 30, 2022
Collateral for credit card program	$	1,901	$	1,580
Collateral for outstanding bank guarantees	53,332		60,845
Collateral for surety program included in “Other non-current assets”	10,000		10,000
Total restricted cash	$	65,233	$	72,425

Revenue and Cost Recognition

The Company’s revenue recognition policy included herein is based on the application of ASC 606. As of December 31, 2022, the Company’s revenue was generated primarily from sale of energy storage products and solutions, providing operational services, and digital applications and solutions.

Revenue from Sale of Energy Storage Products and Solutions: The Company enters into contracts with utility companies, developers, and commercial and industrial customers to design and build battery-based energy storage products and solutions. Each storage product and or solution is customized depending on the customer’s energy needs. Customer payments are due upon meeting certain milestones that are consistent with contract-specific phases of a project. The Company determines the transaction price based on the consideration expected to be received which includes estimates of liquidated damages or other variable consideration that are included in the transaction price in accordance with ASC 606. We assess any variable consideration using an expected value method. The transaction price identified is allocated to each distinct performance obligation to deliver a good or service based on the relative standalone selling prices. Generally, the Company’s contracts to design and build battery-based storage products and solutions are determined to have one performance obligation. The Company believes that the prices negotiated with each individual customer are representative of the stand-alone selling price of the product.

The Company recognizes revenue over time as a result of the continuous transfer of control of our product to the customer. This continuous transfer of control to the customer is supported by clauses in the contracts that provide enforceable rights to payment of the transaction price associated with work performed to date for products that do not have an alternative use to the Company and/or the project is built on customer’s land that is under the customer’s control.

Revenue for these performance obligations is recognized using the percentage of completion method based on cost incurred as a percentage of total estimated contract costs. Standard inventory materials that could be used interchangeably on other projects are included in our measure of progress when they are integrated into, or restricted to, the production of the customer’s project. Contract costs include all direct material and labor costs related to contract performance. Pre-contract costs with no future benefit are expensed in the period in which they are incurred. Since the revenue recognition of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses to completion. The cumulative effects of revisions of estimated total contract costs and revenues, together with any contract reserves which may be deemed appropriate, are recorded in the period in which they occur. Due to the uncertainties inherent in the estimation process, it is reasonably possible that these estimates will be revised in a different period. When a loss is forecasted for a contract, the full amount of the anticipated loss is recognized in the period in which it is determined that a loss will occur. Refer to “Loss Contracts” below for further discussion.

Our contracts generally provide our customers the right to liquidated damages (“LDs”) against Fluence in the event specified milestones are not met on time or equipment is not delivered according to contract specifications. LDs are accounted for as variable consideration, and the contract price is reduced by the expected penalty or LD amount when recognizing revenue. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved.

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Estimating variable consideration requires certain estimates and assumptions, including whether and by how much a project will be delayed and/or will not meet performance contractual specifications. The existence and measurement of liquidated damages may also be impacted by our judgments about the probability of favorable outcomes of customer disputes involving whether certain events qualify as force majeure or the reason for the events that caused project delays. Variable consideration for liquidated damages is estimated using the expected value of the consideration to be received.

At times Fluence will incur additional costs to execute on the performance of a contract, when this happens, we typically attempt to recover the revenue associated with these costs via a negotiated claim or change order with the customer. When this fact pattern occurs on a contract it will create a timing difference between when we have incurred the cost versus when we record the revenue as costs are recognized immediately when incurred and the revenue from the change order is recognized as an increase to contract price when it is legally enforceable, which is usually upon signing a respective change order or equivalent document confirming the claim acceptance by customer. For the quarter ended December 31, 2022, we recognized revenue of approximately $11.5 million on a change order during the period in which the performance obligations were substantially satisfied in previous periods.

Revenue from Services: The Company also enters into long-term service agreements with customers to provide operational services related to battery-based energy storage products and solutions. The services include maintenance, monitoring, and other minor services. The Company accounts for the services as a single performance obligation as the services are substantially the same and have the same pattern of transfer to the customers. We recognize revenue overtime using a straight-line recognition method for these types of services. The Company believes using a time-based method to measure progress is appropriate as the performance obligations are satisfied evenly over time based on the fact that customers receive the services evenly. Revenue is recognized by dividing the total transaction price over the service period.

Some of the agreements also provide a commitment to perform augmentation activities which would typically be represented by installation of additional batteries, and other components as needed, to compensate for partially lost capacity due to degradation of batteries over time. The obligation to perform augmentation activities can take the form of either maintaining battery capacity above a given threshold for a stated term while others provide a fixed number of augmentations over a contract term. Augmentation arrangements that require us to maintain battery capacity above an established threshold for a given term are considered service-type warranties. These represent a stand-ready obligation in which the customer benefits evenly overtime, of which we recognize revenue for these arrangements using a straight-line recognition method. Alternatively, augmentation arrangements that require us to perform a fixed number of augmentations over a contract term follow the percentage of completion revenue recognition method. Since these arrangements require a fixed number of augmentations we must perform, we use the pattern of cost as a proxy to identify when our obligations are satisfied and to recognize revenue.

Revenue from Digital Applications and Solutions: In October 2020, Fluence Energy, LLC acquired the Advanced Microgrid Solutions (“AMS”) software and digital intelligence platform, which became the Fluence Trading Platform. In April 2022, the Company acquired Nispera AG, a Zurich based provider of artificial intelligence (AI) and machine learning-enabled Software-as-a-Service (SaaS) targeting the renewable energy sector. Contracts involving the Fluence Trading Platform are generally entered into with commercial entities that control utility-scale storage and renewable generation assets. Fluence Trading Platform arrangements consist of a promise to provide access to proprietary cloud-based Software-as-a-Service to promote enhanced financial returns on the utility-scale storage and renewable generation assets. The Fluence Trading Platform is a hosted service that delivers automated, market-compliant bids to local electricity market operators. Customers do not receive legal title or ownership of the software as a result of these arrangements.

The Fluence Trading Platform is technology- and vendor-agnostic (i.e., it can be utilized for wind and solar assets as well as non-Fluence systems). The Fluence Trading Platform is separately identifiable from other services that the Company offers to its customers (i.e., it is not highly interrelated or integrated with other solutions). As such, we determined that the Fluence Trading Platform is accounted for as a separate performance obligation. Revenue from the Fluence Trading Platform includes an integration fee and a monthly subscription fee. We consider the access to the Fluence Trading Platform and related support services in a customer contract to be a series of distinct services which comprise a single performance obligation because they are substantially the same and have the same pattern of transfer. We recognize revenue over time using a straight-line recognition method.

For our sale of energy storage products, services, and digital applications and solutions contracts where there are multiple performance obligations in a single contract, the Company allocates the consideration to the various obligations in the contract based on the relative standalone selling price method. Standalone selling prices are estimated based on estimated costs plus margin. Revenue is recorded net of any taxes assessed on and collected from customers, which are remitted to the governmental authorities.

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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, which is generally based upon International Commercial Terms (commonly referred to as ‘‘incoterms’’) stated in corresponding supply agreements or purchase orders. 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 the customer’s project.

Deferred Revenue: Deferred revenue represents the excess billings to date over the amount of revenue recognized to date. Contract advances represent amounts received by the Company upon signing of the related contracts with customers. The advances are offset proportionately against progress billings. Any outstanding portion is included in deferred revenue on the accompanying consolidated balance sheets.

Loss Contracts: A contract becomes a loss contract when its estimated total costs are expected to exceed its total revenue. The Company accrues the full loss expected in the period a loss contract is identified which is recorded in “Current liabilities — Accruals and provisions” and “Cost of goods and services” on the Company’s consolidated balance sheets and consolidated statements of operations and comprehensive loss, respectively.

Inventory, Net

Inventory consists of batteries and equipment, cases, inverters, and spare parts which are used in ongoing battery storage projects for sale. Inventory is stated at the lower of cost or net realizable value with cost being determined by the specific identification method. Costs include cost of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The Company periodically reviews its inventory for potential obsolescence and write down of its inventory, as appropriate, to net realizable value based on its assessment of market conditions.

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. The carrying amounts of trade receivables, accounts payable and short-term debt obligations approximate fair values due to their short maturities.

Short-term Investments and Marketable Securities: We obtain pricing from Level 1 inputs which includes information from quoted market prices, pricing vendors or quotes from brokers/dealers. We conduct reviews of our primary pricing vendors to determine whether the inputs used in the vendor’s pricing processes are deemed to be observable. The fair value

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of U.S. Treasury securities and government-related securities, corporate bonds and notes and common stock is generally determined using standard observable inputs, including reported trades, quoted market prices, matrix pricing, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets and/or benchmark securities. Marketable securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in “Other Income” in the accompanying statement of operations. The Company recorded a gain of $0.7 million from short-term investments for the three months ended December 31, 2022.


in thousands	Three Months Ended December 31, 2022
Beginning balance	110,355
Contributions / (withdrawals)	(1,178)
Changes in fair market value	685

Ending Balance	$	109,862

Supply Chain Financing

We have provided certain of our suppliers with access to a supply chain financing program through a third-party financing institution (the “SCF Bank”). This program 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 the program and reaches an agreement with the SCF Bank, the supplier elects which individual invoices to sell to the SCF Bank. We then pay the SCF Bank on the invoice due date. We have no economic interest in a supplier’s decision to sell a receivable to the SCF Bank. The agreements between our suppliers and the SCF Bank are solely at their discretion and are negotiated directly between them. Our suppliers’ ability to continue using such agreements is primarily dependent upon the strength of our financial condition and guarantees issued by AES and Siemens. As of December 31, 2022, AES and Siemens issued guarantees of $50 million each, for a total of $100 million, to the SCF Bank on our behalf.

As of December 31, 2022, three suppliers were actively participating in the supply chain financing program, and we had $97.8 million of payables outstanding subject to the program. All outstanding payments owed under the program are recorded within “Accounts payable” on the condensed consolidated balance sheets.

Loss per Share

As of December 31, 2022, the Company’s amended and restated certificate of incorporation authorizes three classes of common stock: Class A, Class B-1 and Class B-2. Loss per share is calculated and reported under the “two-class” method. The “two-class” method is an earnings allocation method under which earnings (loss) per share is calculated for each class of common stock considering both distributions declared or accumulated and participation rights in undistributed earnings as if all such loss had been distributed during the period.

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. When a common unit of Fluence Energy, LLC is redeemed, at the Company’s election, for cash or Class A common stock by a Founder who holds shares of our Class B-1 or Class B-2 common stock, as applicable, 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 following table presents the potentially dilutive securities that were excluded from the computation of diluted loss per share:

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	Three Months Ended December 31,
	2022	2021
Class B-1 common stock	58,586,695	117,173,390
Outstanding stock options	7,835,243	11,294,681
Outstanding phantom units	513,865	2,170,541
Outstanding restricted stock units (“RSUs”)	2,011,690	670,487

In October 2021, the existing limited liability company agreement of Fluence Energy, LLC was amended and restated which recapitalized all existing interests in the Company on the basis of a 14.79-for-1 split. All shares and per share information has been retroactively adjusted to give effect to the recapitalization for all periods presented, unless otherwise indicated.

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 three months ended December 31, 2022 and 2021. Basic and diluted net loss per share of Class A common stock for the three months ended December 31, 2022 and 2021, respectively, have been computed as follows:


In thousands, except share and per share amounts	Three Months Ended December 31, 2022		Three Months Ended December 31, 2021
Net loss	(37,193)		(111,460)
Less: Net loss attributable to the non-controlling interest	$	(12,551)	$	(82,655)
Net loss attributable to Fluence Energy, Inc.	$	(24,642)	$	(28,805)

Weighted average number of Class A common stock - basic and diluted	115,393,437		54,143,275
Loss per share of Class A common stock, basic and diluted	$	(0.21)	$	(0.53)

Recent Accounting Standards Adopted

No new accounting standards were adopted during the three months ended December 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
Accounting Standards Update (ASU) No. 2022-04: Liabilities-Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations	In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2022-04, "Disclosure of Supplier Finance Program Obligations" ("ASU 2022-04"). ASU 2022-04 requires entities to disclose the key terms of supplier finance programs they use in connection with the purchase of goods and services, along with the amount of obligations outstanding at the end of each period and an annual rollforward of such obligations. This standard does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations.	ASU 2022-04 is effective for the Company beginning in its fiscal year ending, September 30, 2024 ("Fiscal 2024") and is to be applied retrospectively to all periods in which a balance sheet is presented. The annual rollforward disclosure is not required to be made until its fiscal year ending September 30, 2025 ("Fiscal 2025") and is to be applied prospectively. Early adoption is permitted.	The Company is evaluating the impact that this guidance will have on disclosures related to its supplier finance program obligations.

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3. Revenue from Contracts with Customers

Our revenue is primarily derived from sales of our energy storage products and solutions.


In thousands	Three Months Ended December 31,
	2022		2021
Revenue from sale of energy storage products and solutions	$	305,803	$	172,655
Revenue from services	3,441		1,896
Revenue from digital applications and solutions	781		336
Other	$	435	$	—
Total	$	310,460	$	174,887

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 December 31,
	2022		2021
Americas (North, Central and South America)	$	176,471	$	141,833
APAC (Asia Pacific)	19,560		16,809
EMEA (Europe, Middle-East and Africa)	114,429		16,245
Total	$	310,460	$	174,887

Customer Concentration

For the three months ended December 31, 2022, our top two customers, in the aggregate, accounted for approximately 51% of total revenue.

For the three months ended December 31, 2021, the Company had one customer that accounted for 84% of total revenue.

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 December 31,
	2022		2021
Deferred revenue beginning of period	$	273,073	$	71,365
Additions	287,840		87,800
Revenue recognized related to amounts that were included in beginning balance of deferred revenue	(91,815)		(13,400)
Deferred revenue end of period	$	469,098	$	145,765


In thousands	Three Months Ended December 31,
	2022		2021
Deferred revenue from related parties beginning of period	$	300,697	$	220,122
Additions	88,530		87,543
Revenue recognized related to amounts that were included in beginning balance of deferred revenue	(38,332)		(107,580)
Deferred revenue from related parties end of period	$	350,895	$	200,085

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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 December 31, 2022, the Company had $2.7 billion of remaining performance obligations related to our contractual commitments, of which we expect to recognize approximately 80% in revenue in the next 9 to 33 months, 15% in 34 to 57 months and the remainder thereafter.

Variable Consideration

As of December 31, 2022 and September 30, 2022, our transaction prices have been reduced to reflect variable consideration of $70.8 million and $75.5 million, respectively. Variable consideration primarily relates to our customers’ rights to liquidated damages in the event a specified milestone has not been met or equipment is not delivered to contract specifications. Variable consideration is estimated using the expected-value method which computes a weighted average amount based on a range of potential outcomes. In contracts in which a significant reversal may occur, we use constraint in recognizing revenue on variable consideration.

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4. Inventory, Net

Inventory consisted of the following:


In thousands	December 31, 2022						September 30, 2022
	Cost		Provision		Net		Cost		Provision		Net
Cubes, batteries, and other equipment	$	1,084,949	$	(1,624)	$	1,083,325	$	653,059	$	(1,294)	$	651,765
Shipping containers and spare parts	294		(12)		282		982		(12)		970
Total	$	1,085,243	$	(1,636)	$	1,083,607	$	654,041	$	(1,306)	$	652,735

5. Other Current Assets

Other current assets consisted of the following amounts:


In thousands	December 31, 2022		September 30, 2022
Taxes recoverable	$	14,956	$	14,378
Advance payments	1,522		1,813
Prepaid expenses	1,750		2,095
Prepaid insurance	7,845		1,549
Derivative asset (a)	991		5,574
Other	$	2,683	1,226
Total	$	29,747	$	26,635

(a) Derivative assets relate to forward contracts used to mitigate foreign exchange risk exposure on customer projects, gains and losses on forward contracts are recorded to cost of goods and services.

6. Intangible Assets, Net

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


In thousands	December 31, 2022						September 30, 2022
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Patents and licenses	$	28,557	$	(9,511)	$	19,046	$	28,551	$	(9,033)	$	19,518
Developed technology	29,677		(3,413)		26,264		28,347		(2,720)		25,627
Customer relationship	3,534		(426)		3,108		3,340		(263)		3,077
Tradenames /Trademarks	5,257		(2,839)		2,418		5,216		(2,679)		2,537
Other	967		(321)		646		1,213		(276)		937
Total	$	67,992	$	(16,510)	$	51,482	$	66,667	$	(14,971)	$	51,696

Intangible assets are amortized over their estimated useful lives on a straight-line basis. Total amortization expense for the three months ended December 31, 2022 and 2021 was $1.5 million and $0.9 million, respectively.

7. Goodwill

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


In thousands	Three Months Ended December 31,
	2022		2021
Goodwill, Beginning of the period	$	24,851	$	9,176
Foreign currency adjustment	965		(9)

Goodwill, End of the period	$	25,816	$	9,167

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8. 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	December 31, 2022		September 30, 2022
Accrued purchases	$	106,864	$	120,446
Solution projects accruals	35,764		32,550
Provisions for expected project losses	16,290		30,032
Warranty accrual	2,291		1,625
Total	$	161,209	$	184,653
Less: non-current portion	(1,022)		(839)
Current portion	$	160,187	$	183,814

9. Debt

Revolving Credit Facility

On November 1, 2021, we entered into a credit agreement for 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 “Credit Agreement”). 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 was $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. On June 30, 2022, the Company increased the revolving commitment available under the Revolver by $10.0 million to an aggregate of $200.0 million with the addition of UBS AG, Stamford Branch as an additional lender under the Revolver. The maturity date of the Revolver is November 1, 2025.

The Revolver bears interest at either (i) the Adjusted LIBOR or Adjusted EURIBO Rate (each as defined in the Credit Agreement) plus 3.0% or (ii) the Alternate Base Rate (as defined in the Credit Agreement) plus 2.0% (subject to customary LIBOR replacement provisions and alternative benchmark rates including customary spread adjustments with respect to borrowings in foreign currency), at the option of Fluence Energy, LLC. Fluence Energy, LLC is required to pay to the lenders a commitment fee of 0.55% per annum on the average daily unused portion of the revolving commitments through maturity. The Revolver also provides for up to $200.0 million in letter of credit issuances, which will require customary issuance and administration fees, as well as a fronting fee payable to each issuer thereof and a letter of credit participation fee of 2.75% per annum payable to the lenders.

The Credit Agreement 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 Credit Agreement 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. Under the terms of the Credit Agreement, Fluence Energy, LLC and its subsidiaries are currently limited in their ability to pay cash dividends to, lend to, or make other investments in Fluence Energy, Inc., subject to certain exceptions, including among others (i) the ability to make investments of up to the greater of (a) $10,500,000 and (b) 1.5% of the consolidated assets of Fluence Energy, Inc. and its subsidiaries, and (ii) the ability to issue dividends and make other Restricted Payments (as defined in the Credit Agreement) (a) if after giving pro forma effect to such dividend or other Restricted Payment the Total Liquidity (as defined in the Credit Agreement) of Fluence Energy, Inc. and its subsidiaries party to the Credit Agreement is at least $600,000,000, or (b) such dividend or other Restricted Payment is made to reimburse Fluence Energy, Inc. for certain tax distributions under the Third Amended and Restated Limited Liability Company Agreement of Fluence Energy, LLC (the “LLC Agreement”) and certain payments under the Tax Receivable Agreement, dated as of November 1, 2021, entered into connection with the IPO, by and among Fluence Energy, Inc., Fluence Energy, LLC and the Founders (the “Tax

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Receivable Agreement”) and certain operational expenses incurred in connection with the ownership and management of Fluence Energy, LLC.

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 December 31, 2022, we were in compliance with all such covenants or maintained availability above such covenant triggers.

As of December 31, 2022, we had no borrowings under the Revolver and availability under the facility of $156.4 million, net of letters of credit issued of $43.6 million.

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 12 — Related-Party Transactions for borrowings from related parties.

Borrowings Against Note Receivable - Pledged as Collateral

During the quarter, we transferred $24.3 million in customer receivables to Standard Charter 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 had a maturity date of 24 months as of September 30, 2022 and was previously classified under “Other non-current assets.” The transaction is treated as a secured borrowing as we did not transfer the entire note receivable due from the customer to SCB. We continue to receive quarterly interest income from the customer, while SCB is responsible for collecting payments on the principal which represents the initial receivable balance from the customer. We have no other continuing involvement or exposure related to underlying receivables. We will record aggregate interest expense of $3.2 million to SCB over the 24 month period until the note receivable is fully due from the customer.

10. Income Taxes

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

Income tax expense (benefit) was $(0.6) million and $0.4 million for the three months ended December 31, 2022 and 2021, respectively. The effective tax rate for the three months ended December 31, 2022 and 2021 was 1.6% and (0.3)%, respectively. For the three months ended December 31, 2022, the Company’s effective tax rate differs from the U.S. statutory tax rate of 21% primarily due to flow-through losses attributable to the Founders, valuation allowances and foreign exchange gains. For the three months ended December 31, 2021, 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.

As of each of December 31, 2022 and September 30, 2022, the Company does not believe it has any significant uncertain tax positions and therefore, has not recorded any unrecognized tax benefits.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes valuation allowances when it is more-likely-than-not that all or a portion of a deferred tax asset may not be realized. As of December 31, 2022 and September 30, 2022, the Company had recorded a full valuation allowance against deferred tax assets on Fluence Energy, Inc. primarily related to its investment in Fluence Energy, LLC, as well as on certain foreign subsidiaries based on the weight of available evidence, including cumulative losses.

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11. Commitments and Contingencies

Guarantees

As of December 31, 2022, the Company had outstanding bank guarantees, parent guarantees and surety bonds issued as performance security arrangements for several projects. Performance security is a precondition to receive any payment from the customer and is reduced in stages according to the project completion status.

Typical turn-key contracts and long-term service agreements contain provisions for performance liquidated damages payments if the solution fails to meet the guaranteed performance thresholds at completion of the project or throughout the service agreement period.

Purchase Commitments

The Company has commitments for minimum volumes of purchases of batteries under a master supply agreement. Liquidated damages apply if the minimum purchase volumes are not met. The Company expects to meet the minimum committed volumes of purchases. The following presents our future minimum purchase commitments by fiscal year, primarily for batteries, and liquidated damages, if the minimum purchase volumes are not met, as of December 31, 2022:


in thousands	Purchase Commitments		Liquidated Damages
2023	643,125		24,569
2024	788,073		125,992
2025	178,568		34,975
2026 and thereafter	4,050		2,502
Total	$	1,613,816	$	188,038

During the three months ended December 31, 2021, the Company made a $60.0 million advance payment as a capacity guarantee pursuant to a purchase agreement with one of our suppliers, of which, as of December 31, 2022, the balance of $37.0 million is recorded within “Current assets - Advances to suppliers” and no portion remains within “Non-current assets - Advances to suppliers” on the condensed consolidated balance sheets.

Negotiations with our Largest Battery Module Vendor

In December 2021, we entered negotiations with our largest battery module vendor to amend our battery supply agreement. As part of the discussions the vendor sought to renegotiate the price, we were to pay for battery modules purchased in calendar year 2022 as well as those expected to be purchased during the remainder of calendar year 2022 and calendar year 2023. As part of these negotiations, we also discussed settlement of contractual claims by Fluence to the vendor. These negotiations continued throughout calendar year 2022.

On December 15, 2022, we finalized an agreement with the vendor, amending the supply agreement and resolving our claims. The amendments and settlement were consistent with what we had estimated and disclosed in our 2022 consolidated financial statements in our 2022 Annual Report. The approximately $19.5 million settlement for our claims was recognized as a reduction of costs of goods and services for the three months ended December 31, 2022.

Warranties

The Company is party to both assurance and service-type warranties for various lengths of time. The Company recognizes revenue for service-type warranties using either a straight-line or cost to cost method depending on the contract. Extended warranties that customers purchase separately from the related products and services are accounted for as separate performance obligations.

The Company provides a limited warranty related to the successful operation of battery-based energy storage products and solutions, apart from the service type warranties described above and are normally provided for a limited period of time from one to five years, after the commercial operation date or substantial completion depending on the contract terms. The warranties are considered assurance-type warranties which provide a guarantee of quality of the products and solutions.

For assurance-type warranties, the Company records an estimate of future warranty cost over the period of construction, consistent with transfer of control of the equipment or battery-based energy storage products. Periodically, the Company evaluates and adjusts warranty costs to the extent that actual warranty costs materially differ from the original

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estimates. As of December 31, 2022 and September 30, 2022, the Company accrued warranty liabilities of $2.3 million and $1.6 million, respectively.

Legal Contingencies

From time to time, the Company may be involved in litigation relating to claims that arise out of our operations and businesses and that cover a wide range of matters, including, among others, intellectual property matters, contract and employment claims, personal injury claims, product liability claims, and warranty claims. The Company accrues for litigation and claims when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. It is reasonably possible that some matters could be decided unfavorably to the Company and could require the Company to pay damages or make expenditures in amounts that could be material.

The following discussion covers the Company’s potential loss contingencies as of December 31, 2022:

2021 Cargo Loss Incident