Good day and thank you for standing by. Welcome to the Fluence Energy First Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear automated messages advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I'll invite you to end the conference over to your first speaker today, Chris Shelton, VP of Investor Relations. Please go ahead.

Good morning, and welcome to Fluence Energy's first quarter 2026 earnings call. Joining me on this morning's call are Julian Nabreda, our president and chief executive officer, and Ahmed Pasha, our chief financial officer. A copy of our earnings presentation, press release, and supplementary metrics sheet covering financial results along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures, are posted on the Investor Relations section of our website at FluenceEnergy.com. During the course of this call, Fluence Management may make certain forward-looking statements regarding various matters and related to our business, including statements related to our future financial and operational performance, future market growth and related opportunities, anticipated growth and business strategy, liquidity and access to capital, expectations relating to pipeline, order intake, and contracted backlog, future results of operations, the impact of the One Big Beautiful Bill Act, projected costs, beliefs, assumptions, prospects, plans, and objectives of management, and the timing of any of the foregoing. Such statements are based upon current expectations and certain assumptions and are therefore subject to certain risks, uncertainties, and other important factors which could cause actual results to differ materially. Please refer to our SEC filings for more information regarding these risks, uncertainties, and important factors. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of today. Also, please note that the company undertakes no duty to update or revise forward-looking statements for new information. This call will also reference non-GAAP measures that we view as important in assessing the performance of our business, including adjusted EBITDA, adjusted gross profit, and adjusted gross profit margin. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is available in our earnings materials on the company's investor relations website following our prepared comments we will conduct a question and answer session with our team thank you very much i'll now turn the call over to julian thank you chris and welcome

to our stakeholders joining our call today turning to slide four this morning i'll highlight first quarter results and the momentum we're seeing in the U.S. order intake, as demand for energy storage continues to accelerate, I'll outline the rapid expansion of our pipeline, driven by new customers and emerging use cases, and share the tangible impact of our enhanced sales efforts. I will also update you on our domestic content strategy and the meaningful progress we made resolving early production challenges in the US. AMED will then cover our financial results and 26 outlook in more detail. To summarize our financial performance, First, our backlog has reached a record of $5.5 billion, reflecting a clear step up in U.S. contracting activity driven by the One Big Beautiful Big Act and rising demand forecast. The midpoint of our revenue outlook is now fully covered by our backlogs. second with q1 now complete we are reaffirming our fiscal 26 guidance supported by greater revenue visibility and line of sight on execution which increase our confidence in delivering this outlook and third we ended the quarter with approximately 1.1 billion in total liquidity, which positions us well to support our growth. Please turn to slide five for details on our order intake. During the first quarter, we signed over $750 million of new orders globally. More than $500 million of these orders were in the US, which represented strong growth from prior quarters. Activity in the US market has been gaining momentum since the passage of legislation last July. We continue to expect growth in orders across all our core markets for this year, with the US representing about half the total, consistent with our pattern from previous years. Please turn to slide 6 for an update on our pipeline. We are seeing growing demand from developers, IPPs, utilities, and rapidly expanding data center opportunities. During the quarter, we also ramp up our sales efforts in all our core markets, including expanding our sales channels and outreach to existing and potential new customers. We are already seeing initial benefits with an approximately $7 billion or 30% increase in our pipeline, with a majority of growth coming from the U.S. The task now is to convert our pipeline into sign orders, and this is where we are concentrating our efforts. Please turn to slide 7 for an update on expanding sources of growth. We are seeing growing interest in our product from new customer segments as well as new use cases. In terms of new customer segments, our biggest opportunity is data centers. We are engaged in discussions covering 36 gigawatt hours of projects, including customers with large portfolios, such as hyperscalers. We are working through technical reviews with them and working closely to show how our technology fits their specific needs. I will note that many of the 36 gigawatt hours of data center projects are not yet included in our pipeline, which represents meaningful upside opportunity. Another area of growth is long duration energy storage, where we are in early discussion with 34 gigawatt hours of projects, largely in Europe and the US. SmartStack leads in density positions as well to compete for these applications. Long duration projects, by definition, require more volume and therefore provide an additional growth opportunity. In addition to new customer segments, we are seeing an evolution in the way our customers use battery storage. Historically, our solutions have been used together with renewable projects to firm up their power generation. Utilities have also used our products to store electricity that can be utilized during peak demand periods, also known as energy shifting, or in specific locations to support grid needs. Today, we're seeing new and developing uses for our battery solutions by large energy users such as data centers and C&I facilities. These include, first, speed to power. storage can speed interconnection to the grid by adapting power demand to the grid capability and avoid the delay and expenses of grid upgrades second quality of power storage can inject reactive power to resolve voltage disturbance manage demand including disconnection from the grid when needed, and provide smooth ramp rate control, among others. We believe that no other technology can offer these three capabilities combined at competitive terms. Third, backup power. Energy storage, lower cost, and longer duration enables replacement of higher cost and carbon intensive thermal gen sets that have traditionally served this need. Fourth, support of onsite generation. Forbring your own generation application. Energy storage can match up behind the meter power with the customer's energy needs by adding flexibility and efficiency to dispatchable generation or firming up capacity for renewal sources. Let's turn to slide 8 for an update on our domestic supply chain. Let me highlight three developments that are strengthening our competitive advantage and keeping us reliably on schedule. First, our domestic content supply chain is now performing at the level necessary to meet our delivery schedule. Cell and module production continue to run ahead of the plan, and our enclosure manufacturing facility in Arizona is now on track to meet our projected needs. Additionally, we continue to expand and diversify our domestic supplier base to enhance our flexibility and cost competitiveness. Second, on battery cells, we continue to make progress with ASC in resolving the prohibited foreign entity or PFE status of its Tennessee facility. Our overall priority is to secure competitively-priced PFE-compliant domestic cells. ASC is looking at various paths to addressing the ownership aspect of PFE compliance. We are confident that the outcome will be consistent with our stated objective to secure competitively-priced PFE-compliant battery cells. Third, we are encouraged by the growing momentum of domestic manufacturing of components for BES. Several facilities are shifting their EV battery lines into BES production. This will enable valuable diversification to a supplier base. We believe that building multiple domestic sales partnerships will optimize pricing, resiliency, and the supply we need to support our growth. Before turning the call to Ahmed to discuss our financial results, I am pleased to update

you on the satisfactory resolution of two pending legal matters.

The first is a Mosland where the matter was settled for an immaterial amount by the company in conjunction with our insurance and subcontractors on confidential terms. The settlement includes a full relief of claims with no admission of responsibility or liability for the 2021 overheating incident. The second is on the Diablo Canyon project, where Fluence has obtained a core dismissal of Diablo's $230 million disgorgement claim. With that, I will turn the call over to Abel.

Thank you, Julian, and good morning, everyone. As Julian mentioned, in the first quarter, generated strong momentum towards achieving our goals for the year. Across our global portfolio, we executed reliably for customers and capitalized on strong growth trends by increasing our backlog to a record level. We also maintained our strong liquidity position that is integral to our strategy and growth objectives. More specifically, starting with slide 10 we generated q1 2026 revenue of 475 million dollars 14 of our full year guidance and nearly double the 18 of full year 2025 revenue earned during q1 2025 this performance was in line with our expectations and keeps us on track to meet our full year 2026 revenue guidance Our adjusted gross profit for the quarter was $27 million, representing an adjusted gross margin of 5.6%, well below our full year expectation of 11 to 13%. The result reflects cost impacts in two discrete areas, most of which we expect to recover over the remainder of this fiscal year. The variance reflects two specific factors. First, we incurred approximately $20 million of additional costs, a majority of which were associated with two specific projects outside the U.S. We expect these costs will be largely recovered over the course of this year, consistent with our experience in resolving similar items in the past. Second, our gross margin reflects our typical first quarter margin dynamics, where revenue is more lightly weighted while fixed overhead costs are spread relatively evenly across the year. Historically, this creates one to two percentage quarterly margin swing that normalizes over the course of the fiscal year. The lower gross margin also drove adjusted EBITDA to negative $52 million for the quarter. In short, our first quarter gross margin reflects the lower revenue rating and some discrete project-specific items, not systemic or structural issues. Turning to slide 11 for a broader perspective on our adjusted gross margin and how disciplined project execution and revenue growth initiatives translate to the bottom line. As you can see, we have been steadily improving our gross margin even with the softer result this quarter, our rolling 12-month adjusted gross margin is 12.3 percent, a solid double-digit result. This resilience reflects our disciplined execution and reinforces our confidence in our ability to deliver on our commitments to our stakeholders. Beyond this year, we expect continued margin improvement driven by strong execution, supply chain-enabled cost advantages, innovation and scale as energy storage demand continues to grow. Turning to slide 12 for an update on our liquidity. We ended the quarter with total liquidity of approximately $1.1 billion, reflecting the strength and flexibility of our balance sheet. This includes $477 million in ending cash and an additional $617 million available to our credit facilities. Our liquidity position underscores the discipline with which we are managing the business and provides us with the capacity to continue investing to drive future growth. Turning to slide 13 for our 2026 guidance, we are reaffirming the ranges we introduced last quarter, reflecting our strong visibility into the year and continued momentum we see across our business this confidence is grounded in three factors first the midpoint of our full year 2026 revenue guidance is now fully covered by orders in our backlog second we have ordered all equipment required to meet our commitments minimizing supply chain and commodity price risks and third we have clear visibility into the operating cost structure needed to deliver margins in the 11 to 13 percent range. On that basis, we are reaffirming our full-year outlook. We expect revenue in the range of $3.2 to $3.6 billion with a midpoint of $3.4 billion. We expect annual recurring revenue to reach approximately $180 million by the end of fiscal 2026, and we continue to expect adjusted EBITDA in the range of $40 to $60 million for the full year. In summary, with the right building blocks in place, our focus remains on discipline execution for our customers and delivering value to our shareholders. With that, I will now turn the call back to Julian for his closing remarks.

Thanks, Ahmed. Let me summarize today's call with a few takeaways. First, Strong Financial Foundation. Our Q1 performance and record $5.5 billion backlog puts us on track to achieve our fiscal year 26 guidance. We ended the quarter with $1.1 billion of liquidity, giving us strong visibility and flexibility to support growth. Second, U.S. momentum is accelerating. This quarter, our order intake exceeded $750 million globally, with over $500 million coming from the U.S., reflecting increasing demand driven by recent legislation and a strengthening of market fundamentals. Third, pipeline and growth opportunities are expanding. Our pipeline grew by approximately $7 billion, or 30%, led by U.S. demand, with additional lopsided from data centers and long duration energy storage projects, not yet fully reflected in the package. Fourth, broader use cases and differentiated technology. We are seeing expanding applications for storage, particularly from data centers and large TNI where our solutions are uniquely positioned to serve emerging customer needs. And fifth, execution and risk reduction. We continue to strengthen our global supply chain by expanding and diversifying our supplier's base. In summary, we see accelerating demand, improving visibility, and a strengthening of our execution, which together reinforce our confidence in meeting our commitment to customers and deliver long-term value for shareholders. With that, we will now open the call for questions.

Thank you. At this time, we'll go to the question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by. We will compile the Q&A roster. And our first question comes from the line of George of C.G. Your line is now open.

Hi, good morning, everyone, and thank you so much for taking my question. Good morning, George. So maybe just to focus for a second on AESC, and I know you're in the process of resolving the ownership stake, but could you just help guide us as to what resolution will look like? I mean, because there are, you know, certain, several potential outcomes to this. So just help us understand, you know, how you're framing this for us.

Great. Thank you, Arch. Our main objective in our relationship with ASC is ensuring that we have access to BFP-compliant sales at competitive terms. That's our main objective. That's our priority number one. As part of that, we've been working with them on ensuring that they meet all the different conditions of the OBBA or BBBBA. In terms of ownership, which is your specific question, we made them a proposal. our understanding today is that they will resolve that problem in some other form so we got assurances from them that they will meet the conditions of the law that they will resolve that problem and they will resolve it without the need for us to get involved in the ownership structure of the of that plan so you know for us you know as you know we have been working with them for many years we trust them very much we think they're going to do and you you know, we're working with them and waiting for them to give us more light today. They have not communicated to us the details how they expect to do it, but we're very confident they will meet the deadlines of the law and the conditions, you know. In terms of the other ones related to material assistance and IP and all of that, we, as part of our process, we have all that information. That's why it's the ownership where we still need to wait. But, and I will make a point that I think is very, very important, if you'll end, which is a side point here. the market for sales in the u.s is expanding like crazy we have all these eb battery lines that are converted into into now into us so we're seeing for the first time you know plethora of projects of people offering all types of things so we are if you tell me we will see here in the u.s something similar was on china two years ago you know or three years ago when all these eb lines converted We're very excited about what the prospects for a company with our structure and our strategy will do in the U.S. during the next couple of years. So, you know, I think this is a great time. This is a great opportunity. We are very confident on AXE, and we are very, very optimistic about the future for the market for battery storage in the U.S. due to how the market is changing the dynamics. We saw what happened in China the last couple of years with the Chinese, when the EB demand came down and how that, you know, allowed for our markets to grow and brought in more suppliers, better quality. It really changed how the back market changed. So we're excited about this time.

If I may ask a follow-up, segue into what the competitive environment looks like. I would imagine some of these data center bake-offs, some of the big hyperscalers don't want to use one of their competitors as a supplier. But are you seeing any increased competition from the likes of Ford, who's doing the exact thing that you mentioned, converting some of their cell supply into energy storage-related cells? So help us understand what the landscape currently looks like, particularly in data.

I think the competitive landscape has changed today. there have been other people there's some but but they don't think that competitive the landscape has changed at all what we have seen is a significant diversification of battery cell suppliers it probably will change over time I don't disagree that it might change you know and because some people might decide to do different things but what we have today is you know no real changes in the competitive environment but a real change in the way they supply for battery cells in the market especially for the second half of 26 you know and i you know what we there will be new entrants this market is exciting if you know it's growing great there will be new interest in the market and we compete in the world with the you know with a chinese state you know with our chinese competitors who are the support of their government so here competing against some of these players i don't think it will be more difficult than what we do globally. So, you know, we like competition. It's a great driver of our innovation and gives me wake up. It allows me to wake up early, maybe put it away. I sleep very well, but wake up early, excited about what we're doing. So, hey, excited about the prospects for the U.S. market. This is going to be, you know, the golden years of battery storage are coming. Thank you.

Thank you, George.

Thank you. We'll move it for our next question. Our next question comes from the line of Brian Lee of Goldman Sachs, your line is now open.

Good morning, Brian. Good morning, thanks for coming. Good morning, how are you doing? Good, thank you for taking the questions. I guess just starting on the data center-related pipeline, you know, the 36 gigawatt hours, it's pretty impressive, grew again, quarter-on-quarter. I guess the focus and the execution question now is, you know, first, how much have you actually converted to backlog and you know is there any of that in the 750 million of bookings you reported this quarter and then secondly just you know what's it's a big number 36 gigawatt hours can you just kind of give us a sense of you know the outlook in conversion ratio timing that you're targeting maybe when do we really start to see this move into bookings and pml

impact for you great i mean to tell you there's no but these are the new type of use cases no we have served data centers with a behind you know in front of the meter solutions with the renewal companies those were not included in these services because these are you know behind the center or dedicated lines to data centers behind the meter or dedicated lines to that it's slightly different than we have done global just the first point so answering your question completely we have not converted into backlogged any of the new data center partners no that's that's today this is a new market segment for us these are markets that we have not served directly before you know before september or you know before before a couple of months ago we were serving this company this company indirectly there's a new market segment we are engaging with them but it you know it's very very difficult for us at this stage to give you a clear you know view of how much of that will convert and how will it work over time however we do when we looked at the pipeline and we looked at what we are the maturity of the project that we're working with we should respect something happening you know in the second half of the year but you know say fourth quarter a third or fourth quarter of the fiscal of the calendar year that's what we should expect to do some conversion of this we clearly would love to do it earlier and as this is coming such an important segment that as we learn more about it we'll probably communicate more but as of this station fortunately you know we are we are learning how to do this working with them of the first time as you can imagine some of these companies have been you know are very very you know the supply chain teams are very detailed and they're really there's a lot of value involved great big projects so it's a lot of work we're going through that you know my things are selling you know we're learning and working very well but today we do not have an actual number that i can share with you what's exciting about this if i can give you brian the point is that how fast is growing you know that's today what we are communicating it is going very fast you know we think we have a competitive advantage we look at the other technologies we believe we can do better than anybody else hey so and we're working very hard using it goes very much to our capabilities the viral interconnect you know the things that where we excel so that's what we're so excited about it but today I think it is a new market segment we cannot provide

more clarity on. Absolutely. No, that's great color. Maybe just two quick follow-ups on the guidance. You know, one, on the $20 million of, you know, incremental costs here related to the two projects, can you be elaborate on kind of what those costs exactly were and then how you plan to, you know, recover those costs through the course of the year, the $20 million? And then And secondly, you know, Julian, obviously you're pretty bullish on the outlook for energy storage broadly, whether we're at a center or not. And you're saying that the guide is fully covered by backlog. So, you know, with pipeline and bookings continuing to grow, maybe it's a little bit too early. It's only fiscal Q1, but how would you characterize the upside potential to your kind of 2026 guidance outlook here starting off the year? Thank you, guys.

I will go over the guidance for the year, and then Ahmed can give you details on the gross margin on the two projects I had. Well, I'll tell you on the guidance, you know, our approach to our performance that we want to, we're working towards meeting our guidance, we're committed to meeting our guidance, that that's where you should expect from us, and that we, most of what we want to like to provide you the better opportunity will be for 27 that's what we want to do so if you ask me today our order intake for the squadron will be the lowest one of the of the year it will be the low point of the year and we should be able to go and deliver better order intake that will provide stronger visibility for 27 and that's how we expect to try that giving you a quarter to quarter you know a point we want to keep this year where it is or in line with our guidance hopefully the upper side or whatever but not not we do not want to exceed well we do we are look we're working towards making 27 making 27 how we provide you know good news to the market that's what we're working on today we cannot provide guidance on 27 but we will we will that that's what we're working on and that's the way you should think so on the 20 on the on the third game

Brian so the $20 million impact so this is the impact is that two projects non u.s. projects two different countries different technologies different stages of completion and the change is essentially the change in scope of the project in both cases one is the scope change in equipment and the other one is in the schedule so i think our plan is to basically as we have done in the past is whenever these changes happen we always recover those into the contract from from our customers and that is what we plan on doing during the rest of the year so feel pretty good that we can recover this this

impact okay helpful thanks guys i'll pass it on thank you ryan thank you one moment for our next

question. Our next question comes from the line of Dylan Asano of Wolf Research. Your line is now

open. Thanks for taking my question. Just wanted to check. So Tesla mentioned on their earnings call that they before saw some Megapack margin pressure this year. I think they named some things like competition tariffs and the like. So just wanted to check. Have you seen any kind of intensification on any of these issues recently or you feel like you've already accounted for

this all in your current outlook? Yeah. I mean, yes. We also saw that. We don't see any major competitiveness, no real changes. So unless Tesla is referring to us, maybe. That's the only thing I can think of. They're saying that, hey, we're too fluent. But in terms of tariff and all of the other stuff, I think we are very much aligned. So we are confirming our guidance with a view that there's no real change so you know so we are not very clear what they were referring to got it no more the competitive environment which has always have you know very very intense not any any different and the tariffs have been very stable you know the so we don't expect any major changes in 26 numbers there are some a movement not real movement so we know we're

company and what we're going to do it got it thanks appreciate that um and then for my follow up just kind of given uh some of the margin headwinds this quarter uh can you kind of confirm that if you do end up being the acquirer of the ase facility that you know you feel good about kind of the uh your liquidity situation and no need for any kind of external capital to

Yeah, no, from ASC perspective, we already talked about in the last call, you know, we have factored that in our forecast that we shared in the last quarter outlook for the year. So I feel pretty good.

Well, as I said, I don't think we don't expect that they will resolve this issue some other way. That's our understanding.

Got it. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Julian DeMuyen-Smith of Jeff Fries. Your line is now open.

Hey, good morning, team. Could you guys hear me okay? Hey, Julian, how are you? Hey, pleasure. So maybe just to follow up on the data center opportunity here, I wanted to press a little bit further. How are you thinking about your products fitting into what the data center community wants, especially when it comes to ramp time, interactivity? Again, I get that the product could work, but how do you think about it fitting into your product roadmap, if you think about this? Again, there's probably an iterative nature of what they're looking at versus what you're providing here. Can you speak to that a little bit? And then separately related, how do you think about setting expectations to include explicitly data centers into your pipeline and backlog specifically?

In terms of our product roadmap, I think as we have communicated, there are different needs that we're meeting. I will say in the great majority of needs, there's no real change. And we have a very strong competitive advantage. Then it's a problem. So, you know, very safe, you know, without the sign, the risk of a terminal runway is very limited, you know? Reliability, we have our reliability last year, last year it was close to 99, very few people can do this, you know? So, we've done very, very well. Cyber security, nobody, you know, we've been working very, very strong. So, we're very, very happy on, you know, that part. Therefore, one of the needs, which is the quality of power, they need response time of, you know, below 10 milliseconds. And we have a roadmap to deliver that part. But when I looked at the pipeline, that's one of the areas where we are competing with other technologies. And where there's, you know, we're not necessarily the first, you know, that's not what's driving the contracting we see today. there's some projects that are connected to that but that's not what's right we want to serve it we want to do and we're offering this high you know very very quick response time but you know just to be clear today it is more connected to speed to power and to bring your own generation you know applications than necessarily to quality of power no so so we're very very you know we're very confident we are also you know we're not a competitor of the data center we are we are we've been very you know historically a company that has been very customer centered so we and these are big buyers so we are adapting our the way we control the way we think to them so i think that we are in a very very good position in terms of how to you know as i said unfortunately on your second question on our ability to give you a proper guidance on when will things will go into the pipeline and when we will convert it into into a backlog is a new customer segment so for us we're learning no we we are moving forward and I think we're getting better and better every day and my sales team is really excited about this and we brought in Jeff who's doing a great job on this but today's you know very difficult to commit to me additionally as you know hey I have to be very careful with my competitive information So we will try to provide you as much information as we can without necessarily playing our card or what we're doing because, you know, there are a lot of people trying to do this job and we don't want to provide them with competitive information. So that's where we are. Well, excited about the growth, excited about how we fit into it, excited about the way we approach our customers that will work very well with these customers and with our And our product will do a wonderful job, and hopefully we will see more and more coming up. And as this market segment develops for us, we should be able to provide you more clarity.

Got it. All right. Just maybe not quite ready. And then on AESC, just to clarify earlier, you would not expect an ownership outcome. This is more of a contracting relationship. And ergo, perhaps we could see other potential counterparties that you'd be negotiating with for your domestic cell supply?

Yeah, I will say we have an MSA. The MSA will say we respect it. But, you know, we were looking, we have made a, we provided an opportunity for us to take, you know, ownership on it, which they now have resolved with that. So, you know, our contract will not change at all. We will be an off-taker. Our technologies are very much intertwined, intertwined and that you know we understand that the solution that ASC is working on which they're not you know I don't have the details it will not affect in any way any of the issues we haven't you know we were trying to resolve this issue for them was so we have gave them that which I was a good offer but clearly they have something better some other solution that is much more attractive. So we'll be an off-take. We'll continue being an off-taker of that facility as we move forward. Right. And you could add a second off-take just to expand your data. Oh, we already, remember, last quarter, we already added another second update. And as I told, you know, so we already are working with some of the EV lines that are converted into VEST. And that market is getting, you know, very, very exciting. And as I said, this is no different than what we saw in China two years ago, or two years ago, when you had all that EV capacity that suddenly didn't know where to go. So I think this is, you know, it's a good opportunity.

Yeah. Awesome. All right, guys, I'll leave it there. Sorry. Thank you.

Thank you. One moment for our next question. Our next question is from the line of Mark Staus

of J.P. Morgan. Your line is now open. Yeah, good morning. Thanks for taking our questions. Yeah. Julian, I just want to go back to something you said in the prepared remarks. When you're talking about some of the data center opportunities not being in the pipeline, are you saying that that would be in addition to the 36 gigawatt hours that you're specifically calling out for data centers? Are you saying some of the 36 gigs of data center pipeline is not included in your $30 billion kind of overall pipeline? And then maybe just some color on kind of what delineates what goes in and what stays out. Yeah, good.

So the 36 gigawatt hours we have there are projects we're working on, some are in the pipeline, some of them are leads. We're giving you that number because that compares to the 30 gigas we gave you last part. In order to get into our pipeline, we need to ensure that we believe there's more than a 50% probability of the project occurring within the next two years exactly so some of these projects you know these are new things so we are trying to and we're very careful because you want to be sure that what comes into our pipeline that drives another set of decisions internally how we embed manager so we're very careful looking at this as these things come in very coming in very very quickly we're looking at them and deciding which going to a partner some of them will probably not become part of our pipeline over time but the ones that come into a pilot because other ones we're going to be investing money and and providing offers and doing the engineering and working so that's a day the 36 gigas if they say well if they will convert if they were all to convert into into the pipeline will be a will be it's an upside to the pipeline

we have today to the 30 billion pipeline we have in front of us okay all right that's helpful thank Thank you.

On the long duration side, don't think this as a complaint, 34 gigawatt hours is a very big number, but it is down from what you were talking about last quarter, so I just want to ask kind of what's going on there, quarter over quarter.

No, that's a good point. Last quarter, we talked about what we believe the time was, what the receivable market was, 60 gigas of which we had more portion. put a thing to look at that and these are now these 30 gigas are projects that we are either in pipeline or or in people that were working on preparing the engineer looking at it identifying so this the numbers are different the other one was more of a time i'm sorry that i got that i saw that in a few notes that we created that confusion the the the 60 gigawatts last time was a more of total addressable market that was all the time though that included projects are wearing markets that we do not serve or customers we don't work with or things like that so now the the 30 are projects that have the potential to become part of our pipeline because they are in markets we serve with customers we like to work with and we're just going over the work on how much of it we believe has a 50% chance of really and the 50% chance it looks at you know interconnection land rights you know ensuring that that thing is actually a project that has not a pie in the sky okay thank you and I'm sorry for the confusion at that point I read that in a couple of notes and you know we probably were not clear enough the last time that the 60 the 60 was a time not projects and leads that we're working on.

Thank you. One moment for our next question. Our next question comes from the line of Tampocozai of Bank of America. Your line is now open.

Good morning, Ahmed. Thanks for taking this question here. Just given your commentary on strengthening the domestic supply chain and module cell output ahead of plan, can you give us a sense of the mix of U.S.-made versus imported cells that's kind of embedded in your 26 delivery plan and specifically how much of that supply is kind of already on hand or contracted for the year and then I

have a follow-up yeah okay I'll have Ahmed walk you through the number the

mix is hi good morning so mix is roughly half and half I think is the domestic versus import yeah and your second question was that's fine and then I

asked how much of that supplies already on hand or kind of contract so we have

secured 100% of our domestic and international needs for this year okay

and then secondly just to draw on that right as we kind of think about this gross margin or structural gross margins can you help us frame you know the gross margin delta between, you know, systems that are built with non-PFE U.S. made cells versus, you know, today's imported mix under the, you know, the current 48% tariff load?

So I think we look at, frankly, from our perspective is blended grade. I mean, the guidance we have given is 10 to 15%. It all depends on the project scope. Sometimes we have EPC, sometimes we don't. So I think net-net, that is what we are looking at between 10 to 15%

margin. Regardless of where the sales come from, regardless, like, when it's non-PFE and with the tariffs, with extra tariffs, it's...

Yeah, I think, I mean, it could be, you know, depending upon situation, you know, so I think, but net-net, that's where we land in that range.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Ben Callow of Bayard. Your line is now open.

good morning. Thanks for taking my question, guys. My question is around leverage, but I want to get at it from volume. Could you talk to the amount of volume, because you have this massive pipeline that you can execute on. Just how do we think about, you know, your contract manufacturers and your own, you know, supply chain people and capital constraints that you guys have? If you want to go up to, say, 10 gigawatts a year or something like that, what is the process for that, and how much flexibility do you guys have to ramp and execute that? And then specifically outside of manufacturing and your contract manufacturers, on the liquidity side, because we did see you do a capital raise for working capital, and as these numbers get bigger, I know you have a billion dollars in liquidity plus, but that might not be enough as we go you know start talking bigger dumpers so

if we could just address that thank you so I will address the supply chain and how I meant to talk to our working capital and capital you know the capital plan also black change the way we work is we have a long term plan of volume that you know you know that's a base case that's an upset case and it has a you know hit it out of the park case and we serve those needs with different sources of you know suppliers that work either way you know so we have base suppliers that support our normal work upside suppliers that have a tuition capability and we also identify players of which we we can play it so we feel very comfortable we have the supply chains to to go even beyond what you know You know, what we are outside cases that we communicate significantly above that. So it is a work of working with our suppliers with, you know, building a little bit of spare capacity, providing suppliers that have spare capacity they can deliver. So it's a little bit of a renegotiation strategy and it has been working well. And, you know, my ambition will be to use it. You know what I mean? To be able to use it today. And we believe that where the world we're entering into, this might be probably an option that will happen. In terms of capital, I will ask Ahmed to respond.

So I think you're right. We have a billion dollar liquidity, which we believe is sufficient to support our current plan. And, I mean, in terms of the additional capital needs, I mean, Julian talked about today, you know, significant opportunities we see. And those opportunities will require additional capital once they materialize, I think. And then we will be, frankly, opportunistic to see how we can raise that capital. But at the end of the day, we will be very mindful of creating value for our shareholders. I think that's our job as a management.

And then just a follow-up on the leverage side. could you just talk about you know what type of scale it's like translating that like operating leverage you know under the current gross margin that if that's what we should expect even if you do as as your volume grows or or does that gross margin get bigger is there any leverage there and then how that translates into operating margin if you can give me any framework helpful yeah

thank you the way we've been communicating I mean the way we think of this actually is that now you should assume that our growth margins say the same and our ability to growth are a bit that will come out of our operating leverage and how do we think of it and so you a that our top line grow out our overhead would only grow at half and no more than half of the growth of our top line growth so you know say if we grow but our you know top line growth goes at 100, our overhead will grow at less than 50%. And that's where the operating leverage is, and that's what you should think about. If you believe that we can grow, let's say, at 100, then that operating leverage gives you significant appetite growth. Thank you, guys. Great. Thank you, guys. Thank you.

Thank you. One moment for our next question. Our next question comes on the line of Vikram Bagri of Citi. Your line is now open.

Hi. Good morning, everyone. A lot of discussion about competition, and you've highlighted significant opportunities as well. I wanted to ask, how important is it for you to be vertically integrated given the rising competition? How are the M&A opportunities that you see today? And then finally, could you share the threshold of return for you to make an acquisition, whether it's a ESC or someone else, how do you look at the possibility of M&A in terms of accretion or, you know, return on invested capital? What's that threshold?

Yeah. So, how do we think about vertical iteration? We are very much integrated with our suppliers because our suppliers sell back to us our, you know, our designs, our IPs, our, that's how that would work. much they they were using our own engineering is what's driving our supplier base so generally our contractor manufacturers are allowing us to have a competitive cost with access to a technology we need so we don't really see a strong need for you know vertical iteration no things change that will be that you could think about it but today we'll see any strong need to you know we are we are we can we we can work with contracted manufacturers that integrate our technology into hardware that we can software to our that we can then convert into product at a very very competitive price so we're happy on that in terms of you know any acquisition generally you have to be a creative from you know for also a so that's how we looked at it you know when we were doing, evaluating the potential acquisition of ASE or participating in that deal, you know, it has to be accreted, so it has to make sense, so, you know, and the accretion needs to create, you know, it needs to reflect the additional risk that you take when you integrate vertically, because what the great capability we have is that we are very agile. we can we can have three or four different battery manufacturers you know integrate into our system that we have developed our smart start that it can integrate any battery I'll tell you more we can make any battery great no using political slogans but it is true anybody we can make it great if you put it into our system so that's what that's our approach to supply chain so if we were to integrate vertically we will lose that healing that agility and that ability to to to read things so we also take that into account when we were looking at the ac at least hey we need to take into account that we're going to lose some of the agility we have today that today we are we are talking with a plethora of potential suppliers that we can integrate and you know all of them with different capabilities and we can make them all great so got it thank you and as a follow-up

Could you provide a split of leads versus pipeline in a data center and long duration sort of numbers that you've shared on the slides? And could you also remind us how do you define leads versus pipeline in this category?

Yeah. Roughly, between leads and pipeline, roughly 25%, you know? And the difference between leads, so 25% of 34, 36 gigawatt hours are in pipeline today. In order to go into a pipeline, it needs to be a project that we believe within the next two years has a 50% chance of we all converted it into backlog flow. So we lose that, you know, we said a customer that we will do with that, he has a good credit that, you know, the project is real, you know, it's not. a lot of people talking a lot of talks you go sit down and you know it's just an idea so those things we don't come into don't we don't bring it into a pilot because what comes into our pilots rise costs you know engineering drives you know planning drives so we are very very careful what comes in you know i think my main point on data center is how fast is moving no we have to see how this big market opportunity converts into real execution within the next quarter.

Thank you.

Thank you. Thank you. One moment for our next question. And our next question, because our line of Christine Chell of Barclays, your line is now open.

Good morning. Thank you for taking my question. I just have a clarification, I guess, on the last response. I think last quarter when you talked about the 30 gigawatt hours, at least at the time of the call, you had said half was in the pipeline and now you're saying 25%. So just curious as to what drove the change over the last quarter.

Yeah, you know, things come in and out. So, you know, maybe when we did the engineering and it didn't work or, you know, things come in and out all the time. So, you know, we're very excited about where we are. I mean, that's just, you know, nothing that we're giving you information that usually we don't communicate on how these things move in and out all the time. And, you know, as we go in and they put in the money and the thing doesn't work, they're crazy. There's no way you want to do what you want to do. So we take it out of our pipeline and tell the customers go and figure out what you're going to do or some other source, some other issue.

Okay. And then if I look at your pipeline from the $23 billion to $30 billion, just nominally, the U.S. went from $10 billion to $17 billion. So just based on all the comments that you just talked about with the data center, is it fair to say that increase was primarily driven by your typical front-of-the-meter customers?

That's right. Yeah, that's right. You know, we had, we reorganized the company with this growth group now rather than having it in the region. We brought in Jeff Monday to help us run that group. He dedicated the first quarter on, you know, preparing the pipeline, expanding our capabilities of business development, and, you know, you'll see some of the results in these, you know, new pipeline numbers we have.

Thank you. This concludes the question and answer session. I'll now turn it back to Chris for closing remarks.

Thanks, everyone, for joining our call today. Please reach out with any additional questions, and have a great day.

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