Good morning, and welcome to Fluence Energy's third quarter earnings conference 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 metric 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 relating to our business, including, but not limited to, 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 and 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 measure is available in our earnings materials on the Investor Relations website. Following our prepared remarks, 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 everyone joining us today. Turning to slide four, today I will provide an update on the progress we have made in driving new order intake and building our backlog, both of which were at record levels this quarter. I'll discuss our growing business, which includes robust demand from our core customers, combined with a rapid expansion of data center customers, from which we receive our first orders and contract awards totaling $850 million. We believe that the momentum of the past few months will continue in the quarters to come, driven by our differentiated product offering and our team's long-standing ability to meet customer needs. Following my remarks, Ahmed will review our financial results for the quarter and our outlook for the remainder of the year. Starting with key highlights for the third fiscal quarter, First, we signed $1.44 billion of orders during the quarter, which is nearly triple the $509 million we signed in the same period last year. Second, included in our record order intake was our first deal with a data center developer, worth $300 million. During July, we were awarded an additional $550 million of business across multiple data center sites by one of the hyperscalers that we discussed last quarter. Third, we ended the quarter with a record backlog of $6.4 billion, representing 14% growth over the second quarter, and more than 30% growth since the third quarter of last Fourth, we ended the quarter with total liquidity of approximately $860 million, in line with our expectations. Third, AMER will discuss our third-quarter financial results shortly, but revenues were affected by delays in expected project deliveries driven by the ramp-up of two new contractor manufacturing facilities. Accordingly, we are lowering our guidance midpoints for 2026 revenue and adjusted EBITDA to $3 billion and negative $10 million, respectively. We do not take this reduction lightly and have instituted changes in an effort to ensure we deliver on our growing market demand. I will detail our plan further in a moment. Please turn to slide 5 for more detail on our order intake. With $2.7 billion now signed to the third quarter of this year, our orders are 80% higher than the amounts from last year. with utilities and IPPs making up approximately 90% of this total. We expect fourth quarter orders will be another record level for the company, and we see reason for this strong momentum to continue in future quarters, given our current demand and competitive position. Let's turn to slide 6, as I detail our progress with data center customers. Our announcements on last quarter's call that we have signed two master supply agreements with hyperscalers raise our profile with other potential data center customers. Overall, our data center pipeline has increased to 16 gigawatt hours, representing a more than 35% increase compared to the second quarter. Our pipeline now includes a mix of projects from both hyperscalers and data center developers. During the quarter, we signed a $300 million order for a behind the meter project with We were introduced to these customers by one of the hyperscalers we have been working with. The sales cycle for these customers was much faster than our traditional market segment, converting from lead to order in three months. We continue to see the developer segment centered on speed to power solutions, and we are pleased to be positioned to meet their needs. Hyperscalar customers continue to focus on quality of power solutions, where we also stand out in terms of our ability to deliver. We were pleased to receive approximately $550 million of awards under one of our MSAs in July. These are not yet purchase orders, and we expect this will add to our total of signed orders in the coming months. These data center customers have a pipeline of projects that we continue to believe we are well positioned to build on, and we look forward to expanding our business with them in the near future. Please turn to slide 7 as I discuss backlog and pipeline growth. Our backlog has benefited from record orders in two of the past four quarters and sets a strong base for revenue growth in fiscal 27. As of June 30th, approximately $2.2 billion of our $6.4 billion backlog is expected to convert to revenues in fiscal 27. This compares to the $1.5 billion of fiscal year 26 revenue coverage we had as of June 30th of 2025. Turning to our pipeline, we exited the quarter at $33.1 billion, which is an increase of 1.6 billion compared to last quarter this indicates 3 billion of new opportunities after considering our conversion of pipeline into orders during the quarter we continue to see a growing percentage of our pipelines coming from the u.s market compared to previous years mostly attributed to the data center segment. Please turn to slide 8 for details on the expansion of our supply chains. We have been expanding our supply chain capacity to meet the strong demand for our products as reflected in the growth of our backlog. New, larger, contracted, manufactured facilities globally are expected to increase our capacity and also deliver the quality our customers expect. A major driver of our revised revenue expectation for this year is attributable to ramping up production at two of these new factories. In the U.S., we will be the off-taker of a new, fully automated facility located in Houston, with expected capacity of 15 GWh per year. Completion of this new facility has been delayed by a few months due to delays in construction and issues related to the automation equipment. Limited production commence this quarter, and our manufacturer is taking steps to address outstanding issues. We expect the facility to reach full production levels during our fiscal first quarter of 2017. I would highlight this contract manufacturer has been our main enclosure supplier from Vietnam, which is a very similar facility to this new one in Houston. We believe their knowledge and experience will be helpful as this factory moves towards full production. Our new international facilities are now fully run, and our product is being shipped to customers on a delayed timeline because initial production did not meet our quality expectations. Corrections were implemented, and we have resumed shipping high-quality products to projects all around the world. Given the importance of timely, consistent, and high-quality production to our business, we recently made organizational changes to ensure more direct oversight of and accountability for our production capabilities. Today, we announced that Roman Lucent will assume leadership of our supply chains and Peter Williams will concentrate on products, with both leaders reporting directly to me. Roman currently serves as our Chief Enterprise Operations Officer and brings more than 20 years of global leadership experience at Siemens, where he held senior operational and and business leadership roles with responsibility for supply chain, manufacturing, and business transformation. Roman will lead a set of managers with deep experience and skill sets in supply chain and manufacturing that have joined our company over the past few months. I am confident that this new management team will strengthen our supply chain and manufacturing to meet the growing demand for our products. When combined with our supply of domestic sales, we expect the Houston facility will span our annual capacity for domestic content significantly compared to our current footprint. Once it is fully run and added to our current supply chain, we expect to have capacity to meet our current backlog of projects and confidence to meet the growth of the U.S. market. Please turn to slide 9 for details on how we are differentiating in the current market. We have been successful in growing our backlog and penetrating the new and important data center customer segment in a very short period of time. Fluent has new and repeat customers who appreciate our advanced product designs, leading energy density, and focus on total cost of ownership. In addition to these factors, our proprietary software stack, including an operating system, is designed to enable our customers to optimize their solution over its long-term life and allow for remote monitoring. These features can increase availability and extend the life of our solution for customers in all use cases. Specifically, for data center customers, the ability of our operating system to efficiently help smooth loads and handle periods of low voltage have contributed to new awards and MARSTA has been gaining favor in terms of orders this year, representing 75% of our orders year-to-date. One of the attractive features of SmartStack is that we designed it as a product platform, with the ability to upgrade over time. During the quarter, we announced the first evolution with SmartStack 10, which increases density of each unit from 7.5 MWh to 10 MWh. The ability to upgrade our smart stack offering over time with speed and efficiency allows us to quickly adapt to evolving customer needs, which is valuable for both Fluence and our customers. To conclude, we believe we have the right product and team to win in this rapidly growing market. With our first data center awards added to our record backlog, and a growing global supply chain size to meet future growth, we are committed to delivering for customers and creating long-term value for shareholders. With that, I'll turn the call over to Ahmed to discuss our financial results and outlook for the rest of this year.
Good morning, everyone. While our results this quarter were disappointing, the challenges we experienced were primarily related to construction and production startup delays at new manufacturing capacity and scaling of our new products. We have taken actions to address issues and improve execution and are now tracking to our revised production plan. Importantly, these investments strengthen our supply chain globally and position us to support our growing backlog. As these new facilities move beyond the initial ramp-up phase, we believe Fluence will be better positioned to deliver profitable growth and create shareholder value. Starting with slide 11, We generated Q3-2026 revenue of $650 million, up 8% year-over-year. This was approximately $90 million below the expectations we discussed on our last quarterly call. This shortfall was primarily driven by production delays at two new contract manufacturing facilities that are currently ramping. Production from the employer manufacturing facility in Houston was pushed by a quarter due to construction and automation delays. The facility has begun limited production and is expected to achieve full production levels in the first quarter of fiscal 2027. The other issue occurred at one of our two new facilities in China, where initial production of components of SmartStack did not meet stringent standards and required rework. The facility is now producing consistently to our standards and has achieved full production in the fourth quarter. While we expect to realize the revenues associated with the Q3 projects that were delayed, the slower ramp-up compresses the timeline for production in the fourth quarter, pushing a portion of previously planned 2026 deliveries into fiscal 2027. Our pre-adjusted gross profit reflects the lost margin from revenue shortfall and an approximately $15 million cost associated with new product rollout and production delays. In addition, we recorded 15 million loss on a planned battery supply agreement, most of which was associated with a single project. Despite the upfront cost, this arrangement secures the long-term supply and attractive pricing, strengthening our ability to support growing demand and price future orders with greater confidence. Turning to slide 12 for our fiscal 2026 guidance, We have revised our outlook to reflect our updated expectation for production through the end of this fiscal year. More specifically, we expect revenue in the range of $2.9 to $3.1 billion with a midpoint of $3 billion. The approximately $400 million reduction versus the prior midpoint is largely the result of manufacturing ramp-up delays that pushed revenue recognition into 2027. In terms of EBITDA, we now expect adjusted EBITDA negative $30 million to positive $10 million with midpoint of negative $10 million, compared to our prior midpoint guidance of $50 million. While there are several puts and takes relative to our prior guidance, the $60 million reduction is largely explained by two items. About $44 million of lost margin from shift of approximately $400 million of revenue into 2027, and $15 million related to the proposed long-term battery supply agreement discussed earlier. And we are maintaining our expectation for annual recurring revenue of approximately $180 million by the end of fiscal 2026. Turning to slide 13 for an update on our liquidity position, we ended the third quarter with total liquidity of approximately $863 million, which includes approximately $365 million in total cash. Consistent with what we said on the last call, we expect total liquidity will return to $900 million level by fiscal year end, driven by execution on our backlog of projects included in the guidance. Bottom line, our liquidity position continues to support our near-term working capital needs, particularly heading into our highest revenue quarter. Regarding liquidity needs for 2027, we are comfortable that our existing liquidity has us well positioned for success. That said, As William noted, our expected order intake is reaching new highs, and to support that growth may require an additional $300 to $500 million of working capital over the coming year. We will remain disciplined and pursue financing only where there is a clear line of sight to profitable growth and shareholder value creation. In summary, while we have more work to do, demands remain strong, our backlog continues to grow, and we are taking actions needed to improve our execution and support long-term profitable growth. With that, I will turn the call back to Julian.
Thanks, Ahmed. Let me close with a few key takeaways.
Operator
Order momentum continues.
Our third quarter order intake. a record of $6.4 billion backlog, and the initial order with the data center developed all evidence of our successful product strategy and sales effort. We currently expect orders to reach a record level again during the first quarter of this year. Second, additional production capacity. We are adding new contract manufacturing capacity in the U.S. and abroad, and have realigned our organization with new leadership to strengthen execution. Third, product offer. The integration of smart stack density, safety, and reliability metrics, where our software and controls capabilities allowing for fast response, load, smoothness, and remote operation, puts us in a dominant position to meet the growing demand of the diverse customer segments we serve. In conclusion, we are positioning our company to continue profitable growth and to deliver value to our customers and shareholders.
Operator
It is now our question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. Your first question comes from the line of George Gianna Rikis from Canaccord Ingenuity. Your line is live.
Hey, everyone. Nice to have you back. Good morning, George. And before you answer, I really want to apologize for the technical mishap we have this morning, which we'll figure out what it is. But we've been waiting in hope for the same time you were waiting, and we will not have been connected. So sorry for that, everybody. We really appreciate and value your time, and we know it was a little bit of a waste of time but hey great hey george good morning good morning all good um uh maybe first if you could provide some additional granularity on the production delays and and just sort of go into a little bit of detail what's happening at the facility thank you yeah great so we have we were you know as you know as we're scaling up the company we are in you know increasing our production capacity as part of that we brought we brought in two new two new manufacturing groups one to serve the international market and one to serve the u.s market on the international market we're working with reputable well-known and you know seasoned contract manufacturers one of these manufacturers as they were they are producing our smart stack for the international markets one of those manufacturers producing our pods the ones that you know the things that go on top of these kids that we have and the initial production was not meeting our stringing testing and we had to significantly delay production to ensure that we got the production in line with our quality and that meant delays that have been significant that since then we have fully resolved and now we're producing, they're working full time, they're fully ramped up, they're doing a great job but we won't be able to recuperate the full amount of the volumes we lost during the quarter during the year. So that's that case, and we feel confident, and we're seeing it today, that they can meet our quality, our volumes going forward, and it will really put us in a good position to serve the international market with a competitive product. The U.S. is slightly different. The U.S. were putting a fully facility with our contra-manufacturer that works out of Vietnam. The same one is putting a fully automated facility, an improved version of the one we have in Vietnam, fully automated, a lot more automated because of the U.S. labor costs somehow, but, you know, fully automated system. And they experienced construction delays where the construction delays were then, we got delays in connected to the utility and out of the you know we've been running the plan with generators and that meant that we had to manage that we do we could not do all the works in parallel that meant that some of the automation took longer than and it's the same thing as these delays got stuck one another there was a moment it was clear that we would not meet we were not going to be able to recuperate the volumes for 26 and that we had to pull volumes to 20 to 27 that facility is ramping up is producing today it will connect to the to the grid in the next couple of weeks the issues are being resolved and as i said this is a uh you know very much a sister company to the one that that's in vietnam so we're confident that the production levels we have set for ourselves for the quarter that will be met that the issues that we have identified are fully resourced and resolved so we're very confident on it i would say on a more general point this facility will be will be a will provide us a competitive advantage in the u.s market you know that we believe is very very important of our strategy here in the u.s market They will allow us to produce, you know, 15 gigas of fully U.S.-made products, fully automated integration. So we are really, really happy with what we will receive. However, we're going through this, you know, these delays that, unfortunately, we could not fully resolve on time.
And maybe just as a follow-up, an update on your recent commercial traction and data centers, specifically how would you characterize the competitive dynamics in your win rates and deals you participated in, and what are the key differentiating factors that lead to your wins?
Yeah, very great, great question. I think that, you know, how we win? We win because of the density, safety, and reliability of SmartStat as it combines with our operating systems that allows for, very efficient load management and, you know, very, very good response to the low voltage ride-through. So it's a combination of technical, you know, of our operating systems and our enclosures, which are our delivery equipment, which are safe and reliable. That's how we win. Generally, it has been very, very good. And we're very happy with the traction we have. This is significantly better than our plans, and we are very, very confident that as that industry grows, that will be an important part. What's interesting for us also is that we are now looking not only in the U.S. with most of the activities we have and the concepts we have time today are from, but also looking at some of our markets with some of the hyperscalers and some of the same developers to help them in other markets, which I think will put us, our global footprint will help us on capturing that demand more globally.
Operator
Thank you, York. Your next question comes from the line of Brian Lee from Goldman Sachs & Co. Your line is live.
Hey, guys. Thanks for taking the questions. I wanted to ask about the battery cell cost uplift. It sounds like it's an international supplier, but can you give us a little bit more detail? Does this have anything to do with the new AESC ownership, or maybe just walk us through what's changing to impact costs here, and is this also a drag into your fiscal 2028 procurement and costs as well?
Yeah, great question. No, this is for the international market. It's not connected to AESC. And we enter into a long-term agreement that is not only a supply, but also some technological alignment in how the batteries will work in our modules and how we work going forward. And it's a longer-term contract that we believe will put us in a very good position for 27 and 28 going forward. However, we had to take a charge in one project that we had that was being supplied by the same customer that as part of the deal we, you know, as a deal adjusted, we needed to take. So that's what it was. But the MPV of the project is significantly higher than the charge we're taking. So we decided that better take the charge and move forward. That's what it is. I think that we, as we have continued to grow, we believe that, you know, integrating our technological roadmap with the technological roadmap of our self-suppliers is fundamental for our success in longer term.
Yeah, fair enough. Okay. And then maybe just a question on sort of the conversion cycle, because, you know, this is, if you look at slide seven, obviously a lot of backlog growth the past couple of years, a lot of pipeline growth, especially the past couple of quarters. So you have a lot of, you know, top of the funnel momentum heading into fiscal 28. Obviously, there's some operational challenges here that are tripping you up in terms of meeting expectations this year, but how should we think about the conversion cycle on these record backlog levels and, you know, kind of the impact of these data center and hyperscaler bookings, just any sense of how quickly we should start to see these turn into P&L impact? impact, and does it, you know, differ from your historical backlog conversion cycles?
I mean, as you said, we are just starting with data centers. So we have limited proof points of what it is. The proof points we have is that they work at a much faster conversion cycle. You know, we had the deal with the developer. We signed it from lead to contract in less than three months, so tremendously fast, and they will also have a very fast conversion cycle going forward. So we believe those will help accelerate our conversion cycle. Our normal, the other 90% today or our other segments are working on the same conversion cycle of roughly a year to 18 months that we had at. So, you know, as you know, we recognize revenue, so the revenue recognition occurs in accordance to the milestones of the program. And I would say in a period of 18 months, you recognize the full revenue. Some of it is recognized fairly quickly as we, you know, it's recognized in milestones as we move on the execution of the project. Not like it all happens at the end.
Appreciate it. I'll pass it on. Thanks, guys.
Operator
Your next question comes from the line of Julian DeMoulin-Smith from Jefferies. Irvine is live. Good morning.
Hey, good morning, team. Thank you guys very much. I appreciate it.
Operator
Thank you, Julian.
Hey, a couple things real quickly just to rehash. Number one, you made comments about the expedited nature of the BTM, the potential customers here with BTM. Can you elaborate a little bit more about how you're thinking about the potential cadence for incremental bookings from here against some of these arrangements, and also elaborate a little bit on the composition of customers in as much as, obviously, last quarter we talked about a couple in particular. BTM could be an array of different kinds of counterparties as well. Can you talk about sort of the nature of these counterparties? And I've got a quick follow-up.
Yeah, so last time we talked mostly about hyperscalers, you know, and now where we have the hyperscalers have brought on into, which was our plan, go to the hyperscalers because we know that's the door for the developers. And what we have seen with the developers, and there has been a change when you talk to hyperscalers, mostly speed to power, mostly, sorry, quality of power solutions. That's why they're looking, you know, they'll spend very technical analysis, you know, very deep understanding. When we're talking to the developers, it's mostly speed to power. And what we have seen is that the need, the developers are probably, I will say, I don't know, but at least what we have seen today, they are in a much of a hurry than compared to the hyperscalers. So we see that market a lot more active and we see those activities especially moving from leads to pipelines to orders more quickly. So that's what we can say as what we have seen up today. The pipeline, today hyperscalers have the majority, but the developers represent the growing segment that is working in Guyana.
Operator
Understood. Excellent.
And then just quickly, I see a comment here about strategic expenses just of late here. Just would love to add a lot. How are you thinking about the company strategically if there's anything to flag there? I don't know, on the quarterly expenses.
Is there anything we should be watching for it to spend?
You know, we have, you know, this is what we're looking at. we're always in the market and we're always looking at it so as you know earlier in the year we look at ASC as an option and there there's some of the costs are connected to the ASC review and all the analysis we have to do for the ASC review so there are nothing we're here no nothing to announce got it if it's still looking at all alternatives on that front on procurement well you know what we are seeing we're spending a lot of time looking at talking to the all the battery capacity in the market, and talking to them, nothing really to talk about at this stage, but, you know, that's where we're spending our time as we see an opportunity to work more closely with the battery manufacturers in the U.S.
Operator
Excellent. Well, thank you very much. Thank you, Julian.
Operator
The next question comes from the line of Dylan Nassano from Wolf Research. Your line is live.
Yeah, hi. I just wanted to check in terms of the scope of the delays that you guys are seeing in the manufacturing facilities, to what extent, if any, are those impacting the hyperscaler MSAs and these orders that you guys are talking about here?
No, not at all. These are issues and contracts that we have today and that we signed a year, a year and and a half ago, and they have nothing. They are normal contracts, non-normal contracts. They are typical segments, so no affection to, in no way, affecting the MSAs. The MSAs of the contracts were signed in with a data center.
Got it. Okay, thanks. And then, I mean, maybe it would just be helpful if you could just level set us again on the number of MSAs. I believe it was due last quarter. And, you know, how many hyperscalers exactly does that include? And can you just clarify, so you have the $300 million first order and then the $550 million awarded. Are those from the same hyperscaler, or is that two different hyperscalers?
So we have two MSAs with two hyperscalers. As we have engaged in working with hyperscalers, they have referred us to developers that work for them. And we are now, as I said, our pipeline and our work, we're spending a lot of time with developers as they continue to work with the hyperscalers no doubt but as they have a pipeline that requires very quick response time in terms of the contracts we signed we signed the the the 300 million dollar contract with a developer that was referred by one of the hyperscalers we have an msa with so this was a contract that is a developer building a data center for one of the hyperscalers that we will be providing our equipment. Then we have, on one of the hyperscalers, there was a tender we got awarded the 550 million. We saw one that we're in the process now of finalizing all the final technical points to be able to convert this into a backlog, and we should convert it into backlog in the coming months.
But we continue to work to engage with more hyperscalers, and we have seen, you know, both hyperscalers were working, and we're working on several projects, both in the U.S. and internationally, that we will provide, you know, that we will want to bid on, and we would like to serve them with our projects.
Operator
Your next question comes from the line of Vikram Bagri from Citi. Your line is live.
I wanted to ask about the margins first. One of your larger peers indicated margin pressures in storage. I was wondering how you feel about the 10 to 15 percent margin guidance you have, you know, backlog converting 2.2 billion next year, 2.8 after that.
So, you know, pretty long backlog at this point aren't there any variance and if it is there a variance in margins when you look at the sort of like backlog in the near term medium term and long term are you are you witnessing the same pressure as your fear don't talk about it the reality is that we are very silver very comfortably within the 10 to 15 range even when you looked at our results is This year, you know, if you take out some of the one-time soft that we have during the year, we will have been around the 12% that we got in the market towards. So we're confident. We don't see in our backlog or in the new orders, they are only in line with the 10 to 15. We do not understand the pressure that the other big supplier, you know, announced that they were coming down with this. We don't really know. There might be something in their cost structure that is different. You know, as we move forward, our big issue is scaling this company. You know, that's the issue. And that's kind of the pains we're having going through are connected to scale. And scale drives competitiveness, probably in the case of our competitors that some of them have already reached scale. They're finding some other issues that, you know, for us, they're not visible.
Got it. And you talked about really in scale. And my next question is, you know, loosely tied to that. We'll be talking about guidance for next fiscal year on the next call. I was wondering what is the mechanism, how you're thinking about, you know, setting the guidance. You have $2.2 billion of backlog for fiscal 27. Is 85% coverage the right way to think about it, or it should be connected to the capacity that's coming online, how much you can bring online, the capacity from supplier perspective, and or the 85% coverage should be higher. Relative to that, I'm very encouraging to see the executive management changes to improve execution. I was wondering what specific changes Roman and Peter will make in next 12 months. You're dealing with contract manufacturers, so you have relatively less control over their operations. So what sort of like changes the new team will make to ensure, you know, on-time deliveries.
Let me start with your second question. So I am bringing Roman to lead our manufacturing and supply chain due to his deep transformation. You know, he's been working on supply chains and manufacturing, but he's very experienced in transformation. One of the things you realize as you scale a company, and we move to a very different scale, is that you need a transformation, that your systems and your process need to transform to the new scale. So that's what he's working on. We have very good suppliers. We have great manufacturing partners. So it's not a strategic change. It's an execution issue. That's what he will concentrate on, on delivery. Peter has been leading the development of SmartStack. So I think that he will continue ensuring that, continue developing SmartStack. And for 20, for 27 and forward, the main point is continue the integration of our software and our hardware in a way that we can provide, you know, much more stringent customers than what we had historically. So that's what these two groups are going to do, you know. Transformation of our manufacturing, which is not changing suppliers or anything. It's just ensuring our processes, our systems, our planning is aligned with our bigger scale and, you know, continue developing SmartStack at our platform and continue strengthening the connection between one and the other. So very happy. And your first question was on the coverage. This is, I still believe that 80% to 90% is the right one, the 85%. So that's our view. We clearly, clearly, and this is a learning, new facilities. this you know even though we put in a plan we put a patch and a contingency and you know we are what happened is this is that we had a hedge we went over the hedge and we had the contingency we went over the contingency and that is when the problem becomes a problem so to the extent that we have new facilities coming up we will probably hedge them you know for for next year having said that we do not expect any, no enclosure facilities, we do not expect any major new manufacturing capacity that will support our revenue in 2027. So, you know, I feel confident that 80 to 90% coverage will be the right coverage in 2027. But we will look at it clearly as we look at it here.
Operator
Your next question comes from the line of Justin Clare from Roth Capital. Your line is live. Good morning.
Thanks for the time here. So just wanted to ask about the guidance here. So based on the revised revenue and adjusted EBITDA guide, it looks like the fiscal Q4 gross margin could be roughly 12% around that range. And just wondering if you could clarify what's embedded in the assumption for the gross margin in Q4. And then are there any costs associated with the new products or the production delays from fiscal Q3 expected to extend into fiscal Q4?
Sure. Hi, Justin. This is Ahmed. So I think the implied gross margin, we are looking at roughly 11% for Q4 based on the guidance we discussed. It's a little less at the midpoint if you're looking at midpoint to midpoint. And yes, we have considered additional costs that we may incur based on the outlook we see today. There are many puts and takes, but I think net-net we feel pretty good that after taking those additional costs for delays, So the guidance we gave, we should land at the guidance that we gave based on the outlook that we see today.
Operator
Okay. That's helpful.
And then just on the supply chain here, I was wondering if you could discuss the potential impact of the FCC's restrictions on inverters here. I know you have access to a U.S.-based inverter supplier. wondering if you have any exposure to sourcing inverters from China and then just curious if you know compliant domestic sourcing of inverters could be a competitive advantage here as your customers kind of reassess exposure to imported inverters we only work with a non-chinese inverters in the US mostly U.S. made, some of them imported out of Europe.
So we feel that, you know, we will not be affected in any way that has been our policy since then. We do see that those restrictions on inverters will also increase in Europe, that that will happen also, and we expect, and we are working towards continuing, you know, in Europe we work with a mix of Chinese and non-Chinese, but we're working towards getting ready for a fully European solution for the European market. We see the market, our view from day one, when we started, that there will be more technological restrictions on this technology as it continues to grow and plays a more important role in the grid.
Operator
I got it. Okay, thank you. Okay, thanks very much. Your next question comes from the line of Christine Cho from Barclays. Your line is now live.
Hey, Christine, good morning. award with the hyperscaler, or data centers collectively, do those include EPC, and is there any difference between the developer versus hyperscaler, and should we assume that both of these projects have a duration of two hours?
Yes. On the data centers, they have a duration of two hours that generally we do not offer, and they're really not really offered at less than two hours in the market, so all the markets are at two hours no real difference on the what the technical requirements or and you know and the the and the margins of the generally very much aligned or what as I say the developers which are usually smaller companies more agile and more you know and who can make decisions a lot faster the conversion rate is significantly faster so that will say that that's our current view of this is as you know an emerging an emerging segment so we you know some of the things we're learning as we move forward but you know going very happy with it in terms of of the 1.1 of the non-data center roughly the u.s continues to be where we're making the most traction and i will say you know number is around 60 40 you know 60 percent the u.s and 40 percent the international markets. You know, one doesn't mean that that's what this is going to be. It was a quarter where there was a lot of activity in the U.S. and, you know, limited activity in the international markets.
Okay. And then just a housekeeping item, the 10-Q indicates that there were some IEPA refunds. Did any of that show up in COGS, or was it applied to inventory?
I think that was the point I was saying there is some IPA refund we have I think it's a little over $10 million that we have recognized year to date and you'll expect to recognize some more in 4Q over time part of it is recognized part of it goes into inventory and I think the inventory converts into revenue then you recognize it over time so okay your next question comes from the line of chris dendrios dendrinos from rbc capital markets your line is live hey great yeah thank you hey
good morning um you know i guess i hate to belabor the point here just a little bit more following up on a rock question around around the guidance here but you know if i look at at the outlook for the remainder of the year, you know, pretty wide range just given the amount of time left in the year. And so, you know, what is driving that guidance range? And I guess I'm asking just trying to get a sense for how confident you are in the execution path here going forward.
Yeah, no, that's a fair question. I don't think you need to read too much into it. Frankly, I think based on the execution, we have still some work to do on execution. So we thought it is prudent to give you a guidance in case there are any incremental costs we may have to incur as we ramp up our operations. So that is what is really driving that wider gap versus the revenue guidance we gave. So EBITDA guidance is wider than what you would expect. So the only thing that reflects a traditional cost that we may incur.
Operator
So that is what is really his underlying driver.
Got it. That's it on my end.
Operator
Your final question comes from the line of Amit Fakar from BMO Capital Markets. Your line is live.
Thanks for squeezing me in. Hey, good morning. Thanks for the time. Thank you for squeezing me in. um i mean just following up on chris's question maybe in a little bit different way if i think about the midpoint of your uh guidance now for for fiscal year 2026 i think it implies like 1.4 billion dollars of revenue for uh for 4q um you know if i look at kind of the where the revenue recognition and kind of implied asps are it's kind of like let's just say kind of 235 i think implies like 6,000 megawatts or revenue recognition megawatts does that are you guys anticipating like a large portion of what you'll recognize in 4Q to have kind of EPC you know I know some of the European contracts you have in the past that had you know pretty attractive it's kind of implied ASPs because you were doing EPC work is that the case for 4Q and I've got one more quick follow-up No, I don't think most of that is in the U.S.
And that's mostly the deliveries that we have under our domestic content.
I would say, you know, for the quarter, for this quarter, we already have produced and have fully integrated roughly half of what we need to do for the quarter. So we are confident that we will get to the numbers. Clearly, as I said, we're ramping up Houston and that, we really will have it under control. But like any ramp-ups, there's always reason we cannot envision today. And that's why, you know, the wider range. But nothing in line with what we can do, you know. We already did have already. We already have our in boats going to where they need to be or in trucks going to where they need to be. So we feel, you know, the guidance is still good.
And then just if you could kind of help us, it looks like your cumulative deployed megawatts were unchanged versus the prior quarter. And I think they're only up like, I think, 8% or 9% from the beginning of the year or for the end of the last year. I mean, I think cumulative deployed megawatts, it's like 7.4 gigawatts, I think, at the end of the year with 6.8. but the revenue is obviously from a percentage basis a little bit better. Can you just help us kind of understand when all of those megawatts get deployed?
Our definition of deployed megawatts in our metrics is projects that have reached substantial completion. Our revenue recognition happens significantly earlier when most of our revenue, when we deliver the equipment to sign and transfer title. So that's where you see the disconnect. So, you know, we use our definition of delivery is actual substantial completion while our revenue recognition is on transfer of title, which occurred, you know, a quarter off. So, you know, this will convert into actual, what we call, deliver products later on. I know it creates a confusion because a part our competitors use delivered as you know actual delivering to site rather than substantial completion we we probably need to amend our definition to align it more with with the revenue recognition definition which is percentage of completion yeah got it so that's not the disconnect damit okay well thank you everybody for joining and again And, you know, really, you know, we want to, we are, sorry that we were late, you know, that we had to be late, that we had a technical issue. It's really an inconvenience, and not for all of you, and we'll assure you that it won't happen again. And thank you so much for your time and your questions.
Operator
This concludes today's meeting. You may now disconnect.
