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Operator: 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 speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message if your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would like to hand the conference over to your first speaker today, Chris Shelton, VP of Investor Relations. Please go ahead.

Chris Shelton: Good morning, and welcome to Fluence Energy’s First Quarter 2026 Earnings Call. Joining me on this morning’s call are Julian Nebreda, 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’s management may make certain forward-looking statements regarding various matters unrelated to our business, including statements related to our future financial and operational performance, future market growth and related opportunities, anticipated growth, 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 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 will now turn the call over to Julian.

Julian Nebreda: Thank you, Chris. And welcome to our stakeholders joining our call today. Turning to Slide four. This morning, we highlight first quarter results and the momentum we are seeing in the U.S. Order intake as demand for energy storage continues to accelerate. I will 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 U.S. Ahmed will then cover our financial results and 2026 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 Bill Act and rising demand forecast.

The midpoint of our revenue outlook is now fully covered by our backlog. Second, with Q1 now complete, we are reaffirming our fiscal 2026 guidance, supported by greater revenue visibility and line of sight on execution, which increased 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 U.S., which represented strong growth from prior quarters. Activity in the U.S. 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 U.S. representing about half the total, consistent with our pattern from previous years. Please turn to Slide six 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 ramped 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 signed orders, and this is where we are concentrating our efforts.

Please turn to Slide seven 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 discussions with 34 gigawatt hours of projects largely in Europe and the U.S. SmartStat, leading density position of 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 product 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 are seeing new and developing uses for our battery solutions by large energy users such as data centers and C&I facilities. This includes first, speed to power. Storage can speed interconnection to the grid by adapting power demand to the grid capability and avoid the delayed 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 gensets that have traditionally served this need. Fourth, support of on-site generation. For bringing your own generation applications, 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.

Please turn to Slide eight 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 competitive. Second, on battery cells, we continue to make progress with the 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 sales.

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 compliance battery cells. Third, we are encouraged by the growing momentum of domestic manufacturing of components for VES. Several facilities are shifting their EV battery lines into best production. This will enable valuable diversification to our supplier base. We believe that building multiple domestic cell partners will optimize pricing resilience, 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 on Moss Landing, where the matter was settled for an immaterial amount by the company in conjunction with our insurers and subcontractors on confidential terms. The settlement includes a full release of claim with no admission of responsibility or liability for the 2021 overheating and the second is on the Diablo Canyon project, where Fluence has obtained a court dismissal of Diablo’s $230 million disgorgement claim. With that, I will turn the call over to Ahmed.

Ahmed Pasha: Thank you, Julian, and good morning, everyone. As Julian mentioned, in the first quarter, we generated strong momentum towards achieving our goals for the year. Across our global portfolio, we 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, 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 cost, 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 likely 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 weighting and some discrete project-specific items, not systemic or structural issues. Turning to slide 11. 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 twelve-month adjusted gross margin is 12.3%, 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% 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 million to $60 million for the full year. In summary, with the right building blocks in place, our focus remains on disciplined 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.

Julian Nebreda: 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 2026 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 upside from data centers and long-duration energy storage projects not yet fully reflected in the pipeline.

Fourth, broader use cases and differentiated technology. We are seeing expanding applications for storage, particularly from data centers and large C&I customers, 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 suppliers’ base. In summary, we see accelerating demand, improving visibility, and strengthening of our execution, which together reinforce our confidence in meeting our commitments to customers and delivering long-term value for shareholders. With that, we will now open the call for questions.

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Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 1 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of George Gianarikas of CG. Your line is now open.

George Gianarikas: Hi, good morning, everyone, and thank you so much for taking my question.

Julian Nebreda: Good morning, George.

George Gianarikas: So maybe just to focus for a second on AESC, and I know you are in the process of resolving the ownership stake ticket. But can you just help guide us as to what resolution will look like? I mean, because there are, you know, several potential outcomes to this. So just help us understand, you know, how you are framing this for us. Thank you.

Julian Nebreda: Great. Thank you, George. Our main objective in this in our relationship with ASC is ensuring that we have access to PFE compliant cells at, you know, competitive terms. That is our main object. That is our priority number one. As part of that, we have been working with them on ensuring that they meet all the different conditions of the OBVA or BBVA. 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 the problem, and they will resolve it without the need for us to get involved in the ownership structure of that.

So, you know, for us, you know, we as you know, we have been working with them for many years. We trust them very much. We think they are going to do, and, you know, we are working with them and waiting for them to give us light today. They have not communicated to us the details that we expect to do it. But we are very confident that we will meet the deadlines of the law and the commissions. You know? In terms of the other ones related to material assist, and IP and all of that, we as part of our process, we have all that information. That is why it is the ownership we are getting to work. But and I will make the point that I think it is very, very important if you learn, which is a side point here. The market for sales in the U.S. is standing like crazy.

We have all these EV battery lines that are converted into now into west. So we are 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. We saw China two years ago. You know, or three years ago when all these EV lines converted into Ethro. We are 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 AFE. We are very, very optimistic about the future for the market for battery storage in the U.S. due to the now the market is changing the dynamics.

We saw what happened in China. Last couple of years with the Chinese with the when the EV demand came down and how that, you know, allowed for our markets to grow and the brought in more suppliers, better quality. It really changed our how the back market changed. So we are excited about the time.

George Gianarikas: If I may ask a follow-up. Yeah. Great. Segue into what the competitive environment looks like. And I would imagine some of these data center bake-offs, you know, some of the hyperscalers do not want to use one of their competitors as a supplier. But are you seeing, you know, any increased competition from the likes of Ford, who is doing the exact thing that you mentioned, converting some of their, you know, cell supply into energy storage-related cells. So help us understand what the landscape currently looks like, particularly in data I am like,

Julian Nebreda: I think the competitive landscape has changed today. There have been other people. There is some but they I do not think the competitor landscape has changed at all. What we have seen is a significant diversification of battery cell suppliers. It probably will change over time. I do not disagree that it might change. You know, and because of 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 the supply for battery cells in the market. Especially for the ’26. You know, and I agree. You know, we there will be new entrants. This market is exciting. If you know, it is growing great, there will be new entrants in the market.

And we compete in the world with the you know, with a Chinese state you know, with a with a Chinese competitor with the support of their government. So here competing against some of these players, do not think it will be more difficult. Than what we do globally. So, you know, we like competition. It is a great driver of our innovation and gives me wake up. Allow me to wake up early, maybe put it away. I sleep very well. But wake up early, excited about what we are 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 and COVID.

George Gianarikas: Thank you.

Julian Nebreda: Thank you, George.

Operator: Thank you. We will move in for our next question. Our next question comes from the line of Brian Lee of Goldman Sachs. Your line is now open.

Brian Lee: Hey. Good morning, Thanks for are you? Good morning. How are doing?

Julian Nebreda: Doing well. Good. Thank you for taking the questions.

Brian Lee: I guess just starting on the data center related pipeline, you know, the 36 gigawatt hours, it is pretty impressive. Goo, again, quarter on quarter. I guess the focus the execution question now is first, how much have you actually converted to backlog? And is there any of that in the $750 million of bookings you reported this quarter? And then secondly, just what is it is a big number, thirty-six gigawatt hours. Can you just kinda give us a sense of, you know, the outlook in conversion ratio, timing, you are targeting? Maybe when do we really start to see this move into bookings and P and L impact for you? Yeah.

Julian Nebreda: Great. I mean, to tell you, these are the new type of use cases. No? We have served data centers with behind you know, in front of the mirror solution with the renewal company. Those were not included in this. These are you know, behind the fence. They are all dedicated lines to data centers with behind the meter or dedicated lines to a lot of centers. So it is slightly different. We have done just the first part. So answer your question completely. We have not converted into backlog any of the new data center target. No? That is two a. This is a new market segment. These are markets that we have not served directly before, you know, before September or, you know, before before I mean, a couple of months ago, we were serving this comp this company indirect.

There is a new market segment. We are engaging with them, but it you know, it is 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 majority of the projects that we are working with, we should expect something happening, you know, in the second half of the year. But, you know, say fourth quarter, third or fourth quarter of the fiscal of the calendar year. That is what we just expect to do some conversion of this. But, clearly, we will have to do it earlier, and as this is coming such an important segment that as we learn more about it, we will probably communicate more for us of this stage, unfortunately.

You know, we are we are learning how to do this working with them at 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 are really there is a lot of valuable, great big projects. So it is a lot of work we are going through that you know, my our things are selling you know, and we are learning and working very well, but today, we do not have an actual number that I can share with you. What is exciting about this, if I can give you, Brian, the point, is that how fast it is growing. You know? That today is what we are communicating. It is growing 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. So and we are working very hard. We use it. It goes very much to our capability. The viral interconnect, you know, the things that where we excel. So that is what we are so excited about. But today, I think this is a new market segment. We cannot provide more clarity on.

Brian Lee: Absolutely. No. That is, that is great color. Maybe just two quick follow-ups on the guidance. 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 secondly, know, Julian, obviously, you are pretty bullish on the outlook for energy storage broadly, whether go to center or not. And you are saying that the guide is fully covered by backlog. So with pipeline and bookings continuing to grow, maybe it is a little bit too early. It is 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.

Julian Nebreda: I will go over the guidance for the year, and then Ahmed can give you details on the on the gross margin on the two projects I had. Update on the guidance. You know, we our approach to our performance that we want to working towards meeting our guidance. We are committed to meeting guidance. That is 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 is what we want to do. So if you ask me today, our order intake for this quarter will be the lowest one 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 is how we expect to try that, giving you a quarter to quarter, you know, appointment.

We want to keep this year where it is or in line with our guidance. Hopefully, know, the eye view that top side or whatever, but not not we do not want to exceed. We do we are look we are working towards making ’27 make it ’27 how we provide you know, good news to the market. That is what we are working. Today, we cannot provide guidance on ’27, but we will we will that that is what we are working on. And that the way you should think about our company. So on the ’20 on the on the Sure. Hey, Brian.

Ahmed Pasha: So the $20 million impact so this is the impact is at 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 under the contract 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 impact.

Brian Lee: Okay. Helpful. Thanks, guys. I will pass it on.

Julian Nebreda: Thank you, Ryan.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Dylan Nassano of Wolfe Research. Your line is now open.

Dylan Nassano: Hey. Good morning, Dylan. Thanks for taking my question. Just wanted to check. So Tesla mentioned on earnings call that they force also mega pack margin pressure this year. 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 do you feel like you have already accounted for this all and your current outlook?

Julian Nebreda: Yeah. I mean, yes. We also saw that we do not see any competitiveness, no real changes. So unless Tesla is referring to us, maybe. That is the only thing I can think of. You know? They are saying that, hey. We are to fluence. I mean, but in terms of tariff and all of the other stuff, I think we are very much aligned. So we are we are we are confirming our guidance with a view that there is no real change. So, you know, so we are not very clear what they were referring to.

Dylan Nassano: Got it. Thanks. No no more com the competitive environment, which has always have, you know, very, very intense. Not any any different than the tariff have been very stable. You know? So we do not expect any major changes in 26 numbers. There are some movement not real movement, so we no. We are confident of what we are yeah, confirming to it.

Dylan Nassano: Got it. Thanks. Appreciate that. And then for my follow-up, just kinda given some of the margin headwinds this quarter, can you kind of confirm that if you do end up being the acquirer of the ASC facility, that, you know, you feel good about kind of the your liquidity situation and no need for any kind of external capital to Yeah. Yeah. No. From the ASC perspective, we already talked about in the last call. You know, we have factored that in in our forecast and that we shared in last quarter. Outlook for the year. So feel pretty good.

Julian Nebreda: Well, I as I said, I do not think we do not expect that that they will they will resolve this issue some other ways. That is our understanding.

Dylan Nassano: Got it. Thank you.

Operator: Thank you. One moment for our next question. Question comes from the line of Julien Dumoulin-Smith of Jefferies. Your line is now open.

Julien Dumoulin-Smith: Hey, good morning, team. Could you guys hear me okay?

Julian Nebreda: Yeah. Hey, Julian. How are you? Hey. Pleasure. My name is Nick. 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 commit 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 road map if you think about this? Again, there is probably an iterative nature of what they are looking at versus what you are 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.

Julian Nebreda: Yeah. In terms of our product road map, I think as you as we have communicated, are different needs that we are meeting. I will say in the great majority of needs, there is no real change. And we have a very strong competitive advantage. Why? Dense is product. Say you know, very safe, you know, without design. The risk of a terminal runaway is very limited. You know? Reliability. We have our reliability last year that is close to 99. Very few people can do it. You know? So we have done very, very well. Cybersecurity. Nobody you know, we have been working very, very strong. So we are very, very happy on that part. Therefore, one of the needs, which is the quality of power, they need response time of, you know, below ten milliseconds.

And we have a road map to deliver that part. But when I looked at the pipeline, that is the one of the areas where we are competing with other technologies. And where the know, we are not necessarily the firm you know, we are we are that is not what is driving. The contract that we see today. There are some projects that are connected to that, but that is not what is driving. We want to serve it. We want to do it. We are offering this high know, very, very good 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. You know? So we are very, very you know, we are very confident. We are also know, we are not a competitor of the data center.

We are we are at we have been very, you know, historically company that has been very customer centric. So we are these are big buyers, so we are adapting our the way we have gone through the way we think to them. 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 go into the pipeline and when will convert that into backlog. These are new customer segments. So for us, we are learning. No? We are moving forward, and I think we are getting better and better every day on my sales team is really excited about this, and probably Jeff was doing a great job on this. But today is, you know, very difficult to commit to this.

Additionally, as you know, I have to be very careful with my competitive information. So we will try to provide you as much information as we can with our necessarily playing our card on what we are doing because, you know, there are a lot of people trying to do this job. And we do not want to provide them with competitive information. So that is where we are. Well, excited about the growth, excited about how we fit into it, excited about our the way we approach our customer that will work very well with these customers. And with our product, you know, and our product will do a wonderful job. 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.

Julien Dumoulin-Smith: Got it. Alright. It is just maybe not quite quite ready. And then on AES, you just take a 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 would be negotiating with for your domestic cell supply? That that I will say we we have a an MSA. The MSA will say they respect it. But, you know, we were looking we have made a we we provide a you see an opportunity for us to take, you know, ownership on it, which they now have resolved with with that. So, you know, we have our contract will not change at all. It will be will be an off taker. Our technologies are very much intertwined, and, you know, we understand that they solution that ASC is working on, which they are not know, I do not have the details.

It will not affect in any way any of the issues we have. You know? So, you know, we were trying to resolve this issue for them, so we have given them the what we thought was a good offer, but clearly, they have something better, some other solution that is much more attractive. So we will be an offtake. We will continue to be an offtake of that facility. As we move forward.

Julien Dumoulin-Smith: Right. And you could add a second off take? Just to expand your Oh, we we already remember, last quarter, we already added an update. And as I told you know so we already are working with some of the EV lines that are converting into best. And that market is getting, you know, very, very exciting. And I said, this is no different than what we saw in China. Two years ago. Or three years ago. When you had all that EV capacity that suddenly did not know where to go. So I think this is you know, it is a good opportunity.

Julien Dumoulin-Smith: Yeah. Awesome. Alright, guys. I will leave it there. Sorry. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Mark Strouse with JPMorgan. Your line is now open.

Mark Strouse: Hey. Good morning. Thanks for taking our questions. Julian, I just have to go back to something you said in the prepared remarks. So when you are 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 are 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?

Julian Nebreda: Yeah. Good. So the 36 gigawatt hours we have, there are projects we are working on. Some are in the pipeline. Some one some of them are lead. We will give you that number because that compares to the 30 gig that we gave you. Last quarter. In order to get into our pipeline, we need to ensure that we believe there is a 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 are very careful because we want to be sure that what comes into our pipeline, that drives another set of decisions internally on how we invest, manage them. So we are very careful looking at this. As this thing is coming very coming in very, very quickly.

Looking at them and deciding which going to apply them, and some of them will probably not become part of our pipeline over time. But the ones that into a pilot because they are the ones who are going to be investing money. And providing offers and doing the engineering and working. So that is it. The 36 giga if, let us say, if they will convert if they were to auto convert into a into a five ten. Will be will be it is an upside the vibe that we have today to the the 30,000,000,005 memb we have in front of us.

Mark Strouse: Okay. Alright. That is helpful. Thank you. Yeah. On the long duration, side, do not think this is a as a complaint. Thirty-four gigawatt hours is a very big number, but it is down from what you are talking about last quarter. So I just want to ask ask kinda what is going on there quarter over quarter.

Julian Nebreda: So that is a good good point. Last quarter, we talked about what we believe the TAM was or the rest of the market was. 60 gigas of which we had more portion. We put a thing to look at that. These are now the 30 gigas are projects that we are either in pipeline or or in leads. People that were working on preparing the engineer, looking at it, identifying. So these the numbers are different. The other one was more of a time I am sorry about that. I got that. I saw that in a few notes. That would created that confusion. The 60 gigawatts last time was a more total addressable market that we saw at the time. That included projects that were in markets that we do not serve or customers we work with or things like that.

So now the 30 year project that have the potential to become part of our pipeline because they are in markets we serve with customers we would like to work with. And we are just going over their work on how much of it we believe has a 50% chance of really and the 50% chance looks at, you know, interconnection, land rights, you know, ensuring that that thing will exactly the project that has. Not by this guy.

Mark Strouse: Great. Okay. Thank you.

Julian Nebreda: And I am sorry for the confusion at that point. I read that. In a couple of notes, you know, we probably were not clear enough the last time that the ’60 the ’60 was that time. Not a not a project. And and leads that we were working.

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

Dimple Gosai: Good morning. May I help you? Thanks for taking this question here. Just given your commentary on strengthening the domestic supply chain and modules are output ahead of plan, can you give us a sense of the mix of U.S. made versus imported sales that is kind of embedded in your ’26 delivery plan? And specifically, how much of that supply is kind of already on hand or contract for the year? And then I have a follow-up.

Julian Nebreda: Yeah. Okay. I will have Ahmed walk you through it then. The number. The mix is hi. Good morning. So mix is roughly half and half. I think it is the domestic versus import. Yeah. And your second question was sorry. I missed that.

Dimple Gosai: That is fine. And then I asked how much of that supply is already on hand or kind of contracted for the yard? Secured a hundred percent of our domestic and international needs for this year.

Dimple Gosai: Okay. So And and then secondly, just to draw on that. Right? As we kinda think about this this gross margin or structural gross margins, can you help us frame the gross margin delta between systems that are built with non-PFE US made cells versus, you know, today’s imported mix under the you know, the current 48% tariff load.

Ahmed Pasha: So so I think we we look at, frankly, from our perspective is blended rate. I mean, the guidance we have given is 10 to 15%. It all depends on the project scope. Sometimes we have EPC. Sometimes we do not. So I think net net, that is what we are looking at between 10 to 15% margin.

Dimple Gosai: Regardless of where the sales come from, regardless, like, when it is non-PFE and with the tariffs, with extra tariffs, Yeah. You know? Yeah. Yeah. I think I mean, it could be, you know, depending upon situation. You know? So I think but but net net, that is where we land in that range. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Ben Kahlo of Baird. Your line is now open.

Ben Kahlo: Hey, good morning. Thanks for taking my question, guys. My question is around leverage, but I want to get get at it from volume. Could you talk to the the amount of volume? Because you have this massive pipe or back pipeline. That you could execute on. Just how do we think about your contract manufacturers and your own you know, supply chain? People, and capital constraints that you guys have. You know, if you if you want to go up to, you know, say, 10 gigawatts a year or something like that, what is the process for that? And and, you know, how much flexibility do you guys have to ramp and execute that? And then specifically in in in outside of manufacturing, your contract manufacturers, on the liquidity side because we did see you do a capital raise know, 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 numbers. If we could just address that. Thank you.

Julian Nebreda: So I will address the supply chain, and I will have Ahmed to talk to our working capital and capital you know, the capital plan. On supply chain, the way we work is we have a long-term plan of all that, you know, you know, that has a base case. That has an offset case, and it has a, you know, heated out of the park case. And we serve those needs with different sources of, you know, suppliers that work either way, you know, who we have. Base suppliers that support our normal work, the upside suppliers that have a capability, and we also identify players of which we we can play we feel very comfortable. We have the supply chains to to go even beyond what you know, what we are are upside cases that we communicate to significantly above that.

So it and it is a work of working with our suppliers with you know, building a little bit of spare capacity, providing suppliers that have spare some capacity they can deliver. So it is a little bit of a of a renegotiation, Charlie. And it has been working well. And, you know, my my ambition will be to use it. You know what I mean? But to be able to to to use it today. And we believe that the the world we are entering to this be probably an option that will happen. In terms of capital, I will ask Ahmed to respond.

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

Ben Kahlo: And then just a follow-up on the on the leverage side. Could you just talk about what type of scale it translates in that like operating leverage you know, under the current gross margin that if that is what we should expect even if, you know, as as your volume grows, 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 there, be also.

Julian Nebreda: Yeah. Thank you. I will tell you. The way we have been communicating I mean, the way we think about this actually is that you you should assume that our gross margins stay the same. And our ability to grow our EBITDA will come out out of our operating leverage. And how do we think about it? And to to to you a, that our top line grow our 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 at our know, top line growth goes at a hundred, our overhead will not will grow at less than than 50%. And that is where the operating leverage is, and that is the way you should think about it. You believe that we can grow, let us say, at a 100, then that operating leverage gives you significant appetite. Growth. That is the four Thank you, Yeah.

Ben Kahlo: Great. Thank you, guys.

Julian Nebreda: Thank you.

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

Vikram Bagri: Hi. Good morning, everyone. Lot of discussion about competition and and William, you 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 and a opportunities that you see today And then finally, could you share the threshold of return that you for you to make an acquisition, whether it is a ESC or someone else? How do you look at look at the possibility of m and a in terms of accretion or know, return on invested capital. What is that threshold?

Julian Nebreda: Yeah. So how do we think about about vertical integration? Are very much integrated with our suppliers because our suppliers sell back to us. Our, you know, our designs, our IPs, our it is that is how that would work. Very much, they they were using our own engineering is what is driving our supplier base. So generally our contractor manufacturers are allowing us to have a competitive cost with access to the technology we need. So we do not really see a strong need for you know, vertical integration. No? If things change, I will be that that you could think about it. But today, we will see a strong need to you know, we are we are we we can we we can work with contractor manufacturers that integrate our technology into our work that we can and our software into our work.

That we can then convert into product at a very, very competitive price. So we are happy on that. In terms of, you know, any acquisition, generally, it will have to be accretive from, you know, from from for us. So so that is how we look at it, you know, when we were doing evaluating the potential, a decision of ASC or participating in that deal. You know? It has to be accretive. So it has to make sense. So, you know, and the accretion needs to create you know, is that needs to reflect the additional risk that you take when you do when you integrate Vertex. What the great capability we have is that we are very agile. We can have three or four different battery manufacturers you know, integrated into our system that we have developed our smart start that it can integrate any battery.

I will tell you more. We can make any battery great. No? Using political slogans, but it is true. Any battery, we can make it great if you put it into our system. So that is what that is our approach to supply chain. So we were to integrate vertically, we will lose that healing, that agility, and that ability to to wet things. So we also take that into account what we were looking at a fairly Hey. We need to take into account that we are 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 capability we can make them operate.

Vikram Bagri: Got it. Thank you. And as a follow-up, could you provide a split of leads versus pipeline in data center and long duration sort of numbers that you have shared on slides? And could you also remind us how do you define leads versus pipeline Mhmm. In in this category?

Julian Nebreda: Thank you. Roughly, it it between leads and pipeline, roughly 25%. You know? And the difference is the the the the difference between lead so 25% or thirty-four thirty-six gigawatt hour. Are in in in pipeline today. In order to go to a pipeline, it should be a project that we believe our within the next two years. Has a 50% chance of we all converted it into backlog for 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. The you know, it is not there are a lot of people talking a lot of stuff. You go sit down and, you know, get an idea. So those things, we do not come into a do not we do not bring it into a pilot because what comes into a balance drives cost.

You know? Right? Engineering, drives, you know, planning drives. So we are very, very careful what comes in and what. You know? I think my main point on data center is how fast it moves. You know? We have to see how this this let us see how this big market opportunity converts real execution within the next quarters.

Vikram Bagri: Got it. Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Christine Cho of Barclays. Your line is now open.

Christine Cho: Good morning. Thank you for taking my question.

Julian Nebreda: Good

Christine Cho: I just have a clarification, I guess, on the on the last response. I think last quarter when you talked about the 30 gigawatt hour at least at the time of the call, you had said half was in the pipeline, and now you are saying 25%. So just curious as to what drove the change over the last.

Julian Nebreda: Yeah. You know, things come in and out. So, you know, maybe for that, we when we did the engineering, it did not work or, you know, some some things coming out all the time. So no. We are very excited about where we are. I mean, that is it. Yeah. And then if You know, those that that we are giving you information that usually we do not communicate on how but these things move in and out all the time. And, you know, as we go in and they put in the morning, the thing does not work. They are crazy. There is no way you want to do what you want to do. So we take care of our partner. And tell the customers, go and figure out what you are going to do or some other sort or more of the issue.

Christine Cho: Okay. And then if I look at your pipeline from the 23,000,000,000 to 30,000,000,000, just nominally, The US went from 10,000,000,000 to 17,000,000,000. 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 is right. Yeah. That is right. You know, we we had we have reorganized the company with this growth group now rather than having a the region. We brought in Jeff Monday to help us run that group. He dedicated the first quarter of keeping preparing the pipeline, expanding our capabilities. So business development and, you know, that you see some of the results. In this, you know, new pipeline numbers we have.

Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Chris for closing remarks.

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

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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