Hello, and welcome to Fluence Energy Investor update call. At this time, all participants are on a listen only mode. After the speakers' presentation, there will be a question-and-answer session. To ask the question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. We ask that you limit yourself to one question and one follow-up. I would now like to turn the call over to Chris Shelton, Head of Investor Relations. You may begin. Good afternoon, and thank you for joining us. Joining me on today's call are Julian Nebreda, our President and Chief Executive Officer, and Ahmed Pasha, our Chief Financial Officer. A copy of our press release is posted to 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 related to our business and the company that are not historical facts. Such statements are based upon current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward-looking statements and for more information regarding certain risks and uncertainties that could impact future results. 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 financial measures that we believe are useful in evaluating the performance of our business. We are unable to reconcile our projected fiscal 2026 adjusted EBITDA to the most directly comparable GAAP measure because certain items that may affect future results are outside our control or cannot be reasonably estimated at this time. Following our prepared remarks, we will conduct a question-and-answer session with our team. During this time, to give more participants an opportunity to speak on this call, please limit yourself to one initial question and one follow-up. Thank you very much. I'll now turn the call over to Julian. Thank you for joining us today on very short notice. Earlier this afternoon, we issued a press release reducing our fiscal year 2026 guidance to reflect the impact of supply chain issues affecting our U.S. production, particularly at our new contract manufacturing facility in Houston. These issues had a significant impact on expected revenue for the fourth quarter of fiscal year 2026. Today, I'd like to first provide more color on these issues and the impact on our anticipated 2026 financial results. Second, cover the action plan we have put into place, and third, provide an outlook on how we are approaching our fiscal year 2027 plan. First, to address the issues affecting our U.S. production. On our last earning call, we discussed the slower than expected ramp-up of our Houston facility and the production levels we projected to achieve during the remainder of the fiscal year. Since then, we have experienced additional delays. Our team underestimated the complexity of the ramp-up of the Houston facility. Specifically, the major issue that has emerged has been the underperformance of the customized automated welding process, which is operating significantly below its targeted level. Another issue has been the speed of final assembly of components into finished product, which lags our expectations due to shortages of skilled labor. In order to address these challenges, our contract manufacturer has taken the following corrective actions. First, they switched to manual welding, which require hiring additional skilled labor. Manual welding is slower than automated and requires more detailed quality inspections. Second, they engaged three subcontractors across different locations in Houston to increase the capacity of both the welding and the assembly processes. Implementation of these corrective actions is taking longer than expected. As a result, we don't expect to achieve our previously targeted production levels during this fiscal year. Our previous guidance midpoint assumed an average of 11 units per day during ramp-up of August and September. Actual production in August has averaged under one unit a day, but with the corrective actions implemented, production levels have increased to an average of three units per day during the first two weeks of September. We expect to continue improving production to achieve the targeted capacity of the facility. Separate from the Houston facility, we have recently experienced delays in the delivery of balance of plant equipment such as transformers and inverters, and a couple of projects due to supplier logistical constraints that will shift revenue out of this fiscal year. Turning to the impact on our fiscal 2026 guidance, we are now expecting to recognize approximately $2.4 billion of revenue. This represents a reduction of approximately $600 million from the guidance we provided in August. More than 80% of the expected revenue decrease is attributable to U.S. production issues. This includes approximately $450 million of production delays, primarily from the Houston facility, and approximately $65 million of penalties largely associated with late delivery. The remaining approximately $85 million reflects logistics primarily due to bottlenecks and customer credits. We now expect to record an adjusted EBITDA loss of approximately $200 million as compared to a loss of $10 million in our prior guidance. Approximately 2/3 of the increased loss is attributable to missed project milestones, including approximately $65 million of associated penalties and approximately $65 million from gross margin tied to revenue shifted into fiscal 2027. The remaining $60 million impact includes $35 million costs associated with the initial rollout of new products and an estimated $25 million of additional costs to achieve volumes and quality standards on initial production from the Houston facility. In response to these developments, and to better position us to execute on our backlog in fiscal 2027, we are implementing a plan to strengthen our supply chains, production systems and processes, and execution discipline. To that end, we have made structural changes to our management, including appointing Bernerd Da Santos as our new Chief Operating Officer. Some of you may know Bernerd from his many years at AES, including as COO, and most recently, as head of AES Clean Energy. He has extensive experience managing operational turnarounds, including an end-to-end transformation of AES supply chains organization. Bernard and his team will be developing a plan to address the process weaknesses that contributed to the production shortfall, define corrective actions, and track execution against clear milestones. Additionally, they will be developing a framework to effectively evaluate our contract manufacturers and future production schedules. We are approaching this with urgency to incorporate findings and recommendations from this process into our fiscal 2027 operating plan. We have identified several critical areas to be addressed, including strengthening our integrated planning process across all aspects of materials, production, and delivery, and upgrading the resiliency of our supply chains. We plan to provide an update on our action plan in November, when we report fiscal 2026 results and provide guidance for fiscal 2027. Beginning in November, we plan to report U.S. production levels each quarter, both actual and forecast, so that our stakeholders may track our progress on production and delivery performance. At this time, we wanted to provide you the framework from which we are developing our fiscal 2027 operating and financial plan. First, our plan is to deliver on our 2027 backlog, estimated at $2.9 billion as of today, which provides a strong foundation for revenue. Second, we intend to rightsize our revenue growth and corresponding investment so that we do not have need for additional capital in fiscal 2027. Third, we are targeting neutral to positive operating cash flow in fiscal 2027. Finally, we will address the seasonality aspect of our business, reducing execution concentration and supporting a more balanced delivery profile. In closing, while today's guidance revision is disappointing, the underlying issues have been identified, concentrated in our domestic supply manufacturing ramp-up, and addressed. Our international operations are on track, and demand for energy storage remains robust. Importantly, recent progress at Houston reinforces our belief that these challenges are operational in nature and can be resolved through targeted execution. Operator, we are now ready for questions. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Dylan Nassano with Wolfe Research. Your line is open. Good afternoon, Dylan. Hi, good afternoon. Hello. When you talked in the last quarter earnings call, you spoke about access to power being a headwind. Is that still an issue here, or have we moved past that and these are kind of unrelated issues? The facility is still not connected to the grid. However, we have provided additional generators that essentially address this issue. Today, where we stand, the automated welding is the main critical path. We know that we haven't had the power as being a limited path. Okay. Thank you. We are expecting connection to the grid, sorry, we're connecting connection to the grid first quarter of 2027, so sometime between October and November. Okay, got it. Secondly, just on the financial outlook here, you're speaking to neutral or positive operating cash flow, but did this kind of change how you're thinking about the need for capital next year at all? Yeah, our view is still we are right-sizing the plan to ensure there will be no need for additional capital in 2027. We are evaluating. We started evaluating the new order intake in terms of the need for additional capital. We will ensure that we will have no additional. We will not need any capital. Second, we will look in our costs, something that we will do to ensure that it's over. It'll be a combination of. The plan for next year is no need for cash, a balanced plan based on our backlog, and with a cost structure that allows us to have a neutral to positive cash flow in 2027. Thank you. Okay. Thank you. Our next question comes from the line of Justin Clare with Roth Capital Partners. Your line is open. Hey, good afternoon. Thanks for taking our questions here. Good afternoon. The first one here, just wondering if you could quantify what the targeted production level is at the Houston facility at this point, when you expect you might reach that run rate, and what is necessary in order to support the fiscal 2027 delivery plan. Just curious on the shift to manual welding, does that solve the near-term bottleneck at the expense of potentially higher unit costs? Is there any trade-off in making that shift? Well, let's start with 2027 first. I can give that. We have $2.9 billion of backlog for 2027, of which $1.2 billion needs to be produced out of the U.S. Primarily, or the majority of it, might be essentially the majority of it will come out of the U.S. facility. We have built a plan, and we have looked at the ability to monetize that backlog against a purely manual welding operating scheme. Not what we expect to happen. But to ensure that we could today communicate firmly that we believe we are going to deliver on the $2.9 billion, we built a plan based on that. It clearly carries more costs, and it will take a little longer, but that is the plan we are doing today. In order to reach the targeted levels of the facility of Houston, we need to resolve the automated welding. The automated welding is in the learning process, so it is going through a process of learning how to weld our Gridstack Pro 5000. It is progressing well, but it is taking much longer than expected. We believe this is a time issue that it will be resolved, and it will become operational. But in order to be able to confirm the numbers, we wanted to ensure that we could offer you a plan that was based on manual welding. As we said in our numbers for 2026, now going to 2026 on the additional cost, we identified additional $25 million of cost connected to meeting all the volumes and quality numbers. This is an estimate at this time. It could be potentially a lower number or there were some uncertainty around it. But clearly represent the additional cost of procuring manual welding and bringing some of these additional subcontractors to support the process. As we said, that even though we are presenting a plan based on manual welding for 2027, we are working actively to resolve the constraints we have today connected to automated welding and final assembly to ensure that we can confirm the guidance, the margin metrics we have in the Got it. Okay, appreciate that. Then just one more. You had talked about right-sizing the business to support growth here so that you do not require additional capital. Wondering, with the $2.9 billion of backlog already scheduled for fiscal 2027, what does the right sizing mean at this stage? Do you have to limit the incremental orders that you take for 2027? Is there any sort of revenue level that could be supported while still maintaining a neutral to positive cash flow? Good question. No, the right sizing means limiting additional backlog that will convert into 2027, especially in the U.S., and ensuring that any additional backlog provides positive cash flow to the plan. As you know, our main use of capital as a company is working capital. Sometimes this program, even though they are generally positive in cash flows during most of the execution of the plan, it changes case by case. So we are being very careful on what comes into 2027 in terms of supporting 2027 revenue. So there is spare capacity in the international business to bring additional production, and our sales teams are looking at working on that. But on the domestic production level, we are being very selective on what we can commit to 2027. That is it. Got it. Thank you. Thank you. Our next question comes from the line of George Gianarikas with Canaccord Genuity. Your line is open. Good afternoon, George. Hey, good afternoon, everyone. Thank you for taking my questions. Maybe it's early, but I'd love to understand any impact that you're seeing to your market share so far. You sort of mentioned, I think, in some of your answers, that you're limiting what you're going to put into backlog. Are you sort of competing less for certain projects, or are you seeing any negative impact to the market share dynamics that you had so far? I will say that the following. In the international side, on anything that often needs production out of the U.S., we continue actively at working. In terms of anything that goes beyond 2027, we are actively working on. What we're limiting is any products that require U.S. productions in the U.S. delivery on 2027. That's what we're working on. I think that this will have an effect, as we're talking to customers in delaying some projects or saying no to some projects, but it should not have a meaningful effect in our ability to meet customer needs. The only thing I would add, George, this is Ahmed, is that there are many customers in the U.S. who want not necessarily domestic content. I think we will continue to look at those opportunities in the U.S., particularly the data centers in the U.S. Thank you. Maybe as a follow-up, you did mention some issues in securing some supply of components, particularly transformers and I think an inverter, as you mentioned. Do you know if that has anything to do with the recent announcement from the Trump administration around the U.S. bulk power system and district? These are usually small delays of days or weeks that would have been within our guidance range. As we are presenting the number and presenting only a final approximate result and not providing a range, these things move. But if we are talking at a few weeks or a few days of movement, that means that projects that we were expecting late in September are now looking to be more into the end. None of that has connected to the new restrictions, both in the U.S. and Europe, on imported or inverters or transformers, or inverters especially, from certain countries. Well, has there been any- Go ahead. No. Has there been any impact from that announcement from the Trump administration? Oh, we have seen a major preview change in the way most of our customers request that we do not use any inverters from both here and in Europe, from certain countries. As you know, we have a good supply chain in terms of inverters outside of China. Sorry. Try to avoid mentioning them, but we have no issues meeting those requests from us. Thank you. Thank you. Our next question comes from the line of Vikram Bagri with Citi. Your line is open. Hi, it's Vikram. Good afternoon. Hello. No worries. Good, thank you. Just in terms of thinking about the methodology for setting the guidance, is there any change in the thinking there in terms of the coverage level that's being set with the typical 85% ratio? Just thoughts on that. Very good question. We are not setting guidance for 2027 today. What we are setting is the parameters of what we believe will be our guide to monetize all our backlog. We will have no need for additional capital. We will have operating with positive net versus positive operating cash flow, and we are levelizing all that. I said that the 85% rule, and as part of the plan to be able to do that is limiting or right-sizing some of the order intake to ensure that it aligns with all the three objectives. The 85% rule, I will not say that it will apply to our main objective, meaning the score points as we move forward. Got it. Thank you. Just as a follow-up on the need for capital, is there anything from a covenant standpoint that would require additional capital either this year or next? No, currently we are not required. Obviously, we will keep an eye on our covenants. But no, there is nothing. We are in compliance as of today. I think as Julian mentioned, our goal is to continue to generate neutral to positive cash flow. So feeling pretty good. Thank you. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of David Arcaro with Morgan Stanley. Your line is open. Hi. Thanks so much for taking my questions. I was wondering, do you have any recourse to the contract manufacturer that you're using, in terms of financial damages or anything like that, or costs that they would cover? And then going forward, is an option that you might consider to use a different contract manufacturer for that process? Let me start with the beginning. This is a contract manufacturer we have used since the inception of Fluence, essentially since the inception of Fluence. He has been very successful delivering our products with quality and on time, all the time. They have experience producing in the U.S. It's just this project has been a project that has had significant challenges, and they have not been able to succeed. We do have some recourse, however, in our contract, but not material enough to change significantly the numbers we're sharing with you. In terms of a manufacturing strategy, I think that one of the elements that we clearly take comes very evident from the situation. There are a few, but the one I want to highlight is the need for a more resilient supply chain that does not put us at risk of a simple process affecting our numbers. In this case, the delay in resolving or putting into place the manual welding created essentially $1 billion of miss in our revenue for the year, or represent the great majority of the $1 billion miss. That is clearly not a resilient plan. As we are looking at our 2027, we will look at ways of reducing our dependency, not only on suppliers, but also on any single process. Understood. Thanks. That is helpful. I guess, looking ahead to the backlog and executing against that, I was wondering, have you had conversations with customers on the 2027 deliveries? Has there been any change in commitment levels within the backlog as a result of this? Or potentially any financial risk to you to the extent there are challenges executing the backlog projects that are coming for next year? We have communicated with all the customers who have delays due to the issues in 2026 that will move into 2027. That has been communicated. We are reflecting in our numbers the LDs that come out of those delays. That is part that is already here. We are working with our customers to ensure that the delays in production do not affect or their effect on their meeting their commercial operation dates are reduced. We are putting plans to ensure we do commissioning in parallel, both whole and half commissioning, to try to reduce the amount of delays that these delays in production will have in their commercial operations. We are working with them. You can imagine that this is clearly something that is not in the plans. That creates problems for them, and I am in the process of addressing by one by one. Okay, got it. Thank you so much. Thank you. Our next question comes from the line of Joseph Osha with Guggenheim. Your line is open. Hi. Thanks for taking my question. I have two. Julian, setting aside some of the stuff from this current announcement. You indicated earlier that one of the challenges here is simply the back-end loading of the fiscal year and the fact that you're having to flex your organization so much, which just inherently creates risk. You said you're trying to address that, but I guess my question is how, right? Because we've been seeing this back-end loading continue to take place. How are we going to address that? Thanks. Yes. Very good question. The thing we're doing this year is we're limiting the amount of production and revenue we'll have per quarter and not taking any additional obligations beyond what we believe is a reasonable number. That by itself has balanced the production and revenue levels quarter per quarter for 2027, and we will continue that for 2028 and onwards. Okay. I believe this will reduce significantly our risk. So that's really interesting then. Might one conclude that we could see much greater, more even loading across the four quarters in FY 2027 than we've seen today as a result of that? That's what we're planning to. I think that we're looking at both production levels and revenue. Even though you might see on revenue that they are not equal, the production levels we're organizing in a way that are as equal as possible. Yeah, that's the work we're doing right now. Okay. Thank you very much, Julian. Thank you. Ladies and gentlemen, at this time, I would like to turn the call back over to Julian for closing remarks. Yes. Thank you, everybody, for joining at such short notice. I would like to end up with, clearly what happened today does not meet the standards of how we want to work, does not meet what we want to do as a company. It is something that we understand we should have identified earlier and corrected earlier. We are working actively and now with Bernerd joining the company and with the executive team here in Fluence to ensure that we put the corrective actions so this doesn't happen again, and we can continue serving our customers with a good quality product with on-time delivery. There is no way of success out of this process without pleasing and meeting our customer needs. So thank you very much for your support, and thank you for participating as well. Ladies and gentlemen, that concludes today's conference call. You may now disconnect.