Fluence Energy Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
FLNC$5.40+2.5%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001868941-24-000045
Item 1A. Risk FactorsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001868941-24-000059
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 7 previous paragraphs and 8 current paragraphs.
1 unchanged; 4 reworded; 3 added; 2 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
and limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or in pursuing our strategic objectives.
Current report
Short sellers may engage in manipulative activity intended to drive down the market price of our Class A common stock, which has and could in the future result in related governmental and regulatory scrutiny, among other effects.
Current report
Short selling is the practice of selling securities that the seller does not own but rather has borrowed or intends to borrow from a third party with the intention of later buying lower priced identical securities to return to the lender. Accordingly, it is in the interest of a short seller of our Class A common stock for the price to decline. At any time, short sellers may publish, or arrange for the publication of, opinions or characterizations that are intended to create negative market momentum. Short selling reports can cause increased volatility in an issuer’s stock price, and result in regulatory and governmental inquiries. For example, on February 22, 2024, as previously disclosed, the Short Seller Report was published which contained certain allegations against the Company. In response to the Short Seller Report, our Audit Committee completed an internal investigation, with the assistance of outside counsel and forensic accountants, into the allegations in the Short Seller Report. We, after consultation with the Audit Committee, believe that the internal investigation demonstrated that the allegations of wrongdoing contained in the Short Seller Report are without merit. We have been informed that the SEC is conducting a formal investigation andasking for certain information regarding our financial reporting. We intend to fully cooperate with the SEC’s investigation. Based on the information requested by the SEC, we believe that the SEC is reviewing the Company’s revenue recognition practices, a previously-disclosed material weakness in internal controls, capitalization of internal-use software costs, as well as certain service contracts with related parties. These areas were the subject of assertions in the Short Seller Report and were included in the Audit Committee’s internal investigation. Any inquiries or investigations conducted by a governmental organization or other regulatory body, such as the ongoing SEC investigation, or any internal investigation, such as the one conducted by our Audit Committee, could result in a material diversion of our management’s time and result in substantial cost and, in the event of an adverse finding, could have a material adverse effect on our business and results of operations. In addition, any perceived or actual failure by us to comply with applicable laws, rules, regulations, and standards could have a significant impact on our reputation and expose us to legal risk and potential criminal and civil liability.
Removed paragraphs (2)
Previous report
Borrowing availability under the ABL Facility is subject to a borrowing base calculated in part on percentage of Net Orderly Liquidation Value (as defined in the ABL Credit Agreement) of our Eligible Inventory and Eligible In-Transit Inventory (both as defined under the ABLCredit Agreement), which, may be impacted by factors outside of our control, including demand for the Company’s products, production levels, operating activities, competition with producers of similar products, U.S. legislation and regulation, and supply chain factors. For example, if our inventory in the United States is limited and lower than expected, then our borrowing base availability under the ABL has and may in the future decline and we have had, and may in the future have, no borrowing capacity under the ABL Facility. In addition, the agent under the ABL Credit Agreement is permitted to adjust what is included in Eligible Inventory and Eligible In-Transit Inventory definitions and impose reserves under the ABL Facility, in its discretion, which could materially adversely affect the borrowing base availability. As a result of the foregoing, we may not have full or any access to borrowings or letters of credit under the ABL Facility based on the actual borrowing base calculation with respect to any period. As of the date of this Report, based on the most current borrowing base certificate delivered to the ABL Lenders, we had no borrowing availability under the ABL Facility as a result of limited U.S. Eligible Inventory and Eligible In-Transit Inventory, due primarily to timing of our U.S. projects. Any limitation on our ability to borrow against the ABL Facility may have a material adverse impact on our liquidity and out ability to fund future operations.
Previous report
Further, to the extent that no Covenant Relief Period is in effect, the ABL Credit Agreement provides for a full cash dominion period if certain thresholds are not met under the ABL Credit Agreement. During a full cash dominion period, Barclays has ability to conduct daily sweeps of our controlled accounts, which may place constraints on our cash management system and could impede our access to liquidity.
Reworded paragraphs (4)
Previous wording
Our ABL Credit Agreement imposes certain restrictions that may affect our ability to operate our business and make payments on our indebtedness and may limit our ability to borrow under the ABL Facility.
Current wording
Our 2024 Revolver imposes certain restrictions that may affect our ability to operate our business and make payments on our indebtedness.
Previous wording
We are party to the ABL Credit Agreement with revolving commitments in an aggregate principal amount of $400.0 million, as amended from time to time. The ABL Credit Agreement contains covenants that, among other things, restrict our ability to incur indebtedness; incur liens; sell, transfer, or dispose of property and assets; invest; pay dividends, make distributions or other restricted payments and engage in affiliate transactions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources— Asset-Based Lending Facility” for further discussion of the ABL Facility. These restrictions may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry or take future actions, including raising additional debt or equity financing to operate during general economic or business downturns, to compete effectively or to take advantage of new business opportunities. As of each of March 31, 2024 and the date of this Report, we had no borr owings under the ABL Facility and no letters of credit outstanding.
Current wording
We are party to the 2024 Credit Agreement, as may be amended from time to time, with revolving commitments in an initial aggregate principal amount of $500.0 million, with a cash draw sublimit of $150.0 million and a letter of credit sublimit in the amount of $500.0 million. The 2024 Revolver contains covenants that, among other things, restrict our ability to incur additional indebtedness; incur liens; sell, transfer, or dispose of property and assets; invest; make dividends or distributions or other restricted payments and engage in affiliate transactions. In addition, we are required to maintain minimum liquidity, minimum consolidated leverage ratio, and certain other financial requirements relating to the guarantor coverage test on certain applicable dates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—2024 Credit Agreement” for further discussion of the 2024 Revolver. The 2024 Revolver limits our ability to make certain payments, including dividends or distributions on Fluence Energy, LLC’s equity and other restricted payments, provided, however, that payments in respect of certain tax distributions under the Third Amended and Restated Limited Liability Company Agreement of Fluence Energy, LLC and certain payments under the Tax Receivable Agreement are permitted. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Tax Receivable Agreement” for further discussion of the Tax Receivable Agreement. Such restrictions may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry or take future actions, including raising additional debt or equity financing to operate during general economic or business downturns, to compete effectively or to take advantage of new business opportunities. As of the date of this Report, we had no borr owings under the 2024 Revolver and no letters of credit outstanding.
Previous wording
Our ability to meet the restrictive covenants under the ABL Credit Agreement may be impacted by events beyond our control. Our ABL Credit Agreement and related security agreements provide that our breach or failure to satisfy certain covenants constitutes an event of default. Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding, if any, under its debt agreements to be immediately due and payable. In addition, our lenders, to whom we granted a security interest in substantially all of our assets, would have the right to proceed against such assets we provided as collateral pursuant to the ABL Credit Agreement and related security agreement. If our borrowings under our ABL Facility was to be accelerated, we may not have sufficient cash on hand or be able to sell sufficient collateral to repay it or be able to borrow sufficient funds to refinance it, which would have an immediate adverse effect on our business and operating results.
Current wording
Our ability to meet the restrictive covenants under the 2024 Credit Agreement may be impacted by events beyond our control. Our 2024 Credit Agreement and related security agreements provide that our breach or failure to satisfy certain covenants constitutes an event of default. Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding under its debt agreements to be immediately due and payable. In addition, our lenders, to whom we granted a security interest in substantially all of our assets, would have the right to proceed against such assets we provided as collateral pursuant to the 2024 Credit Agreement and related security agreements. If our borrowings under our 2024 Revolver were to be accelerated, we may not have sufficient cash on hand or be able to sell sufficient collateral to repay outstanding borrowings or be able to borrow sufficient funds to refinance, which would have an immediate adverse effect on our business and operating results. Any such acceleration could potentially cause us to cease operations and result in a complete loss of your investment in our Class A common stock.
Previous wording
Amendment No. 2 to the ABL Credit Agreement expands the borrowing base calculation under the ABL Facility to include borrowing base qualified cash, which would be held in a specific borrowing base qualified cash account with Barclays. In addition, the borrowers must satisfy certain release conditions prior to the transfer of funds out of the borrowing base qualified cash account, and there is no guarantee that the borrowers will be able to satisfy such conditions at any given time. To the extent the Company maintains such borrowing base qualified cash account, the cash deposited into such account will be restricted under the terms of the ABL Credit Agreement and not available to the Company for other business purposes. The ABL Credit Agreement also requires us to dedicate a portion of our cash flow from operations to interest payments, thereby reducing the availability of cash flow to fund working capital, capital expenditures and other general corporate purposes.
Current wording
Moreover, the 2024 Revolver requires us to dedicate a portion of our cash flow from operations to interest payments, thereby reducing the availability of cash flow to fund working capital, capital expenditures and other general corporate purposes; increasing our vulnerability to adverse general economic, industry, or competitive developments or conditions;