Fluence Energy (FLNC) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Our relatively limited operating and revenue history as an independent entity and the nascent clean energy industry in which we operate makes evaluating our business and future prospects difficult
2. 02complications, and delays frequently encountered in connection with the growth of a business in a nascent industry, as well as those that are specific to our business in particular as which are further described herein
3. 03We anticipate increasing our expenses in the future and we may not be able to maintain prolonged profitability
4. 04Our order intake and results of operations may fluctuate across fiscal periods, which could make our future performance difficult to predict and could cause results of operations for a particular period to fall below expectations, resulting in a decline in the price of our Class A common stock
5. 05We may experience difficulties in maintaining our current manufacturing capacity and establishing our expected full commercial scale mass manufacturing capacity in the future
6. 06We have experienced and may continue to experience delays, disruptions, and quality control problems in our manufacturing operations, in part due to our third-party manufacturer concentration, which may in turn adversely affect our business, results of operations, financial condition, and future prospects
7. 07The suppliers in our supply chain may not be able to provide us with the quality and quantity of components on the timeline that we have contracted for which could result in insufficient inventory as well as negatively affect our results of operations
8. 08We face risks relating to our status as a relatively low-volume purchaser of our key components of our energy storage solutions as well as resulting from supplier concentration and limited supplier capacity
9. 09We are a global company with operations in many countries and maintain a global supply chain which comes with a number of risks that may impact our business, results of operations, and future growth
10. 10inputs or otherwise adversely impact our operations. Prohibitions on forced labor have also been adopted in other jurisdictions, such as the European Union, and is a topic that will likely be subject to further regulations or prohibitions in the markets we operate within
11. 11Significant changes in the cost and/or availability of raw materials and components that are incorporated into our energy storage products could adversely affect our business, results of operations, and future prospects
12. 12Failure by our manufacturers, vendors, and suppliers to use ethical business practices and comply with applicable laws and regulations, including labor and environmental laws, may adversely affect our business
13. 13risks that may impact our business, results of operations, and future growth” above
14. 14We face increasing competition for our energy storage solutions, services, and digital application offerings from both more established and new competitors. If we are unable to attract new customers and retain existing customers, our revenue growth and operating results may be adversely affected
15. 15In an increasingly competitive energy storage market, maintaining and enhancing our reputation and brand recognition is critical for keeping our position as an industry leader. If we are not able to maintain and strengthen our reputation and brand recognition, our business and results of operations may be harmed
16. 16If we fail to effectively manage our recent and future growth and expansion of our business and operations, we may be unable to execute our business plan, maintain high levels of customer service, and/or adequately address competitive challenges
17. 17Our growth depends in part on the success of our relationships with third parties
18. 18If we are unable to attract and retain qualified personnel, including members of the senior management team, in order to execute our business strategy and growth plan, our business and ability to compete may be adversely affected
19. 19The sales and installation cycle of our energy storage solutions is lengthy, and if we fail to close sales on a regular and timely basis, it could adversely affect our business, financial condition, and results of operations
20. 20potential impact to our customer relationships, any of which could adversely affect our business, prospects, financial condition, results of operations, and cash flows
21. 21Our energy storage products and solutions, which are complex, could contain defects, or may not operate at expected performance levels, which may cause us to incur warranty expenses beyond current estimates and could adversely affect our business and results of operations
22. 22We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results
23. 23Our current and planned foreign operations expose us to additional business, financial, regulatory, geopolitical, and other related risks which may have a material adverse effect on our business
24. 24Amounts included in our pipeline and contracted backlog may not result in actual revenue or translate into profits
25. 25As part of growing our business, we have in the past made acquisitions and expect to continue to evaluate acquisitions into the future. If we fail to successfully select, execute, or integrate our acquisitions, then our business and operating results could be adversely affected and our stock price could decline
26. 26Our customer relationships, business, financial results, and reputation may be adversely impacted due to events and incidents relating to storage, delivery, installation, operation, maintenance, and shutdowns of our energy storage solutions
27. 27Actual or threatened health epidemics, pandemics, or similar public health threats, such as the COVID-19 pandemic, have had and could in the future have a material adverse effect on our business, outlook, financial condition, results of operations, and liquidity
28. 28We may not be able to obtain letters of credit, surety bonds, or other financial assurances for our projects, if and when needed on favorable terms, if at all, and we may not have sufficient liquidity to satisfy any indemnification obligations thereunder

Risks Related to Our Industry

1. 29If renewable energy technologies are not suitable for widespread adoption or sufficient demand for our offerings does not develop or takes longer to develop than we anticipate, our sales may decline, and we may be unable to achieve or sustain profitability
2. 30If the estimates and assumptions we use to determine the size of our total addressable market are inaccurate, our future growth rate may be affected, and the potential growth of our business may be limited
3. 31The economic benefit of our offerings to our customers depends on the cost of electricity available from alternative sources, including local electric utility companies, which cost structure is subject to change
4. 32Macroeconomic uncertainty and market conditions may adversely affect our industry, business, and financial results
5. 33An increase in interest rates or a reduction in the availability of tax equity, project debt capital, or project financing in the global financial markets could make it difficult for end customers to finance the cost of a battery energy storage system and could reduce the demand for our energy storage solutions
6. 34Revenue from any projects we support may be adversely affected if there is a decline in public acceptance or support of renewable energy, or regulatory agencies, local communities, or other third parties delay, prevent, or increase the cost of constructing and operating customer projects
7. 35Severe weather events, including the effects of climate change, are inherently unpredictable and may have a material adverse effect on our financial results and financial condition
8. 36Increasing attention to, and evolving expectations regarding, ESG matters may impact our business and reputation

Risks Related to Our Financial Condition and Liquidity

1. 37Our current credit agreement imposes, and future debt agreements may impose, certain restrictions that may affect our ability to operate our business and make payments on our indebtedness
2. 38We may not be able to raise additional capital to execute on our current or future business opportunities on favorable terms, if at all, or without dilution to our stockholders

Risks Related to Our Intellectual Property and Technology

1. 39As a technology company selling commercial products, we run the risk of being sued by third parties for infringement, misappropriation, dilution, or other violation of their intellectual property or proprietary rights
2. 40If our trademarks and trade names are not adequately protected or protectable, we may not be able to build name recognition in our markets of interest, and our competitive position may be harmed
3. 41We may not be able to enforce our intellectual property rights throughout the world
4. 42We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property
5. 43We utilize open-source software, which may pose particular risks to our proprietary software and solutions
6. 44If we cannot license rights to use technologies on reasonable terms, we may not be able to commercialize new solutions or services in the future
7. 45Compromises, interruptions, and shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations
8. 46Risk Factors Related to Legal, Regulatory, and Compliance Matters
9. 47resulting reductions in demand for energy storage products could harm our business, prospects, financial condition, and results of operations
10. 48elimination, or expiration of such incentives could reduce customer demand for our offerings, lead to a loss of customers and potential customer projects, and could harm our business, operating results, and cash flows
11. 49Changes in the global trade environment, including the imposition of new tariffs or changes to existing tariffs, could adversely affect the amount or timing of our revenues, results of operations, and cash flows and could adversely impact our business overall
12. 50Changes in tax laws or regulations could materially adversely affect our business, financial condition, results of operations, and prospects
13. 51We may incur obligations, liabilities, or costs under environmental, health, and safety laws, which could have an adverse impact on our business, financial condition, and results of operations
14. 52Failure to comply with data privacy and data security laws, regulations, and industry standards could have a material adverse effect on our reputation, results of operations, financial condition or have other adverse consequences
15. 53From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental investigations and inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results

Risks related to Ownership of our Class A Common Stock

1. 54Certain provisions of Delaware law and antitakeover provisions in our organizational documents could delay or prevent a change of control
2. 55These antitakeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares
3. 56Because we have no current plans to pay regular cash dividends on our Class A common stock for the foreseeable future, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it
4. 57The dual class structure of our common stock may adversely affect the trading market for our Class A common stock. We cannot predict the effect our multiple class structure may have on the market price of our Class A common stock
5. 58We are a “controlled company” within the meaning of the Nasdaq rules and, as a result, qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You may not have the same protections afforded to stockholders of companies that are subject to such corporate governance requirements
6. 59Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq rules. Our status as a controlled company could make our Class A common stock less attractive to some investors or otherwise harm our stock price
7. 60Our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” does not apply with respect to any director or stockholder who is not employed by us or our subsidiaries
8. 61You may be diluted by future issuances of additional Class A common stock or LLC Interests in connection with our incentive plans, acquisitions, or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price
9. 62Short 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

Risks Related to Our Existing Shareholders

1. 63We are controlled by the Continuing Equity Owners, whose interests may differ from those of our public stockholders
2. 64Certain of our officers and directors may have actual or potential conflicts of interest because of their positions with our Continuing Equity Owners
3. 65We rely on our access to our Founders’ brands and reputation for establishing and building relationships with customers
4. 66Third parties may seek to hold us responsible for liabilities of our Founders, which could result in a decrease in our income
5. 67We may be required to pay additional taxes as a result of partnership tax audit rules

Risks Related to Our Organizational Structure

1. 68The Tax Receivable Agreement with the Founders requires us to make cash payments to them in respect of certain tax benefits to which we may become entitled, and we expect that such payments will be substantial
2. 69Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Founders that will not benefit holders of our Class A common stock to the same extent that it will benefit the Founders
3. 70In certain cases, payments under the Tax Receivable Agreement may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement
4. 71We will not be reimbursed for any payments made under the Tax Receivable Agreement in the event that any tax benefits are disallowed
5. 72Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition
6. 73Risk Factors Related to Accounting Matters
7. 74Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our operating results and prospects