Participants

Lexington May; Vice President, Finance & Investor Relations; Fluence Energy Inc

Julian Nebreda; President, Chief Executive Officer; Fluence Energy Inc

Ahmed Pasha; Chief Financial Officer; Fluence Energy Inc

Christine Cho; Analyst; Barclays

Dylan Nassano; Analyst; Wolfe Research

Andrew Percoco; Analyst; Morgan Stanley

Justin Clare; Analyst; Roth Capital Partners

Leanne Hayden; Analyst; Canaccord Genuity Group Inc.

Jordan Levy; Analyst; Truist Securities

Kashy Harrison; Analyst; Piper Sandler

Ben Kallo; Analyst; Robert W. Baird & Co. Incorporated

Joseph Osha; Analyst; Guggenheim Partners

Tanner Betsson; Analyst; Goldman Sachs

Presentation

Operator

Good day and thank you for standing by. Welcome to the Fluence second quarter conference call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your first speaker today, Lexington May, VP, Finance and Investor Relations.

Lexington May

Thank you. Good morning, and welcome to Fluence Energy's third quarter 2024 earnings conference call. A copy of our earnings presentation, press release and supplementary metric sheet covering financial results, along with supporting statements and schedules, including reconciliations and disclosures regarding our non-GAAP financial measures are posted on the Investor Relations section of our website at fluenceenergy.com.
Joining me on this morning's call are Julian Nebreda, our President and Chief Executive Officer; Ahmed Pasha, our Chief Financial Officer, and Rebecca Boll, our Chief Product Officer.
During the course of this call, Fluence management may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts. Such statements are based upon the 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 our future results. You are cautioned to not 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. A reconciliation of these non-GAAP measures to the most comparable GAAP measure is available in our earnings materials on the company's Investor Relations website.
Following our prepared comments, 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 will now turn the call over to Julian.

Julian Nebreda

I would like to send a warm welcome to our investors, analysts and employees who are participating on today's call. I will cover our Q2 results briefly and then provide an update on our business and the strong growth prospects we continue to see. Ahmed will then give more details on our financial results and outlook.
Beginning on slide 4, we believe our strong financial performance for 2024 will recognize $483 million of revenue and earn 17.5% of gross adjusted gross margin, which brings our year-to-date gross margin slightly ahead of the [10% to 12%].
Secondly, we recorded adjusted EBITDA of $15.6 million, which puts us on track to deliver profitable growth for our shareholders. We added $1.3 billion of new counter setting a new quarterly record for us on bringing our backlog to an all-time high -- a all-time high level of $4.5 billion.
Four, we finished the quarter with $80 million of annual recurring revenue for our services and digital business, reaching the level a quarter earlier than our target. And finally, through our proactive approach to cost and working capital management, we generated $64 million free cash flow for the first nine months and ended the current quarter with $513 million in cash.
Turning to slide 5, we continue to see improvements in our gross margin, driven by our excellent performance on cost management and execution. We have had four consecutive quarters of double-digit growth margin. We're looking at our gross margins on a trailing 12 month rolling basis.
We are back from a golf gross margin of about negative 5% to a positive 12% margin in the 12 months ended June 3. This have been an outstanding transformation in less than two years. We expect this trend to continue to improve, pulling out on a path to achieve sustainable growth margins in the 10% to 15% range.
Turning to slide 6 for an update on our pipeline. As a reminder, our pipeline is a rolling 24 month view, thus giving us confidence in our ability to continue our growth trajectory. As $20 billion pipeline has increased 65% from this time last year, which reflects rapid growth prospect for any storage globally.
As I will discuss a bit more in a moment, all in all, we continue to see a very robust international market, which will further diversify our geographic mix in the coming year. Almost half of our $20 billion pipeline is in the Americas region and interest is in the international market.
The strength of our pipeline is a key reason for our high confidence in our expected revenue growth. We are reaffirming our fiscal year '25 revenue outlook of 35% to 40% growth of our original fiscal '24 revenue guidance midpoint of [30%].
Turning to slide 7, similar to our pipeline we're also seeing remarkable growth in (technical difficulty) the Q3 was our 11th consecutive quarter of order intake outpacing revenue recognition, showcasing the robust growth in visibility to scale and the storage.
Our backlog increased significantly year over year, demonstrating our leading competitive position and the significant role for utility-scale energy storage. Now I'd like to provide an update on the most relevant markets we serve.
Beginning with the United States, which continues to be the largest market we operate in globally. Recent regulatory developments in the US as well as the progress we have made in strengthening our competitive position through our nearly two market domestic manufacturing strategy puts us in a unique position to capitalize on this substantial growth opportunity.
Turning to slide 8, since our last conference call, there have been a couple of favorable policy announcements. First, the US Treasury released guidelines on the 40% domestic content requirements under the (inaudible) for IRA. The treasury provided on the Safe Harbor statement that sets a percent of that value each battery storage component when manufactured in the US and contribute towards the 40% threshold.
As you can see, the highest capacity in battery cells of 38%, which favored our domestic strategy of securing battery cells manufactured in the US. As you may recall, we started the process of procuring US cell capacity before the IRA came out and sign an agreement more than a year ago with AESC to purchase US cell from the (inaudible)
The US cell will go into our battery model, which I will touch on more in a moment. By combining the US cells and US Modules, we believe that we will easily meet the 40% domestic content threshold, further enabling our customers to capture the incremental 10% investment tax credit on their products.
Our proactive approach to securing the US Cell from AESC has resulted in a first mover advantage in delivery in domestic. Second, the [Biden] administration issue a proclamation to increase Section 301 tariff on batteries imported from China, which also applies to battery storage fees.
Today, the higher tariff is set at 7.5% and it will increase to 25% beginning in 2030. We believe this tariff regime could significantly affect the competitive landscape of the US market to the benefit of domestic supply.
I would like to touch briefly on the political environment and implications. The demand for battery storage systems in the US is supported by the growing need for new capacity, greater flexibility and resilience. It is well known that renewables plus storage is the fastest and most economic way to serve this growth.
None of this potential due (technical difficulty) change in administration. Our business model in the US to also be resilient to changes in the political landscape. Government will support policy favors using tax credits to promote domestic production. However, we believe that our US business model will also work effectively if a new administration were to change the industrial policy away from tax incentives in favors of tariff.
Turning to slide 9, I'm pleased to report that we are on track for initial production of the Fluence battery module in late September of this year. The module production line was successfully tested in the manufacturer's factory. The production line is now in the final stages of installation and initial commissioning in our new capacity.
We anticipate starting production with a number of battery modules and gradually ramping up to serve our business.
Turning to additional discussions on the US market on slide 10. Estimate for the size of US utility scale markets continue to show growing adoption of energy storage by adding roughly 40 gigawatts in 2025. The significant demand has been fueled by corporate customers seeking clean, low-cost arena, reliable renewal battery,
A part of this growth in the US have been driven by the rise of Gen-AI, which requires a tremendous numbers of new data sets, which result in increases in electricity and capacity. We're seeing more and more opportunities pop into our pipeline associated with data set, evolving the form of storage for their renewable PPA that large tech companies are procuring to meet their growing demand and [cargo protocol].
Currently, about 40% of our US pipeline is indirectly associated with data sets. We will also note that the great majority of the green energy investments associated with the IRA and the resulting job creation are appearing in Republic.
Furthermore, any storage is becoming a critical part of an increasing numbers of rates across the country regardless of political lead. For example, in their core market impacts of a traditional red states. This time the role that energy storage plays in degrees is evident when you consider the interconnection fees. We chose nearly 132 gigawatt of battery storage projects of nearly 35% from this time last year.
In summary, the US market increasing demand for electricity and capacity. The Gen-AI industry's growing need for renewable power. And there we are seeing some of our USB signal to policy changes makes us confident in our outlook for the US market and its contribution to our growth plan.
Turning to slide 11, alongside the attractiveness of the US market in the Europe, Middle East and Africa region, I'm happy to say we are seeing a growing number of opportunities in Europe and a resurgence in the UK and Ireland.
Ireland intends to operate this electrical grid with 95% renewal. This level of renewable generation will require significant battery storage to provide a higher level of rate stability and reliability. For this reason, 2024 annual utility scale capacity additions are expected to be north of 11 gigawatt hours, which is more than 100% increase from the 2024 forecast as well.
We see a similar story of robust growth in other regions. In the Asia Pacific and Australia region, we have seen tremendous growth over the past few years with annual utility scale capacity allocations approaching nearly 8 gigawatts this year, driven largely by Australia where the national battery strategy continues to provide opportunities for our growth.
Turning to slide 12, I'm pleased to report that we recently launched our new digital service center in India, which will serve as a central hub for applying operational data intelligence to the global fleet of assets managed by Fluence, provide an insights for the company's research and development and service launch.
We expect that these efforts will provide more value to our customers by optimizing the performance of their store accounts. The co-location in Bangalore, India of the service enter with the new remote monitoring and diagnostics capabilities and our technology centers proves that [NOV] capability provides a platform that is intended to allow for efficiency and experience in both.
I will now turn the call to Ahmed to discuss our financial results. Ahmed?

Ahmed Pasha

Thank you, Julian, and good morning, everyone. Today I will review our third quarter financial results, our strong cash position and our near-term outlook. Beginning with third Quarter 2024 results on slide 14. We generated $483 million in revenue, which was 20% higher than our expectations discussed on our last earnings call.
This was primarily attributable to completing certain projects milestones ahead of schedule. Furthermore, we generated $85 million of adjusted gross profit, representing a 17.5% adjusted gross margin, which was the fourth consecutive quarter of double-digit gross profit margins.
Including the third-quarter results, we delivered year to date adjusted gross margin of 12.8%. We expect to achieve Q4 adjusted gross margin within our previously communicated range of 10% to 12% and for the full year to be at the high end of that range.
This performance reflects our focus on achieving operational efficiencies that have been translated to improved profitability on projects During Q3, after operating expenses, we generated $16 million of adjusted EBITDA which puts our trailing 12 months EBITDA in positive territory for the first time. Overall, these results illustrate our commitment to delivering profitable growth to our shareholders.
Before turning to a discussion of our liquidity and guidance, I will briefly review our disclosure included in our 10-Q that was filed yesterday. As you may know, a short seller report was published on us back in February of this year.
In response to the allegations made in the short report, our Board's Audit Committee conducted an investigation with the assistance of an outside counsel and forensic accountants. I am pleased to share that this investigation concluded that the allegations contained in the short report are without merit.
Recently, however, the SEC notified us that they are investigating certain matters pertaining to the company. Based on the information the SEC has requested, we believe we are examining some of the topics raised in the short seller report, such as revenue recognition policies and our previously disclosed material weakness.
We are fully cooperating with the SEC, although we cannot predict the timing of or the outcome based on the nature of these matters and information requested by the SEC. We do not expect this to have a material impact on our financial condition.
Turning to slide 15, with an update on our liquidity. We continue to bolster our liquidity to support our industry-leading growth objectives. For that end, I am pleased to report that we ended the third quarter with nearly $600 million of total liquidity.
I'm also happy to share that this week we replaced our ABL credit facility with a traditional revolver to further enhance our liquidity. As you may recall, our $400 million of ABL facility less standardized by the level of our US inventory, which have had a lower balance, thus limiting the availability under this facility to mark more than $100 million since its inception.
With new covenant line revolving credit facility contributes $500 million of commitments from an expanded bank program. With this facility on a pro forma basis, our total liquidity is now more than $1 billion, which puts us in an excellent position to capitalize on the growing energy storage market.
Moving to slide 16. We have narrowed our full year '24 revenue guidance range to $2.7 billion to $2.8 billion with a midpoint of $2.75 billion. This is $250 million lower than our prior revenue guidance. This reduction is mostly due to two factors.
First, there were two specific projects accounting for approximately $100 million of expected revenue that had been postponed by the customer for multiple years. And second, the signing of certain projects into our backlog was delayed for a variety of reasons that includes site readiness, civil works, permitting and customer routine process.
None of these delays were related to interconnection issues. These projects were signed and moved into our backlog admittedly later than anticipated. Although disappointing, we expect to recognize the majority of this delayed revenue in fiscal '25.
As Julian noted, our fiscal '24 guidance implies a Q4 result that would be the highest in our company's history. We have strong confidence in our ability to deliver on this goal as the majority of our Q4 project milestones are for production and delivery of cubes, which is within our control.
To that end, we have secured the necessary factories, manufacturing slots and logistics. In fact, with respect to our expected Q4 revenue in the first five weeks of the quarter, we have delivered or put in transit 46% of required cubes, thus securing our revenue for almost half of our expected Q4 revenue.
In summary, our quarter to date performance and our outlook for the remaining two months of the year gives us confidence in our ability to deliver on our Q4 customer commitments and our revised full year '24 revenue guidance.
Turning to slide 17, I will briefly review our other guidance metrics. Lowering the midpoint of our full year '24 revenue guidance by $250 million would be expected to have a gross profit impact of at least [$25 million]. However, we have taken proactive actions to mitigate the impact on our profitability targets.
To that end, we are expecting to achieve a gross profit margin at the upper end of 10% to 12% expected range for this year and deliver adjusted EBITDA of $55 million to $65 million. This revised guidance, midpoint of $60 million is only $5 million below our prior guidance.
In terms of our long-term outlook, we continue to expect our gross profit margins to be in the 10% to 15% range. Furthermore, we are raising our ARR guidance and now expect to achieve ARR of approximately $100 million by the end of fiscal '24, up from our previous guidance of approximately $80 million. This increase is the result of the continued growth we are seeing from our services business.
Finally, looking ahead to fiscal "25, we continue to expect strong growth as we have discussed, using our original fiscal '24 revenue guidance midpoint of $3 billion as a base, we reaffirm our expected fiscal '25 revenue growth of 35% to 40%.
With that, let me turn the call back to Julian for his closing remarks.

Julian Nebreda

Thank you, Ahmed. Turning to slide 18 and in conclusion, I want to emphasize the key takeaway from this quarter's results. First, our year-to-date performance demonstrates our ability to deliver profitable growth. Important, we are on track to deliver 12% gross margins and positive full year adjusted EBITDA in fiscal year '24.
Second, we have started to see the benefits of our US domestic content strategy that were put in motion well before the IRA. We're seeing a strong customer interest, which is converted to each of the above. Third, we have ample liquidity to support our growth plan.
We successfully amended and upsized our credit facility which now puts our liquidity at more than $1 billion. And forth, the outlook for utility cell storage is very robust and we are well positioned to capitalize on this growing market globally as evidenced by the strong growth of our pipeline and our backlog.
With that, I would like to open up the call for questions. Thank you.

Question and Answer Session

Operator

(Operator Instructions) Christine Cho, Barclays.

Christine Cho

Good morning. Over 60% of your revenues this quarter was from rest of world, which also coincided with the very high ASPs and high margins. Is this just a function of more of your projects outside the US requiring EPC.
Just any color on the geographic breakdown this quarter, how that correlates with top line margins and how we should think about how that should trend next year? Maybe also an update on the geographic breakdown of your current backlog. I know it was historically [70:30], but it sounds like you're diversifying more.

Julian Nebreda

Good morning, Christine. Yes, our international markets tend to have more EPCs. They tend to be -- our solutions our offering a lot broader than what we do in the US. And second, as you know, we have been selling our older stock offering in Europe in our transmission assets. So you generally will see higher ASPs on the international markets.
In terms of the composition of our backlog, since -- you know, one-third, two-thirds is kind of where it's going right now. So it will tend -- we have seen a lot of progress in the international markets when you looked at the pipeline, more like [50:50], but I will say today when we looked at our backlog is essentially two-thirds.
It's going to be the same roughly two thirds in the US, one-thirds international. So that's a way to look at it. And certainly, last point is that this is one of the drivers of the lumpiness in terms of our margins on our ASPs as we move forward, how they -- what type of projects come into revenue for which type of project will recognize revenue on a quarterly basis and that lumpiness will stay, not all projects are the same.

Christine Cho

Okay. And then for my follow-up, is there a way to give us a sense of how much of your current backlog for US projects require US cells. I know you've mentioned that you could eventually supply all of US demand with the AESC contract.
But curious to know if the majority of your US customers were mandating that in the contract for the domestic content and Section 301 update came out a couple of months ago. How those conversations have evolved since that update?
And is there some sort of rule of thumb that we can use around how much higher the ASPs are, maybe percentage wise for your batteries that use domestic sales versus imported sales for your US customers or bookings going forward?

Julian Nebreda

I will say that US, we ahve seen a lot of interest come up as people have realized with the new IRA guidelines and the new data. I think that generally now everybody realizes this is the right moment where I know everybody. So you'll see a lot more than what we have seen before.
I prefer not to go into how that plays out because as you know, we'll get into a rabbit hole of that I think will not help anybody. In terms of costs, what I can tell you and this is very, very competitive information for also what I can tell you is that the costs are very competitive and very attractive, even though they included some additional costs by producing in the US.
So they are very, very competitive. And our customers do very, very well when they contract with the US domestic content. That's the way, I can tell you what at this stage, I will prefer not to disclose information on the actual pricing.

Operator

Dylan Nassano, Wolfe Research.

Dylan Nassano

So just doing the math on the updated guidance here, it looks like you're taking $250 million at the midpoint this year. You're holding 2025 $100 million of what came out of this year's delayed multiple years. So that seems to suggest up to [$250 million] shifted from this year to next year.
So I guess if that math is correct, did anything shift out of your prior 2025 outlook? Because if you're adding $150 million this year, like would that put you at the top end or above the 35% to 40% growth

Julian Nebreda

What I will say is we're working on a '25 budget for next year. And we'll give you more details on how '25 looks. But today, what we can confirm is that we can confirm 35% to 40% growth out of our original target of midpoint of [$3 million]. So we'll give you more details we when -- in our next earnings call in late November.

Dylan Nassano

Okay. And then as a follow-up on the board investigation that you spoke about, can you just speak to kind of what was the scope of that investigation, which specific claims from the shore apart, what are you guys looking into.

Julian Nebreda

Our audit committee hired an independent law firm and brought in a forensic auditors and forensic accounting firm, and they looked at everything that was there. Irrelevant to solve that have -- all the elements there and found that all of them had serial merit, no merit in anyway.
So we feel we're a clean bill of health and that's what we can say. It was really a very detailed investigation looking at everything that they're even things that were implied that were not necessarily reading and the both the independent law firm with the support of the accountants came out with all of that stuff zero merit.

Operator

Andrew Percoco, Morgan Stanley.

Andrew Percoco

Good morning. Thanks for taking the question. I just want to come back to the domestic content piece for a second. Just curious, obviously, strong demand for those products, how do you feel in terms of the capacity that you're getting from AESC? Do you see a need to expand that agreement anytime soon?
Just given the level of demand you're seeing? And just kind of curious on maybe how pricing conversations with AESC have shifted just given obviously the higher demand for domestic sales over the last three months or so?

Julian Nebreda

So we have -- we contracted two lines with AESC. One, that has come in start producing in late 2024. So deliveries in early '25 and another one that will come into operation in '25. And we have right of first refusal for any additional lines they bring it up. So we have ample capacity to meet the demand that we see today and are clearly to meet our commitments to the street. So we're very happy.
In terms of the deal with AESC, we had -- remember, we had to pay for these. We have to make them -- we make that prepayment that we disclose to all of you. So it's a firm deal with prices and we haven't seen any discussion on pricing or AESC is not requesting any additional price from the fact that this is becoming more much more popular.
What I will say that we weren't convinced that this was the way to go and I think the reality and the reaction of our customers have proven us right, and we are very happy with that. And now our view is to accelerate this as possible and solidified our first mover advantage in domestic content.

Andrew Percoco

Okay, perfect. And then maybe as a follow-up question, you mentioned AI and tech as a driver of demand. I'm just curious if there's any difference in attributes in terms of duration, sizing that you're seeing from maybe some of those conversations and maybe how that's impacting your offering or the pricing that you're achieving in the market? Thank you.

Julian Nebreda

No, not real different from a technical point of view. What I will say is a level of urgency, our -- that's what I'll say. The need for speed, which is also something that we have invested on. It is coming. We're also seeing that. That's becoming a need of the market. We need to do this faster so that's where -- I think that's a little bit of a difference from the past where when we were not in -- where projects which are not necessarily data center related.

Operator

Justin Clare, Roth Capital Partners.

Justin Clare

So I wanted to start off just asking about how do you expect the gross margins for your domestic supply chain using US cells to compare to margins when you're using international sales and then just curious, as you ramp the domestic supply chain, do you anticipate the margins to initially be lower and then increase as you scale up? Or will you be at full potential right away?

Julian Nebreda

In terms of margin of our US domestic offering, I mean, I prefer not to go into that detail. As I said, this is very competitive especially today. But I will say that our -- what I can say is that our US domestic content makes us even more confident of our 10% to 12% -- 10% to 15% sorry, margin guideline that we provided.
And if I can add a little bit of publicity, we came from minus 5% to 12% today. And I think that -- and a lot of companies -- we're not convinced that we could deliver that 10% to 15% we're telling you today. Well, I think that today, not only our territory but where we see coming out it makes us feel very, very confident on that part.
And then in terms of our ability to realize margins on the initial offering, we have put in a significant investments. First of all, bring in line the module line at earlier to ensure that it runs very well. And we are putting the investments in our labs to test our new products ahead of going publicly in a way that to ensure that we do not -- we can realize our margins from day one.
So we feel very confident that both our US domestic content with a new module line been fully tested for a period of time. And our new labs gave us the confidence that we are going to be able to monetize on the margins on US domestic content, our new products from day one.

Justin Clare

And then just on your backlog, curious how much of the backlog do you anticipate recognizing in fiscal '25 at this point. And if you could just comment on project timelines, how they're evolving. And then just the anticipated average timeline for when you book a project to when you're able to complete a project? And then maybe if you could comment on just the bottlenecks that you're seeing and whether you can pull time lines forward?

Julian Nebreda

Right. In terms of our '25 revenue, what we have in our backlog for '25 revenue, roughly a third. So in line with what we had last year, we feel very well about it today. In terms of our projects timeline, we have invested a lot in accelerating our capability of delivering projects.
You know that actually has given us a competitive position when customers are in a hurry, just as I mentioned, data centers, the one thing very, very quickly. Now that gives us a competitive position. However, what has become a little clearer now that some of the time it is not necessarily set by us.
What set by all other external factors. However, our shorten project timelines allows a much more -- from an economic point of view, a much more efficient.
In terms of a project timelines, I think we should continue to use 18 months. I told you. We brought it -- we have been bringing it down, but I think that's a good guideline for -- good guideline for our financial projections and a good guideline for you to look at our backlog. We will let you know if things improve or change materially.

Operator

Leanne Hayden, Cannacord Genuity.

Leanne Hayden

Good morning, everyone. Congrats on the quarter and thanks so much for taking my question. To start, I know you reiterated 2025 revenue growth expectations. I was just wondering if you still expect to see the same profitability as previously guided? I believe it was a 10% to 15% gross margin?

Julian Nebreda

Yes, we do expect the same profitability of 10% to 15%. And I would tell you that performance this year gave us even more confidence that we will be able to lever in that 10% to 15% range. And also, we're very happy. This was our transformation when we took over the company to today from minus 5% to now being able to feel very confident in that 10% to 15%. We're all very proud of the work that we have done here.

Leanne Hayden

Great, thanks. And then just one more from me on increasing data center demand. Are your data center discussions focused mostly on hyperscalers or small providers as well? Any color you could provide on that would be great.

Julian Nebreda

As you know, we work with top tier developers in the US. So it's mostly hyperscalers. Maybe one or two that are mid-sized, but generally hyperscalers.

Operator

Jordan Levy, Truist Securities.

Jordan Levy

Good morning all and appreciate you taking my questions. I just wanted to get a sense of what you're seeing specifically in the international market from a competition perspective with a large entrant come into that market earlier this year, I think particularly in Europe?

Julian Nebreda

Yes, the international market is different. I've been very clear that our markets are -- with some of the players within the US do not -- are not active. However, I will say about the European market. It tends to be -- especially the UK more than Europe, let's say, stopped over the UK.
The UK is probably the most competitive market, and is a market we are very, very happy that we can win and we'll continue progressing a lot because it is a very competitive -- it is a very competitive market because it is very open to a lot of entrants and is also is a market that requires very good capabilities in terms of delivery.
So that combination makes it an interesting market to work. The rest of Europe, I'll say the intensity of competition in Europe is also a little bit higher however, because it is a new market. They have one hour, not all players offer one hour, it tends to be not that -- a little bit less than the UK.

Jordan Levy

Appreciate that. And then maybe just kind of a follow-up on your prior question on the data center market. I know you all have had probably a lot of conversations in this space with key players. I'm just curious if those conversations you have from your commentary last quarter, if those conversations have evolved at all in terms of what customers might be looking for a more direct storage solution as it relates to duration or anything like that?

Julian Nebreda

Most of our data center demand is indirect -- it comes in directly. We support PPAs that the big top-tier developers offer data centers and large tech companies also. I will say the great majority, it is indirectly. There's very little that we will directly. And that also seem to be a market that is opening up. We'll continue -- we believe that most of our sales that connect to data centers will go through large through PPAs to large tech companies.

Operator

(inaudible) BMO Capital Markets.

Good morning. Just a real quick. It looks like the implied ASPs this quarter were, I think, like [$430] a kWh. I was just wondering if you could kind of speak to were there any kind of one-off factors that drove that? Or are we looking at it maybe perhaps not the right way?

Ahmed Pasha

Hey, Amit. This is Ahmed. So yes, I think if you're looking just for the quarter, you are right, and I think that is more to do with the mix of the contracts because we have more international during the quarter where we have EPC elements embedded in those contracts.
But I think if you look at for the year, year to date versus year to date, ASPs are roughly 25% less. And that reflects the pricing what we have seen in the commodity prices. But -- so that is the right way to think about year-to-date basis is pretty -- is declining, but that reflects on the lithium ion prices.

Operator

Kashy Harrison, Piper Sandler.

Kashy Harrison

Good morning and thanks for taking my questions. Congrats on the impressive bookings backlog and also the execution. So I wanted to focus on the backlog and bookings. I noticed that the total backlog increased significantly in 3Q, but the implied 12 months from the Q is flat quarter over quarter and $2.3 billion.
It is a 12 month look. So it's only good through June 30 of next year. And I was just wondering if you were to extend that to September, can you give us a sense of what would happen to that implied $2.3 billion estimate? I'm just wondering if there's another big jump in 4Q of next year just because of the -- just the general 4Q weighting of the business?

Ahmed Pasha

So yes, you're right. I think this is the nature of our business where the revenues are lumpy and frankly, that is partly driven by the nature of the contracts that we have and the customers who want their deliveries during the summer peak months.
So yes, I think we come in, I think probably 60% to 70% of our revenue is second half back-end loaded this year. And we think probably that would be the case next year as well.

Kashy Harrison

So the $2.3 billion is probably significantly higher if you were to include 4Q of next year?

Ahmed Pasha

Yeah. But I think the key there is a percentage of completion. I think as we sign more contracts, as we execute on those contracts, we will continue to realize. But net-net, you will see more back-end-loaded, that's the lumpiness that we have in our business.

Kashy Harrison

Got it. I appreciate that. And then for my follow-up question. I know it's tough to guide the forward bookings, but I wanted to try to ask this question anyway. Do you think you can hold that $4 billion, $5 billion flat exiting the year. I only ask since next quarter is a very big revenue quarter. And so, I was just trying to get a sense if you could hold [$2 billion, $5 billion] through year end? Thank you.

Ahmed Pasha

Yeah. I think that is the expectations like we did last year. I mean, I think we are pretty much in the same position where we were last year at this stage, Q3 call. We were about one-third of our revenue for '24 locked in in our backlog, and we are at the same place and expectation is as we sign more and more contracts, I think we will be in the similar situation.
I mean, this last quarter we signed 5 gigawatt hours, as you saw. And frankly that is equivalent to the full year '23 deliveries. So we are seeing significant growth in volume and hopefully that trend will continue.

Operator

Ben Kallo, Baird.

Ben Kallo

Hey, good morning, guys. Thank you for taking my question. My first question was just on your pricing environment. You guys talked about ASPs and where they've trended this year as you look out to next year, could you just maybe talk to us about how we square the 12% to 15% gross margin with your pricing as you expect it to be continue to go down, maybe what your levers for decreasing costs.
I know as you transition to your US manufacturing. So if I put all that together, maybe just the levers on bringing down costs you can even keep up with price declines.
And then my second question is just what you're seeing in competition in the US in terms of international players and specifically Chinese or Korean players coming to the US to produce in the US and how competitive they are in pricing right now and if that's impacting any of your business as you look out into next year? Thank you.

Julian Nebreda

Thank you, Ben. On the on the pricing, (inaudible) maybe go back one step. Lithium carbonate was has been stable up to May came down around [10 to 15 plus around 20], let's say, since May. So it is getting soft. And that gives you a sign that this amount about stores market is getting softer.
Lithium carbonate or the price of lithium is becoming a lot less relevant in terms of how this is priced. So nothing important. Having said that, we do believe that we will continue seeing some price reductions going forward and we plan for it, and we work for it.
And our guidance takes into consideration the fact that our pricing is going to -- will continue coming down. We see strong elasticity of demand in this market, strong. You see it in our pipeline. 65% will grow less than a year.
Stating our backlog, just look at our orders this year. We were able to contract the same volume we recognized last year just in a quarter. So it tells you the tremendous elasticity of demand. So as I said, the prices are not going to see a repetition of '24. We will see prices continue to soften and we're ready for it. We have a view of what other will work and we can commit to our 35% to 40% growth out of our $3 billion midpoint -- our prior midpoint without difference.
In terms of competition, it has been always been a very competitive market. It is not gaining more competitive. It is a essentially -- maybe the names change, not because people realize that they cannot deliver what they say, they can deliver and they can (inaudible) but the competition has not get down.
I haven't seen a lot of players are talking about stuff. But when we talk to our customers, these are mirrored. There's no semi-ion. We're not only in Dallas, in Arizona, when you -- I don't -- clearly, a lot of these competitors, I do not get the information.
When I talk to my customers, I think we went there, it was nothing, you cannot touch it. So it sounds very, very good does not exist. So we do expect more competition in the US market, and we are ready for it and we love competition. So we're ready for that, but I do not think that it will take a while for a lot of dreams to become reality from their part I mean.

Operator

Joseph Osha, Guggenheim Partners.

Joseph Osha

My first question relates to domestic sales supply with in an industry event a while ago. Saw some numbers suggesting that by 2026, when I have this 301 tariff comes into effect, the industry is only going to be able to meet maybe a quarter to a third of demand with domestically sourced cells. I'm wondering if you have a reaction to that and if you're seeing kind of the same numbers?

Julian Nebreda

There are people who said we're going to be a surplus and there are peoples if you looked at all the products that are run and people that have a view you have that is going to be -- this market is going to have a huge deficit, probably somewhere in the middle is going to be a tight market, I believe.
But I think that there will be enough to cover. I don't know by 26 that a little bit. But over time, we'll have enough to cover them and in the US. This is very important, and it will happen. We will work to meet that demand from our part. So I think that there will be more players. We don't expect the market where we'll be so tight as you probably have read some other reports around.

Joseph Osha

Thanks. And then my follow-up, I'm just wondering, you had lots of chatter out there about project timing. I'm wondering if you look at your storage only business relative to your storage plus solar business, if you're seeing perhaps any greater level of volatility or movement and uncertainty in the solar-plus-storage business because it certainly seems like we're picking up those signals from some of the other folks in solar world. Thank you.

Julian Nebreda

I mean the reality is we haven't seen anything getting any worse or deteriorated in any way. Normal project -- when we get involved, normal project delays that are transformative laid but cell counter in weeks or not in years or in month. It is the normal delays you get in a project that permit to move things through a three or things of that sort.
So I will not -- we haven't seen -- I mean it's not any different between the projects that we do, but there is a standalone which is mostly in our international markets than the ones we do in batteries and solar is the same type of delay.
But as we have said, we gain into these projects a lot later in the process. So when we're there, there are customers that have signed PPA, they have financing, they have all the permits in place. So the stuff that gets these things delayed are things that delays by weeks, never by months.

Operator

Brian Lee, Goldman Sachs.

Tanner Betsson

Hey, guys, this is [Tanner Betsson] on for Brian. Thank you for taking our questions and congrats on the solid results here. Your pipeline appears to have grown the strongest in APAC and EMEA. But I guess I would have expected to see continued strength in the Americas, given growth from data centers as well as domestic content.
Actually, the CAGR growth is higher in both regions, but from a lower base you called out growth in Germany and Australia. So if you've seen certain products came better than expected traction there. Or are there any other markets where you're seeing outsized growth?

Julian Nebreda

As we talked of Germany has a new nascent market that is very, very attractive. Australia has been growing and we see a big prospects for continued growth. So as you said, we have seen the growth rate out of a much lower base. But the growth rate in our international market growing more strongly.
And the thing is that because our international market are mix, things move here or there differently, and they're not affected. So very, very, very happy with our global strategy. I think that's kind of what I will add maybe highlight. These concentrating globally and working with globally gives us an ability to manage headwinds that you might get here or there much more effectively than if we were only a company working in a few markets or owning a couple of markets.

Tanner Betsson

And then you guys called out 40% of your US pipeline data centers, how do you expect that number to trend going forward?

Julian Nebreda

I think it will continue to grow. I think it will continue to grow and it's difficult to know, as you know, we get this demand indirectly. So we are not involved with the data center. We're involved with the developers. We talk to data centers.
But talking leaches, as we as we always listen to the calls of all our competitors --all our customers and we know they are doing. They are talking a game in the data center, all of them, about a game in the data center market that I think it will be a multiple of what we have seen up to date. So I expect that number to grow.

Operator

(technical difficulty) Financial Group

Good morning. Thanks for taking my question. I wanted to ask the opportunities to use batteries for transmission applications in the US, sort of especially coupling that with DLR technologies and also want to see if there is sort of any regulatory changes that need to take place for that to be deployed here?

Julian Nebreda

Good point. We continue -- this is a great technology, has been very successful in Europe. We are promoting that technology in the US. I will say that the main -- and as you know, or you probably know they circle out matters to be transmission assets. That's good. A lot of the system operators are allowing it in their systems. (inaudible) with the rules in the Northeastern system allowed. So there are some rules.
However, what we see is that there are restrictions on the ownership of the batteries by the owners of the transmission assets. They you can put them, but they cannot be owned by the same person, by the same entity. And that I think is a restriction that needs to be -- and that comes out of the view that a transmission operator or owner cannot dispatch a generation or call in demand.
And that's what in our battery essentially of that. So that creates a regulatory hurdle that we've been trying to play in to regulators. You need to allow the same owner of the transmission asset to own the batteries in order for this to work. And we're working on it. And I think that as these become more and more of a success in Europe, we'll see it happening in the US. So we're confident that it will.

Operator

This concludes the question-and-answer session. I would now like to turn it back to Lexington May for closing remarks.

Lexington May

Thank you for participating on today's call. If you have any additional questions, feel free to reach out to me. We look forward to speaking with you again when we report our fourth quarter results. Have a good day.

Operator

This does conclude the program. You may now disconnect.