Q4 2025 Earnings Call — March 17, 2026
Analyst Name (Firm): Noel Parks (Tui Brothers) Executive Name (Title): Management:
A lot of really great information in the update. And one thing, you know, you mentioned that a good portion of R&D will be going to software, the technology platform side. And I just wondered if you could talk a little bit about the evolution of both sort of market demands for and also your own development of the overall, you know, EMS platform. Sort of like what's ahead for that?
Executive Name (Title): Management:
Yeah, sure. We, as you know, made significant investments back starting in 2021, late 2020, 2021, as we were approaching the market and looking at, one, ensuring we had a capability to basically leverage the best technology in the market at the right economics to deliver for customers. And we've always taken that approach. And to do that, we wanted to have a software platform that would allow us to essentially choose that best of best. And I think a lot of the projects, and I'll use, you know, Calistoga as an example, where we had a software platform to take green hydrogen fuel cells, combine them with lithium ion, and deliver what's the largest microgrid operating that backs up for two days an entire city. In this case, it's Calistoga. So, there was a fundamental emphasis for us to be able to have that flexibility.
There's a lot of capabilities that were developed in the software initially looking at how we both operate and monitor the battery energy storage systems and really any of the energy storage systems we were developing across different technologies. And that's very important as you get into, in particular, as you're turning battery systems over and you're monitoring them from a safety perspective, temperature, you're monitoring the humidity levels, for example, and different things and environmental characteristics to ensure a safe operation. So I think some of those things and getting into more predictive analytics and to get in front of failure modes very early on. So there was a lot of early work in the software that was more operational focused.
And then, Noel, we also developed capabilities over the last two years to essentially move up the stack. When I say that, that means getting into broader asset management as we were going to be managing more and more portfolios, but also now owning and operating them. So that got us up into, for example, our vault bidder platform or having an ability to utilize AI to manage how we're going to charge and discharge at optimum times in the market as we're owning and operating these systems ourselves.
So I would say I think the level of investment we've made here as I'd say is a little over and above what a normal storage IPP would do because of the nature of the fact that we're building these and operating them and monitoring them over time, but also providing new tools that get into how we're going to optimize economics and provide economic dispatching, for example, of the systems.
Analyst Name (Firm): Noel Parks (Tui Brothers) Executive Name (Title): Management:
And I was wondering, and thinking particularly about maybe fuel cells as components of microgrids, I'm just wondering what you're seeing in the marketplace for data center environments, the sort of load following piece implementation of that functionality to support, you know, the sort of particular power needs of, for example, AI facilities. Anything you had on that piece of the puzzle would be great.
Executive Name (Title): Management:
Sure. We're looking at and developing a lot of different technologies to optimize how, for example, data centers are dealing with the inference models and how they're dealing with some of the spiking and the volatility, and hence, for example, what we announced with Peak Energy and their sodium ion battery and looking at a more optimized battery performance system to support not only what you would consider as sort of standard backup for data center, but as well the data center at the edge and the module of data centers.
So we're looking at that optimization. And, by the way, that doesn't exclude, for example, standalone microgrids or utilizing, for example, fuel cells potentially as sort of island or, you know, essentially off-grid applications, type of backup systems. So we're, we're looking at, you know, a few different models and technology and even some trials with some customers. And hence, you know, you've seen one or two announcements from us around looking at that, and those technologies, I'd say fundamentally, you know, that firming between looking at combining, for example, renewable assets, it's intermittent, like solar, with a storage asset and some level of, you know, potentially some fossil and other generation, let's call it, technology.
I think we're right in the middle of all of these different hybrid systems, and it will be different, I think, the technology that's going to be applied based on where it resides in the network, meaning at the edge or supporting some of the larger data centers.
Analyst Name (Firm): Noel Parks (Tui Brothers) Executive Name (Title): Management:
Great. And just the last one for me, I wonder if you could, you know, given the gross margin for the year coming in near the high end of the guidance, I wonder if you could just sort of tease out a little bit that margin improvement and maybe just, you know, how it came in at the high end as opposed to, you know, being a little bit narrower.
Executive Name (Title): Management:
Sure. Yeah, sure. Happy to. It's definitely something we're very focused on, and it really gets down to those unit economics. And for us, as we deliver the projects, and if you look at the nature of the revenue that was delivered, a lot of that recognized revenue is coming from us building and turning over these systems. So we're building them, commissioning them, and turning them over.
So one is we have, I think, a very strong confidence in how we deliver projects and ensure that we can be very cost effective and shrink timelines and deliver an accelerated schedules on site. We do that through, for example, building digital twins before we even get to a site. So we model the site before we come on site that gets us in front of, you know, any issues and ensures we're not going to have any layout issues or issues with construction and design.
So I think the effort we spend, one, in designing the systems and planning before we even get to the site, I think that's one. I think the speed at which, therefore, we're able to shrink the actual time from mechanical completion to when you have the site fully visible through cold and hot commissioning, we do that really at lightning speed. I think we're one of the best in the industry at shrinking that timeline, as our customers would attest.
So that saves a lot of cost and time on site. That obviously shows up in gross margin. So all of this lower cost inefficiency will show up in gross margin. And then the third thing I'd say is how we've managed the supply chain. And, you know, the team, and this is all under Akshay Ladwa, who runs essentially all of our execution as well as the battery design and the software area of the company, is our chief operating officer.
The work done to ensure we have flexible partners especially as we've had to deal with the FEOC and some of the tariff areas this year, that was fundamental. So we didn't have to take any massive hits that would have, of course, hit that gross margin. And I think, Noel, the results are pretty clear. You can compare us, I think, given the revenue we're recognizing now to, you know, the only other pure play, I think, public is Fluence out there. And I know they had a difficult quarter last quarter at about 5% gross margin, but they're still averaging – you know, somewhere in around 12%, 13% from the prior four quarters before the last one.
So we're really achieving something in this space about 2x the market for what includes a big EPC component, which I know is typically something that's a little tougher road as far as managing your cost goes. But I think it's for those reasons I mentioned, those three reasons, I think it's really become a strength for us.
Analyst Name (Firm): Sid Rajiv (Fundamental Research) Executive Name (Title): Management:
Hi. Congratulations on the results, and yes, love the new deck, highlighting both your short-term and long-term vision. My question is regarding your project financing, if I may. How much are you planning for both SOSA and Stony Creek, maybe some color on the capex for both?
Executive Name (Title): Management:
Yeah, sure. As we highlighted in the deck, we're expecting somewhere on the order of $125 to $150 million in total project cost for the SOSA project. In the U.S., based on past experience, you know, not unreasonable to assume sort of let's call it 40% type leverage on the project from a project financing perspective.
And then remember, here in the U.S., you know, we would anticipate a 40% gross ITC. So hopefully that helps with some of the modeling. In terms of Stony Creek, which that project financing is really envisioned to be sort of a second half event, we've kicked it off of, you know, some of the preliminary parts of that process.
You know, this project, I believe it was quoted as a $350 million Australian construction cost, and because of the 14-year long term offtake agreement that we have with the New South Wales government, we're expecting to have a project leverage sort of in excess of 50%. And so we're, you know, we're going to market here soon. But, you know, having executed two of these over the last 12 months, you know, we feel like we've got a pretty good handle on what that's going to look like. Unfortunately, in Australia, you don't get the benefit of investment tax credits. But it is a very attractive project from an economics perspective.
Analyst Name (Firm): Sid Rajiv (Fundamental Research) Executive Name (Title): Management:
Got it. Now, I know you don't provide segmented revenue, but any color, how much of the 2025 revenue and your projected 2026 revenue come from third-party deployments, EPC, and the asset vault?
Executive Name (Title): Management:
Well, with asset vault, while we don't, you know, report these separately, we have stated that on an annualized basis, CalSOGA and Crosstrails, the only two operational assets within asset vault, are envisioned to do upwards of $10 million of recurring EBITDA.
And these are very high margins, so you should kind of assume something slightly higher than that from a recurring revenue perspective. So, again, very high margin, and this portfolio is just starting to ramp.
Executive Name (Title): Management:
Yeah. Yeah, and, Sid, it's Rob here. I think just to add to what Michael said, it's a – if you think about that, then a context on $203 million – And we had those assets up and running basically the second half of the year. So, right, only half the year. So it was a very small portion of the revenue in 2025.
And yet those contributions as we go forward is those revenues now, in particular, not as much this year, but as we get into 27 and 28, when the revenue is going to come off of those long-term service agreements and they're going to be coming in in the 70% to 80% gross margin range, you're going to begin to see a real shift on that gross margin line as these assets that we contracted, that 540 megawatt now that's either contracted or in construction, you know, as those things come online, you're going to see a good shift in the mix, let's say, on the gross margin side.
Analyst Name (Firm): Sid Rajiv (Fundamental Research) Executive Name (Title): Management:
But for the 2026, do you see, are you expecting increased revenue from third-party deployments flat or any guidance you can give there?
Executive Name (Title): Management:
Yeah, the total revenue guidance of 225 to 300 is obviously an increase and the majority of which would come from third party projects.
Analyst Name (Firm): Sid Rajiv (Fundamental Research) Executive Name (Title): Management:
Okay, finally, last question, the contract backlog 1.3 billion. It doesn't include the latest fifth project, right? The one you recently signed for December.
Executive Name (Title): Management:
That does include the fifth project. There is still upside associated with the fourth project based on where we are with the offtake and the project financing on that project.
Analyst Name (Firm): Sid Rajiv (Fundamental Research) Executive Name (Title): Management:
Thanks, gentlemen.
Executive Name (Title): Management:
Thanks, Sid.
Executive Name (Title): Management:
And this now concludes our question and answer session. I would like to turn the floor back over to Robert Picone for closing comments.
Executive Name (Title): Management:
Okay. Thank you, Operator. Again, I want to thank everybody for joining. Special thanks to our employees that persevered through, I think it was a very volatile year for sure, and one that we're very excited now to look at how we're going to build this platform and continue to have another growth year here, as Michael referenced, in 2026, and looking forward to sharing a lot more details around those things and some new things we're working on in the quarters to come. Thank you very much.
Executive Name (Title): Management:
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.