Fluence is looking to raise $30m from institutional investors at 44c per share (a 12% discount to the most recent price).

Ordinary shareholders can also subscribe for more shares under a share purchase plan (SPP), but that is capped at $6m.

The money will be used to "fund global growth initiatives", but little detail was provided here.

As of the most recent half year report (FLC reports on a calendar year basis), the company had US$15m in cash and had operating cash outflows of US$22m for the half.

ASX anouncement is here

Fluence has announced another win in China, this time with a new locally based partner -- Hubei ITEST.

The contract is for 2 Aspiral L4 units and will be used at a highway service area in teh Hubei province and will be instaled and operational by August 2018.

Following the successful testing of this plant, the company expects to secure more sales in the remaining service areas in Hubei province.

Given this tech is already proven, I think it's likely we will see a lot more sales through this partnership in the coming years.

Announcement here

If sales growth doesnt materialise as hoped, there is meaningful downside with the share price. Especially given they may have to conduct a dilutive capital raise.

The business may not scale well. At present its very high fixed cost to sales, and gross margins are only 23%-odd. Burning through 12m per quarter in cash. Cost discipline is key 

Project delays, payment delays etc mean that this business will have lumpy sales recipts from quarter to quarter

Technology could be copied, or overtaken. Oxymem is one competitor in a similar space, with similar tech

Environmental breaches, and associated fines

Fluence is a specialist in 'decentralised' water treatment plants (desalination, waste water treatment etc) servicing a variety of industries, including municiple, industrial, mining, power, agricultural. 

Combined through the 2017 merger of ASX-listed Emefcy and US-based RWL. The former providing the technology and product, and the latter providing the industry presence. RWL has conducted over 7,000 installations with operations in 70 countries.

Products/solutions are centred around a patented Membrane Aerated Biofilm Reactor (MABR). They are fast to install, cost effective to run, and a proven technology (reliable).

The company claims a huge addressable market, and to be a global leader in this niche. China especially represents a significant market opportunity, and Fluence has secured important partnerships and early sales. (ASX 1/6/18 annnouncement.) China's 5-year plan has given US$15 billion in funding for rural wastewater treatment, and Fluence says it is well positioned.

There is a strong thematic tailwind with water shortages, rising waste volumes, global food production. Further, existing infratsructure is costly to maintain and uncompetitive in many cases. 

The business is expected to deliver around $110m in revenues this financial year (end Dec 18) 70% of which is already contracted (this was reiterated in late July 2018, here). It expects to be profitable "at some stage" in FY19. It has around US$40m in cash, and burning through around US$14m per quarter, at most recent quarter.

Expect sales cycles to be long, and revenue recognition can be lumpy.

In many ways, Fluence is similar to another recommendation Envirosuite (ASX:EVS). A great product, huge addressable market, fast growing sales -- but with a fast eroding cash pile and potential disappoint with ambitious targets. But also with significnat upside if they can scale the business well. 

I'd class as a high risk investment, but seemingly worthy of acquiring a modest parcel. See my forecasts page for my valuation.

I'd welcome any insight other members might offer!

Unaudited results released. Thin on detail.

For FY18, which ended on Dec 31, Revenue came in at US$100.8m, short of the US$105m forecast due to reclassification of $5m in revenue as finance income (due to hyperinflation accounting, required by the situation in Argentina. I'm not exactly clear on this, hopefully more detail in audited results due next month)

Of the US$100m in revenue, US$22m is from "Smart solutions" (Nirobox, Aspiral), They have ~US$15m in recurring revenue at the end of the year (Build Own Operate Transfer -- BOOT) much of it not recorded in FY18, with the rest coming from custom engineered solutions. This last segment generates the most revenue, but is lowest margin.

Fluence's focus will be on Smart solutions and Recurring revenue segments, as it is here that they reckon they have a competitive advantage. 

Smart soltuons revenue expected to at least double in FY19, which gives US$44m.  Combined with the recurring revenue run rate and the US$20m from the recently annount Ivory Coast project, this alone gives a base of US$80m for FY19. So it seems that they should see doube digit revenue growth this year given their other projects and further contract wins.

Based on latest 4C, fixed cost base is at least US$50m. Gross margin is 34% 

Have US$39m in cash, down from US$75 last year. Borrowings are <US$1m. Annual cash burn run rate as of 4th quarter was US$38.8m.

Expecting sustainable positive EBITDA by 4th quarter of FY2019.

If they can achieve positive operating cash flow and strong revenue growth, shares will likely be materially higher by year's end.

If not, further downside is to be expected. Definitely higher risk, but I like the thematic.

27/02/2019

Although Fluence tend to announce every contract win, this one is actually very significant.

The company will build a 150,000 cubic meter/day water treatment plant in the Ivory Coast, which is worth around 165m Euro -- potentially more if they also win the contract for maintenance and operations.

Work is expected to commence in the 3rd quarter  of 2019 and will take 2 years to complete.

The contract is expected to bring in US$20m in the current financial year (they report on a calendar basis), US$80m in 2020, with the remainder in 2021. To put that in perspective, Fluence is guiding for US$105m in revenue for the year just ended (FY18).

Note that the financing has not been finalised, so this is not yet a done deal.

ASX announcement is here

3rd party testing of Fluence's Stanford MABR demonstration plant has been shown to comply with California's strict Title 22 water recycling legislation, and to also significantly reduce nitrogen concrentations in waste water.

It's a small announcement (see here), but this study should help further validate the company's value proposition and assist in future sales. 

Fluence has advised that a media release from engineering group Hassan Allam, which refers to Fluence, has not yet resulted in a deal. This was released to ensure with ASX compliance obligations, and it seems that Hassan Allam have jumped the gun here.

ASX announcement here

Statement from Hassam Allam here (image attached below incase it is later removed)

Fluence tend to announce the opening of an envelope, but today's announcement is more significant than most.

It has executed two contracts with a previously announced Chinese partner ITEST, one that provides a total of 35 wastewater units across 13 seperate sites. 

As usual, there's no detail on the financials, and it's not clear what the timeline will be, but the scope of the contracts is materialy bigger than any we've seen recently. Importantly, so long as FLC's solutions continue to deliver, there seems a lot of future sales potential with ITEST.

Full announcement here