Fluence’s Strategic Pivot Raises Questions on Margin Sustainability and Project Risks

Robust First Half Performance

Fluence Corporation Limited has delivered a striking financial performance in the first half of 2025, reporting revenue of $33.1 million; a 64.7% increase compared to the same period last year. This growth was bolstered by a $12 million revenue contribution from the Ivory Coast Addendum project and a 19.3% rise in Smart Product Solutions (SPS) revenue, underscoring the success of the company’s strategic realignment.

EBITDA also improved significantly, exceeding the prior year by $3.6 million for H1, while operational efficiencies led to a 10.5% reduction in selling, general and administrative expenses. Despite a slight dip in gross margins due to the Ivory Coast project’s mix, core business units such as Industrial Wastewater and Municipal Water maintained or improved profitability.

Strategic Shift to Higher-Margin Segments

Fluence is actively transitioning away from lower-margin, higher-risk Custom Engineered Solutions (CES) toward higher-margin Smart Product Solutions and recurring revenue models. This pivot is designed to enhance profitability and capital efficiency, leveraging the company’s proprietary membrane aerated biofilm reactor technology and wastewater-to-energy expertise.

The company’s SPS offerings, including modular and scalable treatment plants like Aspiral and Nirobox, are gaining traction in key markets. This shift aligns with global trends favoring decentralized, energy-efficient water treatment solutions, particularly in North America and Europe, where environmental regulations and decarbonization initiatives are driving demand.

Ivory Coast Project Progress and Opportunities

A major highlight is the ongoing Ivory Coast water treatment project, valued at €164 million for the main works with an additional €48 million addendum. The project has reached provisional acceptance on main works, with partial commissioning complete and all payments received to date. The addendum works are progressing on schedule, with significant milestones achieved including earthworks, drainage, and infrastructure construction.

Importantly, Fluence is in direct negotiations for a potential Operations & Maintenance contract with the Ivorian government, which could provide a steady recurring revenue stream and deepen the company’s footprint in the region. This contract is expected to be finalized soon, representing a strategic win beyond the initial capital works.

Strong Backlog and Pipeline Support Guidance

Fluence’s sales pipeline has expanded by 35% since late 2023, now encompassing over 345 opportunities with an average project size of $1.7 million. The backlog stood at $79.5 million as of June 30, 2025, with new orders in July pushing SPS and recurring revenue backlog to its highest level since Q3 2024.

The company remains confident in achieving its full-year 2025 revenue guidance of $80-95 million and EBITDA of $3-5 million, supported by the robust backlog and ongoing order flow across municipal, industrial wastewater, and water reuse markets globally.

Outlook and Market Positioning

With a leadership team bringing over a century of combined water industry experience, Fluence is well-positioned to capitalize on the growing global demand for sustainable water solutions. The company’s focus on energy-efficient technologies and recurring revenue models aligns with broader environmental and economic trends, offering a pathway to improved margins and shareholder value.

Investors will be watching closely as Fluence advances its strategic transition, executes on the Ivory Coast project, and leverages its expanding pipeline to sustain growth momentum through the remainder of 2025 and beyond.