After zooming out and reviewing the Company’s strategic moves, wastewater solutions company Fluence (ASX: FLC) took a new approach to CY23, highlighting new products and strategic realignments. And the results seem to be returning a major thumbs up.

Q4 CY23 marked Fluence’s strongest financial and operational quarter of the year. The quarter saw revenues of $41.9 million, almost double that of any other quarter in CY23. A significant driver of this growth was the SPS (smart products solution) plus Recurring Revenue, totalling $31.07 million. This figure represented a remarkable 68% increase over Q4 CY22 and was nearly 140% higher than the average of the first three quarters of 2023.

The EBITDA for Q4 CY23 amounted to $4.4 million, reflecting a margin of 10.5%.

These results not only demonstrate a significant turnaround after a comparatively slow H1 CY23 but illustrate that the change in strategy to focus on SPS and Recurring Revenue, combined with the realignment and reorganisation along product lines is beginning to build momentum and show demonstrable results. With respect to full-year results, Fluence finished CY23 with revenue of $106.2 million, gross margin of 27.8%, and EBITDA of $0.3 million, meeting updated guidance of $0-0.7 million. Revenue was short of guidance by $15 million.

The decline in revenue for CY23 compared to CY22 can be attributed mainly to the winding down of the Ivory Coast Main Works, leading to a reduction of $71.6 million. While there was growth in revenue for Industrial Water & Reuse and SEA & China, this positive trend was counterbalanced by lower revenue in Industrial Wastewater & Biogas and Municipal Water & Wastewater. The latter was a consequence of order delays expected to be received in H1 CY23.

Divergences from the revenue guidance primarily stemmed from two factors: the divestiture of the Aeromix product line, resulting in the business operations being treated as an asset held for sale; and delays in the formal initiation of the Ivory Coast Addendum project due to bureaucratic hurdles in finalising the project financing. However, the financing has significantly progressed since December 31 and is anticipated to conclude shortly.

Fluence management also made “the difficult, but ultimately necessary, decision” to halt commercial operations in Israel, supporting the Municipal Water & Wastewater unit, due to historical unprofitability. The focus is now on North American operations, resulting in staff reductions and facility changes.

Last year, Fluence underwent a formal restructuring announced in Q4 CY22, achieving enhanced collaboration, significant cost reduction, and improved capital allocation. The focus on North America included strategic hires in leadership, sales, and technical roles. Notably, Steve Sheidler was recently appointed to lead the global Municipal Water & Wastewater group from February 1, 2024.

On November 1, 2023, Fluence informed of an equity offering aiming to secure $40.7 million, successfully finalised on December 5, 2023. Simultaneously, it engaged in discussions with Upwell Water LLC to amend its credit facility. This amendment included the use of the Capital Raise proceeds to repay about $19.7 million in debt, leading to a substantial recapitalisation of Fluence’s balance sheet.

For CY24, Fluence is forecasting revenue of $136.4 to 151.5 million, representing 29-43% growth over CY22. This will comprise $77.3 million of backlog expected to be recognised in CY24, and order bookings of $60.6 to 75.7 million in H1 FY24. It forecasts its EBITDA to be in the range of $5.3 to 6 million.