Thank you for standing by, and welcome to the Fluence Corporation Quarterly Business Update. All participants are in a listen only mode. If you wish to ask a question via the webcast, please type your question into the ask a question box. I would now like to hand the conference over to Mr. Richard Irving, Chairman and CEO. Please go ahead.
Thank you, Harmony, and good morning to those in Australia, and good afternoon/ evening to those joining from the US, or Europe, and Asia. Thank you for joining us. We're very pleased to be able to present to you our results for calendar 2021, as well as highlighting some achievements from the most recent quarter, like our fiscal Q4. Before we get into the numbers themselves, I think it's worth reflecting on the fact that this was really a landmark year for us. Not only, of course, the second year of the COVID pandemic that we've all had to suffer or struggle through, but also the fact that some major achievements, I think, you know, have been gotten across the line by Fluence.
For example, 2021 was the year where we really moved our proprietary MABR wastewater treatment technology into the mainstream, including successfully selling and commissioning plants treating over 100,000 people's wastewater and getting follow -on orders over the back of that. 2021 was also the year our MABR product line covered the full spectrum of water needs, all the way from treating a cluster of homes to city -scale solutions. For those of you that have been with us for a while, you know that we started out with kind of relatively small solutions, not all the way down to a very small scale, but also not able to scale to the large end. We now cover the full spectrum.
Now, we come off 2021 with plant capacity sold that's capable of treating about 1 million people's wastewater needs. 2021 was also the first year where MABR sales outside China exceeded those inside. We think that doesn't indicate a de-emphasis on China, but it's a recognition that this is now a technology and a solution which is globalizing beyond our initial successes in China. I think it's also very significant to say that in 2021, if you exclude the very large Ivory Coast project, that one-time project which has generated a lot of cash and profit for us, sales of Smart Product Solutions and recurring revenue comprised over 90% of our revenues.
That transformation toward those products, those higher margin smart products, higher margin recurring revenue, is well underway in preparation for when the Ivory Coast project eventually tapers off. 2021 is also the year that Ivory Coast project plant construction really got underway. It's making excellent progress. I'd encourage you to take a look at the video on the Fluence channel on YouTube, and that is updated monthly, and you're gonna see a lot of progress, I imagine, this year based on the plans that we know of. 2021 also of course, very importantly, was the second year we delivered strong growth, achieved guidance and maintained EBITDA profitability despite really strong COVID headwinds persisting throughout the year, such as lockdowns, quarantines, and supply chain disruptions.
Per today's announcement that you may have had a chance to take a look at, I think it's very important to point out that we more than doubled our Q4 sales versus the immediate prior quarter and also versus Q4 of 2020. I think this is very meaningful growth from the company and really shows that our technology is really migrating towards the mainstream. I'd also like to point out that when we set our guidance for Smart Products in January of last year, we gave a range of $35 million-$50 million. The reason for the low end of that range, $35 million, was, well, what if COVID persists throughout 2022? We didn't know whether it would. Of course none of us did. That was where that 35 came from.
The fact that we delivered almost $40 million in SPS sales, frankly, we feel is a really great achievement, which really shows that amidst all of these headwinds, you know, supply chain issues and so on, that we've been able to come through and deploy the solutions that we've booked. We've now sold also 14 smart product plants in the Caribbean. We've talked a lot about wanting to grow sales in North America. This is evidence that it's really happening. Seven of those 14 were sold in the last year. Now we really want to start going forward on emphasizing selling water as opposed to just selling equipment. Because that's far more lucrative for us and provides a very attractive source of recurring revenue.
Very important too, to point out that we're ending the year with $64 million in cash and investments. That puts us in a very strong position to finance our growth going forward, including affording us the possibility of some tuck-in acquisitions to strengthen our sales channel. In other words, if we were to make some smaller, M&As that would grow our business, we can do that within our available means. Looking forward to this year, 2022, we've guided to $45 million in smart product sales, which reflects a similar growth rate to what we achieved in 2021. Growing EBITDA from $1 million last year to $3 million this year. Now these numbers, this guidance range, these guidance ranges assume that COVID headwinds continue throughout 2022.
The implication being of course, if COVID really goes away as an issue in terms of supply chains, lockdowns and quarantines, that there are certainly some upside that we could deliver from that. One way that I think gives us a great deal of confidence in regards to our smart products forecast for this year is the fact that our smart products backlog that's contracted signed orders coming into 2022 is up 65% from the backlog we had entering 2021. We feel there's very good underpinning for the guidance range that we've provided. That the reason for that is because we typically have about the same amount in backlog at the beginning of the year in proportion to the final year, smart product sale.
With all of that, I'd like to hand it over to Francesco to get into a bit more detail on the numbers.
Thank you, Richard. Before I comment on the financial results, I would like to remind everyone that all the figures I will mention are related to continuing operations. Continuing operations exclude the results of the Italy business unit, which is an asset held for sale, and therefore is not consolidated into Fluence financials for fiscal year 2021 and 2020. Fluence had an audited revenue of $43.5 million for the quarter and $103.2 million for the 2021 fiscal year, up 18% on the prior year. The strong growth was underpinned by the Ivory Coast project and the continuing growth in SPS sales. SPS revenue was $20 million in Q4, and $36.9 million for the full fiscal year 2021.
While new SPS sales in China are tracking at a slower than anticipated pace, still impacted by disruption from COVID-19, Fluence achieved overall SPS revenue growth of 46% in Q4 2021, compared to the same quarter of 2020, and 20% growth on the prior year. All research and development costs continue to be expensed over the year, with overall operating costs reduced by 8% on the prior year. Underlying EBITDA for the financial year was positive $1 million. This is the result of several factors, including the revenue from Ivory Coast project, the growth of SPS sales, and the control of fixed cost. We received $33 million of payments from customers during Q4 2021, with positive cash from operating activities of $5.2 million in the quarter. In the same quarter, the company redeemed $11.1 million of short-term deposits.
Most of those related to the release of collateral for bank guarantees for the Ivory Coast project. During the same quarter, Fluence received additional $10 million from Upwell to fund its pipeline of recurring revenue projects and working capital, which bring the existing Upwell facility to $30 million. Cash and cash equivalents were $41.4 million at the end of December 2021, compared to $16.3 million at the end of Q3. In addition, the company held $23 million in short and long-term deposits. Finally, Fluence had a contract backlog of $127.3 million at the end of December 2021, including $94.4 million related to the Ivory Coast project and $25 million related to SPS. I will now hand back the call to Richard. Richard?
Thank you, Francesco. Now I guess we will go to Q&A and, as Harmony let us all know at the beginning, if you wouldn't mind submitting your questions via the webcast interface, that would be great. I notice the first question there pertains to the Upwell loan facility. This loan, I would say a couple of things. Francesco, feel free to add on the back of that. It's a hybrid facility between working capital and project finance. The intent is that we draw the money initially with the ability to use it for working capital. In other words, meeting our own internal operating needs, but with the ability to then map that into project finance for recurring revenue, sale of water type projects.
We have not disclosed the interest rate on that, but the interest rate does not change regardless of what happens in terms of rates rising and falling elsewhere. So that's a fixed rate. Yes, I would say Francesco also that, if I'm correct in saying that there's only one project, as many of you know, the Bermuda desalination plant that is a recurring revenue project today. We're working on a strong pipeline of projects in that space, so hope to have some good announcements around that, at which point that loan will start mapping over from working capital to project finance. What that really means is that the projects pay back the loan as opposed to, if you like, the company having to do it from its balance sheet.
Yes, Richard. I want only to add, yes, it is a fixed rate, so it's not changing over time. Right now, we converted into project finance about $3 million of that facility. The question also was asking if it's a off-balance sheet item after converted into water-as-a-service project and it's not. All our project we maintain majority and therefore are consolidated 100% in our financial and therefore also asset liability are reported in our balance sheet.
Great. Thanks. I also see a question here about sale of water potentially in Tonga, and you know, given the tsunami situation, obviously something that we should all be concerned about. The way we are intending to go is if we do have situations from time to time where there's an immediate urgent need for, shall we say, a single point of use water source in one of the islands.
Typically the, absent, you know, an urgent inbound request like that, which we so far have not received from Tonga, we tend to work in geographies where there's a very strong set of forces propelling people to use our solutions, with the priority around MABR for wastewater treatment and reuse for things like irrigation, as well as using NIROBOX, you know, for freshwater, turning seawater into freshwater. Beyond China, which we've talked a lot about in the past, in Southeast Asia, we see very strong potential in the Philippines, where we've actually opened a subsidiary, so that we can bid directly on projects instead of bidding through local partners. We've made progress in Taiwan.
As you know, of course, we have two very large plants operating in Cambodia with a third one that we concluded an order for very recently, which will be the world's largest MABR plant. In some of these countries, and not just Cambodia and the Philippines and Taiwan, but others in the Southeast Asia region, we're seeing a strong push for high -quality wastewater treatment solutions, but also a sensitivity toward cost and energy use, all of which we provide amply. That's definitely a focus geography for us beyond, of course, focusing on North America.
Richard, I see several questions on the EBITDA. I will address a few of those. The first one is what is excluded from the underlying EBITDA? What we exclude, and we disclosed that in the past, are one-off non-operating expenses such as restructuring or write off of some assets. In the past, those were related to San Quintin or other items that, as I said, are not typical of the business for the specific year. In this regard, there was a question of an estimated depreciation and amortization for 2021. Those are about $4 million. We also exclude from EBITDA items such as stock-based compensation, the expenses associated with the stock option plan for the employees.
One last question on the EBITDA that I want to cover was a reconciliation, why was $1 million from the 2.5 of prior year? That is related to the Ivory Coast contract. If you remember, we disclosed that in the past. Ivory Coast contract from an accounting reporting point of view is really represented by two different obligation. One was the engineering package, which was the first obligation we deliver in 2020, in Q1, actually, and the construction of the plant.
In 2020, we deliver the engineering package that was about $34 million of revenue, with a contribution to the EBITDA way higher than the construction of the plant itself, because the cost of the engineering package were mainly composed by internal engineering hours, which were amortized over a longer period of time. But that generated a major contribution to EBITDA in 2020. That explain why 2021 had a lower EBITDA compared to the prior years.
Great.
There was also a question since the last point, Richard.
No, go ahead.
What was the-
Yeah.
With reference to Ivory Coast, for how long we will benefiting from the margin generated from the revenue on Ivory Coast. Ivory Coast will continue for the entire 2022 and for at least half of 2023. Sorry, Richard. Back to you.
Yeah, I think the question also is talking about, you know, when Ivory Coast goes away, are we going to be where we need to be in terms of the other revenue sources, namely smart products and recurring revenue? I think the answer there is yes, because if you anticipate, as you said, Francesco, that it's at least mid-2023 before Ivory Coast goes away, and remembering that as we've described in the past, there's at least a, I would say, a pretty good probability that we'll get the O&M contract on that, which would be significant recurring revenue.
Beyond all of that, certainly by, you know, with guiding to $45 and having strong backlogs coming into 2022, you know, we're confident that by, you know, let's say mid-2023 and beyond, that we can be profitable without the custom -engineered projects. I think the transition is very much on track. I see there's also a question here about number of micros, Aspiral Micro units. You may recall that that's the very low end of our Aspiral range. That's the MABR plants that are containerized. Wastewater treatment plant in a box, if you like. At the very low end, micro is the one that treats just a cluster of homes, could be 30 or 40 people.
Of the 313 plants that we have reported have been sold to date, only approximately 10 are Aspiral Micros. People are, at this point, buying those and testing them out in certain, you know, settings, where, you know, in some cases they have a need for a lot more, but it's kind of the first step for them. I think what's driving plant sales numerically, I think we're seeing actually an increase in the average plant size, approximately double. The average plant size is about twice the size at the end of 2021 versus what it was at the end of 2020.
You know, we're seeing more plants and, you know, 67 plants sold last year, but also, you know, higher capacity per plant, which is a good sort of multiplier trend. I see a question about where we are with the various volume partners in China. As you know, we have three volume partnerships that have been in place for some time. Hubei ITEST for the highway restaurants, Hunan Kaitian deploying rural wastewater treatment solutions in Hunan province and elsewhere, and then Liaoning Huahong up in Liaoning province up in the north. All of those are placing orders with us, multiple orders in the last year. Although there was the framework agreements we finalized some time ago, those were to some extent delayed by COVID.
You know, we've seen a lot of issues in China where, as I'm sure you're reading in the press, whole cities get shut down, travel is restricted, et cetera. That has slowed down, should we say, scaling up those partnerships. The original agreements, they're still drawing down on. The relationships are all still very much in place. At the same time, as you know, back in March, we signed our first volume purchase agreement with China Three Gorges Group, which is a giant SOE. We signed a development agreement with Beijing Enterprises Water Group, which we expect to bear a lot of fruit going forward, really tuning the localization of our technology for the China market.
A brand new partner very close to where our factory is located, called the Yangzhou Yijian, doing a cluster of projects there. We're really at the point now in China where to put it, I suppose, bluntly, we're kind of an incumbent solution. If you really care about quality, and you really also want to optimize your costs, then Fluence is the way to go. If people don't care about quality, you know, then those are places we cannot fight for because we don't think that there's a lot of point in frankly lowering our prices where people don't care about quality.
Richard, I see there is a question on the backlog. What was the SPS backlog at the end of Q3? We said that in Q4, this grew by 65%. At the end of Q3, the backlog was $16.2 million. A significant increase. I want to use this question also to remind that SPS has a book-to-bill cycle that is not the typical multi-year project. SPS orders are sitting in our backlog for way less than the traditional EPC or project-based approach to water treatment. A backlog of $25 million at the end of the year represents about six to nine months of revenue.
Less, yeah. Probably less. Probably more like four or five months, I would say. Five months, maybe. Based on what we've seen in the past, it tends to be in the 40-something percent of what we end up achieving for the year. You know, so Smart Products backlog, like Francesco said, at end of Q3 was $16. It was actually $15.3 at the end of 2020. 15.3 at the end of 2020 turns into $39.6 at the end of the year in terms of revenues. Now we're entering 2022 with a backlog of $25.2.
We're saying 45 for guidance because again, we don't know where COVID headwinds will take us, but we think we're in a very good position to weather that because of that increased backlog. Also, I think there's a question here also about the MABR inroads into the USA mainland. We look at, you know, one of the things that we announced recently was hiring Richard Cisterna as our Chief Strategy Officer. Rick is a very experienced guy in the water space. He's booked about $1 billion worth of deals in the water, about $100 million in recurring revenue projects. He understands exactly the markets that we're competing in. He's, you know, although he has a global remit as Chief Strategy Officer, he's very much focused initially on North America.
We see North America as more than the U.S. mainland. I can tell you that we have 25 plants today, between the mainland and the Caribbean region. In the Caribbean, we have 14, and in the mainland we have 11. In other words, those 11 in the mainland, there's 10 MABR plants and one NIROBOX. Just to give you an idea, we're not newcomers, but now it's really about scaling that business up. There's also a question about Ivory Coast, when will that actually end? The current project and the scope that we have with Ivory Coast ends in the middle of 2023. That's June of 2023, it's done. I mentioned...
I used the term at least, you know, for the first half of 2023 because I mentioned that we, you know, we anticipate the, you know, getting the O&M contract, although we will see. That's a hope, not a projection. But there is also the possibility of further work connected to that project. That may end up taking longer, not because it's delayed or not because of cost overruns, but because of additional things that we may need to do, which we would only take on if it's profitable and attractive.
There is a question, how is going the potential sales of the Italy business unit in the Peru project? We are in. I would say we are continuing negotiation with interested party. We expect by the end of Q2 to complete those transaction, assuming the negotiation the party come to an agreement. The likelihood of closing those sales of asset is very high.
I think there's a number of questions, you know, reflecting, you know, are we, how are we reaching out and talking to folks. I mean, we do have a good investor relations guy, Andrew Angus, who you'll see on all of the press releases. On the back of what we think are very attractive numbers with the outcome for 2021, we are setting up quite a number of meetings with existing and new shareholders. If any of you on this call would like to discuss things with us in more detail, please do let us know. I'll be happy to set up some time to talk.
We are also reaching out to ESG funds, and we actually have some who have come onto the register. I'm not in a position to name them, but you know, we're encouraged to see that because frankly, I don't think anybody checks the ESG boxes as well as we do, as you can see from the slide that goes out in the deck that we just filed today with ASX. I think with that. Yeah, go ahead, Francesco.
No, I want to address one question that just came in about if the large backlog is restricting the company from bidding for additional projects. The backlog, as I disclosed, is $127 million, of which the majority, almost $100 million, is Ivory Coast, and the balance is really SPS. As we said in the past, SPS being a standard product, can be scale up without major investment in fixed costs or CapEx, because our fabrication is a very light manufacturing process, and the investment is really related to working capital, covering you know the timing between collecting from customer, paying for suppliers. The answer-
Yeah.
It is no. The backlog in SPS is not restricting the company from increasing its bookings in SPS.
No, and I think it's almost the opposite. In fact, it's, you know, there's a bit of a snowball effect that we're starting to see where the more people that jump on our technology, the more plants they buy, the larger the capacity they deploy, the more inbound interest you get. In that sense, you know, we feel we're now well beyond the startup phase, you know, introducing a new technology. This is now becoming the incumbent in the geographies where it's already seen significant deployment, and we only anticipate doing a lot more of that in the year to come. Very good. Thank you all very much for joining us. Thank you for your interest in the company and we just really wanna emphasize we feel incredibly positive about the future.
All I can say is, frankly, if we're doing this well with COVID here, think about how well we'll do when it finally goes away.
Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.