My name is Andrew Angus, and I'll hand over to you.
Thank you, Andrew. Good morning, everyone. My name, as Andrew said, is Benjamin Fash, CEO and Managing Director of Fluence, and I'd like to welcome everyone to our Q1 2026 business and financial update. As always, thank you for your time today and your interest in Fluence. With me is our CFO, Osvaldo Llanes. By now you've likely seen our Q1 business update and Appendix 4C that was recently released. I will provide a brief overview of the results and direction of the business and then turn it over to Osvaldo to provide additional commentary on the financial results. There was a lot to be encouraged about regarding Fluence's Q1 results. In what is traditionally a relatively slow quarter, EBITDA performed quite well, hitting AUD half a million against the prior period EBITDA, which was essentially break-even.
This was a result of continued strong execution of our backlog as gross margins increased 3% compared to Q1 2025, as well as the company maintaining strong cost discipline. While delays resulted in a disappointing quarter in terms of orders with only AUD 7.5 million in bookings, backlog across our core businesses is almost 20% higher today than it was at the same time last year. More importantly, we did not lose many of the key orders we've been tracking. We did, however, experience several order delays. The upside is we now have strong visibility on our near-term pipeline and could see as much as AUD 18 million-AUD 20 million in new orders in Q2, which would result in strong growth in the first half of 2026 compared to the prior year.
The combination of higher backlog across our core business units and near-term pipeline visibility gives us confidence in our ability to meet our revenue and order growth objectives for the year. The Q1 cash flow print was disappointing, there is no doubt. This was also largely due to timing. As we noted in our Q4 update, we collected a large payment from the Ivory Coast Addendum project, Milestone Six, at the end of the year, while we still had a number of payables that needed to be settled early in 2026. In fact, as of the 31st of December 2025, we were more than AUD 7 million ahead on Addendum cash flow, which on its face is a very positive thing. It did result in our cash balance at the end of the year being somewhat artificially high.
Additionally, we had planned to collect Milestone Seven at the end of March. This was forecasted and promised by the government. Had we done so, our operating cash burn in the quarter would have been approximately AUD 1 million rather than the ending AUD 8.2 million seen in our 4C. There were other cash flow impacts that I will let Ozzie discuss in his update, but it bears repeating that much of the cash performance can be explained by poor timing. We are forecasting positive operating cash flow through the balance of the year. However, we may still see continued volatility quarter over quarter due to the large payments associated with the Ivory Coast Addendum project. The other topic that is top of mind for executives and investors alike at this moment in time is the conflict in the Middle East.
Obviously, this conflict is having an impact on businesses around the world. While we have not experienced any direct negative impacts to our business as of yet, we have experienced some minor project delays and supply disruptions. It has no doubt led to uncertainty with a significant number of our customers, and we believe indirectly led to some order delays as customers want to see where energy prices settle and how supply chains will be impacted in the short to medium term. As we look ahead, however, the company is not currently forecasting any significant impact to its fiscal 2026 financial year. However, if conflict escalates or persists for an extended period, our outlook could change. For now, we believe the mitigation strategies that we've put in place over the past 18 months to diversify our supply chains will allow us to manage through this period of uncertainty.
Overall, management remains confident in the positive direction of the company, and we continue to expect double-digit revenue growth driven by momentum in SPS and recurring revenue segments across our core markets. Combined with expansion of gross margins and disciplined cost controls, EBITDA is expected to show strong growth in fiscal 2026. At this point, I will turn it over to Ozzie to provide a bit more color on our financial results. Over to you, Ozzie.
Thanks, Ben. Good day, everyone. Revenue for Q1 2026 was AUD 17.2 million, representing 3.6% growth over Q1 2025. Growth was driven primarily by industrial wastewater and biogas, and CNI China, which increased revenue by AUD 800,000 and AUD 1 million respectively, reflecting continued momentum across our market-focused business units. IVC remained a significant contributor at AUD 5.6 million, consistent with prior year. As Ben mentioned, EBITDA improved to half a million dollars in Q1 2026 compared to AUD 100,000 in Q1 2025, a significant increase of AUD 400,000 year-over-year. The improvement was driven by stronger operational execution across the business with industrial wastewater and biogas and Asia contributing the majority of the growth. Gross margins were 29.2% in Q1 2026, an increase of 3% compared to Q1 2025.
This expansion was driven by improved project execution and margin performance across key business units, particularly MWW or the municipal business, the biogas in Asia, highlighting the strength of our core operations despite some variability in revenue mix. Backlog increased across municipal, industrial waste water reuse and industrial water biogas, and Asia as well, reflecting continued strength across the market-focused business units. Total backlog, however, declined to AUD 64.4 million as of Q1 2026, primarily due to the continued execution and revenue conversion of the IVC Addendum project. From a cash flow perspective, the company ended Q1 with AUD 8 million in cash, plus AUD 4 million in restricted deposits. Cash performance during the quarter was impacted by the timing of several large collections, most notably in the IVC Addendum milestone, which shifted into Q2.
While this timing impacted reported Q1 cash flow, the underlying business continues to demonstrate positive operating cash flow characteristics, and we expect improvement as these collections are realized. I turn it back to you, Ben.
Thank you, Ozzie. As discussed in my introductory comments, Q1 was a disappointing quarter for new orders. The company booked AUD 7.5 million in Q1, a reduction of about AUD 4.6 million compared to Q1 2025. This was largely due to order delays across all business units. The majority of the projects the company was expecting to book in Q1 were delayed but not lost. As a result, the company has a high level of visibility on new orders in its pipeline and expect a significant increase in Q2 2026, potentially as much as AUD 18 million-AUD 20 million. Management remains confident that the company will continue to show growth in new orders in the first half of 2026 and over the course of fiscal 2026.
In terms of backlog, while total backlog reduced to AUD 64.4 million, largely due to the continued execution of the Ivory Coast Addendum project, our core business units are sitting on almost 20% higher backlog today than they were at the same time last year. This, combined with our strong order outlook, gives us strong visibility and confidence in our ability to meet our revenue growth objectives. Further, we wanted to provide you with an update on the Ivory Coast project. Through Q1 2026, the company continued to make progress on the Addendum works. Phase 1 and 2 are complete. 3.2 kilometers of pipeline have been laid and significant other activities have progressed such that we are confident that the Addendum works will be completed in Q3 2026. Equally as important, we remain on budget.
In fact, with visibility on potential savings, which we will have greater certainty on as we get closer to completion. We have seen delays in the works associated with stabilizing the bridge embankment, but we do not believe that this will impact our ability to close out the Addendum works and begin producing water from the plant in Q3 2026. As we've noted in prior updates, the Addendum works are critical for connecting the main works water treatment plant to the broader distribution system, enabling treated water to reach the people of Abidjan. Fluence continues to pursue a long-term O&M contract for the plant. Negotiations are proceeding on an expedited schedule as we push the government hard to resolve this contract in Q3 2026. Draft contracts and markups have been shared, and we have already participated in several in-person negotiating sessions.
The challenge that remains is the bureaucracy associated with negotiating a large contract with a government customer. However, these negotiations are being held exclusively with Fluence, and we remain strongly positioned to win this important contract, which would represent a significant milestone for the company. Fluence continues to maintain the plant on an interim basis and are pushing the government for payment on these services being provided for the past year plus. They have acknowledged and agreed that payment is warranted. However, the specifics still need to be worked out. The Addendum project overall remains in a cash positive position, with AUD 4.9 million of Milestone Seven being received in late April and the remainder to be paid in May. However, a significant amount of payables still need to be settled in Q2. Lastly, I also wanted to provide an update on the shareholder loan and bank financing.
I'm pleased to note that the company and its lenders are currently in the process of negotiating an extension to the revolving credit facility, likely through June of 2027, although this has not been finalized. Both parties are negotiating in good faith and expect to come to an agreement well in advance of the extension period, which ends at 31 July 2026. Once the terms of the extension are agreed, the company will make an announcement detailing the terms of that extension, which may include seeking shareholder approval. Fluence had previously indicated its intention to seek external bank financing. In Q4 2025 and Q1 2026, the company approached a number of commercial banks in the U.S. and in Australia to seek interest in providing a debt financing facility to refinance the revolving credit facility and establish a global banking relationship with Fluence.
Unfortunately, the company was not able to secure commercial bank financing at this time. Management will continue to seek commercial bank financing as the company continues to deliver improved financial results. To conclude, management remains confident in the direction of the company and our growth trajectory. While orders and cash were challenged due to timing delays, project execution and margins continue to perform very well, and the company delivered exceptional EBITDA growth in Q1 2026. As a result, we continue to expect double-digit revenue growth for fiscal 2026, expansion of gross margins, along with disciplined cost controls, driving strong EBITDA and margin growth this fiscal year. With that, I will conclude, and we can open it up for questions from webcast participants. Thank you again for your time and your continued interest in Fluence. Okay. Looking at our questions.
The core of the question is, our double-digit revenue growth guidance implies that there, you know, with the Ivory Coast Addendum delivering probably AUD 12 million-AUD 14 million of revenue this year, significant growth in our core business units, which is a significant acceleration from the core business growth we saw in Q1. Can you walk investors through specifically where that growth is coming from, which business units, which geographies, and what's already in backlog versus what still needs to be won? I think the reality is what we're expecting is that we expect revenue growth across all of our core business units. Several of which I think will be leading the way on a percentage or relative basis.
Our industrial wastewater and biogas business started the year with just under AUD 20 million of backlog, for example, after finishing last year with around AUD 13 million in revenue. Municipal water and wastewater similarly finished last year with approximately AUD 12 million in revenue and started the year with more than that in their backlog. Southeast Asia and China as well, under new leadership, is experiencing strong growth in their pipeline, which we're hoping is going to be able to be converted into orders that can be recognized this year in revenue.
I think the one business unit that is quite stable in terms of its profitability and gross margins is our industrial water and reuse group, but it was also the largest business unit that we have, and therefore may not show the same percentage revenue growth as we're seeing in some of the other business units. Hopefully, that answered the question. Okay. At this moment in time, I'm not seeing any other questions come in. Maybe I'll give it 10 more seconds or so to see if any other questions come in. Otherwise, we can conclude at this time. Okay. Thank you. We truly appreciate your interest in Fluence. We don't take it for granted, your time and attention.
At this moment in time, I think we will conclude the Q&A and the presentation at this time. If you do have additional questions, please feel free to send them through to Andrew Angus, and we will do our best to address them. Thank you, and have a wonderful day.
Thanks, Ben. Thanks, Ozzie.
Thank you.