Ahmed Pasha
Thank you, Julian, and good morning, everyone. Today I will review our second quarter financial results and then discuss our liquidity and updated outlook for fiscal 2025. Turning to slide 12, in the 2nd quarter, we generated $432 million of revenue, which was better than we expected as we were able to achieve project milestones faster than expected across Americas and APAC regions. As we benefited from efficiencies from our supply chain initiatives.
This brings our year-to-date revenue to approximately $618 million versus roughly $500 million of first half revenue expectations discussed on our last call. In terms of gross margin, we generated $45 million of adjusted gross profit, representing an adjusted gross profit margin of approximately 10.4%. This quarter makes our 7th consecutive quarter of double digit adjusted gross profit margins. Year over year operating expenses increased by $10 million to $84 million due to higher R&D spend and sales and marketing costs. A good portion of this increased spending is focused on delivery of our new Smartstack product line to market. Turning to adjusted EBITDA, we reported negative $30 million for the quarter, mainly due to the more level fixed cost nature of our operating expenses compared to backend nature of our revenue as we discussed on our last quarter call.
Turning to slide 13, I will now discuss our strong liquidity which allows us to invest in innovative technologies and support our plan. We ended 2nd quarter with more than $610 million of cash, consistent with the strong cash position we had at the end of last quarter. Additionally, we have $532 million available under our revolver and supply chain facilities, which puts our total liquidity at more than $1.1 billion. Looking ahead, we will be allocating a couple $100 million of our available liquidity to fund working capital needs to deliver our revenue and execute on our domestic content strategy. Bottom line, we continue to see robust liquidity for the remainder of the year and beyond.
Turning to slide 14, I will review our revised guidance for 2025, which we have lowered to reflect current market conditions in the US, which have impacted our full year revenue and EBITDA expectations. Aside from these tariff headwinds, we are pleased with our performance as we are on track to deliver double digit adjusted gross margins. We continue to see opportunities in our recurring digital and services revenue platform. Accordingly, we are reaffirming our guidance for ERR of $145 million.
Turning to slide 15, let me explain our revised revenue expectations further. Recent tariff announcements made it clear that bringing products from China at these rates is uneconomical for our customers and for Fluence. This led us to mutually agree with some of our customers to pause certain shipments and entry into pending contracts until we have better visibility. Here, I want to mention two things. First, we do not expect any material cancellations, and second, we remain engaged with our customers. We look forward to improved visibility that allows us to price these pending contracts with adequate returns for both Fluence and our customers. Accordingly, the deferral of these contracts translates to $700 million of revenue previously expected for this year that has been pushed to the right. As such, the midpoint of our revised guidance is now $2.7 billion. This guidance is largely de-risked as we have 100% of the required sales in the US. Furthermore, 95% of the midpoint of our guidance is supported by our backlog plus revenue recognized to date.
Turning to slide 16, covering adjusted EBITDA, we are lowering our guidance to a midpoint of $10 million which is $75 million less than our prior midpoint guidance. Our revised guidance includes a combined $100 million of anticipated tariff-related headwinds, which we believe will be partially offset through our proactive actions. To go into this a bit more detail.
First, the $700 million lower revenue I just discussed will have an impact of approximately $80 million. Second, we are incorporating a $20 million incremental impact for tariffs that we were not able to avoid or pass through to our customers. These impacts were partially offset by the benefit of approximately $25 million from currently in progress and planned operational efficiency improvements. These include some renegotiations of equipment costs with our suppliers as well as cuts to our budgetary operating expenses.
In summary, although current tariff policy has created some near-term challenge, we are pleased with the underlying performance of the business. We remain confident in the long-term prospects of energy storage in general and particularly influencer's ability to deliver maximum value to its customers and shareholders. With that, I would like to turn the call back to Julian for his closing remarks.
Julian Nebreda
Thank you, Ahmed. Turing to slide 17. In closing, I will highlight the key takeaways from this quarter's performance and our outlook moving forward. First, the recently imposed US tariffs have introduced substantial economic uncertainty, which is impacting near-term customer decision making and project execution. Although this presents some immediate challenges, we are optimistic that they are temporary and manageable. Second, we remain confident in our long-term positioning. We strongly believe that our product innovation strategy anchored in our new platform, Smartstack and our US domestic contained capabilities, position us to benefit materially over time as the market overcomes the current economic uncertainty and regains its growth trajectory.
Third, we are operating from a position of strength. Our backlog now is approximately $4.9 billion, providing a solid foundation for future growth. We believe our track record of capturing double digit adjusted gross profit margins provides us with additional visibility on our future financial performance and profitability. And fourth, our liquidity remains robust, with more than a billion dollars in total cash and committed working capital facilities. We believe that our solid financial condition will give us the flexibility to continue investing through a period of volatility while executing on our long-term strategic priorities. Together, these factors reinforce our confidence influence the ability to navigate the current environment and emerge even stronger. With that, I would like to open up the call for questions.
Operator
Thank you. Ladies and gentlemen, as a reminder to ask the question, please press 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press 11 again. We ask that you limit yourself to one question and one follow up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Bryant Lee with Goldman Sachs and Company. Your line is open.
Hey guys, good morning, thanks for taking the question. I guess the first question just on, the ASC ramp, appreciate some of the additional disclosure here, but I just wanted to make sure I have the numbers right. I think in the past you had talked about like 3 to 4 gigawatt hours on line one and then line 2 would double that. I think I just heard you say by the summer of next year. You'd be at an annualized run rate of 12 gigawatt hours of capacity out of ASC in the in the Tennessee facility. Is there another line being contemplated there, or were there some, efficiency gains that are getting you additional capacity? The 12-gigawatt hours seems a little bit more than we had been anticipating.
Julian Nebreda
Yeah, no, thanks, good question. Each of these lines have capacity between 3 and 3.5-gigawatt hours and contracts are at a minimum of 3, but we can ramp them up to 3.5. What we do with domestic content is that we mix. Domestically produced manufactured batteries with imported batteries, and that's how we convert the 6 gigawatt-hour that we have available with the two lines in 212 by mixing the two. So that's where the 12 come from. And this assumes a combination of half and half domestic, half locally manufactured, half internationally manufactured. Clearly the decision on how much the how that that mix will go will depend on the final tariff levels that we get from China and how all this process goes, but that's generally a good assumption to go forward.
Ahmed Pasha
And the only thing I would add, is that we mix because we get the benefit of 40% because what we need is to offer our customers at least 40%. Minimum, domestic content. So I think that gives us ability to basically sell more volume at the same time, give our customers what they want, which is the domestic content incentives. So I think that allows us to meet our growing need that with the 6-gigawatt hours we can sell 12-gigawatt hours equivalent volume for domestic content.
Okay, no, that's helpful clarification, but presumably if you know the 150 plus tariffs, percent tariffs in China remain, the economics on blending and mixing at any ratio wouldn't make sense. So really, it's 6 to 7 gigawatt hours of domestic capacity, run rate next year, yeah, if I kind of do the math at current ASP levels.
I guess it implies like a $2- or $3 billion-dollar revenue capacity that can be supported on pure US domestic sales. One is that the right range to think about and two, would that cover all your needs for fiscal '26 given, the $700 million that's pushing out from this year's revenue to next year and then what you're projecting for next year on the backlog?
Julian Nebreda
Yeah, as we said in the call, even with the current tariff levels, even with the current tariff levels, mixing imported and local manufactured tariffs, we can go with a price that beats fully imported. Batteries, it beats by 10%, even taking away, even not considering the 10% bonus just on the 4 just using the 45X. So we believe this, let's say that if the situation were to stay in the current approach, we'll still believe, with the current tariff level, we still believe a comb a mix. Of imported and non-imported tariffs, it's, it will be a way it was a way to go. So we, the likeliest scenario, most of the likeliest scenarios we see coming forward, they we will offer a mix of when we offer a product, they will have a combination of important and unimported tariffs so.
Okay, just my last question just since you have run those economics and, kind of have that analysis as you talk to customers, obviously the tariff environment is fluid, but if you, it sounds like no contracts are going to get canceled. They're just going to get renegotiated or potentially just done from a different sourcing strategy, but if you do mix, is there Have you had customer conversations as to kind of what you know pricing and then your margins would be because you know obviously you've taken out the revenue impact from tariffs. As that revenue comes back into the picture, whether it's later this year or if it gets embedded in fiscal '26 guidance at some point, like what do you think the margin implications would be of bringing that revenue which is now going to still have some tariff impact if you're blending and you're having to set a different level of price, I suppose with customers.
Julian Nebreda
That's right. So, let me tell you our approach to this, which I think I'm answering your question. It's a little bit first point, the issue we have today. Is the uncertainty. The fact that we have a tariff level that it is subject to a potential negotiation with the Chinese government and There is a likelihood that it will go down. No, so that's what we are. So it is unclear, very difficult for me to form a price to my customers that I can tell them this is a price that will work in any tariff conditions because the tariffs could work in different ways. And it is very difficult for my customers to go out to their customers and tell them this is the way you should go because the cost structure. So that that's the problem we have today. Assuming the problem gets resolved at the current level, at a lower level, whatever it does. I mean, let's not, we have sufficient optionality to offer our customers a price that competes with alternative offerings, no, very well, and that allows us to meet our margin objectives.
In terms of the point you've mentioned, okay, will this still work for the customers? When we go out and looked at it generally, and this is a general statement clearly, there are not many alternatives to battery storage to resolve the needs of the US grid. They are not that many, no? They are limited. And we believe, I'm not saying that there's no price electricity, no please, or that we at any price it will happen. I'm just saying they're limited. So when they, because they're limited, we believe that most of these countries and not all of them, will move forward at a potentially higher cost than what we originally thought if tariffs were to stay at this level. So that's the way we think of it. And this is very important. We had designed our contracts in a way. Where the interests of our customers and ourselves are aligned.
And we can, we have, we're aligned, we share some of these risks together, so our interests are aligned to resolve this in a way that our customers meet their profitability objectives, and we meet our mark. So, we're very confident when we looked at all these enemies, all my optionality in supply chains. The opportunity that our customers that their customers have, and where would the value that battery stores can provide to the US grid that we will be able to address. Once the uncertainty gets clear, whichever way it gets clear, we will be able to regain our growth, no?
All right, thanks guys I appreciate it. I'll pass it on.
Operator
Thank you, Byran. Please stand by for our next question. Our next question comes from the line of George Gionnekis with Canaccord. Your line is open.
Hi, good morning, everyone. Thank you for taking my question. Along the same lines around ASC, can maybe you discuss the ownership structure there and any solutions if that has to change due to any political concerns. Thank you.
Julian Nebreda
Thank you. So, you are referring in a telegraphic mode to the potential FEOC restrictions on the current reg or if they were to put in place. So today, as we all know, there are no FOC restrictions on the IRA benefits for battery storage. There are for, as you all know, also known for the EV industry, not for our part, but there. What we have done as this is a potential risk, we have worked with ASC to ensure, and we have a plan that we will put it where we will put in place to ensure that we will meet any restrictions on ownership that might come up. That's what I can say today. We cannot be more specific than that, unfortunately, but this is something a risk that we have identified. That we have worked with the ASC to address and we have a plan that we will put together to ensure that if there are restrictions on ownership that we will adapt to will ensure those lines and those investments will still be able to meet potential restrictions that come up and the interns of ASC and ours are very much aligned in ensuring this goes forward. So that that's what I can say. This is not, this is something we clearly have been working on for some time and we feel confident that, when if that we will be, it's not that we are, we're working ahead of the problem coming, no, and, as the time goes along, we'll inform more stuff, but that's what I can communicate at this stage.
Thanks, and maybe around competitive concerns last quarter you had mentioned that you had seen incremental competition from Chinese in in the US and I'm curious as to what's happened from a competitive landscape. I know that a lot of deals are paused, but you can see incremental steps from Chinese vendors in the US or is that sort of over the last several months.
Julian Nebreda
I think that the US essentially to due to the uncertainty, the fact that it's very difficult to price solutions with this with things potentially changing very quickly, it's very difficult to see where competition it is, today, to be very clear because everybody's kind of in a wait mode. I believe that clearly that as we see some of these restrictions happening, it will be very difficult for some competitors who have, essentially built everything in China and bring it here to compete in this market.
Not that I say that we were ready for this level of certainty because it's not, but we were ready for this scenario. We always expected. That the US market was going to become a domestically produced market and that's why we have been working so hard in developing a strategy that allows to build a solution in the US even with US Steel that people say you cannot do it, even with US Steel, we're going to deliver, we're going to receive our first enclosures made with US Steel that we can put the flack, grain on them and sell to our customers at very competitive price. So, I'm sure that a lot of people now are trying to do this and put it together. We have a 22 year leg up because we were envisioning this world we.
Globally, which is a little bit different, we see, I would say, the competitive landscape is the same as it was last quarter, the very intense, but with Smartstack and, we had to accelerate our product launches to be competitive, but we are very confident that. The Smartstack is going, is the way to go, and now just to give you an example, you see people trying to copy it, very bad copies if people do, what we are doing. It tells you that that's the best compliment that you have, that we got it right, that people are trying to figure out how to do something that we can do. So, we're very confident that we can win in the international markets with the Smartstack and win over, the Chinese players and all the competitors we have.
Operator
Thank you. Please stand by for our next question. Our next question comes from the line of Dylan Naano with Wolf Research. Your line is open.
Thanks for taking my question. Can you just talk a little bit about kind of the global alternative self-supply situation that's not China and that's not, I guess, US and AFC.
Julian Nebreda
I mean, limited. There's some production coming out of Korea, Southeast Asia, and some in Japan, but really, I would say the majority of cell production today comes out of China. So that we are working with, to diversify, looking at some of it, but the volume we can capture out of China are limited. So, that's what I will say that we are working to develop a US supply chain very, as much as we can and hopefully some more players will work on this and we'll have a stronger local supply chain here in the US in the coming years. But today we're very much dependent on Chinese. This industry is dependent on Chinese equipment.
Great thank you. And then as my follow up, so I mean, I think you mentioned Australia in your opening remarks, can you just talk about was any of these projects that you signed this quarter related to the stuff that was delayed previously like the status on those.
Julian Nebreda
Yeah, those three core projects that we delayed last quarter, we expect to sign 2 in this this quarter, the 3rd quarter, and 1 in the 4th, so they're going well and we're very happy and, they're going well. So, none of them were part of the $200 million dollar order intake we took this quarter.
Operator
Great thank you. Please stand by for our next question. Our next question comes from the line of Christine Cho with Barclays. Your line is open.
Good morning thank you for. Good morning.
Julian Nebreda
Christine. How are you?
Good, how are you?
Julian Nebreda
Yeah, well, could be better, I guess.
So, I appreciate your comment that you know today your mix of domestic content and non-domestic content batteries is 10% cheaper versus 100% imported panels from China and that could be a fair statement today, but you know if we are to assume that capacity is going to build outside China. Let's call it next year, and that's going to be much cheaper than what Chinese imports with the current tariffs are. So how should we think about that scenario and how it would impact your future bookings and, how should we think about, you diversifying your supply outside China if only for risk mitigation purposes, and if you do decide to do that, how long would that take?
Julian Nebreda
Yeah, I mean, yeah, we clearly have a view of where prices in China could move. And we also can reduce our local cost in the US. So it is, I wouldn't, we know where we are, we know how, what the cost structures of Chinese and we have a view on pricing for them. So, I'm confident that we will continue to be, let's say, this is scenario which is one scenario. Tariffs, stay very high, but our domes are mixing of domestic content. We'll still be competitive. The other point to take into consideration that is important is we also bring, as I said, it's a mix of locally produced and internally. So we also will take advantage of the locally produced batteries, to the, of the, sorry, of the Chinese prices. So, we, when we looked at the scenarios, this a strategy we have given us an optionality and works well in many of these scenarios, including a scenario where your Chinese prices come down significantly. I don't have a lot of space to come down, by the way, just to be clear, but yeah, so you know we're confident that we have at the this is the right.
Okay, and you talk about you guys providing the mixing that you're mixing it with your domestic, supply and your imports, but can the is there an option for your customers to just get the batteries with domestic sales from you and get batteries with none domestic content cells elsewhere and do the mixing themselves with different manufacturers or are there.
Julian Nebreda
Why they would do that. I mean, no, the real value is our, the batteries are like gasoline. You don't care where, the real value is our BMS, our ability to integrate our services. That's where we create value, you, I mean, the batteries are important, are an important cost element. Well, that's not where the value is created. Batteries are a commodity essentially. The value is creating in our ability to our logistics, the intelligence, our systems, the ability, our ability to deliver, high availability. That's where the value is fixing stuff, this is not, it doesn't work.
Got it thank you.
Operator
Please stand by for our next question. The next question comes from a line of a meet the car with BMO Capital Markets. The line is open.
Good morning. Thanks for taking our questions. Just, on the $700 million of contracts that you've, kind of, I guess are kind of in a state of pause right now, can you give us kind of like the mix between contracts that were under advanced negotiations, versus, contracts that were already executed out of that $700 million and then the contracts that were under advanced negotiations, is there anything kind of obligating them to, kind of like I guess stay with you, rather not cancel that project and I've got one follow up.
Julian Nebreda
They were roughly half and half of them were contract already in our backlog that were passing the execution, and these were contracts that were very early in the execution, and we have not been able to allure to bring in the. To bring it to the country, the equipment for that and the other half were contracts that were that were not signed, and as I said, with the way our approach to the contracts that were signed is an approach of sharing the tariff risk so that aligns our interest in resolving the problem together. No, I somehow, if I can maybe give you a two-second approach. This is completely different than the approach that how the COVID situation was managed. Remember, after COVID, we had that major supply crunch and how do we end it? We ended up with a lot of contracts where we were on the water that we had to deliver on, and it took us a year and a half to bring those contracts back to neutrality.
Today, we have a completely different risk management. We share the risk with our customers in a way to ensure that we will align in the execution once the situation is clear to ensure that we can get the margins we care about and that they can do have the profitability they want to. So that that's a completely different approach. We think we're in a much better position to. Get out of this situation as once there's clarity that we can get out of it very quickly and profitability compared to what we had when we COVID when it took off, a year, almost a year, more than a year, and we were able to do a just to bring the contracts to meet, to meet the neutrality, no, so I think we're in a good place.
Alright, thanks for all of that color, and just on turning to the cash flow statement, it looks like you guys have kind of burned around $260 to $270 million of cash. I think Ahmed kind of indicated to be another couple $100 million of investment in working capital for the second half of the year. A big portion of that was like the $500 million of kind of inventory that you. I guess kind of pre-bought sells from ASC to help them stand up, I guess the additional lines at their Tennessee plant, when would those spot like that kind of those pre-bought kind of domestic sells start coming back to you in in terms of cash?
Ahmed Pasha
So, hey I meet Ahmed here. So yes, you're right. I think when you said $200 million I think that is, year-to-date. I think in the quarter, our cash is roughly $40 million negative, I think, free cash flow, and that is primarily I think the key is we if you look at we are building inventory to execute on our. The revenue plan that we have for the remainder of the year, keep in mind we have, roughly $2 billion of revenue that we have to deliver. I think that is what the inventory is, which is roughly $700 million of inventory on a balance sheet to deliver our Q3 revenue and then the remaining I think is for, we will be using cash, as you mentioned a couple of $10 million. Half of that is roughly for our domestic content and the remaining half is for our Q4 revenue, but I think we will recoup the, we will have, receivables at the end of Q4 which will be, collecting within the next 30 to 60 days after the year ends. So net, I think this is all working capital long way of answering your question. Thank you.
Operator
Thank you. Please stand by for our next question. Our next question comes from the line of Andrew Pracoco with Morgan Stanley and Company. Your line is open.
Great thanks so much good morning, everyone, thanks for taking the question I just most of my questions have been asked, but I just wanted to follow up on domestic content strategy here I guess I'm just curious why, just given the uncertainty around tariffs on China, a 100% domestic sell. Battery from you guys wouldn't be something that customers would be willing to contract today. To get that there's uncertainty around what's going to happen to the China tariffs, but it seems like that's an easy workaround for a customer. Is it because they're waiting to see what happens to China and they'd rather mix? Is it because, 100% domestic sales are not cost, it's cost prohibitive, just trying to get a sense for why that wouldn't be an easy solution for customers right now. Thank you.
Julian Nebreda
Good question. I think that, as I said, the main issue today is I don't sure you practice, the, where do you think things are going to be, when is the uncertainty going to be resolved? No. If you believe that the current tariffs are the solution long term, no, and that there will be no reduction in tariffs going forward in the short term. Clearly, the solution of a fully domestic offering will be very attractive. No. However, a lot of some of our customers and I think generally the, there's a view.
That the government is engaging with trade negotiations with China and that there will be a change in the negotiations with China into that will convert into lower tariffs with in the near future. So it's very difficult to commit to a 20 year contract, and resolving a problem if you believe that, two weeks from now there will be an announcement saying or a month from now, whatever time frame you think it is saying, hey, these retaliatory tariffs that we have mentioned are no longer in the, because remember what we had is that a lot of the tariffs we have today are retaliation because the mark, they were not talking with some people expect that once they start talking, the retaliation will come down and we'll have a much better view. So that's what it is. I think that if, but you're right, if we had a view that this is a tariff level going forward, they probably, a full US offering will be very competitive.
Okay, that's helpful context. Appreciate that. And just one follow up, I guess a little surprised to see the weakness in bookings in the first quarter being that tariffs, the high tariffs really didn't go into effect until April. So just curious if you could talk more to what you saw. Was it competition driven? The international markets, which I know has been a headwind, just curious to get more context around why first quarter was such a significant drawdown, whereas maybe we would have expected to see more of that in the second quarter with the China tariffs. Thank you.
Julian Nebreda
Good question. I think that we're expecting a significant number of US contracts this quarter, and I say once it was clear that Liberation Day was coming. That the Trump administration was, I'll say early March, late February around that time frame. People start saying, hey, you should take the risk or we should take the risk, it started that part and that that made it very difficult to our approach is, we let's share the risk, but most of our customers wanted to wait until they have a better view on and that happened, a few weeks before liberation day. So internationally we were not expecting that much but clearly I don't think it has been affected at all by the US situation. Today, we were not expecting major contracts. We do expect major contracts this quarter, so you know that's what I'll tell you. So we, and we don't see any real any real spillover of the of the US situation into international markets at this stage.
Great thank you.
Operator
Please stand by for our next question. Our next question comes from the line of Julian Demoullian Smith with Jeffrey. Your line is open.
Hey, good morning. This is Hannah Velasque on for Julian. Thank you for taking the question and squeezing me in. So first, good morning, on the note about the couple of $100 million of additional working capital needs, can you just confirm that that's specific to 2025, or do you see that extending into 2026? And then as a related point, when, or could you speak directionally to when you expect to inflict back to positive free cash flow generation?
Ahmed Pasha
Sure, so I think, in terms of your question, yes, I think this is mostly for 2025, we will be, as I mentioned, to Amit's question, I mean, I think we will have a couple of $100 million of receivables at the end of Q4 because we keep in mind as we discussed, we have. Back end loaded revenue that we in our backlog, that we will be recognizing in 4. So I think that revenue we will be collecting those receivables in, Q1 next year. So I think that will give us enough cash to, so we feel pretty good about our cash position going forward. And your second question is on free cash flow. Yeah, I think we continue to see, we don't have any significant capital commitments, this year, EBITDA is roughly $10 million but at next year we will give you guidance on Q4 call. But as Julian mentioned, I mean, I think if we continue on the path of our, that we expect in terms of signing new contracts, we feel pretty good that we will be free cash flow positive next year. Because we don't have any significant cap packs and it all boils down to the EBITDA, if we, our goal is to generate free cash flows next year and maintain our profitability, that is frankly the key focus for everybody in Fluence.
Okay, got it, super clear, thank you. And then as a follow up question, the $700 million and paused revenues, is that reflective of the pause projects and delayed signings that you have visibility into as of today, or have you built in any potential or any extra cushion, I suppose, in case, say. I know the 90 days pause on reciprocal Paris is not extended. I don't know your level of exposure there but could that $700 million widen is the premise of the question.
Julian Nebreda
No, I think the $700 million is what we see there is, and we don't see any downside additional downside. Even if tariffs were to, let's say that being tariffs on Vietnamese or Malaysia or somewhere else were to grow or to move, so we're confident where we are.
Ahmed Pasha
Yeah, I think the only thing I would add is that given we have a confidence that we have, as I mentioned in my comments, we have already brought all required equipment in the country, so we have the risks that, the revenue guidance we have given there's nothing to be imported, forecast.
Operator
Thank you. Our next question comes from the line of Cassie Harrison with Piper Sandler. Your line is open.
Hey, good morning going, thanks for sliding me in here. Julian, you said your domestic, solution is 10% cheaper than the imported content, before taking the bonus into consideration, how is there a simple way we should think about the break even tariff level that would make your cost, exactly in line with imports that, 100% is a 50% just trying to think about, what gets you to, being in line with the imports.
Ahmed Pasha
So yeah, I think, I mean, obviously, I think it's frankly we are still in discussions with many customers, so I can't be more specific, but I think in any likely scenario where we think the tariff's going to land. We feel pretty good that our product will be competitive. Obviously 150 is, when we already said, but I think we continue to see in any we then different scenarios and in any likely scenario we feel pretty good. I think that that we can tell you.
Okay, and then, maybe just a follow up, on the guidance, you indicated that you're 95%, covered, but you've also, you're not, you've paused US bookings and so. Is how do we get to the midpoint of guidance if possible is that just from international or is there something else?
Julian Nebreda
Yeah, I mean, the 5% is essentially the revenue we will recognize out of the contracts we expect to sign from now to year and as we recognize a small portion of them early on once we deliver the engineer and stuff, so that that's what it reflects to and it's in line with what we are expected to sign in the coming in the coming month and it does not include any in the US.
Ahmed Pasha
Yeah.
Okay, thanks. Actually, if I could just sneak one more in, It doesn't include you guys got it. If I could just sneak one more in, you know how, what proportion were any of those projects that you delayed co-located with, solar, if so.
Ahmed Pasha
Oh, I don't know it's a combination of both, it's not one single, so I think there are multiple projects that we have.
Alright thank you.
Operator
Thank you. Ladies and gentlemen, due to the interest of time, our final question will come from the line of Jordan Levy. Mr. Levy, your line is open with Tru Securities.
Oh, thanks for squeezing in, it's more on for Jordan. So, quick one here, I understand $700 million reduction is mostly due to US projects. Are you seeing any delays in international projects? And can you maybe walk us through the supply chain for your international shipments and then I have a quick follow up.
Julian Nebreda
No real delays in international things are going well and in, for we produce for international markets generally, we produce our enclosures in the, in Vietnam by batteries from China, most, and we bring the those batteries are integrated into our Vietnam facility and deliver to sites and then in terms of inverters, we generally bring them from Europe to meet more customers and we're developing a new supply chain. So, for Smartstack essentially that will bring a new supply source so generally we are we're doing very well, no?
Great, that's super helpful. I think the last quarter you mentioned 15% of backlog was exposed to tariff risk. I'm just wondering what's that number in your current backlog. Thank you.
Julian Nebreda
But in, you mean in the case of the US, where do we see the way, we should think about our backlog today and our tariff risk is that because we share the risk. We are aligned with our customers to ensure that once the situation settles that we will find a path that will ensure that we meet our margins and they meet and they meet their objectives. That's the way it's not, tariff risks is a is a little bit of because the way this this is designed is to ensure that we resolve the problem. So clearly tariff freeze and the tariff freeze will be a guess that the contracts could be delayed or delayed while we negotiate, but we're not expecting the way we have designed this, we will not move forward with contracts that have negative or have margins that we do not find attractive. So that's the way to think about it.
Appreciate the Color.
Julian Nebreda
Jordan, thank you.
Operator
Thank you. Ladies and gentlemen, at this time I will not, I would now like to turn the call back over to Lexington for closing remarks.
Thank you for participating on today's call. If you have any questions, feel free to reach out to me. We look forward to speaking with you again when we report our 3rd quarter results. Have a good day.
Operator
Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
