GWH - Earnings call transcript Q4 2021

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Operator

Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Erik Bylin. sir. ahead, go Please

Erik Bylin

XX-XX Fnancial ESS's conference Fourth to Results Quarter call. Welcome

from on CFO. Eric the me ESS call Moftakhar, Joining Amir today are and Dresselhuys, CEO,

management's Relations of XXXX. session. earnings a release financial will on remarks, the This for today, the company's available Investor results quarter ESS released of Following Q&A fourth the is prepared section we Earlier hold website.

from forward-looking call. the well statements strategy reminder, include made call during materially with forward-looking our of reports without our business, to or subject The and cause the detail the limitation, and are will for described in be information in and statements, periodic and to us to statements prospects those In as today about and unknown that risks factors those presented our the that growth Exchange on actual and this as As economy. set are forth uncertainties unpredictability the a information in filed markets, our in will current based as Securities risk uncertainty more statements differ implied XXXX. particular, recent projected currently known These including, most this today. on results available Commission, could

the forward-looking as update law. hereof. not this to that of as events. we and And should call assumptions obligation predictions make we except any any are on You date forward-looking All required rely as statements beliefs on future disclaim of forward-looking statements statements, based by on

conjunction GAAP results measures of of turn excluding call evaluate our information that that investors financial basis. management business, believes certain non-GAAP information we ESS call, make core over I U.S. will CEO, non-GAAP U.S. earnings Eric the not with and decisions. our on certain and of will to non-GAAP financial in manage, a the taken Dresselhuys. and GAAP results. Reconciliations the indicative also non-GAAP useful are and presented release. role internally And by are within that, financial During present items between provide measures Management operating operating measures understand, our uses Management with to

Eric Dresselhuys

performance The earnings you discuss then and year outlook. clear has you. to the long-duration storage. and product I giving for fourth It discuss that, on Thank those welcome momentum of is the as the slowing. become at some financials by to then forecast storage will beginning our ' by not but to the that scalable, I a exiting abundantly go-forward long-duration our year, for were hand the ESS, deliveries, XXXX some dwarfed company. and context safe After more for transition storage In unprecedented energy met today's was quarter than because plan. start last past, that represented Amir call only it the details on a call imperative will lithium-ion moving the four to to an future. market, clean only for hours ESS public technology. storage share our grid and also is And first available has not off

of And on to move is for need hours longer of and a the proliferation technologies like tailor-mades imperative. durations it's more even discharge of and this the applications. renewables, basis. continued environments operating solar in the that catalyst use acceleration wind, X, the regular storage for for to news supporting varied XX installations those transition and X with easy cases The Now storage industry these to from evidence intermittent legacy become can and over find has

resilience support as suited million California dedicated grid to support over emergencies for. not next long-duration projects month, $XXX reliability, such lithium-ion Certainly targeted These is energy its against adding applications are funds storage last two wildfires. years. to Just fiscal

paired study storage of the eight released to Among newly XXXTWh decarbonize the authors for by with require example with place Energy dozens to to of infrastructure, concluded producers as investment. in Electric in which and Long-duration storage levels, provide such Council, Storage can that McKinsey grid. highlighting helping the with energy needs is Rio the between Shell, storage to more the scaled XXXX, and up In resiliency these XXTWh this to would safely Gas renewable delineating XXX project day for and $X that transition. San great Google, generation a need on energy Long-Duration the Diego needs while life. companies joined its hours. Our to critical coming and trillion November, discharge storage, the for driving formed than times the a focusing council, importance $X.X long-duration on energy between the findings, others Microsoft, LDES and users to be present capacity, plays Leading Tinto, and have of large long-duration also

in fray, cost, visibility, almost an And into market customer while inbound have has effectively rise, as our and organizations plans and work marketing across Finally, with systems, the that some efforts, remain energy undeniable direct the approved add we be grown renewables storage Certification know the the solve friendliness, XXXX, and We that comes this relationships that California vast recently flood receive These point confident safety. this inquiries long-duration storage. exclusively opportunities UL to earlier storage future that deployed entails the this for well. although we environmental was we have believe the sales have of that month, battery inquiries. But new and only land for the raising future. begun of in from to demand and those quality have us XX%. into opportunities to And move renewable are continue of can modules, safety, to lithium-ion. state's inbound ingenious. technologies There's a behind from the reliability, today through we gigawatts we is a of fire that build the got to The solution LDS is to State best design the away need portfolio by off brought over XX already gigawatts improving not inquiries promise XX of distant

to flow for is build, water. technology simple grid at very the has its core power relatively battery non-flammable. which input ESS With and economical and a at capacity longer salt, Our separates iron fade of makes more our iron, storage even being from us components system: inexpensive over durations. the capacity, the and cycles, zero benefit additional carries environmentally technology sustainable reliable, XX,XXX

Moving results. our fourth on to quarter

began revenue of were warehouses were in we in to While units the new delivered first our fourth second-generation material with not make and We in and separate recognize customer the and sales, three of installed we able to operations. progress QX, ramping shipping energy our quarter XXXX, customers quarter third the deliveries, did XXXX.

our history the longer from for revenue customers. or history our process than of these have we products successfully are our is revenue commercial establish and been more obtaining each with when will we near-term, recognition to until a ship, acceptance to units However, and products be has deliberate. slow first be mature deferred our will unit, acceptance as recognition a Initially, received so be acceptance. In this until are process were likely customer new, customer more

accelerate quickly; also recognize will only not future. our startup. These the how efficient improve customer our in help the applications even and the quickly ' for us our sites advance, but to receive recognizing learned testing, in revenue, we process that to in expect can lot a prepare of the customers up learnings more that remarkable We've our be so more revenue can so value We solutions about bring customers more faster.

has that fortunate feel shipments chain challenges, the Energy as that Warehouse’s. ESS we While has timing the groundswell to long-duration production, our brought at energy to that slowed coincided has unprecedented also moved storage scale forefront, have with just that initial supply

faced injected securing with process components. through well as each molded working As We're limitations of in we some examples, as of certain electronic the parts, challenges these.

more base supply our available redesigning components. strengthening and widely leverage and broadening are PCBs to We

of With we regimen are put and see them. we accomplishment demanded Southern in growth. by units to at however, the the test it's sites a these operational to in commercial ramp, trajectory a short-term and strong been caused team said, we a running have constraints. testing and at campus Importantly can a units handle delay issues, while we our In believe has anticipate the that of these California us near-term, behind and bed in they California. heavy of pass them Softbank's and on a customers great X fully get customer that as Northern

excited to prove the Additionally, have storage ' we this solution solve chapter the that first SDG two continue grid undertaken and ESS can [Indiscernible]. shipped, next help challenges. units We're to

considerable since XX% and to out continue make company. headcount the have in also the doubled company's almost We of We the that operations to building of XXXX end to 'XX. XXX our added progress

Ben Engineering. of SVP as Tesla. both leadership team to SolarCity Heng Ben add broad to at able has were and background we held Importantly, technical roles brings and the

customers. out We are our new building and sales team announcing

feet XX,XXX facility square us Wilsonville we Additionally, helped to feet quarter, fourth total in square to double footprint added XXXX. XXX,XXX our which in our the

the production have for chain Given supply we adjusted XXXX. environment, plan our

significant this commencing Center plan to product our continue as ramp Energy our shipment a of in We shipment, as Warehouse well year. Energy

of chain Although the faced more shift our last pace This of ramp than Amir share shift in the the our over little quarter-to-quarter, challenges more we four will right. five considerable a will the on that the plan. a or production specifics the represent we expect will from to months growth details supply will be one-quarter expectations.

will of with ramp reduction planned which proceed for our We speed. independent two initiatives this of year, cost is each

for harnesses assembly. PCBs The simplify manufacturing common activities connections first solder replacing more wire standard with and cheapen with is redesigning components and to design like

our our our costs of our dramatically our cash allowing the implement ramp but the than automation minimizing the and The demand in prudent initiatives of increasing a ramp production are to the overall quality. The trajectory us lower conditions. way fewer These in This or to lowering confidence advanced burn. second will XX%, of shipped, the incorporate thereby capacity inputs line maximize more end cost change production products, our macroeconomic by labor velocity business, is XXXX. reflection to production is a by to response added of unit for units expected adjustment and no benefit to rather adjustment to capability, over have in reductions production in

our not units customers communications and of schedule. news shared new the close To a with in single ordered. and been to customers, we've our have they our remain Importantly, the date, committed have cancellation, we had delivery

like Speakman replace Gast hardened Board of strategic an years leadership and across bringing Cycle early-stage scaling investment over in I products industrial to brings of to Directors. Claudia XXX companies Fortune ESS. at organizations. investment of experience Claudia will welcome roles commercial led financial valuable to Shirley who the Claudia and XX in With market would experience Capital and Finally, firms.

that, with We turn commitment to through I'll And her take of and also want to years to valuable to thank financials. her us Shirley the for it over ESS, contributions. Amir

Amir Moftakhar

you, Thank Eric.

Now, I the review will financials.

shipped as While of we established recognize latter in five did acceptance near-term a will unit, and Revenue until history QX. is longer mature new, Energy we when from deferred to until each a or obtaining XXXX, have the the each from we customer has with in received are recognition than customer products been our In successfully acceptance be acceptance. products process these of part of for Warehouses more are a units we've history customer. revenue be this not our likely more

are we cost stages in and resulting of expensed ramping sold. of making are products goods these of under labor shipped We cost the units As development early be the overhead zero accounting. and incurred, the material we to-date, production the in still

our million. million adjusted in or losses. expenses reported With million, at QX non-GAAP $XXX.X QX basis. EBITDA that, non Our QX negative were with $X.XX in expectations for GAAP we GAAP of line on were per-share a - operating losses $XX net $XX.X

$XXX.X cash the $XX.X fourth-quarter, balance Moving to was with investments. year ended million In cash by the used sheet, short-term and operations we the in million.

just have adjusted by ramping our a environment due navigating unprecedented as the expectations our and are began great was impact XXXX, of as were to supply delays for we delivery hands challenges. impacts shared, supply-chain we on degree, brought production Eric decision that us an manufacturing. we To out As to this

end flight, will key XXXX. three the velocity the in Given and our to production focus our exit the make supply production that, for investments deliver execute allow, XXXX the maximize at in units programs CapEx will cost-savings be already necessary that our on of areas: were

Let me on these. touch of each

delays, we production our ramp a with XXXX. our of chain Energy despite supply strong will Warehouse First, continue in

in these than of deploy delays, schedule on this is result one more product shipment now previously year. fiscal expected. As first later a our little quarter we than our We Center planned have track a Energy remain to

installing legacy some shipments see delay and In at between level our and ahead testing terms units of ECW ready. these a believe performed Once factory early to experience varied when customer. recognition. customer revenue shipping our Given will Wilsonville at acceptance units is we process, side contractual we for in deployments our we Commission we current existing received, of deals, facility a the

testing formal a at perform protocols customer customer acceptance. followed the additional acceptance we Finally, by site,

For deployments, recognition acceptance. expect follow early we to our revenue customer

successful we occur recognition acceptance to As acceptance, installation a quickly. and and build record track revenue of expect customer more we

approximately Given we are schedule, to recognize all ship contracted we them, to our Warehouses million $XX revenue If and ship in XXXX, all of ramp are point. of expect new for and units revenue. XX between these now this to able Energy at translate which XX this would in

are our goods scale, labor input are production that each time. of cost sold total and we dependent to lower on reduce A Second, portion execute will reductions of our cost improvements significant in not design our but unit. plans reduce

Eric alluded to a initiatives critical designed to, we year. third, expand had are manufacturing to our we shared dramatically module year, already for these capacity. we cost power As manufacturability automation this line an as ramping for ordered throughput, And last planned

to times production we XXX XXXX. late and our XXXX, in We throughput megawatt manufacturability each to an slowdown allow into end extremely supply To of With annual backdrop not ongoing in expected of point, timing, expect with three a for with would delivery rapid hours running with this is design our than these customers healthy been production be the cancellation growth conversations. to to XXXX. chain line expand among This place customer up nor and by dramatically continue our more where a improvements, booked have we automation, reiterate and have received year. open the seen important about our very we started we have any single us orders,

in customers proposition the to long-duration to ESS of I speaks think our brings importance well implementing this the storage value strategic as our as long-term applications.

and current expenses operating under our assumption year, plan our expect to in Given will come $XXX remain we for full accounting the that about million. the development at we

the to coming $XXX the As open we line the to our of execute with more we for ample the in in on than end year and of the expect balance million have run business year, questions. up plan that, well sheet. liquidity And cash can excess we

Operator

Instructions] ask for in compile I pause question, to time. Q&A just a to a this remind like At would moment roster. the everyone order to [Operator please We'll

question Canaccord first Dorsheimer the line comes Your from Jed of from Genuity.

So, Jed, please go ahead when you're ready.

Jed Dorsheimer

details Wondering customer if more just provide the could Hi. of the running. Thanks, you sounds guys. elaborate actually and five are It of some three the acceptance. specifics on like

So, rev that occur Thanks. what the specifically for for achieved rec. be to to acceptance needs

Eric Dresselhuys

Sure. Thanks, Jed, I'll it. take

so one of its full have customer that's sign a of the shipped call, startup, the number We've process, off. this the through units commissioning of those installation, full and recognition gone units. completed right. two units actually, At system and as You're with of revenue totally time sites, is of the testing

to start-up then next a for they'll in week. being then we units time. testing one rec to when done. they the this delivered, and get at complete done expect very or we'll maybe other routine and that the that's rigorous, days some be off, And The of signs go customer through go still, rev that through Another

Jed Dorsheimer

know other and any redesign as the guess of ones have of just Headwind. I an issue the the I chip bigger it's the been at supply PCB? Got headwinds, that's particular potential point, supply like near-term. issue but all that one you there the Are in containers mentioned and others resolved it. chips. chain or you Thanks. see a chain And were sounds the about

Eric Dresselhuys

memory. Yeah. Good Thanks.

at that. but shipping year, -- in have we to work containers, were now. getting having containers got one-point were delays we We able of last through We've plenty

we've you the they have We that thing, chips, and these redesign; just had which we're, is not -bought we have do But work us stock a now it up. to as call back got think, the you through up solutions the to On pre constraint. come through we've fall, when in come down now. problem be them that some alternative to slowed but right out

this as so here ensure having hard we about of alternative robust have working at we as need, we we release, to today, chain turn. every feel we at we have and we're sit supply So, -- that in said good that sources supply the a more bit the supply

Jed Dorsheimer

Last for back jump question queue. the Great. me, then I'll in

I'm or negatively with through that through and just know EW, has you learning EC continue the or that positively think curve either changed a gone wondering, that ago? the about what around as now the go you've versus any Given expectations you of year the to

Eric Dresselhuys

positive just grid the of all field. EC the systems in getting I systems of in out renewable or to more interface our towards we're modestly that with inclinations the think the sense systems experienced

the So, experience the at get, get we more we faster a return.

online with think help And as I that'll come so, they later year. ECs this out

Jed Dorsheimer

Thank you.

Eric Dresselhuys

Thank you

Operator

Jed. you, Thank

You now next ahead. Oppenheimer. Colin, from Colin have of go please Rusch question the

Colin Rusch

talk is Thanks move how a point or to [Indiscernible] be process is much. process you because work the Can automation, done as labs? little bit done towards of all this engineering about is you still some there manufacturing so much at left

Eric Dresselhuys

the I line here think this engineering coming automation year. is for online that's the done

our see engineering So, on side. any I don't

is have out course, that with arrive. we to line automation that the of for just us the the are components partners complete. waiting Of design all working building We're so of

Colin Rusch

thinking you're model with of just you the about storage up Generally, helpful. and your supply forward. about to wondering years. you how we're then build at I'm and as a a this prices power going That's go business environment, seeing number be And pricing of on for solutions. environment as go here for tight there's you pricing look Okay. the pipeline chemical lithium-based pricing

Eric Dresselhuys

being versus to really but our on on solutions to always declining, not been lithium prices think the have a has value a starting alternatives, nothing? trying pricing extent, value bit. that as the Sure. doing little Well, And up of our so, work approach. What's to focused approach go versus stopped only I

for But might out proposition being little us that value of power. give about sure really us, the a customers. by making is think pricing appreciated total I our more bit that it's

Colin Rusch

notifying. the point. Perfect for That's Okay. guys. Thanks,

Eric Dresselhuys

you. Thank

Operator

Thank you.

Company. comes line open. line Cowen Boyd question is and Thomas, your next of from Your of Thomas the Sir,

Thomas Boyd

you for Excellent. Thank my taking questions.

update awarded? an composition in phase. give being how the has if booking’s of really still one with is much How wondering like been you negotiated? first Just And qualification much was for I the us can XXXX, [Indiscernible] a kind look what's

Amir Moftakhar

Good question, shift Thomas. towards production we're or that seeing Right what's booked, not negotiating we're now, given XXXX. in the awarded, with right now in just guiding in schedule XXXX,

As have continue alluded anticipate Eric to, this with to do We conversations we shipments robust year. EC customers. starting healthy, the

you'll time, with the XXXX. for that think EC guiding of EW our the in and shift this more we're But introduction XXXX awarded I continuation or booked what's to projects. at not see of product

Thomas Boyd

pipeline, it categorize would expand overall demand. fair to XQ? as it billion to in Then as as still I that Understood. was know be far it have continued around things maybe $X obviously is that

I just there. was So, wondering about an update

Amir Moftakhar

and type Yeah, for that projects about we've pipeline as or so of NDA through And we that that it's global EC an remains that billion either that now some in of those connected what have And participated EW for an RFP named with is in range both with our them are the execution of that products. shared there $X opportunities. we've pipeline our is no that information in such robust. exchanged opportunities customers shortage

Thomas Boyd

really could last appreciate if it. I A in and I Great, quick. sneak one

opportunity gotten have who what maybe second-generation received kind chance to unit? that customers of a the first-generation you've Just also the that had work with that from have unit is or feedback

Eric Dresselhuys

there's around lot think I excitement of it. a

it's it's at and its ardent products said, every in we really product, As a of just turn [Indiscernible] terms more performance. delivery its

So, excited people about are that.

the up think products frankly awareness is is I need duration acute for the since probably longer more that were thing first-generation market of other today. come that's well-known, more shipped, the the

or same the before. same excited and product than been So, functionality, more it, people they've about they're see

to to of two building. think this, at down a right I Southern video least the more think on to heard of things to we've to units that's be about believe about because can California. and people brought the gets surprising and table that And the perimeter they up install storage And And installed that be s system next and in that's the do. website. have Lithium got when of Warehouse at that is drawing It something with The a we package. think me you long-duration big batteries, Energy a they into remote, the got in when were it's The place. a can't picture so customer there's easier been they hits I shipped One amazed safety people hoisted many installed can that have to building. how close that they what just you see they're

you've in with see so, marketplace. the they out from one And kind safety heard about of other thing and people that when the wildfires the installation issues hear we happens. the number That's

Thomas Boyd

have the Excellent. call address We [Operator to questions. Appreciate from Jayson Osha of Guggenheim. now question the Instructions]. next the

is open. line Your

Jayson Osha

Hi there. Eric? Hi

Eric Dresselhuys

Hello are how you? there,

Jayson Osha

I'm good.

of that's go to that couple the believe core in waited million a XX that back I you to that And what right? in to is Just EW said, revenue. -- units, guidance here questions $XX

Eric Dresselhuys

right. That's Yeah.

Jayson Osha

Okay.

units manifested be XX revenue? of as those that I it would but XX recognized Or those that idea here. Now XXXX, said were actually going to you're is revenue -- have being to understand have end XX the out some those want by point? for is more all of would at units that that the just what's actually only

Eric Dresselhuys

Yes.

rev hard to the to So, we're rec to what accelerate units. able be and or we've is the the process. a through ship all If How we is many predict. will they little that move get the we said time on as that rev depends much recognition cut-off would bit process to commissioning a to play where revenue rec would in call out little alluded expect how

Jayson Osha

will field that of the by recognized units and that end and the the the to some year in XX best you'd be modest. to those Is like of have of that way it? think units some So is

Eric Dresselhuys

we tell vast the be Well, recognized. will you not. all whether certainly a of recognized would There them question be I be expect to they or would could that majority of

Jayson Osha

a any form That's of And in Jed's larger EC on EC in Okay. question. a expect different the Can follow-up factor the thing. fine. Obviously, we the is see just XXXX. to is field

Eric Dresselhuys

As to that, question you said, units Again, We’ll but -- get within we expect we recognition. to up said, get this at start not will year. made ramp do revenue 'XX. same revenue this We've expect to the year. ship on more shipping -- as year. point fully as that start And be that recognized continue expect dramatically shipping into units we've this we we claim

Jayson Osha

just Sure. some then Got seems makes And That stuff here. you. out folk’s sense.

yet, New are one the expensing the that absorption in When of about in that these costs there you're is the of out XXX% mentioned million all recognition. that XXX% includes XXXX, real some cost a essentially a XXX that of you'd not product a some field for OpEx? awaiting recognized potential of million that of of XXX units a -- are talk does you or that, but OpEx like

Eric Dresselhuys

good Yeah, question.

as So that costs development also and or quarters were will OpEx future we're period. product all inventory for purchases the making would future in accounting, expensed years be future as long under include the

purchases and for includes number OpEx inventory the products. that those So

Jayson Osha

normal the to business OpEx that in down versus terms R&D Okay. Good. and course run-rate? you absorption of Would of $XXX that care million like product break

Eric Dresselhuys

that We've comment Yeah. now. that and wouldn't on guided right to not

could shipments automated line and the to we finds running up fully get I on we normal a our think cadence its provide more business, as more state of way guidance and that. of

Jayson Osha

beat to COGS Okay. that from revenue, to back actually XXX% some do revenue add work? how of or recognize or you When guys sorry And with do reverse then -- me that question the up. last just you does OpEx you fall-through does

Eric Dresselhuys

accounting that point. see there's the formal the to go we'll would on that the revenue, or that would we get opportunity recognize revenue match you mean, then inventory and that. when until the COGS get guide And recognize revenue we COGS we So, wait certainly to to I the where to will point. without

Jayson Osha

much. very you Thank Okay.

Eric Dresselhuys

Joe. you, Thank

Operator

Thank Dresselhuys. at you. There Erik are this time. questions Mr. no

Eric Dresselhuys

those In joining Well, the ever call extremely be system. to effort the than thank de goals summary, well-positioned excited been to and help today. them you Governments for in meet contribution needs. more to -carbonize ambitious our and corporations global we've the we solutions to have set all we're energy delivering are

resources today, a for expansion your we coming In have our announcements we facilities. well-funded that the public customer a make apprised months, As our Until the we encourage shipments, vision new our you to then on progress. you to thank now continued company, progress and of production we look to you of and reality. with projects, mark time forward keeping

Operator

today's concludes conference This call.

You may now disconnect your lines.

ESS Tech (GWH) 25 Feb 222021 Q4 Earnings call transcript