Earnings call transcript Q3 2022

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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

XXXX Financial ESS's Conference Third to Results Quarter Call. Welcome

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

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

and will growth As a strategy beyond. about including our prospects, without financial statements, for reminder, the XXXX include information limitation, forward-looking presented and partnerships, today performance statements

subject Securities from Forward-looking unknown this and or are in described to statements and to Commission current results geopolitical forth inflation, the risks in as the set situation. those during more in well unpredictability the and uncertainties and Exchange known actual in cause with recent to implied our markets, factors our call. particular, that with detail most those our uncertainty as current business, periodic could In differ our risk materially projected issues reports economy, partnerships, the the filed

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

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

turn call I over Dresselhuys. that, now will CEO, ESS's Eric With to the

Eric Dresselhuys

trends I customers, successes, we're our well as our current operational will market Thank us. success Reduction recent as impact the Act. the you discuss of with and challenges for Inflation Today, seeing, joining including and new

business ESS at continued juncture was third to a buoyed is gain and quarter, traction Act. thrilled the ESS entire important Inflation by company. here our the the across the fronts that clear see an It's market to as in the of tailwind of Reduction multiple team

expanding to with We scale of market environment, this a in renewable supply the drive skilled continue team to cohesive, just at is as suited a We're neutral. differentiated couple to the delivering in build is unprecedented highly capable generation dramatically. technology ideally that carbon storage global serve an we doing

ESS initiative shipment on First, recognition. made pleased the to revenue time extremely progress that has our great important product share I'm to expedite and between

a front, with on Energy for recognize array, the QX to accompanied we it delivered revenue attendance. Energies cutting technology Sycamore was were EW and months. near our recycler of to solar end based that less On ceremony in that by Warehouse ribbon an in the congressional unit integrated the International, than with shipment of commissioning Pennsylvania delegation three able The TerraSol a partner a we

Warehouse Energy at Sycamore indication their unique capacity, strong can placed TerraSol storage the we a on another the to a for value follow deliver. site Importantly, order double of

incorporate Even our pushing scale. ahead as by to need of new volumes issues we that with in a have Warehouse we many so chain facing with supply is companies and with experience this are Energy With challenges broad-based to plant. ongoing challenge, components vendors the across said, variety of by the continued that supply purchase production. driven increasing balance and are we compounded This

that bay delayed. We continue Energy but awaiting sitting are to in the finished production build parts nearly are Warehouses, units the our

tested be parts. final to these quickly expect completed we the units once and We receive

in us completion fourth rate quarter the many had ship QX we by still feel of But for had the year. we the we stages as target units others many didn't we we ability end original feel of EWs importantly, or hoped, and run quarter. XX confident can ship third more in the to in XXXX. leave we as While below to our That exit get will our in in our various

These the obscure with our production progress are making challenges we processes.

generally production we intellectual reminder, of a As modules, in and speak our battery two categories: represent balance property; core about which plant.

before fully battery have year. of the module now and line our up side, running and we have to automated On two running lines semi-automated the be slated the end

As to improve with target megawatt of lines than to cycle XXXX optimize year. line we a original time, have and exit capacity these greater XXX works our per to each sight our now hours team scalability of cost, of

end third of the of from the half manufacturability the start initiatives and plant, by quarter, cut On labor quality that associated to lower the the the design with by costs. year. have expect improvements to the the for we inputs make end labor improve progress Warehouses throughput, of and our Energy balance At speed considerable additional already its we and of continue year

transitioning We capacity. are as are of our grow midst in the processes optimizing batch and manufacturing to scale we from

the want tirelessly execute working I backdrop. improvements a to that give big Importantly, these to against supply the team shout out to challenging is

gel new many XXXX, wealth progress. as at see ESS. a and I in manufacturing growth have Vince to team. to an team would our to be thrilled certainly experience Chief Canino time like brings high faces ESS exciting Operating also the the to existing September Vince with drive welcome that It's Officer of us joined I am leading the to organizations. joined in

We continue with customers. progress to make significant

the five calls Sacramento ESS and X gigawatt District up transformative to grid. Energy in the supply years storage over As electric Utility the This to for you duration hours is likely Energy energy of decarbonizing a long saw, deal next form SMUD we the deal a last of or SMUD. Centers. leader Municipal month, in with Warehouses announced

of the state. a than objective California's is have XX generation carbon free XXXX, rest While the SMUD to is years electricity XXXX, targeting earlier by

long up and progressive universities this ESS colleges Additionally, energy with and forward as will the their of to as they another significance team center storage a as chosen local partner the market. workforce duration establish plan. educate drive install and the excellence thrilled to utility We're this burgeoning of sign SMUD has of with to their service transaction, needed zero-carbon ESS

XX% deal will needs. put million electricity as exciting And in market million in the transformative as homes serves a homes provides supply is, terms And X.X in perspective only this SMUD deal California. to let's and of XX of fraction and the this size. SMUD about of their only

which one-tenth In XX to be fact, roughly estimated gigawatts. about of the California power represents U.S. the needed is in storage

supply it critical role energy heels of goals. recognize their the in comes with Asia Energy long announcement utilities the of storage or International on will quickly in achieving As jurisdictions duration progress the Storage Pacific the Australia-based plans, their around world ESI. deal partnership our of decarbonization This

with ESI agreement, Australia meaningful In the reach energy is for more to the not entire when fact, we I last how have into combined new forward and and growing base moving years SMUD established relationship opportunities expands market When with week, come. offer for of impressed was The a a expect significant All-Energy been fast ESS. accelerate our long the storage. to to business the over Conference duration and we've in could geographic decarbonization region attending demand Australia just the drive

And had Act Senate. last just passed the the I the time Reduction spoke you, Inflation to

customers certain receive should have dramatic XX% our along that, project if law, into on like of technologies many development grants; energy is has With savings. or that benefits it for flow a total two-thirds can zone, and expect incentive that in top knock a access kicker clear system. battery IRA or it customers costs, of can batteries. available decarbonize without These that our our project the for On total credit our any increase possible by customers decade. siting domestically been XX% a next off deploying more. impact additional than could also of tax Now economic others iron that more for for an process XX% deploying baseline the application their the receive with We can can approved, project a sourced approaching customers signed are to and to investment another domestic XX% apply energy an tax will the credit for ours ESS

is we're today, to that our customers carbon-free prices ROI storage with this market suppliers. we a our profitability can the the without a of of accelerant unprecedented about ship, and already to better incentives tax $XX investment both capital of provide represents seeing while expected for was investing combination storage projects. other The an credit impact as objectives. The in receive dramatic per that than hour incentives we solar the production options. plus initiatives generation Additionally, kilowatt ESS produces combined a growth in a in energy these regarded to and considerable by Coupled many catalyst market, of increasing improvement believe

opportunity the excited presents. on are We it to capitalize

that With will many in all announce efforts. contributor and our business ESS. excitement the for his development to significant of we him this early of Amir been to bittersweet market, the a has Moftakhar be Amir and company the thank the leaving it's

weeks excited as the release, forward and and him details the but brings team. included know our and over announce has join We look new coming Tony months. are to to to very Rabb Tony that CFO to agreed getting across range are have industries a say extensive that delighted experience join the press I'll to in We've leadership quickly Tony we everyone of

to Amir the financials. to I'll that, off And with hand discuss it

Amir Moftakhar

Thank you, Eric.

best say me it's been how the let and unique I'm for Before four CFO of has company proud I the my that years. accomplished the to as that ESS to serve the past review the come. financials, pleasure of know yet is much

other have team built. and Rabb, accelerate transition the successor, the we've momentum continue As opportunities, of that proud and we've Tony will my I on I'm built confidence

I'll review financial. our Now,

on talk about basis. a will noted, Unless today numbers all otherwise be non-GAAP we

the to is non-GAAP financial on earnings find which posted Investor will Relations measures website. in You our release, of reconciliation our GAAP

the initiatives, momentum Energies, able As to I'm resulted manufacturing good than revenue of progress months. QX, and that gain we've for unit we Eric third the advancing continues made pleased Near and to process. in to on customers. as to in gain with end commission, recognize our on also ESS were This quarter. revenue the acceptance share the recognition of TerraSol well revenue $XXX,XXX unit shipped this shared, less with three we as developer

battery progress purposeful This deploying and further Customer been up of to in we've we've working revenue and process process SXXX accelerated revenue recognition speed honing we've made module further Success to customers customer up our field we ramping process. on legacy our initial are contracts, balance experience organization. and reflects with our these committed as our each As we across shared, that our achieving very timing fronts, recognition the

we producing the in resulting material the shipped in sold. in accounting reminder, under into cost a rules costs overhead incurred products remained QX, we OpEx labor so of As we development zero and goods fall

with line million. and With of expectations adjusted in negative were million. QX in EBITDA with quarter In for expenses our at by was million. cash operating reported the QX third investments. non-GAAP We Our $XX $XXX.X that, cash used third we quarter $XX.X the ended $XX.X short-term operations million

progress We great continue cost to in reduction make efforts. our

many team manufacturing And manufacturing We as setting both not also the our the leadership people stage first have the operations, move we line. to outstanding improving manufacturing to in and continue lines semi-automated beyond make only fully our but scale on progress new floor the automated ranks. on current our two they to

As optimizing processes hours. exiting XXX our than ESS and capacity team's in on with Eric XXXX the of mentioned, result a megawatt believe focus goal we initial greater innovation should

rest under to remain the around current non-GAAP come we assumption will our year operating we and Given for to development the accounting our the expenses continue $XXX for plan, at in the million. expect of that year,

our with we year end year, in to plan liquidity the short-term have million. to ample expect investments currently cash, excess As the coming run of and cash $XXX and equivalents the business we execute in

the we And with open that, for can line up questions.

Operator

Rusch first comes with line Your the question Instructions] from Colin of [Operator Oppenheimer.

Colin Rusch

the talk testing qualifying have of product are at that number you the Could point? this customers about you or

Eric Dresselhuys

about to Good Colin. One hear you. from a dozen point. -- half Sure, at this

Colin Rusch

performing are off and the had that you bit then a out about seeing field, to a the any got in out little the systems you've in you've can terms talk for that in data of relative how And you're expectations surprises the bit longer? that field them operating systems little

Eric Dresselhuys

I so conclusive. Well, we've set, anything learned know entirely it's still data that a relatively limited don't

performance I goes so over We that transport have broad of through conclusion the lot period hardening system about learned any deliveries, system point, the shipments, this we at But it a product, know have extended process. time. don't the any around

Colin Rusch

to with tracking And couple relative yields speak those the then running, expectations? that up can that's how lines of just getting you're lines and off to and of you

Eric Dresselhuys

expectations. Yes, it's ahead a of little

call, the anticipated. that comes tracking we of off on had that what for year yield And availability we a from the we're So the Amir the end capacity slightly than at better really as mentioned we anticipated. better than total had of had lines

great point. been really we supply to feel we that of feed that. the limiting case chain about as the at this lines have So the It's more a factor ensuring

Operator

comes Cowen with question from next and the The of Company. Boyes line Thomas

Thomas Boyes

First just recognized great me, cost maybe off mean, just I this to one piggyback see of as reductions lines, of the It's with for it's to labor around XX% the Colin’s. quarter. the

line see I up think target? yields? of what kind closer balance long-term that of of think target the improvements because the those timeframe to Is and the do still just better you that And with fair it Is we was better of XX%. automated kind running? maybe a would the over

Eric Dresselhuys

of line commissioning automated Yes. process I our in look, the mean, now. we're

think So still directionally, I I those hold. -- targets that think,

up I processes number to get that, to speak finalize able would some around the need or think we running once updated we'd the to of if and not. be and be better line that

right I the is, think that exactly the heart middle, with is. the there's right a and labor of we're opportunity in what that cost what's determining remains out significant driving out in summary

Thomas Boyes

hour And color four the the following again XXXX. give if a still then I'm kind of some seeing of increase, be of passage And still could you kind it IRA lot just would that that demand that the in in uptick maybe of systems is wondering you're range. two-four around

plus systems? six pronounced shift longer You're generation, already to more power of kind seeing

Eric Dresselhuys

it. take I'll Yes,

have duration further think I for the Thomas, I eight, renewable whether the of where more all ask week. some just are longer And what irrespective or six, curve markets, maybe more seen that duration easily starting goes happened certainly requests longer advanced IRA are it's penetration it last impact hour California projects after of on in or the that developed happened something that we've think, to What's Australia of the margin the into are XX was was would on markets on Any storage. of ROI before, is kind ITCs was figuring IRA. on if And incentives, kick now doing it in. the the be. IRI the the return their people their would the math and the money there on that

projects. to size the the accelerant and And to the so of I scale been really frankly amount think the an that's inquiries and -- of the

Thomas Boyes

And I back sneak Perfect. after in more could offering. hop one the shelf maybe in, a saw I I'll just the queue. if you that close had filed

color helpful. I could So some that would you just wonder be give if around

Eric Dresselhuys

you Sure. anniversary listing. the on Well, as of we've just come know, the one-year

kind would through move corporate of housekeeping. good kind it's to I what that of next of time considered So generation

if in but fundraising are So to act There on we filed the to that, to the that and when S-X no immediate shelf. specific any with plans comes. take activities around we the wanted time right we're position ensure the

Operator

with line question Guggenheim Partners. comes Osha of the next Joseph from Your

open. now is line Your

Joseph Osha

questions. of couple A

for note, on And to you you're recognized you've then have in on you related those currently many go First, final waiting that wondering products you you're sitting on? you just update revenue. just warehouse -- waiting But have how recognition parts. may many us back a parts how I'm And working there to obviously, to units the can are revenue achieve for field still some ship? to that units that of one

Eric Dresselhuys

Yes.

of units various in on So waiting here, floor are units for acceptance overdue we about in terms units completion waiting complete final stages are or of that another we've those kind the that seven have eight got the of XX and parts. effectively

it's in about to units, substantial XX relative pretty up. deployed, which what's step now certainly a is total been So

Joseph Osha

me can you've at point? XX, for remind revenue it you many Okay. And of of recognized how this the

Amir Moftakhar

commissioned. revenue it unit, of the because Hi, Joe. we've SoftBank recognized then process SDG&E in that the That units, Applied the being still those a unit four We've microgrid. Medical two of project so be for would and that's is TerraSol the initial units shipped,

Joseph Osha

okay. call end is year? the that by have it to seven of there sitting in the or the kind Okay, loading boats or of of it, And trucks then on eight those dock, your hope are that, maybe

Eric Dresselhuys

Yes, XX don't rolling is of in to of the our the exact the correct. know be, something We those year. before customers number will what to of end get the hope final but neighborhood

Joseph Osha

tag question. we nice And XX, now because then you representative revenue is going to I should that unit see can know okay, recognized forward? $XXX,XXX even one great. we're the -- wondering is how on going my what It's out. this that last just of that figure we pricing that price ASP whether I'm perhaps is,

Eric Dresselhuys

say. to difficult It's

cases were these two early ago. that Some signed contracts we're year are shipping some in units against a or of that

And the the because market general of Act, Reduction so moved considerably both pricing. market things the has Inflation just I think like but

it unit, along deliverables contract of our of just are So also if depends, on or little that. components bit other the there with scope are what under a it's a and services course, standalone a if

a it's to expect off, we would of the forward. lower So what would be not going probably side it but mile

Joseph Osha

clarifies To you, lower the side. then. Thank that

Operator

next Our Moore Chip Hutton. Instructions] line from [Operator with of question EF comes

Chip Moore

of projects in timeframe projects of that following longer. being acceleration future types nice what for rec? of us SDG&E Kind in be think might type revenue kind able takes for Is you curious, of on through, Can to we type And of walk little timeframe? to unique, microgrid and in just that that that that should or in different to of future unique terms a of recognition the touched follow Pennsylvania you project maybe type is see that situation just Pennsylvania. rev unit about

Amir Moftakhar

Yes, I'll that take is question. Amir, this

I some single small projects. delivering straightforward the will all the project delivering our to we're a we're think accelerate will those of of most newer With just recognition say did. way be unit EWs. working the really think unit with acceleration customers. component EWs on the projects contract I certainly behind recent more where number would broadly for revenue terms, So the It's those no I larger that there

they the and and think more purposeful little I that I legacy those think bit to are a component, little more them need customer time and larger bit in to contracts cycle. care project there's extent get running commissioned microgrid up a and/or a just

time, revenue to of over will changed, the take single all a through just shipping as a So or certainly, And through. you'll will accelerate, and see what to project, we'll terms history our it's those is, have work I get then customers, we these continue time favorable whether more process. unit it to contract delivering recognition build a just think some

Chip Moore

And maybe economics benefits. you way potential for those about customers Any my there great or from on pretty IRA, about to of as follow-up hindcast their did those some some of job sort a you’re delays savings into how decision-making, think of or contemplate outlining that? any compelling thinking

Eric Dresselhuys

thanks, Yes, Eric here. Chip,

ship don't had for I'm us haven't We please and anybody product, because the call waiting say IRA.

I in a delays the So that rules schedule detailed IRS shifts I the our are are right or don't result being know any now. think shipment as of worked expected order.

We and case end the before maybe be of of that effect this 'XX specifically. and the the full more ITC PTC on will tax and published the year in year, calendar 'XX year expect both in will the that calendar for be those length the impacts tax

there is projects to deploy So I will be be product scramble time and need people anticipation will a we're the to for near-term get going frame. the capacity Because if ‘XX surge and I to feel in anything, that there for demand think able in be now to a ‘XX say, they urgency capacity -- seeing products?” “Am

Operator

Your with Thomas follow-up line from and is Company. the question a of Boyse next Cowen

Thomas Boyse

one had I just more.

Is give seeing you're if and foreseeable seeing wondering anything the be the to give interconnection rolled? is it confidence there it the still you tight as be insight future? that queues. there congestion might some that be you might could Or for to might relates going what that Just relaxed into

Eric Dresselhuys

the suspect on would tell to across tight near-term. people survey that they if they in you expected did it project a of developers, be really to I you think I the depends of spectrum that projects. continue

we're us, fortunate in two regards. For

get is for that a deployed And not on the first downstream The nearly large the where queue the interconnect projects distribution networks of lot our is transmission is it burden projects. taking larger we're that -- some for advantage we have involved care developer already second that that managing the interconnect in, the partner is of projects the of queue. partner is or

whole after project at that process in out the has phase the waiting determined. -- We're is. coming developer the way not we're the that So been interconnect construction queue

Operator

further There are questions no at this time.

the turn presenters. the So, over I'd to call to like back

Eric Dresselhuys

Thank believe growth head we're for you you, finishing We're the all excited strongly in market, progress and we year building into very at to and continued be for the important joining an call look a as which the rate, today. excited accelerating XXXX, ESS. that thank about we year forward very of the will

So we'll thank to talking you forward for and you look soon. to your support

Operator

concludes conference. today's This

may disconnect. You now

ESS Tech (GWH) 3 Nov 222022 Q3 Earnings call transcript