Earnings call transcript Q2 2023

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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’ll 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

Second Results ESS' Call. Quarter to Conference Financial Welcome

ESS call Dresselhuys, Joining the from are CFO. me on Rabb, today Eric Tony CEO; and

remarks, a prepared will session. management's Following we Q&A hold

of results the in Relations section website. the financial is company's Investor released the ESS earnings release today, second Earlier quarter XXXX. of The available for

and about statements presented for partnerships, call. prospects, financial materially subject and strategy the implied As include or and and statements, growth a information unknown reminder, during forward-looking including, those from cause uncertainties our forward-looking remainder beyond. of to known that XXXX the this projected will differ are actual today without The limitation, statements risks to results performance, could

most Exchange in the risk the in those our recent current geopolitical our as set Commission, the described reports particular, the In with issues and filed in as partnerships, and Securities unpredictability our inflation, uncertainty with markets, the in business, current and factors forth periodic well our more situation. detail economy

should not on of predictions as events. statements future You forward-looking rely

All that we beliefs forward-looking are and except any assumptions date to by statements of required obligation this law. on as the any on and as based hereof, statements, call update we make disclaim forward-looking

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

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

Eric Dresselhuys

Rob, I'm customer our our of Tony earnings Act. operational the inflation recent second Thank for Reduction and Today, us our review results, you all call. progress, joined and quarter financial the successes I'll thank for CFO. joining by you, Erik, impact

Our many ESS the and business. ongoing progress results demonstrate rapid making is for the across of QX fronts

a detail we behind bringing earnings, what's those quarter's to scenes involved of bit who shared the technology last revolutionary help During market. our quite follow ESS, in understand to

We highly another of dedicated tirelessly team, a this throughput positive the great and on product working the optimize to they a improve and are have design, step skilled this manufacturing customers. feel our product and is quarter assembled speed journey. deliver We for

We delivered different to warehouses nine energy in four the quarter. customers second

beneficial Municipal $X.X shipments revenue continue long our revenue, District on began improve a Importantly, for with Sacramento progress to for process. recognition be of and relationship relationship. we mutually phase the recognized make Utility as We deliveries our a and we expect to first we record in what million

and managed and million under Importantly, our cash we with maintain tightly fiscal in and balance quarter $XXX just the in prudence sheet equivalents.

our progress, continued and have optimizing assembly to streamlining We for and great importantly, most internal test operations, sourcing product components drive our processes.

performing improved has Our the and consistency. vendor efficiency lines optimizing semi-automated into technique and we put effort and assembly automated and molding, resulted the are injection in well,

to perfect continue processes our this last and of implementing the balance to results. strong system, lean quarter, yielding manufacturing assembly are As for mentioned techniques we of is

of road While performance. modules, the us we systems have balance proton further energy market the make long-duration a across improve components our serve map to our an to market field energy system the of to pumps capabilities density potential have and power and the leader, optimize engineering storage numerous to electrolyte,

and transport improve while maximize enhancements simplify to longevity. the durability components and We the and and IP, and balance further modules are speed design pumps to for innovating the we to power capacity of within core proton system assembly

patents now the or these were filed XX of additional granted new on progress granted, XX. second our We XXX of sign patents an quarter in and a we a fronts, As pending application. in alone, total have

confident flow iron to technology moat feel for come. approach the IP We years our our safeguard around will portfolio that

Gen our am a improvements. I continue short processes drive X we proud the to lower our of in to These on time, costs the and great are around performed our second lowered perfect has direct we XX% REVX quarter As impressive XX% build design, alone. by improve team performance. as we push work accomplishments in our and time innovation intend We and to reduced by these costs

could focus the with our assembly, I began manufacturing design carefully to and so that intent with XXXX our results. and am on We output pleased manage optimizing we

our on products, team Our to our maximize drive to cost continually lower profitability. and improving processes of quality to while our is aligned unit efficiency the assembly

more While profitable a these allow to also needs they to are clearly timely customer a and in manner. scaling company, steps predictable us deliver to

take hitting team the sharing deployments the is enable building CRM team infrastructure customer-facing by portal. deeper ability stride the well. time down support as service Our and with our to year. the of to to knowledge commission to end globe, To customer XX% by expand XX% EWs capabilities our and ago its team the engagement The scale through field driving weeks to reduced customer another its a is success has out to customer to it individual year the across compared by required platform a two is

replicate energy. announce hour for repeatable were as ESS infrastructure to we work power and commission major quarter. clean German XXX-megawatt a contract, this transformative battery On at renewable beginning LEAG expected building to Boxberg Subject thrilled a in plants provider XXXX. site the is to LEAG’s design by to Power to work transform we plans their energy they expect iron second create plan This which another LEAG, flow deal quarter, their installation new with system, build this Plant the block to business across energy year finalizing front, to the a to and

in large-scale region mining to implementing into lignite and powerhouse. many the Germany transform coal-fired operates vision sites and LEAG green a is generation Eastern coal-dependent Germany's

renewable gigawatts green and production. hydrogen of XX generation technologies seven these a carbon baseload gigawatts Combined, to zero net paired X will system. of storage gigawatts company X plans with of The X create energy to to energy develop

customer now ESS could transition coming has the in storage significant LEAG, three the of With well-respected generate revenue which Asia-Pacific each Utility industries, Municipal transformational relationships pioneers, years. Sacramento District, with and energy energy

for with Queensland. congratulate government We the project recent ESI Energy the regarding Queensland announcement

grateful for their customers We trust put that forward-thinking sustainable their ESS are a around energy as embark model will many to the in clean, these a believe serve path as a future they and others world. on work

the project keenly improved technologies our the and with in been pleased operators although delayed that an launching to quarter, trust are overseas gratified placing are we is of there industry soon. good resolution delay these are of of progress, we this deployments often has and we Last the pace in bumpy aware mentioned new remain a ESS, road. leading hope we with Although

but and improve execution storage disclosure. Other informed we requirements ago, predictability customers' keep We've flow years activities, of to projects as establish our abiding on as and try everybody with committed legacy last by storage struggled the have the lease iron sometimes We our appropriately learned continue a shifted. leader. the to to energy project over our or year have remain requirements lot long-duration

announcement recent rapidly. opportunities shows, our expanding As worldwide are our

large Bill isn't implementation as of Bipartisan the of like. to the continue initiatives US, and of Infrastructure the as activity and accelerate energy in the Inflation various initiatives pace engage we in Act, fast deployment Reduction These state-level actively Here the I'd to are the storage.

on implementation by announcement actually very the we're which some as said, companies content, like in IRS the well ESS, storage challenge, the initiatives we on strongly That of will as which battery accelerate recent modules DOE's of Infrastructure brand in domestic recent which many Bill US IRA. here encouraged hope and favors the the guidance build the the energy

taking of seats top efforts, On those national are many action.

million additional its just budget, across incentives for example, over we included country. California As and to in energy see in the similar $XXX an has hope efforts storage

to over cover that, with results. our I'll turn And it Tony to

Tony Rabb

all numbers will Thank you, Unless on basis. non-GAAP be discuss a otherwise Eric. today we noted,

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

customers. delivered warehouses We the quarter, in recognized we million in $X.X and energy to revenue nine four second

made progress discussed with revenue quarter, we we've process. last As our tremendous recognition

warehouse terms or soon works is energy of the and by the the XXXX, expect at of the newer upon occur energy revenue place picked most up our of could from of the to During are customer. remainder shipping as the of recognition the site the delivery warehouses control as ex case customer terms in on or to revenue terms. to customer Under contractual of our in transfer contracts, we recognize delivered dock DAP case transferred the

We expect the second during all to of these apply to of year. our kind half deliveries this terms of

of products into goods remain incurred QX, overhead we've material in OpEx, fall in development zero resulting cost and the delivered in accounting the We rules so labor we sold. costs under producing

and have accounting We cost quarter, will our separately R&D be the in of determined operating our into from out inventory reporting that also of we expenses. commercial so transitioning third goods we will be accounting

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

cash to in should well continue rate and last on will into We us manage effectively the XXXX. hand burn coming quarters our the cash

and were in cost the variable With results quarter initiatives. related reduce the our Eric XX% continued cost-out able our progress second EW’s we to benefits by the discussed, operational direct of the of to

are we profitable we ongoing XXXX. in and the second to planning, be progress of to half a expect cost initiatives the continue out gross on and that With non-GAAP EW’s margin basis additional future

revenue to of We to expect the average of our similar half be the the quarter second for our second revenue. year quarterly

quarterly scale. some until our experience may revenues various we we of variability However, customer greater reach due timing of in projects to completion

second In while we below burn with experienced what reduction mitigate on similar stated our cost our usage slightly addition, initiatives. cash and to previously, levels quarter efficiency have rate about aligns we or we as cash what curbing to well. production in our improvement our be volume the to expect progressing This

I'll with that, it open for questions. And up

Operator

Thomas. first question Our Boyes go today from Instructions] of from Please Cowen. Thomas the ahead, [Operator comes TD line

Your line now is open.

Thomas Boyes

the of ago, components. one, balance like much make equation. factor a here there just the new couple year. challenges, of It to of questions. Maybe no very cost here is do suppliers. and the sounds while onboarding the talking quarters side expectations the revenue on kind of process for the you of gains obviously, whole for possible you've end the you some approach first of to know the for There's continue pretty around through gone just Thank the as taking as about were access I limiting to

was coming still just how in of year? those online the process that is wondering second the I half vendors going, So

Tony Rabb

is for Rabb. Yes. that. This Tony Thanks

burn cash our the are primarily material to to with. it we that place to we've it vendor in of continue there the cost production continue we to on minimize on and of make our vendors while wanted mitigated, intermittent Ew’s with based chain put that So as is are types that progress and that But that we constraints fact relates a the to has something deal lot supply the delays, but and progressing it's nicely. type been curb

Thomas Boyes

as check of follow-up. then recognition my of nine if legacy nine that sure I this the on revenue Got just to I were units quarter. shipped those And I units, kind sure, were revenue deferred wanted in the I saw around it. but units. I'm wasn't to -- declined June the

what still of provide we were are there for would in or quarter? that it where then And that? the kind intra-quarter timing intra-quarter be maybe color current any shipped Is that in rev-rec just this you units could or helpful. the Just is

Tony Rabb

I'm first were in part, revenue? question the the you and regarding referring to change so understanding just deferred the Just the your balance

Thomas Boyes

delivered that and there revenue. just units again about then just of assess of units I were quarter revenue nine first, first the the challenge. the were to to of trying well, the recognition gone was five was around were today kind were nine the legacy recognized a -- as And those out ones still that that The that units units, that that also three are better the were delay? had shipped kind time it

Tony Rabb

terms the But we've of resolved that I within recognition Look, the units facing. we feel do do been of and about like newer challenges to going customers half the will contract talk anticipate the and to And customers will say we Yeah. were specific conditions. terms revenue we're the that that year, we've our we not updated shipped. those that that in be second under all make deliveries

Thomas Boyes

Great. Thanks.

Operator

Thank you.

Rusch Colin question Colin. today go the next Please Our comes line ahead, from from Oppenheimer.

Your line is now open.

Colin Rusch

about I'm much. so curious assembly going strategy the forward. Thanks

little of or You've you been that the that's manufacturing components systems. you avenues announce some able plan bit elements contributing couple these manufacturing now? how different a of customers to the replicate how central existing to to talk potential Can a about customers on of within other having to have right and local and much you core that

Eric Dresselhuys

for Thanks that. question. Eric Colin. take Sure, here. I'll the

You're right.

all of the the of future, IRA. for course, in for very foreseeable PTC think US modules the in us I building in a the efficient it's that we location because implication do Wilsonville, get to the anticipate with of automation like building we we requirement. because And those that central battery the

maybe as building more overseas On side, capacity the to in that of the near the out ship and term, completed needs that here we've of and avoid can our do some the announced we start repeatability project get to when units we of balance in delivery of do to Wilsonville, that, process to meet system build not we've get assembly Australia. got we're want to doing to to blocks, with out plenty ESI that, systems to I And well the the because very in the Europe to the also that of want to we near-term for perfect efficient in simply expect look level it. do But to units of it's expect eventually those we that Oregon. and to future not we'll volume, facility.

Colin Rusch

are the now relative how if to nameplate seeing then can the look you to to performance systems operating of fleet those at what out the relative expectations? you just systems that And and are terms field Excellent. now, right right you're in of in speak

Eric Dresselhuys

They're Yes. all way, learned isn't that it customers in way The is use discharge working the would a about you how battery, it on, linear, straight always one generally we've it thing lot up, the expect. which well. the turn charge

where operations. some where So the interesting had places been units now one with results the We've in in that's usage deployed, fully see is of the grid they're integrated to patterns. really things great are micro

now outages, the dropping unit get every customer field the more the is the are customers hoping immediately of we site. the power we to things right start field. because as experiencing as the units and we're shipments new the so and recharging time out And more in units go But learning increase to operating one in to we're are something

Colin Rusch

Excellent. Appreciate it. much. so Thanks

Eric Dresselhuys

Colin. Thanks,

Operator

go Corinne Corinne. Blanchard Thank line from you. The question next today Deutsche Bank. the Please comes from of ahead,

is line Your open. now

Corinne Blanchard

my Thank afternoon. good Hey, question. taking you for

more into maybe medium-term XXXX we back maybe just to maybe believe, like if center little and XXXX what So I later or – energy in energy you actually long-term, to of terms come next a focus year. about supposed talk the can warehouse and maybe bit was what the the for should on maybe in that expect

see to idea to trying and the want get an the months Just going months? business where XX basically you next XX over

Eric Dresselhuys

for thanks the Corinne, Yes, question.

have we'll yet We as guidance that We more XXXX. expect, modest not any pace. past, given the certainly said continue for ship at a in to we've

now to the targeting cost beyond of right then year. we mentioned, then as feel And we on of we're get big is point and part the pace we'd expect, that As up. into course, that more doing that and end through And our we're goods Tony comfortable of EC, we you said, XXXX that get the as this at cost as roughly ramping well. then, the would a of

up ramping part a in point. put next this ship it energy we but to of we year, haven't centers the to and components, see ability at core Our later number

Corinne Blanchard

equity what's the expect there maybe to on or intend on and to Okay. out market production. maybe here? do? else you. go anything Like Like burn, do Except cash Thank [indiscernible] second the question the data you then plan And the is right? that curious on you

Tony Rabb

question. for appropriate where the balance the always we and be that add year. balance very that rate burn plan we expected the we highlight Yes. as we rate this balances cash well and Thanks It's have supplement sheet Look, our would we At considering any hand fact Tony. our strengthen and we ways then we're that to that. to get and cash next burn our our going the on that exactly when us with can how could times that will favorable are terms. on to are And cash do point, folks into we comfortable long as and

Corinne Blanchard

question you. Thank rest I my appreciate. the I of off-line. would take

Operator

Instructions] you. Thank the [ph] today [Operator Our next comes question from from line Lean Canaccord Hayden Genuity. of

Your now line is open.

Unidentified Analyst

Good quarter. afternoon, congrats everyone. for much and the Thanks taking on my question, so

customer invited understand level on can currently? projects you're you're us start, help of currently to in Just seeing the bid being you the please And to marketplace? interest what

Eric Dresselhuys

increasingly what the really Sure. base targets terms we're becoming clear What's thanks It's green the is states out seeing to XX to all -- a Mostly load. front US the business, in is I'll that of of the energy. create in now take need the question. have regulatory meter XX or variety. the mandates, come the and through green XX/X that, of specific to drive with the for strive now

the announced, been do you replicate you LEAG you gas load. coal And a but to the we to call create out seven-day interesting to is coal project translation, have of week base of the driver of and base so used they combination it fire do green German, biggest that that's or what a load, at how which get XX-hour, in it's a

pressured. been And that's of then resiliency. are is across business behind about But the the the outages spared grid look and power West seeing year you of some rest really driver this going country, the the all second that fortunate has we're weather worst in really that We're from getting meter if the resiliency on. the Coast

from driver. demand focused really on an of course, in resiliency decarbonization, commercial have large as their and who, lot interest of are reliability a primary seeing we're customers but So industrial

really rely can to more But and the are renewables site. reliability, we those power the cases, think world project good resiliency to just paired So that more the and of things going slug other where with in we're this as economy. in like project are projects some how designed announced going example, have parts we've cases, on Burbank as fuel drives in I a make and the some that sure towards that on of of electricity the some we're

Unidentified Analyst

months, next you Thank over changed? you much. question. gross just Okay. a line to color any offer second XX Do XX you to that? Great. on become the that margin has intend very time non-GAAP Can And positive still or

Tony Rabb

Hi, Yeah. Tony. it's

projects Our that gross positive in very is time non-GAAP got of number next the that good to and expect line initiatives We've progress the this year. objective we achieving half of be still and initiatives be year. that next second going later we're that us half launching progress margin making are of a second that towards a of ongoing additional we'll number to year in

Unidentified Analyst

All right. you both Great. much. Thank so

Operator

The question from Instructions] ahead. today Baird. comes line go Sunderland [Operator Thank of from you. Please next the Davis

now is line Your open.

Davis Sunderland

guys. Thanks taking for Hey, my question.

one Just for one me. quick

or talked California talk maybe I a be energy You a Europe, getting bit maybe storage, having or duration from you little storage, anything project you or carve-out initiative and Thanks. seeing incentives specific Australia about else? about could particularly long in could think guys IRA any outside of state from stationary a maybe anything LEAG the you're

Eric Dresselhuys

Thanks the lot, thing. for Thanks, not Sure. frankly but It's it's question. Davis. a one

business. driving in single right. terms So the that's initiative of is incentives the The IRA largest you're

rulings, more As IRS that gain to get and we continue we traction. expect more to

level in a build on in the money infrastructure realized also and federal that's get projects. is through to there come actual starting course, Of

You've -- states. specific got states

targeted then entities the combined to targets that correct, the like million, with the to out serving that utility further California, And gets go long-duration mandate put the are by California putting commissions specifically and public that states you're certain XXXX targets Some to in all hit into towards XXXX. of load is storage. $XXX a

based look structures around the the on bit regulatory If it because structures the incentive you world, are. a changed little what

the puts they in that ESI if it saw of state do They don't have project week So by was IRA an if And equivalent. sponsor, the just you actually Queensland an will bill announced integrated structure. in you vertically as the who example, different the as is Australia, look money. grant last market states a Australia, announced, have of some we because one and the bit other the because they're little that of that a market be Queensland, the in

but money the And the a finally, are then of the on of in kind more help with branch in premium there the LEAG, number what's kind defray the exist Europe model. that green to known are reductions, of they different case of to of cost help of as pools capital

apply U.S. CapEx incentive tax-based utilities, reduction. So LEAG as those then the way and would the It's the grant here including the others for or it not is use in a

the that to a mechanism the tax is manage. to accelerate mechanism, is I we grand defray it's to see help combination and a is thing we What going lot plus regulatory to So think like a know a of that's cost, really deployment. that's mechanism whether or mandate the the financial to start

Davis Sunderland

That's you much. very helpful. Appreciate Thank it.

Tony Rabb

Thank you

Operator

No [Operator time. at additional we you. Thank Instructions] questions see this

for any So to back Eric Dresselhuys pass like call I'd remarks. to closing the

Eric Dresselhuys

going I'd very another for to and making support. you the think you transformative of are to this come further as quarter world storage. a everybody for to great what we update energy back saw is the build business thank in call a We're be and to and quarter we in and like excited give as progress, your joining meaningful

your you thank So Thanks, a safe evening. pleasant have support, and for and everybody. again

Operator

conference all today's call. for you concludes Thank This participation. your

lines. You may your now disconnect

ESS Tech (GWH) 8 Aug 232023 Q2 Earnings call transcript