ESS Inc. (NYSE: ESS), a developer of long-duration vitality storage options, mentioned a number of important developments throughout its newest earnings name.
The corporate introduced a brand new partnership with Sapele Energy in Nigeria for an 8-megawatt-hour storage deployment and highlighted progress with installations at notable places like Schiphol Airport and Burbank Water and Energy. ESS emphasised developments of their Power Heart product, together with seismic certification and the manufacturing of a second system.
The corporate’s financials present a first-quarter income of $2.7 million and an ending stability of $89.6 million in money and short-term investments, which they count on to maintain operations into the primary half of 2025.
Key Takeaways
- ESS established a brand new relationship with Sapele Energy for an 8-megawatt-hour storage deployment.
- The corporate highlighted buyer installations, together with at Schiphol Airport and Burbank Water and Energy.
- ESS’s Power Heart product has accomplished inside checks and achieved seismic certification.
- The primary absolutely automated energy module line has decreased labor hours and prices.
- A second automation line, rising capability by 40%, is predicted to be operational early subsequent yr.
- ESS reported Q1 income of $2.7 million and ended the quarter with $89.6 million in money and short-term investments.
- The corporate is specializing in value discount initiatives and expects to succeed in non-GAAP gross margin profitability by year-end.
Firm Outlook
- ESS is concentrating on a 40% discount in the fee to construct an Power Warehouse this yr.
- The corporate is looking for to strengthen their stability sheet by means of financing options.
- ESS is well-positioned within the U.S., Australia, and Europe, and sees alternatives in areas transitioning to inexperienced baseload energy.
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Bearish Highlights
- Value of income for Q1 was excessive at $11.1 million because of the transition from R&D to stock accounting.
- Non-GAAP working bills for Q1 stood at $9 million, with adjusted EBITDA at detrimental $15.4 million.
Bullish Highlights
- ESS is making strides in direction of profitability with value discount by means of worth engineering, provide chain optimizations, and course of enhancements.
- Manufacturing effectivity enhancements are being seen in stack manufacturing and the stability of system facet.
Misses
- The corporate’s present COGS outcomes don’t but absolutely mirror the fee discount initiatives.
Q&A Highlights
- Eric Dresselhuys mentioned the potential for debt financing within the vitality storage business.
- Lenders have gotten extra excited about vitality storage, and ESS’s efficiency information and guarantee relationship with Munich Re are anticipated to construct confidence.
ESS Inc. is making headway within the vitality storage market with new partnerships and developments in product growth and automation.
Whereas monetary challenges stay, the corporate’s strategic initiatives geared toward value discount and market growth present a constructive outlook for future profitability and progress.
InvestingPro Insights
ESS Inc. (NYSE: ESS) has been navigating the vitality storage panorama with strategic partnerships and product developments, as highlighted of their latest earnings name. To additional perceive the corporate’s monetary well being and market efficiency, let’s check out some key metrics and insights from InvestingPro.
InvestingPro Knowledge:
- Income Development (final twelve months as of This fall 2023): 743.4%
- Value, Earlier Shut: $0.88 USD
InvestingPro Ideas:
- Analysts anticipate gross sales progress within the present yr, aligning with the corporate’s reported developments and new partnerships.
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- ESS Inc. holds additional cash than debt on its stability sheet, which is a robust indicator of its means to maintain operations as confirmed by their monetary report.
InvestingPro presents extra insights and metrics that could possibly be invaluable for traders trying to dive deeper into ESS Inc.’s financials and market efficiency. For these , there are 15 extra InvestingPro Ideas obtainable for ESS Inc. at https://www.investing.com/professional/ESS. Make the most of the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Professional and Professional+ subscription, and achieve complete entry to information that might assist in making extra knowledgeable funding choices.
Full transcript – ACON S2 Acquisition (GWH) Q1 2024:
Operator: Women and gents, thanks for standing by. Presently, all contributors are in a listen-only mode. Later, we’ll conduct a question-and-answer session. [Operator Instructions]. I’d now like to show the convention over to Erik Bylin. Please go forward.
Erik Bylin: Welcome to ESS’ First Quarter and Fiscal 12 months 2024 Monetary Outcomes Convention Name. Becoming a member of me on the decision at present from ESS are Eric Dresselhuys, CEO; and Tony Rabb, CFO. Following administration’s ready remarks, we’ll maintain a Q&A session. Earlier at present, ESS launched monetary outcomes for the primary quarter of fiscal yr 2024. The earnings launch is obtainable on the Investor Relations part of the corporate’s web site. As a reminder, the knowledge introduced at present will embody forward-looking statements, together with, with out limitation, statements about our progress prospects, partnerships, monetary efficiency, and technique for 2024 and past. The forward-looking statements are topic to recognized and unknown dangers and uncertainties that might trigger precise outcomes to vary materially from these projected or implied throughout this name. Specifically, these described in our Danger Elements set forth in additional element on our most up-to-date periodic experiences filed with the Securities and Change Fee, in addition to the present uncertainty and unpredictability in our enterprise, points with our partnerships, inflation, the markets, the financial system and the present geopolitical scenario. You shouldn’t depend on forward-looking statements as predictions of future occasions. All forward-looking statements that we make on this name are based mostly on assumptions and beliefs as of the date hereof, and we disclaim any obligation to replace any forward-looking statements, besides as required by legislation. In the course of the name, we may even current sure monetary info on a non-GAAP foundation. Administration believes that non-GAAP monetary measures taken at the side of U.S. GAAP monetary measures present helpful info for each administration and traders by excluding sure objects that aren’t indicative of our core working outcomes. Administration makes use of non-GAAP measures internally to grasp, handle and consider our enterprise and make working choices. Reconciliations between U.S. GAAP and non-GAAP outcomes are introduced inside our earnings launch. With that, I’ll flip the decision over to ESS’ CEO, Eric Dresselhuys.
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Eric Dresselhuys: Welcome, and thanks for becoming a member of the decision. At the moment, I am going to cowl a latest deal, some buyer actions, our progress with the Power Heart and our second automation line. Then Tony will cowl financials. As we did final yr, we now have created a video highlighting a few of our operations that features a take a look at our Power Heart. Yow will discover it at our Investor Relations web site. As you noticed in at present’s launch, we simply introduced a brand new relationship with Sapele Energy, a number one Nigerian vitality era firm with over a terawatt of energy era capability. The preliminary deployment part will start with 8 megawatt hours of storage to enhance the effectivity of Sapele’s present belongings by offering ancillary providers. Supported by the Export-Import Financial institution of the U.S. or EXM, this set up shall be an awesome alternative to offset backup mills and enhance grid resiliency. With future phases together with 50 megawatts of battery storage to help inexperienced baseload energy, this deal reveals the worldwide market want for long-duration vitality storage to assist energy producers maximize the reliability of their electrical energy provide. Our buyer success staff is busy throughout many installations, and we’re getting nice suggestions about our staff’s engagement with prospects at their websites. We have made great progress on this entrance. Between increase the staff, formulating the very best processes, and expertise, and studying to nimbly alter to the numerous working environments wherein our expertise operates. We now have established a wholesome suggestions loop from our buyer success staff to our engineering and operations groups that’s producing design enhancements that result in easier, quicker set up and commissioning in addition to ongoing upkeep. Our staff is working intently with our prospects to make sure our batteries are ready to carry out as quickly because the tasks obtain readiness. At Schiphol Airport in Amsterdam, our preliminary unit is now commissioned and able to go as this main airport makes use of our expertise to part out polluting diesel floor models that provide energy to plane whereas parked on the airport gates. We additionally accomplished our set up at Burbank Water and Energy. We’re excited for them to carry their ceremonial ribbon chopping as the primary try was sadly rained out, however we count on that can occur within the coming weeks. Our first unit shipped to Carousel has been biking for fairly a while now. The truth is, tomorrow is the one-year anniversary of the start operation, and our models at Sacramento Municipal Utility District or SMUD are biking as nicely. You’ll be able to see a number of the pattern working information from models within the subject in our presentation. We have additionally just lately put in and are commissioning a unit with SP Power in Colorado, and we’re wanting to get that going with our companion. With each working cycle logged within the subject, we set up better credibility with potential prospects and reveal the efficacy of our iron stream battery expertise in assembly the decarbonization wants of our prospects throughout quite a lot of working environments. We consider these deployments and the various extra we’re planning over the approaching months are establishing ESS as essentially the most deployed, most confirmed, and versatile long-duration storage expertise obtainable out there. Our work with prospects is constructing an awesome reference set throughout quite a lot of functions, use instances, and geographies that can serve us nicely as we develop our influence. We have been additionally completely happy to study of a go to by a Honeywell (NASDAQ:) staff to the Power Warehouse system that we shipped to one in all their places simply exterior of Chicago. The Honeywell CEO and a handful of his high-ranking executives have been in Chicago and stopped in to see their first vitality warehouse buy and have been guided across the unit. We’re actually excited to proceed planning and constructing momentum between the groups. The truth is, you may see a testimonial from Honeywell within the video we posted on our web site. And now I would like to provide you a peek into a number of the element behind our progress with the Power Heart product. As I discussed within the final name, we now have constructed and at the moment are testing the inaugural EC system to be put into operation for Portland Normal Electrical (NYSE:). As you’ll have seen, we just lately handed the testing to fulfill the necessities for the very best stage of IEEE 693 certification, a seismic ranking that qualifies the EC system for deployment as essential infrastructure throughout the USA. Whereas seemingly mundane, this is without doubt one of the many necessary administrative containers that must be checked to ensure that any long-duration vitality storage resolution to be put in in seismically energetic areas, which additionally double as a number of the most fertile renewable vitality markets, together with our West Coast and Australia’s East Coast. Importantly, we’re the primary non-lithium grid scale battery to realize this certification. Past seismic certification, I am happy to share that we now have accomplished the entire 90 plus inside checks we run to validate the operation, security, and efficiency of our options. This speedy progress was pushed by our devoted workers right here at ESS, and I used to be thrilled to see the staff leverage the learnings from our earlier vitality warehouse product experiences to shorten the time and enhance the effectivity of the EC’s new product introduction. We’re additionally now conducting extra sturdiness biking towards each the PNNL and ENGINE 19 testing regimes and the unit is performing nicely. We’ll begin constructing our second EC system for Portland Normal Electrical (NYSE:) instantly adjoining to the primary unit, which we count on to happen in early Q3. This unit will incorporate a lot of design optimizations from the primary EC to reinforce manufacturability. From there, we’ll shortly transfer to manufacturing for business deliveries, which we count on to start out transport to Tampa Electrical and SMUD within the again half of this yr. Whereas it is nonetheless early, we will already see the leverage made attainable for our enterprise by deploying our vitality middle batteries. The EC may have greater than 2.5 instances the vitality capability of our EW with the identical footprint. We’re nonetheless optimizing the design, however we count on the EC to be 25% cheaper to construct on a per megawatt hour foundation than an EW resulting from its better capability and the truth that it makes use of a lot of the identical inside componentry. With this important value benefit, reaching our EC ramp is one other nice step in direction of profitability as a enterprise for ESS. I additionally wished to share that for greater than a yr, we now have been biking what we name sturdiness models in our facility. The aim of those models is to run checks to topic them to various working calls for and study from their response and hone the design and upkeep processes. We now have 4 of those sturdiness models, and two have been biking since early 2023, combining for greater than 750 charge-discharge cycles representing greater than two years of operation. You’ll be able to see a pattern biking chart in our investor presentation. It has been a precious train because it has helped us validate the operational capabilities of our models. Now I am going to flip to an replace on our energy module automation capability. As we have shared, our first absolutely automated line has dramatically lowered the labor hours, cycle time, and value of constructing our energy modules. And for the reason that first line started working, our engineering and manufacturing groups have additional honed the road to extend capability and enhance consistency. I am happy to share that based mostly on this success, we now have ordered our second automation line. Time to coincide with our product cargo ramp, we count on the second line to be operational early subsequent yr. By making use of the learnings from the primary line to this next-generation automation line, we predict a lot better capability, which interprets into considerably decrease CapEx per megawatt hour of manufacturing. The second line shall be able to producing greater than 600 megawatt hours of battery modules per yr, a 40% improve from line 1. And that capability will come at a dramatically decrease CapEx spend per megawatt hour of capability, about 50% decrease than our line 1 implementation value on a {dollars} per megawatt hour foundation. This may deliver our absolutely automated nameplate energy module capability to greater than 1 gigawatt hour yearly and set the blueprint for additional growth as we proceed to develop. These financial savings shall be coupled with additional operational optimizations throughout the stability of system, which we anticipate will translate to an roughly 50% lower in our whole value so as to add capability throughout the system. Clearly, we’re on an awesome trajectory in decreasing not solely our manufacturing value but additionally our value to develop capability. The actions we have taken to streamline value and enhance manufacturing capability are serving to us scale the enterprise for future progress. And we’re diligently executing in direction of our income and profitability ramp within the second half of the yr. On condition that, we stay nicely positioned with our EW and EC shipments by means of the yr, so we stay snug that we will triple or quadruple our income in comparison with final yr. And with that, I am going to flip it over to Tony.
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Tony Rabb: Thanks, Eric. Except in any other case famous, all numbers we talk about at present shall be on a non-GAAP foundation. You will see the reconciliation of GAAP to the non-GAAP monetary measures in our earnings launch, which is posted on our Investor Relations web site. We reported income of $2.7 million within the first quarter with the related value of income reported at $11.1 million. As beforehand shared, the transition from R&D accounting to stock accounting leads to an LCNRV adjustment that dramatically impacts our present COGS outcomes. This won’t be a fabric contributor to our financials as we attain scale. We proceed to make progress in direction of profitability. Nevertheless, our COGS outcomes won’t absolutely mirror our value discount initiatives advantages, thereby making it troublesome to evaluate our progress by means of our present monetary statements. As we layer on to our COGS discount outcomes from 2023, we’re making nice progress with incremental value discount initiatives by means of worth engineering, provide chain optimizations and course of enhancements for each the Power Warehouse and Power Heart. With the enhancements we’re realizing on these extra value reductions in 2024, we nonetheless count on to succeed in non-GAAP gross margin profitability on the Power Warehouse by the tip of this yr. Our non-GAAP working bills for Q1 have been according to our expectations at $9 million. Non-GAAP R&D got here in at $2.9 million which we consider displays the corporate’s run fee and continued funding in our value out initiatives and product roadmap enhancements on reliability, sturdiness and effectivity of the Power Warehouse and Power Heart. With that, we reported Q1 adjusted EBITDA of detrimental $15.4 million one other important year-over-year enchancment and indicative of our trajectory in direction of profitability. I would wish to take a second to recap some necessary progress we have made on value discount. As we talked about final name, throughout 2023, we lowered the fee to construct an EW by 60% final yr and we’re concentrating on one other 40% this yr. We now have invested in one other automated line to provide energy modules that can drastically improve our means to ramp up in 2025 and that capability growth comes at a dramatic enchancment in value per megawatt. With our lower-cost energy module capability growth, we now consider we will develop full battery manufacturing capability at half the fee we beforehand anticipated. With this important operational progress and increasing relationships throughout nice utility prospects and strategic companions like Honeywell, we really feel we’re well-positioned to capitalize on our management place within the long-duration vitality storage market. Turning to money stream and liquidity, we ended the primary quarter with $89.6 million in money and short-term investments. We stay centered on managing our money burn fee, together with driving ongoing efforts to optimize working capital and CapEx spend. Our money readily available ought to help our enterprise nicely into the primary half of 2025. We proceed to opportunistically look to strengthen our stability sheet by means of dilutive and non-dilutive financing options to supply the required capital to provide us operational flexibility to reply the market demand. We really feel excellent about our money place and liquidity and the prolonged runway we possess to push in direction of our longer-term purpose of attending to money stream breakeven. And with that, I am going to open it up for questions.
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Operator: [Operator Instructions]. Our first query comes from the road of Colin Rusch. Your line is now open.
Colin Rusch: Might you speak just a little bit about the place you are seeing the true manufacturing effectivity? It looks as if you guys are making some fairly wholesome progress there. I would love to grasp what particularly is transferring ahead in an incremental method?
Eric Dresselhuys: Sure, positive, Colin. Eric right here, I am going to take that and let Tony chime in if he is received something so as to add. The most important piece for us is in stack manufacturing and getting the absolutely automated line up and working, getting the entire provide chain that feeds that working easily is the only largest value merchandise within the product. And so, getting that finished is by far the most important factor. The second factor on the methods facet actually, I would say falls into two classes. We’re beginning as we’re ramping up shipments, we will use much more electrolytes. So, getting the fee down and the manufacturing, the blending course of on the electrolyte down has a big effect. After which on the system facet, the stability of system facet, it is just a little bit like the method of going by means of constructing a automobile or every other giant system, getting the flows by means of the manufacturing unit, in order that it is actually taking out all of the waste and motion and movement by means of the manufacturing unit is the most important factor. I feel there it is in all probability extra plumbing and electronics than anything.
Tony Rabb: Sure. Hey Colin, simply so as to add on, that is Tony. On line the second line, we have additionally factored in a lot of design enhancements that we have discovered from the primary line. So, whereas the primary line is extraordinarily environment friendly and has fairly excessive throughput, the second line has factored in some design enhancements to it that permit us to get a lot increased throughput by means of the tools than the unique absolutely automated manufacturing line. So massive pickup on stacked manufacturing capability.
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Colin Rusch: And now that you have a lot of models within the subject and a considerably increased quantity of knowledge round efficiency, are you able to speak just a little bit about what kind of debt financing your prospects are taking a look at or consolation stage incremental diligence that lenders are doing across the expertise that will help incremental gross sales alternatives?
Eric Dresselhuys: Sure. I feel we will begin to see that ramp up. It hasn’t been a giant a part of the story at present, however within the New York Instances article that got here out at present that we have been lucky sufficient to be talked about in after which there was one other article in I feel Power Storage Information that was speaking about this very matter. Lenders on the whole are beginning to have a look at vitality storage as sort of a giant progress house. So most of our prospects to this point have been giant industrial prospects or municipal prospects, and so they have not relied on third-party financing as a lot. The IPP market and the developer marketplace for each standalone batteries and renewables is we expect going to be a giant a part of the enterprise going ahead and thinkability and having that information for efficiency goes to, I feel be a giant enhance to constructing confidence. I’d be remiss if I did not additionally name out that for years now, we have had this relationship with Munich Re from a product guarantee perspective. And I feel the mix of efficiency information plus feeling actually excessive confidence within the product assure are the 2 issues that actually assist open up that market.
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Operator: [Operator Instructions]. Our subsequent query comes from the road of Corinne Blanchard with Deutsche Financial institution. Your line is now open.
Corinne Blanchard: Good night, guys. Simply possibly in case you can speak about so you bought a brand new contract with in a distinct area in Africa, I consider. So simply in case you can speak about, possibly, if in case you have a area of focus or if in case you have any, geographic that you’d favor to focus possibly within the subsequent 12 months to 36 months?
Eric Dresselhuys: Sure, positive, Corinne. Thanks for the query. I feel the overwhelming majority of our enterprise continues to be going to stay in our core markets of the U.S., Australia and Europe. And we have talked about these tasks. The brand new venture we introduced, we’re enthusiastic about it. For us, it appears just a little bit like a U.S. venture as a result of we’re constructing and promoting the product right here within the U.S. to a third-party that is developed that can deploy it in Africa. However what we’re seeing occur is sort of opportunistically anyone that is transferring in direction of those self same use instances that we now have within the U.S., in Europe and in Australia round inexperienced baseload energy, these persons are fairly, I feel, in an accelerating foundation saying, we want lengthy period storage to make the thought of a resilient 24-hour system work. And the instances article at present highlighted that as nicely. So, anyplace the place you are seeing the transition to Inexperienced Base Low Energy, we will have alternatives. However we expect the most important alternatives, nearly all of our enterprise will stay within the U.S., Australia and Europe.
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Operator: [Operator Instructions]. There are not any additional questions presently. Mr. Dresselhuys, I flip the decision again over to you.
Eric Dresselhuys: Nicely, I thank all people for listening in to the decision. We’re excited and we remind you to go to our Investor Relations web site the place you may see a presentation and a brief video about our operations and we look ahead to speaking to you all subsequent quarter.
Operator: This concludes at present’s convention name. It’s possible you’ll dial disconnect.
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