Lowered Q4 Adjusted EBITDA loss by More Than
50% year over year
Exited 2023 with Cash and Short-Term
Investments over $100 million; Expected to Carry ESS Well Into
H1’25
Delivered First Energy Warehouses to
Honeywell
Energy Warehouse manufacturing cost lowered
by 60% in 2023
Target 40% 2024 EW Cost Reduction to Achieve
non-GAAP Gross Margin Profitability
ESS Tech, Inc. (“ESS,” “ESS, Inc.” or the “Company”) (NYSE:GWH),
a leading manufacturer of long-duration energy storage systems
(LDES) for commercial and utility-scale applications, today
announced financial results for its fourth quarter and full year
ended December 31, 2023.
“During 2023 our team made significant progress towards our most
important objectives, including securing transformative
partnerships with LEAG and Honeywell, optimizing our internal
operations, and pursuing design initiatives to lower production
costs by improving manufacturability and scale. While we faced
customer-related delays that impacted our financial results, the
team’s work during the year laid a solid foundation for us to scale
the business, launch the Energy Center and move toward unit
profitability in 2024. In fact, our strategic decision to make
fewer Energy Warehouses (EWs) and ship them to customers with the
greatest long-term opportunity allowed us to conserve cash and exit
the year with a cash and short-term investments balance over $100
million. Importantly, we brought down costs to build an EW by
almost 60% during 2023 and successfully cut our Q4 adjusted EBITDA
loss in half year over year,” said Eric Dresselhuys, CEO of ESS.
“ESS continues to make tremendous progress on our strategy to build
a world class, scalable company that is well-positioned to serve
the immense long-duration energy storage market. The actions we’ve
already taken have resonated with customers and we continue to see
robust customer engagement. In 2024 we plan to further reduce EW
unit costs by up to 40% as we move toward unit profitability while
ramping our scale and maintaining a healthy cash balance.”
Recent Business Highlights
- Achieved record revenue of $7.5M for FY 2023.
- Delivered first Energy Warehouses™ under the partnership with
Honeywell in Q4 2023 and recently cleared previously announced
customer delays in Australia, which we expect will result in
revenue of approximately $2 million in Q1 2024 which was originally
anticipated in Q4 2023.
- At the end of 2023, ESS successfully “lifted” its first Energy
Center™ (EC), a key milestone in the manufacturing process. The EC
is a utility-scale, front-of-the-meter long-duration energy storage
product which provides up to eight hours of energy storage with a
flexible, scalable platform to meet the LDES needs of utilities
worldwide. We expect this inaugural EC system will be commissioned
and delivered to Portland General Electric later this year.
- Delivered an Energy Warehouse™ system to the Burbank Water and
Power (BWP) EcoCampus, BWP’s first utility-scale battery storage
project. This EW will be paired with an on-site solar array where
ESS technology will demonstrate the critical role of LDES in a
fully renewable grid.
- Delivered two Energy Warehouses™ to Turlock Irrigation District
(TID) in Central California to support TID’s Project Nexus. At TID,
the EW will be paired with a proof of concept of solar panels over
irrigation canals. which aims to conserve water resources by
reducing evaporation while generating clean energy, reducing diesel
generation and reducing energy costs.
- Completed commissioning of an Energy Warehouse™ system at the
Contingency Base Integration Training Evaluation Center (CBITEC)
operated by the US Army Corps of Engineers Engineer Research and
Development Center in Fort Leonard Wood, Missouri. This EW has been
incorporated into a tactical microgrid at CBITEC and will
demonstrate the key role that LDES, specifically iron flow battery
technology, can play to reduce fuel consumption at Contingency
Bases such as Forward Operating Bases or other temporary use
locations providing humanitarian assistance or disaster
relief.
Conference Call Details
ESS will hold a conference call on Wednesday, March 13, 2024 at
5:00 p.m. EDT to discuss financial results for its fourth quarter
and full year ended December 31, 2023. Interested parties may join
the conference call beginning at 5:00 p.m. EDT on Wednesday, March
13, 2024 via telephone by calling (833) 927-1758 in the U.S., or
for international callers, by calling +1 (929) 526-1599 and
entering conference ID 261003. A telephone replay will be available
until March 20, 2024, by dialing (866) 813-9403 in the U.S., or for
international callers, +44 (204) 525-0658 with conference ID
769695. A live webcast of the conference call will be available on
ESS’ Investor Relations website at
http://investors.essinc.com/.
A replay of the call will be available via the web at
http://investors.essinc.com/.
About ESS, Inc.
At ESS (NYSE: GWH), our mission is to accelerate global
decarbonization by providing safe, sustainable, long-duration
energy storage that powers people, communities and businesses with
clean, renewable energy anytime and anywhere it’s needed. As more
renewable energy is added to the grid, long-duration energy storage
is essential to providing the reliability and resiliency we need
when the sun is not shining, and the wind is not blowing.
Our technology uses earth-abundant iron, salt and water to
deliver environmentally safe solutions capable of providing up to
12 hours of flexible energy capacity for commercial and
utility-scale energy storage applications. Established in 2011,
ESS, Inc. enables project developers, independent power producers,
utilities and other large energy users to deploy reliable,
sustainable long-duration energy storage solutions. For more
information visit www.essinc.com.
Use of Non-GAAP Financial Measures
In this press release and the accompanying earnings call, the
Company includes Non-GAAP Operating Expenses and Adjusted EBITDA,
which are non-GAAP performance measures that the Company uses to
supplement its results presented in accordance with U.S. GAAP. As
required by the rules of the Securities and Exchange Commission
(“SEC”), the Company has provided herein a reconciliation of the
non-GAAP financial measures contained in this press release and the
accompanying earnings call to the most directly comparable measures
under GAAP. The Company’s management believes Non-GAAP Operating
Expenses and Adjusted EBITDA are useful in evaluating its operating
performance and are similar measures reported by publicly-listed
U.S. companies, and regularly used by securities analysts,
institutional investors, and other interested parties in analyzing
operating performance and prospects. By providing these non-GAAP
measures, the Company’s management intends to provide investors
with a meaningful, consistent comparison of the Company’s
profitability for the periods presented. Adjusted EBITDA is not
intended to be a substitute for net income/loss or any U.S. GAAP
financial measure and, as calculated, may not be comparable to
other similarly titled measures of performance of other companies
in other industries or within the same industry. Further, Non-GAAP
Operating Expenses are not intended to be a substitute for GAAP
Operating Expenses or any U.S. GAAP financial measure and, as
calculated, may not be comparable to other similarly titled
measures of performance of other companies in other industries or
within the same industry.
The Company defines and calculates Non-GAAP Operating Expenses
as GAAP Operating Expenses adjusted for stock-based compensation
and other special items determined by management as they are not
indicative of business operations. The Company defines and
calculates Adjusted EBITDA as net loss before interest, other
non-operating expense or income, (benefit) provision for income
taxes, and depreciation, and further adjusted for stock-based
compensation and other special items determined by management,
including, but not limited to, fair value adjustments for certain
financial liabilities associated with debt and equity transactions
as they are not indicative of business operations.
Forward-Looking Statements
This communication contains certain forward-looking statements,
including statements regarding ESS and its management team’s
expectations, hopes, beliefs, intentions or strategies regarding
the future. The words “anticipate”, “believe”, “continue”, “could”,
“estimate”, “expect”, “intends”, “may”, “might”, “plan”,
“possible”, “potential”, “predict”, “project”, “should”, “will”
“would” and similar expressions may identify forward-looking
statements, but the absence of these words does not mean that a
statement is not forward-looking. Examples of forward-looking
statements include, among others, statements regarding the
Company’s manufacturing plans, the Company’s order and sales
pipeline, the Company’s ability to execute on orders, the Company’s
ability to effectively manage costs and the Company’s partnerships
with third parties such as Amsterdam Airport Schiphol, BWP, CMS,
ESIAP, the Sacramento Municipal Utility District and the Turlock
Irrigation District. These forward-looking statements are based on
ESS’ current expectations and beliefs concerning future
developments and their potential effects on ESS. Many factors could
cause actual future events to differ materially from the
forward-looking statements in this communication. There can be no
assurance that the future developments affecting ESS will be those
that we have anticipated. These forward-looking statements involve
a number of risks, uncertainties (some of which are beyond ESS
control) or other assumptions that may cause actual results or
performance to be materially different from those expressed or
implied by these forward-looking statements, which include, but are
not limited to, continuing supply chain issues; delays,
disruptions, or quality control problems in the Company’s
manufacturing operations; the Company’s ability to hire, train and
retain an adequate number of manufacturing employees; issues
related to the shipment and installation of the Company’s products;
issues related to customer acceptance of the Company’s products;
issues related to the Company’s partnerships with third parties;
inflationary pressures; risk of loss of government funding for
customer projects; and the Company’s need to achieve significant
business growth to achieve sustained, long-term profitability.
Except as required by law, ESS is not undertaking any obligation to
update or revise any forward-looking statements whether as a result
of new information, future events or otherwise.
ESS Tech, Inc. Statements of
Operations and Comprehensive Loss (Unaudited, in thousands,
except share and per share data)
Three Months Ended December
31,
2023
2022
Revenue:
Revenue
$
2,796
$
15
Revenue - related parties
—
1
Total revenue
2,796
16
Cost of revenue
10,312
—
Gross profit (loss)
(7,516
)
16
Operating expenses:
Research and development
3,842
22,789
Sales and marketing
2,096
1,721
General and administrative
5,611
6,902
Total operating expenses
11,549
31,412
Loss from operations
(19,065
)
(31,396
)
Other income (expenses), net:
Interest income, net
1,525
1,188
Gain on revaluation of common stock
warrant liabilities
1,375
5,273
Other income (expense), net
35
(140
)
Total other income, net
2,935
6,321
Net loss and comprehensive loss to
common stockholders
$
(16,130
)
$
(25,075
)
Net loss per share - basic and
diluted
$
(0.09
)
$
(0.16
)
Weighted average shares used in per
share calculation - basic and diluted
173,552,254
153,414,471
ESS Tech, Inc. Statements of
Operations and Comprehensive Loss (in thousands, except
share and per share data)
Years Ended December
31,
2023
2022
Revenue:
Revenue
$
7,537
$
610
Revenue - related parties
3
284
Total revenue
7,540
894
Cost of revenue
20,495
—
Gross profit (loss)
(12,955
)
894
Operating expenses:
Research and development
42,632
71,979
Sales and marketing
7,744
6,938
General and administrative
22,574
27,469
Total operating expenses
72,950
106,386
Loss from operations
(85,905
)
(105,492
)
Other income (expenses), net:
Interest income, net
5,262
2,187
Gain on revaluation of common stock
warrant liabilities
2,292
25,788
Other income (expense), net
773
(452
)
Total other income, net
8,327
27,523
Net loss and comprehensive loss to
common stockholders
$
(77,578
)
$
(77,969
)
Net loss per share - basic and
diluted
$
(0.48
)
$
(0.51
)
Weighted average shares used in per
share calculation - basic and diluted
159,958,645
152,676,155
ESS Tech, Inc. Balance Sheets
(in thousands, except share data)
December 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
20,165
$
34,767
Restricted cash, current
1,373
1,213
Accounts receivable, net
1,990
4,952
Short-term investments
87,899
105,047
Inventory
3,366
—
Prepaid expenses and other current
assets
3,305
5,657
Total current assets
118,098
151,636
Property and equipment, net
16,266
17,570
Intangible assets, net
4,923
—
Operating lease right-of-use assets
2,167
3,401
Restricted cash, non-current
945
675
Other non-current assets
833
271
Total assets
$
143,232
$
173,553
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
2,755
$
3,036
Accrued and other current liabilities
10,755
14,125
Accrued product warranties
2,129
1,643
Operating lease liabilities, current
1,581
1,421
Deferred revenue, current
2,546
6,168
Notes payable, current
—
1,600
Total current liabilities
19,766
27,993
Notes payable, non-current
—
315
Operating lease liabilities,
non-current
957
2,535
Deferred revenue, non-current
3,835
2,442
Deferred revenue, non-current - related
parties
14,400
—
Common stock warrant liabilities
917
3,209
Other non-current liabilities
—
85
Total liabilities
39,875
36,579
Stockholders’ equity:
Preferred stock ($0.0001 par value,
200,000,000 shares authorized, none issued and outstanding as of
December 31, 2023 and 2022)
—
—
Common stock ($0.0001 par value;
2,000,000,000 shares authorized, 174,211,911 and 153,821,339 shares
issued and outstanding as of December 31, 2023 and 2022,
respectively)
18
16
Additional paid-in capital
799,496
755,537
Accumulated deficit
(696,157
)
(618,579
)
Total stockholders’ equity
103,357
136,974
Total liabilities and stockholders’
equity
$
143,232
$
173,553
ESS Tech, Inc. Consolidated
Statements of Cash Flows (in thousands)
Years Ended December
31,
2023
2022
Cash flows from operating
activities:
Net loss
$
(77,578
)
$
(77,969
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
6,513
1,523
Non-cash interest income
(3,635
)
(1,349
)
Non-cash lease expense
1,234
1,134
Stock-based compensation expense
10,635
11,889
Inventory write-down and losses on
noncancellable purchase commitments
11,932
—
Change in fair value of common stock
warrant liabilities
(2,292
)
(25,788
)
Other non-cash income and expenses,
net
(60
)
483
Changes in operating assets and
liabilities:
Accounts receivable, net
3,633
(1,886
)
Inventory
(14,661
)
—
Prepaid expenses and other current
assets
2,422
(311
)
Accounts payable
(229
)
1,464
Accrued and other current liabilities
(3,378
)
6,789
Accrued product warranties
486
1,643
Deferred revenue
11,500
1,881
Operating lease liabilities
(1,418
)
(1,123
)
Net cash used in operating
activities
(54,896
)
(81,620
)
Cash flows from investing
activities:
Purchases of property and equipment
(5,790
)
(14,180
)
Maturities and purchases of short-term
investments, net
20,861
(103,704
)
Net cash provided by (used in)
investing activities
15,071
(117,884
)
Cash flows from financing
activities:
Proceeds from issuance of common stock and
common stock warrants, net of issuance costs
27,132
—
Payments on notes payable
(1,733
)
(1,900
)
Proceeds from stock options exercised
237
—
Repurchase of shares from employees for
income tax withholding purposes
(310
)
(2,808
)
Proceeds from contributions to Employee
Stock Purchase Plan
541
492
Proceeds from warrants exercised
—
165
Other, net
(214
)
(22
)
Net cash provided by (used in)
financing activities
25,653
(4,073
)
Net change in cash, cash equivalents
and restricted cash
(14,172
)
(203,577
)
Cash, cash equivalents and restricted
cash, beginning of period
36,655
240,232
Cash, cash equivalents and restricted
cash, end of period
$
22,483
$
36,655
ESS Tech, Inc. Consolidated
Statements of Cash Flows (continued) (in thousands)
Years Ended December
31,
2023
2022
Supplemental disclosures of cash flow
information:
Cash paid for operating leases included in
cash used in operating activities
$
1,670
$
1,625
Cash paid for interest
—
154
Non-cash investing and financing
transactions:
Common stock warrants issued for the
acquisition of intangible assets
4,990
—
Purchase of property and equipment
included in accounts payable and accrued and other current
liabilities
704
1,358
Right-of-use operating lease assets
obtained in exchange for lease obligations
—
4,534
Right-of-use finance lease assets obtained
in exchange for lease obligations
—
123
Warrant vested under contracts with
customers
—
46
Cash and cash equivalents
$
20,165
$
34,767
Restricted cash, current
1,373
1,213
Restricted cash, non-current
945
675
Total cash, cash equivalents and
restricted cash shown in the statements of cash flows
$
22,483
$
36,655
ESS Tech, Inc. Reconciliation of GAAP
to Non-GAAP Operating Expenses (Unaudited, in
thousands)
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2023
Research and development
$
3,842
$
42,632
Less: stock-based compensation(1)
(295
)
(2,696
)
Non-GAAP research and development
$
3,547
$
39,936
Sales and marketing
$
2,096
$
7,744
Less: stock-based compensation(1)
(290
)
(816
)
Non-GAAP sales and marketing
$
1,806
$
6,928
General and administrative
$
5,611
$
22,574
Less: stock-based compensation(1)
(1,502
)
(5,370
)
Non-GAAP general and administrative
$
4,109
$
17,204
Total operating expenses
$
11,549
$
72,950
Less: stock-based compensation
(2,087
)
(8,882
)
Non-GAAP total operating expenses
$
9,462
$
64,068
(1) For purposes of calculating Non-GAAP
total operating expenses, stock-based compensation is allocated on
a departmental basis based on the classification of the award
holder.
ESS Tech, Inc. Reconciliation of GAAP
Net Loss to Adjusted EBITDA (Unaudited, in
thousands)
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2023
Net loss
$
(16,130
)
$
(77,578
)
Interest income, net
(1,525
)
(5,262
)
Stock-based compensation
2,962
10,635
Depreciation and amortization
3,326
6,513
Gain on revaluation of warrant
liabilities
(1,375
)
(2,292
)
Other expense, net
(35
)
(773
)
Adjusted EBITDA
$
(12,777
)
$
(68,757
)
Source: ESS Tech, Inc.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240313875100/en/
Investors: Erik Bylin investors@essinc.com
Media: Morgan Pitts 503.568.0755
Morgan.Pitts@essinc.com
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