GWH ESS Tech Inc

Installed and Commissioned Second Energy Center

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 third quarter ended September 30, 2024.

“The core investment thesis for ESS remains as strong as ever – we have a massive and important emerging market opportunity in front of us, a top tier, forward-thinking customer base, and a differentiated, IP-protected, scalable technology tailor made to serve them. We continue to make strong progress on our key operational initiatives, but have faced challenges that have delayed our revenue ramp. Our Australian partner has had great success signing contracts with major utilities and securing funding to build a factory to help meet the high demand for long-duration energy storage in Queensland. However, delays in completion of this funding affected our ability to ship and recognize revenue in Q3 for units that were already built. We are receiving payments and are shipping units now so we are optimistic we will get this over the finish line in the fourth quarter and that, coupled with EC product shipments, should lead to $9 to $11 million in revenue for the year, leading to meaningful year-on-year growth,” said Eric Dresselhuys, CEO of ESS. “On the operational side, our first Energy Center for Portland General Electric has been operating with high reliability and availability and we successfully built and are testing our second EC product on the same site. We’ve been gleaning valuable insights from these units – from build to test to operation – to further improve our processes and design as we prepare for the ramp of our EC products. Optimized for larger scale deployments to meet the needs of the broader utility industry, our EC products can provide double the capacity of our Energy Warehouses with the same footprint. We continue to aggressively execute on our cost reduction activities as we scale our operations, efficiently manage our resources and drive to profitability.”

Recent Business Highlights

• On November 1, ESS executed the credit agreement with the Export-Import Bank of the United States, or EXIM, for the first $20 million tranche of the $50 million funding package previously announced, becoming the first energy storage manufacturer to be supported by the Make More in America Initiative of EXIM. This funding is long-term, low interest, and non-dilutive capital to finance expanding manufacturing capacity. For further details, see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on November 5, 2024.
• We have built and installed the second Energy Center for Portland General Electric and are now in testing. Final hand-off to PGE is expected in Q4. We've started building and expect to start shipping our first commercial EC products in the fourth quarter of 2024.
• On August 23, 2024, ESS executed a 1-for-15 reverse split, following a listing notice from the NYSE received in March, bringing the Company back into compliance with the listing requirements and enabling continued operations as a publicly-listed company.

Conference Call Details

ESS will hold a conference call on Wednesday, November 13, 2024 at 5:00 p.m. EST to discuss financial results for its third quarter ended September 30, 2024. Interested parties may join the conference call beginning at 5:00 p.m. EST on Wednesday, November 13, 2024 via telephone by calling (833) 470-1428 in the U.S., or for international callers, by calling +1 (404) 975-4839 and entering conference ID 385282. A telephone replay will be available until November 20, 2024, by dialing (866) 813-9403 in the U.S., or for international callers, +1 (929) 458-6194 with conference ID 356245. 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.

ESS Inc. (NYSE: GWH) is the leading manufacturer of long-duration iron flow energy storage solutions. ESS was established in 2011 with a mission to accelerate decarbonization safely and sustainably through longer lasting energy storage. Using easy-to-source iron, salt, and water, ESS iron flow technology enables energy security, reliability and resilience. We build flexible storage solutions that allow our customers to meet increasing energy demand without power disruptions and maximize the value potential of excess energy. 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 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 Gross Margin as sales price less direct labor, direct materials, and other direct costs and includes the benefits of the 45X Advanced Manufacturing Production Tax Credit. 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 amortization, 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” and “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, the Company’s relationship with its Australian partner and the development and commercialization of the EC product. 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; issues related to raising additional capital; and the Company’s need to achieve significant cost reductions and 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.

Condensed Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Revenue:

 

 

 

 

 

 

 

 

Revenue

 

$

355

 

 

$

1,544

 

 

$

2,911

 

 

$

4,741

 

Revenue - related parties

 

 

4

 

 

 

1

 

 

 

534

 

 

$

3

 

Total revenue

 

 

359

 

 

 

1,545

 

 

 

3,445

 

 

$

4,744

 

Cost of revenue

 

 

12,741

 

 

 

10,183

 

 

 

35,615

 

 

 

10,183

 

Gross profit (loss)

 

 

(12,382

)

 

 

(8,638

)

 

 

(32,170

)

 

 

(5,439

)

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

2,684

 

 

 

1,609

 

 

 

9,066

 

 

 

38,790

 

Sales and marketing

 

 

2,529

 

 

 

2,056

 

 

 

7,274

 

 

 

5,648

 

General and administrative

 

 

6,087

 

 

 

5,831

 

 

 

17,791

 

 

 

16,963

 

Total operating expenses

 

 

11,300

 

 

 

9,496

 

 

 

34,131

 

 

 

61,401

 

Loss from operations

 

 

(23,682

)

 

 

(18,134

)

 

 

(66,301

)

 

 

(66,840

)

Other income, net

 

 

 

 

 

 

 

 

Interest income, net

 

 

807

 

 

 

1,155

 

 

 

3,097

 

 

 

3,737

 

Gain on revaluation of common stock warrant liabilities

 

 

343

 

 

 

344

 

 

 

459

 

 

 

917

 

Other income, net

 

 

39

 

 

 

17

 

 

 

2

 

 

 

738

 

Total other income, net

 

 

1,189

 

 

 

1,516

 

 

 

3,558

 

 

 

5,392

 

Net loss and comprehensive loss to common stockholders

 

$

(22,493

)

 

$

(16,618

)

 

$

(62,743

)

 

$

(61,448

)

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(1.90

)

 

$

(1.59

)

 

$

(5.35

)

 

$

(5.93

)

 

 

 

 

 

 

 

 

 

Weighted-average shares used in per share calculation - basic and diluted

 

 

11,814,580

 

 

 

10,471,738

 

 

 

11,722,378

 

 

 

10,358,503

 

ESS Tech, Inc.

Condensed Balance Sheets

(unaudited)

(in thousands, except share data)

 

 

September 30, 2024

 

December 31, 2023

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

12,822

 

 

$

20,165

 

Restricted cash, current

 

906

 

 

 

1,373

 

Accounts receivable, net

 

413

 

 

 

1,990

 

Short-term investments

 

42,292

 

 

 

87,899

 

Inventory

 

7,037

 

 

 

3,366

 

Prepaid expenses and other current assets

 

5,084

 

 

 

3,305

 

Total current assets

 

68,554

 

 

 

118,098

 

Property and equipment, net

 

19,857

 

 

 

16,266

 

Intangible assets, net

 

4,723

 

 

 

4,923

 

Operating lease right-of-use assets

 

1,853

 

 

 

2,167

 

Restricted cash, non-current

 

947

 

 

 

945

 

Other non-current assets

 

763

 

 

 

833

 

Total assets

$

96,697

 

 

$

143,232

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

10,937

 

 

$

2,755

 

Accrued and other current liabilities

 

10,178

 

 

 

10,755

 

Accrued product warranties

 

3,298

 

 

 

2,129

 

Operating lease liabilities, current

 

1,631

 

 

 

1,581

 

Deferred revenue, current

 

6,034

 

 

 

2,546

 

Total current liabilities

 

32,078

 

 

 

19,766

 

Operating lease liabilities, non-current

 

451

 

 

 

957

 

Deferred revenue, non-current

 

—

 

 

 

3,835

 

Deferred revenue, non-current - related parties

 

14,400

 

 

 

14,400

 

Common stock warrant liabilities

 

458

 

 

 

917

 

Other non-current liabilities

 

109

 

 

 

—

 

Total liabilities

 

47,496

 

 

 

39,875

 

Stockholders' equity:

 

 

 

Preferred stock ($0.0001 par value; 200,000,000 shares authorized, none issued and outstanding as of September 30, 2024 and December 31, 2023)

 

—

 

 

 

—

 

Common stock ($0.0001 par value; 1,000,000,000 shares authorized, 11,882,581 and 11,614,127 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively)

 

1

 

 

 

1

 

Additional paid-in capital

 

808,100

 

 

 

799,513

 

Accumulated deficit

 

(758,900

)

 

 

(696,157

)

Total stockholders' equity

 

49,201

 

 

 

103,357

 

Total liabilities and stockholders' equity

$

96,697

 

 

$

143,232

 

ESS Tech, Inc.

Condensed Statements of Cash Flows

(unaudited)

(in thousands)

 

 

Nine Months Ended September 30,

 

2024

 

2023

Cash flows from operating activities:

 

 

 

Net loss

$

(62,743

)

 

$

(61,448

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

3,302

 

 

 

3,187

 

Non-cash interest income

 

(2,094

)

 

 

(2,438

)

Non-cash lease expense

 

1,000

 

 

 

916

 

Stock-based compensation expense

 

8,538

 

 

 

7,673

 

Inventory write-down and losses on noncancellable purchase commitments

 

5,170

 

 

 

11,422

 

Change in fair value of common stock warrant liabilities

 

(459

)

 

 

(917

)

Other non-cash (income) expenses, net

 

311

 

 

 

(34

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

 

1,352

 

 

 

3,874

 

Inventory

 

(9,768

)

 

 

(13,132

)

Prepaid expenses and other assets

 

(1,709

)

 

 

3,701

 

Accounts payable

 

5,671

 

 

 

275

 

Accrued and other liabilities

 

(219

)

 

 

(4,305

)

Accrued product warranties

 

1,169

 

 

 

993

 

Deferred revenue

 

(122

)

 

 

12,532

 

Operating lease liabilities

 

(1,142

)

 

 

(1,050

)

Net cash used in operating activities

 

(51,743

)

 

 

(38,751

)

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(3,823

)

 

 

(4,209

)

Maturities and purchases of short-term investments, net

 

47,709

 

 

 

20,208

 

Net cash provided by investing activities

 

43,886

 

 

 

15,999

 

 

 

 

 

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

)

Proceeds from stock options exercised

 

80

 

 

 

236

 

Proceeds from contributions to Employee Stock Purchase Plan

 

214

 

 

 

332

 

Repurchase of shares from employees for income tax withholding purposes

 

(245

)

 

 

(165

)

Other, net

 

—

 

 

 

(214

)

Net cash provided by financing activities

 

49

 

 

 

25,588

 

 

 

 

 

Net change in cash, cash equivalents and restricted cash

 

(7,808

)

 

 

2,836

 

Cash, cash equivalents and restricted cash, beginning of period

 

22,483

 

 

 

36,655

 

Cash, cash equivalents and restricted cash, end of period

$

14,675

 

 

$

39,491

 

ESS Tech, Inc.

Condensed Statements of Cash Flows (continued)

(unaudited)

(in thousands)

 

 

Nine Months Ended September 30,

 

2024

 

2023

Supplemental disclosures of cash flow information:

 

 

 

Cash paid for operating leases included in cash used in operating activities

$

1,306

 

$

1,246

Non-cash investing and financing transactions:

 

 

 

Purchase of property and equipment included in accounts payable and accrued and other current liabilities

 

2,844

 

 

747

Adjustment to right-of-use assets from lease modification

 

686

 

 

—

Common stock warrants issued for the acquisition of intangible assets

 

—

 

 

4,990

Transfers between inventory and property and equipment, net

 

1,051

 

 

—

 

 

 

 

Cash and cash equivalents

$

12,822

 

$

37,173

Restricted cash, current

 

906

 

 

1,373

Restricted cash, non-current

 

947

 

 

945

Total cash, cash equivalents and restricted cash shown in the condensed statements of cash flows

$

14,675

 

$

39,491

ESS Tech, Inc.

Reconciliation of GAAP to Non-GAAP Operating Expenses

(unaudited)

(in thousands)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Research and development

 

$

2,684

 

 

$

1,609

 

 

$

9,066

 

 

$

38,790

 

Less: stock-based compensation

 

 

(614

)

 

 

(278

)

 

 

(1,923

)

 

 

(2,401

)

Non-GAAP research and development

 

$

2,070

 

 

$

1,331

 

 

$

7,143

 

 

$

36,389

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$

2,529

 

 

 

2,056

 

 

$

7,274

 

 

$

5,648

 

Less: stock-based compensation

 

 

(209

)

 

 

(211

)

 

 

(467

)

 

 

(526

)

Non-GAAP sales and marketing

 

$

2,320

 

 

$

1,845

 

 

$

6,807

 

 

$

5,122

 

 

 

 

 

 

 

 

 

 

General and administrative

 

$

6,087

 

 

$

5,831

 

 

$

17,791

 

 

$

16,963

 

Less: stock-based compensation

 

 

(1,306

)

 

 

(1,522

)

 

 

(4,280

)

 

 

(3,868

)

Non-GAAP general and administrative

 

$

4,781

 

 

$

4,309

 

 

$

13,511

 

 

$

13,095

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

$

11,300

 

 

$

9,496

 

 

$

34,131

 

 

$

61,401

 

Less: stock-based compensation

 

 

(2,129

)

 

 

(2,011

)

 

 

(6,670

)

 

 

(6,795

)

Non-GAAP total operating expenses

 

$

9,171

 

 

$

7,485

 

 

$

27,461

 

 

$

54,606

 

ESS Tech, Inc.

Reconciliation of GAAP Net Loss to Adjusted EBITDA

(unaudited)

(in thousands)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Net loss

 

$

(22,493

)

 

$

(16,618

)

 

$

(62,743

)

 

$

(61,448

)

Interest income, net

 

 

(807

)

 

 

(1,155

)

 

 

(3,097

)

 

 

(3,737

)

Stock-based compensation

 

 

2,658

 

 

 

2,889

 

 

 

8,538

 

 

 

7,673

 

Depreciation and amortization

 

 

781

 

 

 

1,082

 

 

 

3,302

 

 

 

3,187

 

Gain on revaluation of common stock warrant liabilities

 

 

(343

)

 

 

(344

)

 

 

(459

)

 

 

(917

)

Environmental, Health & Safety compliance estimate

 

 

390

 

 

 

—

 

 

 

390

 

 

 

—

 

Financing costs

 

 

983

 

 

 

—

 

 

 

983

 

 

 

—

 

Other income, net

 

 

(39

)

 

 

(17

)

 

 

(2

)

 

 

(738

)

Adjusted EBITDA

 

$

(18,870

)

 

$

(14,163

)

 

$

(53,088

)

 

$

(55,980

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241113260859/en/

Investors: Erik Bylin investors@essinc.com

Media: Morgan Pitts 503.568.0755 Morgan.Pitts@essinc.com