ESS Tech, Inc.

With our lower cost power module capacity expansion, we now believe we can expand complete battery manufacturing capacity at half the cost we previously expected. With this significant operational progress and expanding relationships across great utility customers and strategic partners like Honeywell, we feel we are well positioned to capitalize on our leadership position in the long-duration energy storage market. Turning to cash flow and liquidity, we ended the first quarter with $89.6 million in cash and short-term investments. We remain focused on managing our cash burn rate, including driving ongoing efforts to optimize working capital and cap expense. Our cash on hand should support our business well into the first half of 2025. We continue to opportunistically look to strengthen our balance sheet. through dilutive and non-dilutive financing alternatives to provide the necessary capital to give us operational flexibility to respond to market demand. We feel very good about our cash position and liquidity and the extended runway we possess to push towards our longer-term goal of getting to cash flow breakeven. And with that, I'll open it up for questions.

At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Our first question comes from the line of Colin Roush. Your line is now open. Colin, your line is now open.

Thank you so much, you guys. You know, could you talk a little bit about where you're seeing the real manufacturing efficiency? You know, it seems like you guys are making some pretty healthy progress there. I'd love to understand what specifically is moving forward in an incremental way.

Yeah, sure, Colin. Eric here. I'll take that and let Tony chime in if he's got anything to add. The biggest piece for us is in stack manufacturing. And getting the fully automated line up and running, getting the whole supply chain that feeds that running smoothly is the single biggest cost item in the product. And so getting that done is by far the biggest thing. The second thing on the system side really, I'd say, falls into two categories you know we're we're starting as we're ramping up shipments we're going to use a lot more electrolytes so getting the cost down and the manufacture the the mixing process on the electrolyte down has a big impact and then on the system side the balance of system side it's it's a little bit like the process of going through building a car or any other large device getting the flows through the factory and so that it's really, you know, taking out all the waste and movement and motion through the factory is the biggest thing. I think there it's, you know, it's probably more plumbing and electronics than anything else.

Yeah. Hey Colin, just to add on. Super helpful. Just on line, the second line, we've also factored in a number of design improvements that we've learned from the first line. So while the first line is extremely efficient, and has pretty high throughput. The second line has factored in some design improvements to it that allow us to get much higher throughput through the equipment than the original fully automated production line. So a big pickup on STAC's manufacturing capacity.

That's super helpful. And now that you've got a number of units in the field and a significantly higher volume of data around performance, can you talk a little bit about what sort of debt financing your customers are looking at or comfort level incremental diligence that lenders are doing around the technology that may support incremental sales opportunities?

Yeah, I think we're going to start to see that ramp up. It hasn't been a big part of the story to date, but in the New York Times article recently, that came out today that we were fortunate enough to be mentioned in. And then there was another article in, I think, Energy Storage News that was talking about this very topic. You know, lenders in general are starting to look at energy storage as kind of a big growth space. So most of our customers to date have been large industrial customers or municipal customers. And they haven't relied on third-party financing as much. The IPP market and the developer market for both standalone batteries and renewables is, we think, going to be a big part of the business going forward. And bankability and having that data for performance is going to, I think, be a big boost to building confidence. I would be remiss if I didn't also call out that for years now we've had this relationship with Munich Re., From a product, you know, warranty perspective, and I think the combination of, you know, performance data plus feeling really high confidence in, you know, in the product guarantee are the two things that really help, you know, open up that market.

All right, thank you for your question, Colin.

Again, if you would like to ask a question, please press star then the number one on your telephone keypad. Our next question comes from the line of Corinne Blanchard with Deutsche Bank.

Your line is now open.

Hey, good evening, guys. Just maybe if you can talk about, so you got a new contract in a different region in Africa, I believe. So just if you can talk about maybe, you know, if you have a region of focus or if you have any geographic that you would prefer to focus maybe in the next, you know, 12 to 36 months.

Yeah, sure, Corinne. Thanks for the question. I think the vast majority of our business is still going to remain in our core markets of the U.S., Australia, and Europe. And we've talked about those projects. The new project we announced, we're excited about it. For us, it looks a little bit like a U.S. project because we're building and selling the product here in the U.S. to a third party that will deploy it in Africa. But what we are seeing happen is, you know, kind of opportunistically, anybody that's moving towards those same use cases that we have in the U.S., in Europe, and in Australia around green baseload power, those people are quite, I think, on an accelerating basis saying, we need long-duration storage to make the idea of a resilient 24-hour system work. And the Times article today, you know, highlighted that as well. So any place where you're seeing the transition to green base load power, we're going to have opportunities. But we think the biggest opportunities, the majority of our business will remain in the U.S., Australia and Europe.

All right. Thank you. That's it for me.

Thanks.

Thank you for your questions. As a final reminder, if you would like to ask a question, press star then the number one on your telephone keypad.

There are no further questions at this time.

Mr. Dresselhaus, I turn the call back over to you.

Well, I thank everybody for listening in to the call. We're excited and we remind you to visit our investor relations site where you can see a presentation and a short video about our operations. And we'll look forward to talking to you all next quarter.

This concludes today's conference call. You may now disconnect.