ESS Tech, Inc.

Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a Q&A session. At that time, if you have a question, you will need to press star followed by one on your push-button phone. I would now like to turn the conference over to Eric Byland. Please go ahead.

Welcome to ESS's third quarter of fiscal year 2024 financial results conference call. Joining me on the call today from ESS are Eric Desselhaus, CEO, and Tony Robb, CFO. Following management's prepared remarks, we'll hold a Q&A session. Earlier today, ESS released financial results for the third quarter of fiscal year 2024. The earnings release is available in the investor relations section of the company's website. As a reminder, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects, partnerships, financial performance, capital raising, and strategy for 2024 and beyond. The forward-looking statements are also subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors set forth in more detail in our most recent periodic filings filed with the Securities and Exchange Commission, as well as the current uncertainty and unpredictability in our business, challenges with raising capital, issues with our partnerships, the markets, the economy, and the current geopolitical situation. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call today are based on assumptions and beliefs as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law. During the call, we will also present certain financial information on a non-GAAP basis. Management believes that non-GAAP financial measures They can, in conjunction with US GAAP financial measures, provide useful information for both management and investors by excluding certain items that are not indicative of our core operating results. Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Reconciliations between US GAAP and non-GAAP results are presented within our earnings release. And with that, I will turn the call over to ESS's CEO, Eric Dresselhaus.

Thank you for joining the call today. There are many reasons to feel great about the future of the ESS. A massive emerging market opportunity, a global top tier customer base, a truly differentiated and IP protected technology, and a great team here in Wilsonville building the product with domestic content. However, the ramp of our revenue continues to be slow due to a variety of external factors. This was evidenced in the last quarter as our ability to stay on schedule was compromised, specifically by further delays in the timing of customer funding. Let me provide some more detail. As I mentioned last quarter, project approval and funding was held up at one of our longstanding partners, impacting our ability to ship and recognize revenue for product that was ready to go. The great news is that the agreement for public and private funding that totaled 65 million Australian dollars was announced at the very end of September. This funding was in support of a massive state mandate for long duration storage in Queensland. But unfortunately, it did not complete in time for us to close out these transactions before the end of Q3. Since we closed Q3, key contracts for our partner are signed. payments are flowing, and we've started to ship the additional units. So we are optimistic we'll ship to their demand and recognize revenue in the fourth quarter. As we look forward to the end of the year, we are able to provide updated guidance and expect to recognize revenues between $9 and $11 million for the full year, representing meaningful year-on-year growth. We expect the fourth quarter will include previously planned EW systems and the initial commercial shipments of our EC product. As you'll recall from previous calls, the EC product serves as our next step in building products designed to support large scale deployments, which is the direction the market is clearly headed. The EC product has more than double the capacity of our energy warehouse product, but with the same footprint. The EC product was the logical next step as we work towards the delivery of the hundreds of gigawatt hours of long duration energy storage our customers and the broader utility industry will need in the coming years. Given the newness of the product and the challenges customers are facing with onsite preparedness, we will moderate our ramp and plan to ship six EC systems in Q4 and defer additional units to the new year. This does not reflect any reduction in demand, as we already have contracts in place for these product deliveries, simply a more prudent initial ramp of a new product. Although delays are frustrating, they are a reality in our industry and we're working to get better at both forecasting and mitigating these as we ramp the business. Looking at our internal progress, our team has done a great job of building the EC systems for Portland General Electric and have been gaining valuable experience operating them. The first EC unit has been operating since March And we have been cycling against the standard PNNL and AUG 19 testing regimes and have been seeing great reliability and availability. That experience allowed our team to incorporate further design for manufacturability improvements into the second unit, which is now in place and in testing. And we expect full handoff to PGE this quarter. We've never had units operating at more customers than we do today. demonstrating our iron flow performance and supporting a wide variety of customer use cases. From California to Amsterdam and beyond, our technology is proving the value of long duration energy storage in addressing customer needs. Some of you may have seen our founding board chairman and retired utility executive Mike Nigley's customer site tour, which kicked off at Burbank Water and Power. They are being posted on LinkedIn and X and he is highlighting the many ways that our technology is being deployed, so please stay tuned as he continues this journey, talking grid resiliency, bulk shifting carbon-free electricity, and the decarbonization of critical infrastructure at customer sites around the world. And importantly, Honeywell's initial units have been delivered and are being deployed. I'm pleased to share that this partnership is hitting its stride across multiple vectors. Our joint development agreement to leverage Honeywell's broad technical expertise to further the success of our iron flow technology is in full swing, focused on lowering costs and achieving ever-improving performance. We're actively engaged in go-to-market activities, collaborating on joint proposals, and are excited to look at technology configurations that are even greater capacity than anything we've conceived to date. our broad market opportunity continues to grow. I attended three events recently that I think really speak to the growing opportunity for Eldez and for ESS specifically. First, at the New York Stock Exchange's Technology Day, I led a panel focused on AI and the transformational impact it is having on electricity usage. With data center energy consumption expected to double by 2028, to 540 gigawatt hours annually, more than the entire state of Texas consumes, data center operators are looking to fuel this consumption growth cleanly and reliably. These operators are recognizing that renewables plus storage is the best, most cost-effective way to meet the need. LDES will be key to fulfilling this use case, and we believe our technology is particularly well suited to the impending demand. I also addressed a panel at the Next Grid Alliance Summit, an annual gathering in Boston hosted by National Grid. It was clear across many utilities, large users, and regulators that we all need to move faster to ensure the reliability of the grid as we increase demands on the grid in the transition to a carbon-free future. LDS was highlighted as critical to making this happen. And it was great to hear about the regulatory mandates now being implemented from New England to the Midwest that create meaningful opportunities for ESS. And importantly, I joined our partners at SMUD in Sacramento for the Energy Thought Summit. Our relationship with SMUD remains on a great path and, like most of the other participants, I remain impressed by SMUD's ambitious plan to decarbonize their grid by 2030. while maintaining reliability and affordability for the people of Sacramento. Our project was highlighted repeatedly by Paul Lau, their CEO, along with a variety of board members and senior leaders, and I did a fireside chat with Laura Engleway, their chief zero officer. SMUD remains at the forefront of utilities driving towards decarbonization, and Laura did a fantastic job addressing both the challenges and the opportunities they face in implementing such an ambitious plan. But they are creating a roadmap for others, and we are certainly very lucky to have such a close commercial relationship with them. ESS continues to make progress in the face of challenges. I'm very proud of the team, and we are laser focused on scaling our solution and driving the profitability as we demonstrate the value of Eldez in delivering the reliability needed to ensure the energy transition. And with that, I'll hand it off to Tony.