ESS Tech, Inc.

Ladies and gentlemen, thank you for standing by. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press the star 1 on your push button phone. I would now like to turn the conference over to Eric Bilen. Please go ahead.

Thank you. Welcome to ESS's first quarter of fiscal year 2025 financial results conference call. Joining me on the call today from ESS are Kelly Goodman, interim CEO, and Tony Robb, CFO. Following management's prepared remarks, we will hold a Q&A session. Earlier today, ESS released financial results for the first quarter of 2025. 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 2025 and beyond. The forelooking 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 metrics on a non-GAAP basis. Management believes that non-GAAP financial measures taken in conjunction with U.S. 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 certain non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Reconciliations between U.S. GAAP and non-GAAP results are presented within our earnings release. With that, I'll turn the call over to Kelly.

Thank you, Eric, and thank you, everyone, for joining the call. I am pleased to be here again to report our first quarter results for 2025. As we noted on our last call, we continue to work diligently to manage liquidity in the near term, support capital raising measures, and give us time to implement our turnaround and current strategy. Our focus this quarter was execution of the energy-based launch and gaining commercial momentum, which I will talk about momentarily. Our first quarter revenue is tied to final deliveries of our battery systems to our Florida utility customer and came in at $.6 million, with roughly 65% tied to equipment and 35% tied to site preparation. Additional project revenues are anticipated to be realized as the project is installed and commissioned through the course of this year. We expect that revenue will maintain these levels in the first half of the year and ramp in the back half based on energy-based sales, although we are certainly exploring near-term revenue opportunities. The results reflect in part our pivot from the energy warehouse and energy center products to implement a more focused business strategy related to the energy-based product and address longer duration storage opportunities at 10 plus hours. This strategic shift is already yielding results. Within just three months of launching the energy-based product, we secured early momentum. We were notified in late April that ESS beat more than 10 shortlisted competitors and a non-lithium RFP initiated by an Arizona public power utility that serves 2 million people and services a significant load from hyperscale leaders. Contracting and approvals for the 50 megawatt hour, 5 megawatt pilot project are anticipated to conclude by September. We expect there will be a significant follow-on RFP opportunity for this customer, and our proposal included indicative pricing for a 2 gigawatt hour 200 megawatt follow-on project. This opportunity is representative of the significant emerging demand for non-lithium ion longer duration storage technologies. We believe that our ability to deliver 10 plus hours of storage, offer competitive pricing, perform in a wide range of temperatures, and bring broad field experience with our core technology scaled to gigawatt capacity in the energy base were important factors in securing this opportunity. In addition, the project off-taker is confirmed, and we are in further discussions for two additional projects. The project will be structured as a power purchase agreement, allowing us to deploy capital and raise financing at the project level. Project-level capital and monthly payment structures like PPAs or tolling agreements also open new opportunities for ESS to maintain some level of ownership in project companies and receive revenue reliably that will help to smooth our revenue projections and provide a revenue baseline to the extent these projects close and become operational. Separate from this particular project, proposal activity has increased substantially on the back of the energy-based launch, totaling approximately 1.2 gigawatt hours and $400 million in the last two quarters, with over 70% representing the energy base. Our Portland General Energy Center systems are continuing grid operation and running daily cycling, having transacted another 158 megawatt hours. In addition, we are taking steps to leverage the grid infrastructure that was installed to support the PGE project to connect additional ESS systems and deploy a Wilsonville energy hub right here in our backyard. These batteries are demonstrating commercial applications and daily cycling. We plan to deploy our first extended duration stacks in an on-site system to demonstrate a 12-hour duration during the second quarter. This effort is a key step in demonstrating the technology at longer durations of up to 22 hours. Operating multiple systems on site that all utilize our core technology will allow us to continue to understand product deployment and field activity firsthand and optimize a hands-on operational approach to better implement learnings and usability for our customers. We continue to work closely in our partnership with Honeywell across a number of fronts, including related to the energy-based product, as discussed on our last call, based on Honeywell's expertise and process design and procurement position related to core elements like tanks, pumps, and control systems. Our first four projects under our joint development agreement are complete or near completion, and the next round is already in flight or will be executed during the second quarter. There have been significant changes in the last several weeks related to tariffs, but as noted on our last call, We are proud that we have made our batteries here in the United States since day one. All of our manufacturing is conducted in our Wilsonville facility, and we do not import foreign cells for US assembly. We have an extremely high degree of American-made inputs from our supply chain, with over 98% of the components in our bill of materials sourced domestically. The cost for Chinese lithium batteries have recently come down, but the tariff landscape remains both significant and volatile. The 90-day agreement between the U.S. and China that was announced last weekend and came into effect yesterday still imposes over 40% cumulative tariffs on Chinese stationary lithium ion batteries in the near term, and over 50% tariffs in 2026 if a broader trade agreement isn't reached before the Section 301 tariffs on Chinese stationary lithium ion batteries are scheduled to increase from 7.5% to 25%. We also continue to see positive legislative tailwinds for domestic battery manufacturing, including for long-duration energy storage manufacturers. On April 8, Senator Bill Cassidy introduced the Foreign Pollution Fee Act, which would levy tiered and escalating tariffs on selected imported goods, including battery components, based on their carbon emissions. with the intention to boost US manufacturing competitiveness in low carbon goods and raise tax revenue. Based on the FPFA's variable charge by sector and country of origin formula, battery inputs from China will face an additional 200% levy if the bill becomes law. On March 10th, the decoupling from Foreign Adversarial Battery Dependence Act passed the House of Representatives. This bill would prohibit the Department of Homeland Security from purchasing batteries produced by Cattle, BYD, Envision Energy, EVE Energy, Gotian Hightech, and Hytheum. On Monday, the House Ways and Means Committee released its bill as part of the budget reconciliation process. While many in the industry were concerned that the Section 45X advanced manufacturing production tax credit would be rescinded, The Ways and Means Committee proposed adjustments to 45X as foreign entity of concern provisions that strengthen a company like ESS's ability to claim the credit between now and 2031. There is broad bipartisan support for the Section 45X credit as a vehicle to scale domestic manufacturing of energy technology and reduce dependence on Chinese technology and supply chains for domestic energy projects. In short, these multiple pending legislative efforts indicate strong continued support for domestic manufacturing, and we continue to believe that ESS and its technology are well positioned to support the administration's mission to reestablish American energy dominance at home and abroad. All of that said, while our team has made significant progress over a very short period, we have not completed our capital raise. And the current capital markets environment is challenging against the current uncertain macro political landscape. We are aggressively pursuing all available options to extend our runway and maximize the value of what we believe is a critical technology in the broader energy landscape. With that, I'll pass it on to Tony to review the financials and our outlook.