Energy Vault Holdings, Inc.

Good morning, and welcome to the Energy Vault second quarter 2023 earnings call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lawrence Alexander. Thank you. Please go ahead, Phil.

Thank you, hello, and welcome to Energy Vault's second quarter 2023 earnings conference call. As a reminder, Energy Vault's second quarter earnings press release and presentation is now available on our investor website, and we will be referring to the presentation during this call. A replay of this call will be available later today on the Investor Relations page of our website. This call is now being recorded. If you object in any way, please disconnect now. Please note that Engivolt's earnings release and this call contain forward-looking statements that are subject to risk and uncertainties. These forward-looking statements are only estimates and may differ materially from the actual future events or results to be a variety of factors. We caution everyone to be guided in their analysis of EnergyVault by referring to our 10Q filing list of factors that cause our results to differ from those anticipated in any forward-looking statement. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, please note that we will be presenting and discussing certain non-GAAP information. Please refer to the Safe Harbour Disclaimer and non-GAAP financial measures presented in our earnings release for more details, including our reconciliations and comparable GAAP measures. Joining me today on the call is Robert Bocconi, our Chairman and Chief Executive Officer, and Jan Kies van Gaalen, our Chief Financial Officer. At this time, I'd like to hand the call over to Robert Bocconi.

Great. Thank you, Lawrence. I'd like to welcome everyone to our second quarter 2023 earnings call. I'll begin today by highlighting the quarter's main operational and commercial and financial milestones as are more detailed in our earnings release that we announced this morning. First, our priority this year has been and remains our execution to customer commitments on our first projects. Following a 2022 year which saw a sign and close multi-gigawatt hour of new customer wins with some of the largest utilities and global IPPs, This year is about executing to those contractual commitments and specifically commissioning and turning over into operation the first system on time, at or above technical performance, and profitably with strong unit economics. Our first results are coming in, and we did not disappoint. Second, and sticking to the theme of execution, deploying our gravity storage technology at scale with the new EVX system As previously announced earlier this month, the first 25 megawatt, 100 megawatt hours in commissioning phase is now powered renewably by an adjacent wind farm and will serve the state grid and local towns. Third, continued growth in our commercial activities where our near-term sales funnel continues to expand, another 27% overall on a sequential quarter-by-quarter basis, and with more global diversity in customer base, in Southeast Asia, for example, South Africa, and Australia, as well as a recent conversion of a 400-megawatt-hour project with Jupiter Power from the award category to the booking category in the U.S. as we build the backlog going into 2024. As a reminder, this result follows the prior Q4 2022 to Q1 2023 funnel growth of 40% or 11-gigawatt-hour, for a total of 21 gigawatt-hour growth representing a little over $7 billion in opportunity in the last six months alone. As a new and emerging high-growth company in an attractive and growing market segment, it is important to measure not only the overall size and growth of our funnels I just talked through, but also the velocity and conversion to final contract bookings of the funnel. This past quarter, we had double-digit percentage growth in both overall funnel size and bookings growth categories, including almost tripling the growth in progressing proposed projects from submitted proposals to being shortlisted, a category that now totals 7.6 gigawatt hour, which equates to over $2 billion in potential awards alone. Fourth, I'm happy to share continued expansion of our high margin and expanding IP licensing segment of our business as we executed our first territory license for some specific states right here in the U.S. market for future project deployments and new applications of our gravity energy storage technology. These new agreements demonstrate the strength of our IP portfolio and continued innovation to expand applications of our gravity technology. These innovations include advances in structural engineering, material science, and software, as well as construction automation, all of which contribute to lowering the initial capex costs while improving the overall economics on a levelized cost basis. And in the case of the U.S. market, where we have the benefit of the IRA legislation incentives, we are seeing increasing interest for long-duration storage toward renewable fed production of green hydrogen, generally, as well as for attractive end markets like sustainable aviation fuel, for example. As our gravity energy technology is 100% local U.S. content in any event, we can maximize the various IRA incentives as a non-lithium energy storage medium and long-duration technology. Fifth, and very importantly, regarding the financial results in Q2, we continue to deliver on the planned revenue ramp. specifically a triple-digit percentage growth in revenue sequentially from $11.7 to approximately $40 million, while prudently managing our operating expense, cash, and expanding our surety capacity with partner Marsh as our project needs grow. While our revenue more than tripled on a quarter-over-quarter basis as projects progressed this year, we achieved about 10% GAAP gross margins on battery system RevRec only, while holding our OpEx in check to roughly flat quarter-over-quarter, resulting in quarterly improvements in adjusted EBITDA, which is a proxy for our cash generation, and final net income. We expect strong continued improvement sequentially in adjusted EBITDA and net income as we enter an admittedly steep cliff for the second half of 2023. where we expect to jump to triple-digit revenue as planned in the coming Q3 and Q4 quarters as we approach final commercial operation dates for U.S.-based storage projects while beginning some others. These coming quarters will represent our largest revenue quarters as a company, and as a team, we relish this opportunity to demonstrate to our customers and to our investors what we are capable of when it comes to profitably scaling this business for growth. As we demonstrated this past quarter with final testing of our first 69 megawatt, 275 megawatt hour system with Wellhead in California, at performance levels that met or exceeded our formal contractual commitments, and in less than nine months from contract award, as well as our first field test of our new software and energy management system platform. All of these results represent strong leading indicators of how we expect to perform now in the second half of 2023. In the end, this comes down to the talent, experience, and dedication of the people at Energy Vault that are obsessed with delivering for our customers. That's the most important part of delivering on our mission of decarbonization and enabling a renewable world. The final proof, of course, is not only in the numbers, but in the words of our customers. Hal Dittmer, the CEO and owner of Wellhead Electric, was quoted last month in the San Fernando Business Journal that was covering local renewable energy and storage projects. When asked about why he chose Energy Vault as a new company, he mentioned the industry network of people and their experience that were working at Energy Vault and saying in the end, and I quote, there were supply chain issues across the board, but we chose Energy Vault as they were the only company that was able to promise and then deliver what was needed for the project. With that, I'll mention a few other highlights from the quarter before turning it over to our CFO, Yanket Sangalan, who will review the details of the financial results, and then we'll open it up for questions. As noted above, our commercial outlook continues to remain robust, with our near-term funnel growing by 27% during the quarter to about 48 gigawatt hours. Additionally, we grew bookings by 33 million related to the signing of a licensing and royalty agreement for our gravity energy storage technology with a new customer in the United States and a recent 400 megawatt hour contract booking with Jupiter Power as we build backlog for 2024 and 2025. I'm also encouraged by continued geographical expansion and customer diversity with a recent award from Southeast Asian Sustainable Energy Company For two energy storage projects totaling 500 megawatt hour that we expect to be booked in the second half of 2023 as part of a broader framework to purchase a minimum 2700 megawatt hours of energy storage in total over the next three years alone. Moving into the latter half of this year, we aim to turn our growing commercial funnel into contracts that bolster our backlog for 2024 and 2025. We are focused on prioritizing contracts with high returns and favorable gross margins that meet our internal requirements. We'll continue enacting strict financial and pricing discipline into everything we do to generate value for the company and our shareholders over the long term while maintaining our competitive prowess. The proliferation of the energy storage industry and demand that was accelerated post-IRA gives us flexibility in the projects and contracts in which we sign to drive both revenue and gross margin expansion. We remain committed to selectively participating in only high-growth, high-margin commercial opportunities. Turning to China, last week we proudly shared that Atlas Renewable and CNTY, China's high-ending, began commissioning the world's first commercial EVX and located in Rudong, Zhejiang, and Shanghai, the 25-megawatt-hour, 100-megawatt-hour GESS system, next to a wind farm and national grid interconnection, and will enhance China's energy grid using stored renewable energy. Commissioning started in June on its advanced electronics and the new ribbon living system. By Q4, we expect the system to be fully grid interconnected. Building on the success of the EV1 tower in Switzerland in 2020, with over 75% round trip efficiency, the EVX has enhanced designing for over 80%, positioning it at the forefront of energy storage efficiency. There's more on the horizon with over two gigawatt hour of EVX deployments planned in China. For example, in June, China's Tianying agreed with Walleye County's government to construct another 100 megawatt hour gravity storage project in Hebei, aiming to bolster carbon goals and support regional data centers. This partnership underscores EVX's potential, promising high margin returns for energy vaults. We're eager to assist our partners in realizing more EVX initiatives in the future. Our commitment to global deployment of our gravity energy storage technology is unwavering as we executed our first gravity energy storage license and royalty agreement for the United States with a U.S.-based renewable developer for multiple named states. The license-only portion of the contract will generate revenue of $33 million, coupled with project royalty streams of 90% gross margin, tied to all future project deployments within the named states. Importantly, this agreement allows for the developer to deploy the technology through a new application of the current EVX technology that enables lower initial capex and demonstrates the flexibility of the technology to be adapted to various LAN topologies pending customer side availability. While we're talking about licensing and royalties, Our model is central to commercializing our gravity energy storage technology and pivotal to our business strategy. This approach enables scalable high-margin returns with an expanding revenue stream from continuous high-margin royalty and service fees. The model lets us utilize data from diverse assets to refine this technology, boost commercial adoption, and strengthen our market position. The model is also CapEx Lite, an asset Lite. Not only fosters, therefore, bottom line growth due to the high margin licensing and ongoing royalties, but also amplifies shareholder value as we near positive cash flow. Importantly, it reduces external capital alliance, setting us apart as an energy storage solutions provider, especially in today's market. As we look at North America, we're dedicated to launching the inaugural EVX Gravity Energy Source solution in Snyder, Texas, marking our first commercial demonstration here in North America. Leveraging cutting-edge tech and research insights, we aim for cost efficiency to foster widespread adoption globally. The Snyder facility stands as evidence for our potential clients now and in the future where we will implement our latest structural engineering, material science, and software innovations focused on lowering both initial capex and thus levelized costs over time. We anticipate an uptick in opportunities to expand the AVX platform in North America. Our strategic partner and customer, DG Fuels, recently welcomed two Japanese investors and a third, securing $30 million in equity. Given this financing and their DOE loan progress, DG Fuels announced that they plan to initiate construction of their $4.2 billion SAF facility in Louisiana in the first half of 2024. This follows recent public announcements of offtake agreements made by Air France, KLM, Royal Dutch Airlines, and Delta Air Lines as well as another large energy trading partner that will be purchasing 100% of the production of the Louisiana facility. We're enthusiastic about GG Fuel's strides and remain committed to supporting Mark Dyster and his team for fulfillment of their sustainable aviation fuel endeavors. I'd like to touch a little bit on our multi-day and ultra-long duration storage announcement with Pacific Gas and Electric as an update. Our technology agnostic approach paired with top-tier partners is showcased in our hybrid energy and green storage project with Pacific Gas and Electric. Importantly, in Q2, we received both the California PUC approval as well as the local Calistoga municipal approvals to take the project forward at full speed for PG&E and the residents of Calistoga. In the first half of this year, we procured the hydrogen storage tank and fuel cells for the system from industry leaders, charred industries, and Plug Power. Start is supplying an 80,000-gallon liquid hydrogen storage tank, ensuring 48 hours of supply, while Plug provides 8 megawatt of fuel cells, making it one of the largest planned hydrogen fuel cell projects in the United States and one of the earliest to COD as planned for Q2 2024. We chose these partners for their unparalleled industry solutions, allowing design flexibility to optimally serve our clients. Central to integrating these technologies is Energy Vault's proprietary software platform, highlighting our unique technology agnostic stance. We anticipate site mobilization and construction efforts on the PG&E project to begin in the fourth quarter this year and remain on schedule for project completion by mid-2024. Before handing it over to Young Case for a detailed walkthrough of our financial performance, I'd like to hit on a few highlights. Our revenue for the second quarter reflected continued construction progress and execution across our battery projects in the United States under a build, commission, and transfer model. As such, we recognize the revenue associated with that progress of $39.7 million, while continuing to pose gross margins of nearly 10% on pure battery project execution. Achievement of this gross margin underscores our commitment to profitability and our differentiated approach that helps to deliver attractive margins. We anticipate the gross margin on our VES project deployments will continue to be financially accretive as we pursue strategic investments and opportunities that enhance our offering and execution capabilities. Last quarter, we disclosed our investment in Core Power, a U.S. manufacturer of battery cells and modules to build supply continuity on a prioritized basis for the domestic U.S. content for Energy Vault's U.S. customers, supporting our short-duration battery and even hybrid energy storage solutions on a preferred economic basis. Since that time, CORE received a conditional commitment for an $850 million loan from the Department of Energy Loan Program Office to help finance the construction of CORE's advanced battery cell manufacturing facility in Buckeye, Arizona. This facility will be capable of producing an estimated six gigawatt hour of battery cell storage capacity annually. And as an early investor, we will benefit significantly from this access to domestically produced content, and take advantage of the IRA legislation that improve the economics for all stakeholders, including Core Power, our customers, and ourselves. This access to domestic content and supply has allowed us to sign a long-term partnership with Jupiter Power to supply 10 gigawatt hour of domestic U.S. content battery modules for their projects over the next two to five years. Project developers are looking for local supply to support U.S. manufacturing efforts but also it has to be competitive from a cost standpoint that allows for them to be competitive. And we feel very good that this investment will allow us to be positioned in the market to be the preferred partners for utilities, IPPs, and renewable developers in the United States. Regarding our guidance and given the progress we have made to date and the visibility on our projects and a high level of confidence in our ability to deliver the projects to our customers on time and on budget, We are thus reaffirming our full year financial guidance, including revenue, gross margins, and adjusted EBITDA. In summary, we're poised to grow and become a prominent player in the energy storage market with our diverse solutions. Our current foundation supports faster and more profitable growth in the market as our financial and operational performance shows. I'm excited about progressing and supporting the outstanding talent and team here at Energy Vault that in the end is what sets us apart. While we have made significant industry strides in the last 18 months in delivering our first revenue as a new public company, our best is yet to come as we enter the second half of 2023 and our largest revenue quarters and customer deliveries ahead of us. With that, now I'll hand it over to Yanket for a detailed financial update. Yanket? Thanks, Rob.