Energy Vault Holdings, Inc.

Greetings, and welcome to Energy Vault's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone wants to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bernie Coulson, Vice President of Investor Relations. Please go ahead.

Thank you. Hello and welcome to Energy Vault's fourth quarter and full year 2023 financial results conference call. As a reminder, Energy Vault's fourth quarter earnings press release and presentation is available now 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 Energy Vault's earnings release and this call contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only estimates and may differ materially from the actual future events or results due to a variety of factors. We caution everyone to be guided in their analysis of Energy Vault by referring to our 10-K filing for a list of factors that may 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 Harbor Disclaimer and non-GAAP financial measures presented in our earnings release for more details, including a reconciliation to comparable GAAP measures. Joining me on the call today is Robert Picone, our Chairman and Chief Executive Officer. and Jan Kees van Galen, our Chief Financial Officer. At this time, I'd like to hand the call over to Robert Bocconi.

Great. Thank you, Bernie. And I'd like to welcome everyone to our fourth quarter and full year 2023 earnings call. We're announcing results on our second year now as a public company, which happens to be also our second year of revenue. As you tend to do sometimes, it can be helpful to step back, zoom out, if you will, and Look at how we progressed these past two years as I did after our first year. We've grown this company as a public company globally in unprecedented ways across multiple continents, multiple technologies, while serving different customer segments, public utilities, independent power players, and large industrial energy users. The result has been the fastest growing company in energy storage in only our first two years. We continue to monetize our long-duration gravity technology via regional license and royalty agreements that will pay long-term dividends and royalties and cap the tremendous second half of 2023, executing multiple battery energy storage projects across the U.S. market with a newly developed energy management software platform that is winning rave reviews from customers and has been a key differentiator in our rapid commissioning timeframes and ability to quickly get through commissioning and site energization regardless of the underlying hardware. I think finally and as a testament to our strategy of solving customer problems as an energy storage solutions provider, we began construction on a first of its kind green hydrogen hybrid energy storage system to provide multi-day storage to the city of Calistoga, California for Pacific Gas and Electric, California's largest utility. Energy Vault uniquely will own this system under a tolling agreement to PG&E, as we also presented the only fully sustainable solution to replace their prior diesel generation systems historically used to secure continuous power. And it will be operational in the mid part of this year. So there's some of the key highlights. Very proud of our progress, our delivery in our first two years. and never been more excited about what the future holds as I am now as we continue to push boundaries and innovation while fortifying strong customer relationships that will be the basis of our future. Clearly, we continue to operate in our sector in a very volatile capital market, and despite that, the team has remained focused on the most important investor priorities, and I would say there are three of those. First, executing for our customers and keeping the customer loyalty that are really the key to our future and really the foundation of our house that we're building here after getting through two years. Without those customers and without those future revenue streams and with those customers now uniquely as reference points for future deals and future customers, we would not have a bright future. I feel very good about that. Second, profitable unit economics as we grow. You can imagine as a new company when you're approaching the likes of some of the largest public utilities and some of the most prominent independent power producers, you don't necessarily have the highest leverage in the contract negotiation. Despite us having, I think, one of the most experienced teams in the industry, which is what led some of these largest customers to have the confidence and faith in us to deliver for them on very critical projects, we negotiated, they put their faith in us, and we've delivered. quarter over quarter with profitable unit economics. And finally, and I think this is definitely not least from an investor perspective, we have protected our balance sheet and liquidity as a company to allow us to control our destiny, to invest in growth, and eliminate any dilutive types of financing to shareholders. I think this, and as you've seen, if our results, if you happen to read through them, which I'll highlight them here in just a minute, this has been an important aspect, in particular in Q4, where we took some proactive actions as it is clear the market has spoken on the desire for even new young companies in a very high growth and necessary market for the future of the planet must get to cash flow positives. With that, I want to begin by covering some of the highlights from our release with some more color. And then we'll turn it over to Yann Case, our CFO, to review detailed financials and get to questions. Off the top, our revenue finished in the range that we'd been reaffirming all year, $341.5 million, which is up over 130% year-over-year and 18% quarter-over-quarter. Within our annual range, due to some shifts of revenue at the end of Q4 that will take place in Q1 and in 2024, it's toward the lower end of that range. We ended the year, however, with an increased cash position of $146 million and with no debt, which is above our prior guidance of $132 million from Q3 2023 earnings and projections. This is pretty noteworthy, as we have kept and funded projects in California, for example, the Calistoga project for PG&E, and Texas on our balance sheet so we can participate in these projects in the longer term predictable and less lumpy cash flows and revenue streams from these tolling agreements. Yet we were still able to grow cash quarter-over-quarter as we began to turn some of our first projects in the second half of the year to substantial completion and final completion. Very importantly, we also reduced our quarterly cash operating expense run rate by 25 to 30 percent through actions taken in Q4 2023. This should enable a 2024 reduced quarterly cash OPEX of a range of 13 to 15 million. We expect these actions to help us accelerate our shift to cash flow positive as we exit 2024 and for full year 2025 results, which we'll be sharing more about during our announced investor day, which I'll be talking about shortly. For the year on gross margin, we delivered a positive gross margin of 5.1%. while reflecting a portion of that a lower than expected Q4 gross margin due only to timing of revenue and associated gross profit recognition that shifted from Q4 into Q1 in 2024 for gravity license and also some battery projects. As I will discuss, gross margins will improve significantly in the first quarter of 2024 benefiting from this shift from Q4 but also due to the mix of revenue with gravity and battery project timing. While this did impact QFAR for both revenue and final EBITDA and EPS, this represents only a timing shift, which will be recognized under U.S. GAAP accounting in 2024. And finally, our commercial pipeline continues to expand with annual year-over-year growth of 24.5 gigawatt hours to a total of 52 gigawatt hours, or almost 90% growth. It also expanded sequentially quarter over quarter by 5.8 gigawatt hours, up 13%. This shows continued market growth, continued market activity, also with significantly larger projects, two of which we are announcing as new project awards in the U.S. for gravity and a large 2.5 gigawatt hour long-duration battery project representing an additional continental expansion with a large global IPP. While these larger project awards have large impacts when forecasting revenue recognition and can create more lumpy quarters and annual guidance, they are both quite transformational in size, scope, and technology adoption, and both first of a kind because of those attributes. As always, we are focused on converting this growing commercial funnel into contracts that further bolster our revenue and backlog and we remain committed to continue our track record of building profitable growth and unit economics with all new projects we choose to take on. We want to work on the velocity through our funnel. We post every quarter our four stages of our more near-term sales funnel that starts from submitted proposals, goes to shortlisted, goes to awarded projects, and then to final bookings. I encourage you to keep an eye on that and take a look at our latest investor website with that update with the numbers that I just reviewed. As you all know from our announced and executed projects so far, we focus on larger and meaningful projects with strong customers that have a funnel of projects where we are developing deep partnerships over time. I realize for many of you in our investor base, Energy Vault is quite a unique animal relative to any other pure play energy storage company, given our unique portfolio of short long, and even ultra long duration storage solutions. But I believe this has also enabled us to be one of the most customer-centric energy storage customers, listening to our customers and solving their problems with a broad portfolio of technology, innovation, and solutions that is unmatched in the market. Looking forward, as we are just a few weeks away from our Q1 2024 finish, We expect revenue to be in line with our prior Q1 2023, given normal seasonality of revenue recognition and project starts, with potential for upside from items that were expected in Q4 2023. We also expect stronger double-digit gross margins in Q1, again, given the shift of revenue and gross margin recognition from the prior Q4 2023. I think very importantly, as we go to investor priorities, we expect to exit Q1 2024 with an unrestricted cash balance in a range of $125 to $150 million. Additionally, we've reduced any remaining restricted cash on the balance sheet to less than $1 million and remain 100% debt-free. Our performance here on cash is a tribute to our focus and tight management of our business as our growth and our cash balance at the end of the year shows. and we project to keep cash levels maintained at these levels without the need for debt or any dilutive equity transactions going forward. As we continue to look at owned projects on our balance sheet, providing predictable longer-term revenue streams, we may evaluate project financing alternatives if they're attractive. This aspect of cash management, managing our operating expense, our culture tied to innovation, and focus on customers is all ingrained in the employees of this company, and as demonstrated by the proactive actions we took in Q4 to reduce our quarterly cash optics rate by about 30% as we entered into 2024. We took these actions to continue to provide strong balance sheet flexibility for growth while accelerating our move to operating cash flow positive, which we have guided for our finish in Q4 this year and for the full year of 2025. We understand the nature of the lumpiness in our current business model and are also taking actions to adapt our product mix and business to reduce this volatility over time. We will be sharing much more detail in this regard in May formally at our first Investor Analyst Day on May 8th. While we are discussing forecasts, I want to mention two projects that were awarded in Q4 that are both multi-gigawatt hour and transformational in technology and territory expansion. We are awarded in Q4 a two and a half gigawatt hour DC long duration battery energy storage project by a leading international IPP that also represents a territorial expansion. And we'll be sharing more details on this project at our investor day. We also announced a new development agreement with a large primary public utility in the state of Washington using our gravity energy storage technology to address another multi-gigawatt-hour storage need regionally in the Northwest. This is so exciting for us, as it represents the first public utility in the U.S. with an agreement of this size and scope for gravity, which complements the previously announced gravity collaboration project with Enel Green Power in Snyder, Texas, which is now an up and out of the ground. Most of you are aware that demand for long-duration storage remains more nascent at this stage, although Energy Vault continues to solidify its global leadership role here with various gravity and green hydrogen ultra-long-duration solutions and multi-day storage solutions that are now starting deployment in large scale across three of the largest energy storage markets in the world in the US, China, and Africa. Specific to our gravity business, Important to highlight our territory expansion to Southern Africa, as I just mentioned, across the 16 SADC member countries via a new license and royalty agreement that was executed in Q4. In China and Rudong, we achieved state grid interconnection as planned in December of Q4 2023 for the first 25 megawatt EVX gravity storage system and achieved in-bourse power operation. Also in China, There are now three additional gravity energy storage systems of 360 megawatt hour, bringing the total projects underway and announced to over 3.7 gigawatt hours. China continues to be an amazing bed of growth and growth and focus as state mandated for not only renewable generation projects, but also for the state mandated energy storage. We continue to be very excited about the work with China and their active development and expansion in the market locally. As also noted above, we have our first USA-based gravity project with a public utility with the announcement of the new development agreement in Washington and an application of our technology that's being uniquely applied to take advantage of existing topology to maximize efficiency at a reduced capex and thus providing strong economics without the need for any subsidies. We'll be very excited to share more on this project, given its scale, size, and application of a new technology. Moving from gravity to our battery businesses, we delivered and progressed final commissioning on our first three battery and storage systems, totaling almost one gigawatt hour. Specifically, with Wellhead Electric, as previously announced, and Nevada Energy, 440 megawatt hour were commissioned on schedule and in record timeframes. from site mobilization to system energization. Also, the project with Jupiter Power is expected to be fully commissioned in the coming weeks here prior to the first quarter close. Regarding our green hydrogen, microgrid, and ultra-long storage duration, we commence construction on the largest green hydrogen project and microgrid system in the U.S. with California's largest public utility, Pacific Gas and Electric. The project is supported by a 10 and a half year tolling agreement with commercial operation expected in mid 2024. This solidifies Energy Vault's global leadership role in green hydrogen technology for long duration energy storage and specific microgrids for multi-day storage. Important to note here that while owning this project, our balance sheet will impact near-term revenue recognition in favor of long-term and predictable revenue streams from the tolling agreement We believe this will also result in more predictable and less lumpy revenue streams with increased margins over time, which we believe is best for Energy Vault and our investors as we scale our business. Very excited to share progress now as we've ramped up new systems with our new software platform and energy management system, our proprietary VaultOS energy management software, showing its innovation right out of the gate, enabling efficient commissioning of our first projects that were turned over in the second half of 2023, and will begin contributing SAS-based recurring revenues in 2024. Albeit small at the start, and will always be a smaller percentage of the overall portfolio, but critical high margin part of the portfolio and our product mix, the software portfolio continues to introduce new capabilities, which now includes two additional products that we will be reviewing in more detail at the upcoming Investor Day, one being Vault Manager, for maximizing project return on investments via optimizing asset performance using enhanced performance analytics and predictive models to provide greater system reliability and visibility. And secondly, VaultBidder to provide competitive dispatch continuous revenue optimization via market participation serving the ISO and IPP markets as well as for our own projects that we manage and operate. Finally, I'd be remiss if I was not recognizing a great year around our project execution. This was an important prove-it year for us to execute on over 1.7 gigawatt hour of projects announced in our first year of revenue as and as a public company in 2022, in which we demonstrated that we can deliver on our promises and complete world-class energy storage facilities on time, on budget, and at performance levels at or above expectations of our very challenging customers. Although there are many to mention, one example. We built, commissioned, and energized the 440 megawatt hour system in Nevada Energy's Reed Gardner site, about an hour outside of Las Vegas, within four months of site mobilization, energizing the system on December 29th in order to meet the customer's requirement to be online prior to year end. I spent some time at the site with our team on site that was working with the local contractors, with some of our partners, and the tremendous work they did to do something that, as far as we know, has never been done before at this size, at this scale, and within this timeframe. These are the things that go unseen and unheard about these unprecedented turnaround times in project delivery and energization are the nights, weekends, holiday times dedicated by our Energy Vault teams to move heaven and earth to deliver for the customer. I want to recognize all of our employees that make this happen every day for our customers as our first projects demonstrated, none of which were without supply chain and supplier delivery issues that needed to be managed, solved, anticipated, and resolved. Just to our employees, I'm happy to be on this call today to stand upon your shoulders on this quarterly report to talk about these results. I do not take it lightly, as you know. It is a pleasure to be here and support you. and what you're doing every day. These customer satisfaction areas and testimonials are proving to be some of our best sales tools as we are well positioned now for the next level of success, both within these customers that we've executed for as well as new customers that observe our performance. We look forward to providing more detail on our Investor Day and Analyst Day that is scheduled for May 8th, 2024 in New York City. We've received a lot of feedback from the investor base about getting in front of you in more detail about our strategy, about the evolution of our portfolio, and also about a view into where we're going as a company in achieving the vision that we set out at the beginning. The events can include new product and customer announcements, portfolio updates, and financial guidance. It will include customers and partners that will be speaking, customers and partners that have experience with us in delivery, but also new technology and new partners that we're working with in expanding our growth across the globe. I look forward to seeing any of you that can attend at that session. I'd like to now turn it over to Yann Case, who will share some financial details for the quarter. Yann Case?