Energy Vault Holdings, Inc.

Good day and welcome to the Energy Vault second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Michael Beer, Chief Financial Officer for Energy Vault. Please go ahead.

Thank you. Hello and welcome to Energy Vault's second quarter 2024 financial results conference call. As a reminder, Energy Vault's second quarter earnings press release and presentation are available now on our investor website, and we'll be referring to the presentation during this call. A replay of this call will be available later today on the investor relations portion 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 that may differ materially from the actual future events or results due to a variety of factors. Please refer to our 10-Q filing for a 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 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 detail, including a reconciliation to comparable GAAP measures. Joining me on the call today is Robert Piconi, our Chairman and Chief Executive Officer. At this time, I'd like to hand the call over to Robert Piconi. Great. Thank you, Michael.

And I also want to officially welcome Michael Beer for the first quarterly earnings that he's taking over for our prior CFO. He joined us in April as we announced on our last earnings call. So welcome, Michael. Great to have you here. We're also taking this call from Lugano, Switzerland, from our international headquarters here where we conducted our board meetings last week and our management meetings here this week. During our inaugural investor and analyst day last quarter in May at the New York Stock Exchange, where we updated investors on our vision, strategy, and two-year financial guidance, we outlined a bold plan with the following three strategic tenets. First, to address the largest and most attractive growth regions for energy storage, very critically addressing them in the business model that is most cash-accretive, most profitable, and the lowest risk for investors. Just to emphasize on this first point as an example, how we address the storage market, for example, in China versus Australia versus the U.S., three of the largest markets in the world might be different considering the three factors I just mentioned, and allows us to choose from a licensed royalty model, a build and transfer model, or a build, own, and operate model. Secondly, we outlined a plan to deliver more predictable and recurring revenue streams. Obviously, especially important as a public company, as PurePlay integrators will continue to be subject to the EPC build schedules of customers that can move in three to six months increments pending permitting and other external factors that can expose us to lumpy quarters, as we are experiencing here this year, after the first two years of very strong growth. Our unique multi-technology and multi-business model approach to the market allows us some degrees of freedom to adapt our solution mix, of licensed royalty, bill transfer, and bill to operate to best optimize our future cash flow streams. Thirdly, offer the high growth and profitability potential within the energy storage segment. This really is about how we are optimizing our product mix and business model to drive the high unit economics in our sector. Whether from our technology agnostic fit for purpose approach to the solutions we develop under the umbrella of our AI-enabled EMS platform, or from the ability to utilize the most attractive commercial structures and business model, including project bonding capacity in excess of $1 billion, we have multiple levers at our disposal that we're using to deliver growth at and above the market growth margins and unit economics we've outlined. As we turn to our second quarter results, we demonstrated progress across all three dimensions of our strategy and in line with our latest 2024 guidance, and ramping revenue later in the year due to the timing on new project starts in the then large concurrent 2025 deployments. Firstly, relative to growth in the largest and most attractive regions, we announced newly booked deals, as noted in the press release, with two projects with ASIN in Australia, a large and important growth region with more coming, and uniquely as a region with the local industrial presence of investors like Korea Zinc and BHP, two of the largest mining companies in the world in their respective sectors. I'll be announcing another new regional expansion for our gravity technology in just a few minutes that has not been previously announced. Secondly, relative to more predictable and recurring revenue streams, we have strong execution progress on the two projects that we will own and operate. First, the largest green hydrogen storage project in the United States, in Calistoga, California, for Pacific Gas and Electric, California's largest public utility, and the CrossTrails battery project in Snyder, Texas, both of which we chose to maintain on our balance sheet, given the long-term IRR attractiveness of recurring high-margin revenue streams, which will smooth the top-line volatility over time. While these choices reduce revenue recognition this year in 2024, They will offer Energy Vault and investors additional high-margin contribution and revenue predictability going forward. As we're in the process of implementing project financing on these projects, we are expecting to return more than $40 million to the balance sheet in the Q4 of this year while increasing the IRRs on these projects in the process. These projects are expected to be online in Q3 2024 within this quarter. and Q2 2025, respectively, and projected to add $8 to $10 million in recurring EBITDA profit streams annually over the next 10-plus years. And thirdly, relative to growth and profitability, we reported strong unit economics at 27.8% growth margins despite the lower revenue due to the mix of the projects, improving adjusted EBITDA up 12% year-over-year, which was also positively impacted due to lower cash operating expense, which was reduced by 23% over the prior year due to proactive measures taken by the company in Q4 2023 and continued vigilance in cost containment, operating efficiency, and continuing to tune our business model for product and solution realizations. I want to give a little more color on some of the commercial highlights from our release, and then we'll turn it back to Michael, our CFO, to review the detailed financials and get to some questions. Regarding the overall sales funnel, we ended the quarter with a solid contribution of new commercial opportunities, aided significantly by the prior second half 2023 and early 2024 successful completion of large-scale battery storage projects at Nevada Energy just outside of Las Vegas. Wellhead in Southern California, Jupiter Power in Texas, and the recently announced NRQ2 expansion into the Australian market with the two projects with ASIN totaling 400 megawatt hour. In line with our growing, our global presence, we have also taken steps to deepen our leadership bench and our investment in our commercial teams, and thus very pleased to welcome Wes Fuller as our new global head of sales. Wes has built a successful career, joining Energy Vault most recently from Powen, where he delivered on large growth initiatives in North America, building upon prior leadership roles of increasing responsibility at Sun Folding, Schneider Electric, and Siemens. I know I speak on behalf of our leadership and those employees that have had initial exposure with Wes, but it has been a pleasure to get to know him better as he has ramped up here the last month, He clearly brings a significant track record of delivering results in large-scale, dynamic, and high-growth environments, but perhaps more importantly for us, a cultural fit and alignment with our values, how we collaborate, and a shared passion to accelerate the world's clean energy transition. Getting back to the numbers, in total, the company ended the quarter with a developed pipeline of $2.8 billion, of which over half is associated with projects being developed by either existing customers or or strategic partners and investors, which obviously gives us a lot of confidence on conversion of that funnel into contract bookings. This figure rose about $100 million from our investor and analyst day in early May. Meanwhile, our backlog of $264 million now reflects the projects with AITS in Australia, as well as new long-term service agreements at Nevada Energy, increasing roughly 17% since our analyst day. While we expect a substantial portion of the project-related work to be recorded over the next 18 months, as we have seen the actual percentage of completion accounting can create lumpiness from one quarter to the next. As I highlighted earlier with increased contribution from newly owned and operated assets and a higher mix of software sales and long-term service agreements, we expect to improve this visibility while reducing volatility over the medium to long-term the end result being a more profitable sales mix for the company. From a balance sheet and liquidity perspective, we remain in great shape, as Michael will cover more in detail, with over $110 million in cash and no debt, and as mentioned earlier, looking at attractive project financing structures for our own projects, which will add cash back for our balance sheet while improving IRRs on these projects. From speaking recently to many of our investors, they've appreciated our stewardship of their investment and our management of our cost structure and cash in what remains a very dynamic and ever-changing market environment, and thus avoiding any cost-convertible debt or other dilutive financing structures, and we will continue to do so. While we expect capital markets as well as energy storage trends will remain dynamic to the least, We remain highly encouraged by the structural and secular trends across the energy storage industry, particularly related to the massive uptick in pure power demand from generative AI and data centers, and thus downstream requirements for renewable energy storage and backup storage solutions. The demand now for economical 24-7 renewable solutions has been accelerated five to ten years, in my opinion, as the world cannot meet the current and upcoming power demand renewably. that demand for 24-7 renewables is here today, yet no economical solutions to implement exist. This not only represents a tremendous opportunity, but is really core to our mission and founding of the company. But it is also an imperative, really a moral imperative for our planet and a massive inflection point for renewables and storage As the world seeks to turn back to all forms of power generation, fossil, small modular reactor, et cetera, increasingly as these new chips heat up the data centers, these same data centers will be heating up the world at an accelerated rate. Enter, therefore, innovation in what Energy Vault and many companies like us are focusing on. It is our mission as a company and the passion of our people that will solve it through teamwork, innovation, courage, fortitude, and pure will and execution despite the obstacles thrown in front of us. As we look toward the balance of 2024 and 2025, we will continue to make progress on our core objectives, leveraging our unique technology and solutions-based approach across all durations and targeted geographies to create real and sustainable competitive advantage in an otherwise highly commoditized space in conventional batteries. As demand for long and ultra-long duration storage continues to grow, Energy Vault is and will continue to be uniquely positioned to capture a growing market share. I would like to finish to touch upon what we announced yesterday and a new announcement and regional expansion with our gravity energy storage that has not yet been previously announced. As some of you may have seen, we announced yesterday with site and concession owner Carbon Sulcis, a new 100-megawatt hybrid gravity and lithium-ion energy storage project on the island of Sardinia at the location of the largest former operating coal plant and mining site in Italy and one of the largest bi-subterraneous coal reserve sites in Europe. Beginning with a courageous vision of Francesco Lippi, CEO of Carbon Sulcis, to transform the coal site to a carbon-free technology hub, while preserving jobs for the local community, Energy Vault is entering now to accelerate its vision with a new hybrid energy storage system approach to address the unique topology, which includes 500-meter-depth mining shafts. This unique solution leverages Energy Vault's new modular pumped hydro gravity energy storage technology called the EV0. The zero, by the way, because we are returning to some of the original incarnations of our technology using water reservoirs. The first full commercial scale EB-0 units will be delivered to the site in Sardinia in the next 60 days. And then installation, testing, commissioning, and operation will commence and be completed in 2025. The gravity system will be complemented by a lithium-ion battery array with all power charging, discharging, asset management, and economic dispatch orchestrated by Energy Vault's VaultOS Energy Management Software Platform, or EMS. This first-of-a-kind hybrid system represents a unique solution to a very specific and unique need to capture energy storage leveraging existing infrastructure, in this case mine shafts, and gravity, which is the basis of 90% of all energy storage in the form of some hydroelectric dams today. And finally, before I turn it back to Michael, it gives me great pleasure to announce that we are again expanding our regional presence with our first EVX gravity energy storage system in Brazil, with Brazil's state-owned oil and gas conglomerate Petrobras. Petrobras is committed to a clean energy transition in Brazil, and we are happy to support their efforts with our gravity energy storage systems to be co-located at one of their refining sites. We will be sharing more details on this exciting relationship and regional expansion in the coming months. With that, I'll turn it back to Michael Beer, who will show more financial details for the quarter. Michael?