GWH ESS Tech Inc

Finalizing Funding Agreement for up to $50 Million with Export-Import Bank of the United States

Began Production of Second Energy Center for Portland General Electric

Energy Warehouse Becomes First Operational Long-Duration Energy Storage at an Airport

Exited Q2 with Cash and Short-Term Investments over $74 Million; Expected to Carry ESS Well Into 2025

ESS Tech, Inc. (“ESS,” “ESS, Inc.” or the “Company”) (NYSE: GWH), a leading manufacturer of long-duration energy storage systems (LDES) for commercial and utility-scale applications, today announced financial results for its second quarter ended June 30, 2024.

“ESS made significant headway in the business in the second quarter and we continue to be encouraged by the growing imperative for Long Duration Energy Storage to be coupled to renewables. Importantly, outside funding is expected to play an important role for not only our operational expansion, but also our partnership with Sacramento Municipal Utility District, or SMUD. First, we are close to finalizing an agreement for up to $50 million in funding from the Export-Import Bank of the United States to expand our manufacturing capacity and expect to add about $10 million to our balance sheet in the second half alone for previously installed capacity. Additionally, our long duration storage project with SMUD has been granted $10 million by the California Energy Commission to further our collaboration. Our progress with our projects across numerous customers in the second quarter also reflects the continued importance of our relationships. In Q2, our Energy Warehouses started charging ground power units at Schiphol airport in Amsterdam, were integrated into Burbank Water and Power’s EcoCampus and connected to a 265 kW solar array, and was selected by Indian Energy, the California Energy Commission and the Department of Defense for testing to deliver energy security to remote communities like tribal nations and military bases,” said Eric Dresselhuys, CEO of ESS. “Although revenue in the second quarter was lower than expected due to the timing of EW shipments due to delays at a key partner, we expect this to resolve itself in the coming weeks, allowing us to ship our products and recover revenue in the third quarter.”

“On the Energy Center front, we remain on schedule with Portland General Electric and continue to expect to ramp EC shipments in the back half of the year. With the first EC currently cycling, we began production of our second unit in July and expect these to be connected to the grid by late 2024. In parallel, we have positioned our operations to begin building the first ECs for commercial deliveries to Tampa Electric and SMUD later this month. Our plan to transition to volume manufacturing and shipments remains solidly on track and we continue to expect to achieve our goal of growing our revenue by three to four times in 2024.”

Recent Business Highlights

• An Energy Warehouse™ (EW) system at Schiphol Airport in Amsterdam, the second largest airport in mainland Europe, became the first iron flow battery to be operational at an airport. This EW will be used to help advance Schiphol Airport’s sustainability strategy and has now been tested on Schiphol’s AB platform. The EW system has begun to be used to recharge Electric Ground Power Units (E-GPU), which are intended to replace the diesel ground power units currently used to supply electrical power to aircraft when parked at airport gates.
• The California Energy Commission, or CEC, awarded a $10 million grant to a long-duration battery storage project in partnership with ESS and Sacramento Municipal Utility District, or SMUD. The CEC funding will be used to demonstrate a 3.6 MW, 8-hour iron flow battery project, with SMUD committing an additional $19.5 million to cover additional other costs for the LDES project.
• We are finalizing the details to close agreement with the Export-Import Bank of the United States, or EXIM, for up to $50 million in funding provided by the Make More in America Initiative. This funding is long-term, low interest, and non-dilutive capital to finance expanding manufacturing capacity, enabling ESS to immediately add to our cash position, borrowing about $10 million on a lookback basis for previously installed capacity. Later this year, the funding is planned to be used for the addition of our second manufacturing line, which is expected to triple our production capacity.
• Indian Energy, a Native American-owned microgrid developer and integrator, the CEC, and the Department of Defense together selected ESS’ iron flow batteries to demonstrate the diverse capabilities of LDES technologies for utility-scale, resilient microgrids and their ability to deliver energy security to remote communities like tribal nations and military bases. Over the coming months, our project partners are expecting to demonstrate optimal use cases in the California energy market, including solar peak shifting and grid ancillary services, after which we expect our EW to be placed into commercial operation.
• We began building our second EC in July, which we plan to deploy beside the first EC, both for Portland General Electric. We expect to start building and shipping our first commercial ECs in the second half of 2024 for delivery to Tampa Electric and the Sacramento Municipal Utility District, or SMUD.
• We filed our definitive proxy statement with the SEC on August 8, 2024 to execute a reverse split, following a listing notice from the NYSE received in March. We will hold our special shareholders meetings on August 23rd and, once having effected the split in late August, we expect to be in compliance with the listing requirements and will continue our operations as a publicly-listed company.

Conference Call Details

ESS will hold a conference call on Wednesday, August 14, 2024 at 5:00 p.m. EDT to discuss financial results for its second quarter 2024 ended June 30, 2024. Interested parties may join the conference call beginning at 5:00 p.m. EDT on Wednesday, August 14, 2024 via telephone by calling (833) 470-1428 in the U.S., or for international callers, by calling +1 (404) 975-4839 and entering conference ID 366142. A telephone replay will be available until August 21, 2024, by dialing (866) 813-9403 in the U.S., or for international callers, +1 (929) 458-6194 with conference ID 167636. A live webcast of the conference call will be available on ESS’ Investor Relations website at http://investors.essinc.com/.

A replay of the call will be available via the web at http://investors.essinc.com/.

About ESS, Inc.

At ESS (NYSE: GWH), our mission is to accelerate global decarbonization by providing safe, sustainable, long-duration energy storage that powers people, communities and businesses with clean, renewable energy anytime and anywhere it’s needed. As more renewable energy is added to the grid, long-duration energy storage is essential to providing the reliability and resiliency we need when the sun is not shining and the wind is not blowing.

Our technology uses earth-abundant iron, salt and water to deliver environmentally safe solutions capable of providing up to 12 hours of flexible energy capacity for commercial and utility-scale energy storage applications. Established in 2011, ESS, Inc. enables project developers, independent power producers, utilities and other large energy users to deploy reliable, sustainable long-duration energy storage solutions. For more information visit www.essinc.com.

Use of Non-GAAP Financial Measures

In this press release and the accompanying earnings call, the Company includes Non-GAAP Operating Expenses and Adjusted EBITDA, which are non-GAAP performance measures that the Company uses to supplement its results presented in accordance with U.S. GAAP. As required by the rules of the Securities and Exchange Commission (“SEC”), the Company has provided herein a reconciliation of the non-GAAP financial measures contained in this press release and the accompanying earnings call to the most directly comparable measures under GAAP. The Company’s management believes Non-GAAP Operating Expenses and Adjusted EBITDA are useful in evaluating its operating performance and are similar measures reported by publicly-listed U.S. companies, and regularly used by securities analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. By providing these non-GAAP measures, the Company’s management intends to provide investors with a meaningful, consistent comparison of the Company’s profitability for the periods presented. Adjusted EBITDA is not intended to be a substitute for net income/loss or any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. Further, Non-GAAP Operating Expenses are not intended to be a substitute for GAAP Operating Expenses or any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

The Company defines and calculates Non-GAAP Operating Expenses as GAAP Operating Expenses adjusted for stock-based compensation and other special items determined by management as they are not indicative of business operations. The Company defines and calculates Adjusted EBITDA as net loss before interest, other non-operating expense or income, (benefit) provision for income taxes, and depreciation and amortization, and further adjusted for stock-based compensation and other special items determined by management, including, but not limited to, fair value adjustments for certain financial liabilities associated with debt and equity transactions as they are not indicative of business operations.

Forward-Looking Statements

This communication contains certain forward-looking statements, including statements regarding ESS and its management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. The words “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intends”, “may”, “might”, “plan”, “possible”, “potential”, “predict”, “project”, “should”, “will” and “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Examples of forward-looking statements include, among others, statements regarding the Company’s manufacturing plans, the Company’s order and sales pipeline, the Company’s ability to execute on orders, the Company’s ability to effectively manage costs, the Company’s partnerships with third parties such as Amsterdam Airport Schiphol, Burbank Water and Power, and the Sacramento Municipal Utility District and the finalization of the EXIM loan. These forward-looking statements are based on ESS’ current expectations and beliefs concerning future developments and their potential effects on ESS. Many factors could cause actual future events to differ materially from the forward-looking statements in this communication. There can be no assurance that the future developments affecting ESS will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond ESS control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, which include, but are not limited to, continuing supply chain issues; delays, disruptions, or quality control problems in the Company’s manufacturing operations; the Company’s ability to hire, train and retain an adequate number of manufacturing employees; issues related to the shipment and installation of the Company’s products; issues related to customer acceptance of the Company’s products; issues related to the Company’s partnerships with third parties; inflationary pressures; risk of loss of government funding for customer projects; and the Company’s need to achieve significant business growth to achieve sustained, long-term profitability. Except as required by law, ESS is not undertaking any obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

ESS Tech, Inc.

Condensed Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenue:

 

 

 

 

 

 

 

 

Revenue

 

$

342

 

 

$

2,826

 

 

$

2,556

 

 

$

3,197

 

Revenue - related parties

 

 

6

 

 

 

1

 

 

 

530

 

 

$

2

 

Total revenue

 

 

348

 

 

 

2,827

 

 

 

3,086

 

 

$

3,199

 

Cost of revenue

 

 

11,748

 

 

 

—

 

 

 

22,874

 

 

 

—

 

Gross profit (loss)

 

 

(11,400

)

 

 

2,827

 

 

 

(19,788

)

 

 

3,199

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

2,836

 

 

 

19,450

 

 

 

6,382

 

 

 

37,181

 

Sales and marketing

 

 

2,711

 

 

 

1,739

 

 

 

4,745

 

 

 

3,592

 

General and administrative

 

 

6,178

 

 

 

5,845

 

 

 

11,704

 

 

 

11,132

 

Total operating expenses

 

 

11,725

 

 

 

27,034

 

 

 

22,831

 

 

 

51,905

 

Loss from operations

 

 

(23,125

)

 

 

(24,207

)

 

 

(42,619

)

 

 

(48,706

)

Other income (expenses), net:

 

 

 

 

 

 

 

 

Interest income, net

 

 

1,052

 

 

 

1,330

 

 

 

2,291

 

 

 

2,582

 

Gain (loss) on revaluation of common stock warrant liabilities

 

 

115

 

 

 

(115

)

 

 

115

 

 

 

573

 

Other income (expense), net

 

 

18

 

 

 

63

 

 

 

(37

)

 

 

721

 

Total other income, net

 

 

1,185

 

 

 

1,278

 

 

 

2,369

 

 

 

3,876

 

Net loss and comprehensive loss to common stockholders

 

$

(21,940

)

 

$

(22,929

)

 

$

(40,250

)

 

$

(44,830

)

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(0.12

)

 

$

(0.15

)

 

$

(0.23

)

 

$

(0.29

)

 

 

 

 

 

 

 

 

 

Weighted-average shares used in per share calculation - basic and diluted

 

 

175,758,584

 

 

 

154,900,330

 

 

 

175,136,561

 

 

 

154,514,265

 

ESS Tech, Inc.

Condensed Balance Sheets

(unaudited)

(in thousands, except share data)

 

June 30, 2024

 

December 31, 2023

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

36,744

 

 

$

20,165

 

Restricted cash, current

 

906

 

 

 

1,373

 

Accounts receivable, net

 

981

 

 

 

1,990

 

Short-term investments

 

37,695

 

 

 

87,899

 

Inventory

 

4,425

 

 

 

3,366

 

Prepaid expenses and other current assets

 

3,908

 

 

 

3,305

 

Total current assets

 

84,659

 

 

 

118,098

 

Property and equipment, net

 

17,758

 

 

 

16,266

 

Intangible assets, net

 

4,790

 

 

 

4,923

 

Operating lease right-of-use assets

 

2,195

 

 

 

2,167

 

Restricted cash, non-current

 

946

 

 

 

945

 

Other non-current assets

 

785

 

 

 

833

 

Total assets

$

111,133

 

 

$

143,232

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

5,833

 

 

$

2,755

 

Accrued and other current liabilities

 

9,669

 

 

 

10,755

 

Accrued product warranties

 

3,240

 

 

 

2,129

 

Operating lease liabilities, current

 

1,572

 

 

 

1,581

 

Deferred revenue, current

 

5,689

 

 

 

2,546

 

Total current liabilities

 

26,003

 

 

 

19,766

 

Operating lease liabilities, non-current

 

884

 

 

 

957

 

Deferred revenue, non-current

 

—

 

 

 

3,835

 

Deferred revenue, non-current - related parties

 

14,400

 

 

 

14,400

 

Common stock warrant liabilities

 

802

 

 

 

917

 

Other non-current liabilities

 

—

 

 

 

—

 

Total liabilities

 

42,089

 

 

 

39,875

 

Stockholders' equity:

 

 

 

Preferred stock ($0.0001 par value; 200,000,000 shares authorized, none issued and outstanding as of June 30, 2024 and December 31, 2023)

 

—

 

 

 

—

 

Common stock ($0.0001 par value; 2,000,000,000 shares authorized, 176,822,039 and 174,211,911 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively)

 

18

 

 

 

18

 

Additional paid-in capital

 

805,433

 

 

 

799,496

 

Accumulated deficit

 

(736,407

)

 

 

(696,157

)

Total stockholders' equity

 

69,044

 

 

 

103,357

 

Total liabilities and stockholders' equity

$

111,133

 

 

$

143,232

 

ESS Tech, Inc.

Condensed Statements of Cash Flows

(unaudited)

(in thousands)

 

Six Months Ended June 30,

 

2024

 

2023

Cash flows from operating activities:

 

 

 

Net loss

$ (40,250)

 

$ (44,830)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

2,521

 

2,105

Non-cash interest income

(1,573)

 

(1,487)

Non-cash lease expense

658

 

604

Stock-based compensation expense

5,880

 

4,784

Inventory write-down and losses on noncancellable purchase commitments

1,530

 

—

Change in fair value of common stock warrant liabilities

(115)

 

(573)

Other non-cash (income) expenses, net

25

 

(33)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

1,526

 

4,653

Inventory

(2,875)

 

—

Prepaid expenses and other current assets

(555)

 

2,561

Accounts payable

1,925

 

(664)

Accrued and other current liabilities

(1,962)

 

(4,234)

Accrued product warranties

1,111

 

3,460

Deferred revenue

(1,209)

 

(3,189)

Operating lease liabilities

(768)

 

(689)

Net cash used in operating activities

(34,131)

 

(37,532)

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

(1,565)

 

(3,440)

Maturities and purchases of short-term investments, net

51,752

 

37,363

Net cash provided by investing activities

50,187

 

33,923

 

 

 

 

Cash flows from financing activities:

 

 

 

Payments on notes payable

—

 

(800)

Proceeds from stock options exercised

21

 

122

Repurchase of shares from employees for income tax withholding purposes

(178)

 

(82)

Proceeds from contributions to Employee Stock Purchase Plan

214

 

332

Other, net

—

 

(14)

Net cash provided by (used in) financing activities

57

 

(442)

 

 

 

 

Net change in cash, cash equivalents and restricted cash

16,113

 

(4,051)

Cash, cash equivalents and restricted cash, beginning of period

22,483

 

36,655

Cash, cash equivalents and restricted cash, end of period

$ 38,596

 

$ 32,604

ESS Tech, Inc.

Condensed Statements of Cash Flows (continued)

(unaudited)

(in thousands)

 

Six Months Ended June 30,

 

 

2024

 

 

2023

Supplemental disclosures of cash flow information:

 

 

 

Cash paid for operating leases included in cash used in operating activities

$

874

 

$

827

Non-cash investing and financing transactions:

 

 

 

Purchase of property and equipment included in accounts payable and accrued and other current liabilities

 

1,970

 

 

931

Transfers between inventory and property and equipment, net

 

1,051

 

 

—

 

 

 

 

Cash and cash equivalents

$

36,744

 

$

30,287

Restricted cash, current

 

906

 

 

1,373

Restricted cash, non-current

 

946

 

 

944

Total cash, cash equivalents and restricted cash shown in the condensed statements of cash flows

$

38,596

 

$

32,604

ESS Tech, Inc.

Reconciliation of GAAP to Non-GAAP Operating Expenses

(unaudited)

(in thousands)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Research and development

 

$

2,836

 

 

$

19,450

 

 

$

6,382

 

 

$

37,181

 

Less: stock-based compensation

 

 

(908

)

 

 

(1,130

)

 

 

(1,309

)

 

 

(2,123

)

Non-GAAP research and development

 

$

1,928

 

 

$

18,320

 

 

$

5,073

 

 

$

35,058

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$

2,711

 

 

 

1,739

 

 

$

4,745

 

 

$

3,592

 

Less: stock-based compensation

 

 

(163

)

 

 

(165

)

 

 

(258

)

 

 

(315

)

Non-GAAP sales and marketing

 

$

2,548

 

 

$

1,574

 

 

$

4,487

 

 

$

3,277

 

 

 

 

 

 

 

 

 

 

General and administrative

 

$

6,178

 

 

$

5,845

 

 

$

11,704

 

 

$

11,132

 

Less: stock-based compensation

 

 

(1,540

)

 

 

(1,430

)

 

 

(2,974

)

 

 

(2,346

)

Non-GAAP general and administrative

 

$

4,638

 

 

$

4,415

 

 

$

8,730

 

 

$

8,786

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

$

11,725

 

 

$

27,034

 

 

$

22,831

 

 

$

51,905

 

Less: stock-based compensation

 

 

(2,611

)

 

 

(2,725

)

 

 

(4,541

)

 

 

(4,784

)

Non-GAAP total operating expenses

 

$

9,114

 

 

$

24,309

 

 

$

18,290

 

 

$

47,121

 

ESS Tech, Inc.

Reconciliation of GAAP Net Loss to Adjusted EBITDA

(unaudited)

(in thousands)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net loss

 

$

(21,940

)

 

$

(22,929

)

 

$

(40,250

)

 

$

(44,830

)

Interest income, net

 

 

(1,052

)

 

 

(1,330

)

 

 

(2,291

)

 

 

(2,582

)

Stock-based compensation

 

 

3,026

 

 

 

2,725

 

 

 

5,880

 

 

 

4,784

 

Depreciation and amortization

 

 

1,302

 

 

 

1,028

 

 

 

2,521

 

 

 

2,105

 

Gain (loss) on revaluation of common stock warrant liabilities

 

 

(115

)

 

 

115

 

 

 

(115

)

 

 

(573

)

Other income (expense), net

 

 

(18

)

 

 

(63

)

 

 

37

 

 

 

(721

)

Adjusted EBITDA

 

$

(18,797

)

 

$

(20,454

)

 

$

(34,218

)

 

$

(41,817

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240814379924/en/

Investors: Erik Bylin investors@essinc.com

Media: Morgan Pitts 503.568.0755 Morgan.Pitts@essinc.com