Energy Vault Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 8 speakers on the call.

Operator

Morning, and welcome to the Energy Vault Second Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Laurence Alexander.

Operator

Thank you. Please go ahead, sir.

Speaker 1

Thank you. Hello, and welcome to EnergyVolt's 2nd quarter 2023 earnings conference call. As a reminder, Energy Vault's 2nd 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 Entybold's earnings release and this call contain forward looking statements that are subject to risks and uncertainties.

Speaker 1

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 10 Q filing, 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 any forward looking statements, except as required by law. Please note that we'll 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.

Speaker 1

Joining me today on the call is Robert Bocconi, our Chairman and Chief Executive Officer And Yang Kees Van Garland, our Chief Financial Officer. At this time, I'd like to hand the call over to Robert Piccone.

Speaker 2

Great. Thank you, Lawrence. I'd like to welcome everyone to our Q2 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.

Speaker 2

Following the 2022 year, which saw 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. 2nd, 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. 3rd, continued growth in our commercial activities where our near term sales funnel continues to expand, Another 27% overall on a sequential quarter over quarter basis and with more global diversity and customer base In Southeast Asia, for example, South Africa and Australia, as well as the recent conversion of a 400 Megawatt hour project with Jupiter Power From the award category to the booking category in the U.

Speaker 2

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 $7,000,000,000 in opportunity in the last 6 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 2,000,000,000 and potential awards alone.

Speaker 2

4th, I'm happy to share continued expansion of our high margin and expanding IP Licensing As we executed our first territory license for some specific state 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.

Speaker 2

S. Market, where we have the benefit 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 Technology is 100% local U. S. Content in any event.

Speaker 2

We can maximize the various IRA incentives as a non lithium energy storage medium and long duration technology. 5th and very importantly regarding the financial results in Q2, We continue to deliver on the planned revenue ramp, specifically triple digit percentage growth in revenue sequentially from $11,700,000 to Approximately $40,000,000 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 rev rec 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 twenty twenty three, 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.

Speaker 2

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 9 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 twenty twenty three.

Speaker 2

In the end, this comes down to the talent, and dedication of the people at EnergyVault that are obsessed with delivering for our customers is 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. Al Dibmer, 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, Jan Kees As noted above, our commercial outlook continues to remain robust with our near term funnel growing by 27% during the quarter So about 48 gigawatt hours.

Speaker 2

Additionally, we grew bookings by $33,000,000 related to the signing of 400 Megawatt hour contract booking with Jupiter Power as we build backlog for 2024 2025. I'm also encouraged by continued geographical expansion and customer diversity with a recent award from Southeast Asian Sustainable Energy Company For 2 energy storage projects totaling 500 Megawatt Hour that we expect to be booked in the second half of twenty twenty three as part of a broader framework To purchase a minimum 2,700 megawatt hours of energy storage in total over the next 3 years alone. Moving into the latter half of this year, we intend to turn our growing commercial funnel into contracts that bolster our backlog for 2024 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.

Speaker 2

The proliferation of the energy storage industry and demand that was accelerated post IRA gives us flexibility in the And only high growth, high margin commercial opportunities. Turning to China, last week, we probably shared that Atlas Renewable In CNY, China's Haiyanneying began commissioning the world's first commercial EVX and located in Rudong, Jiaxing in Shanghai, the 25 Megawatt hour, 100 Megawatt hour GESS system next to a wind farm and national grid interconnection and 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% roundtrip 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 2 gigawatt hour of EVX to construct another 100 Megawatt hour gravity storage project in Hebei aiming to bolster carbon goals and support regional data centers.

Speaker 2

This partnership underscores EBX's potential, promising high margin returns for Energy Vault. We're eager to assist our partners in realizing more EBX initiatives in the future. Our commitment to global deployment of our gravity energy storage With the U. S.-based renewable developer for multiple named states, the license only portion of the contract will generate revenue of $33,000,000 Coupled with project royalty streams of 90% gross margin tied to all future project deployments within the name states. Importantly, this agreement allows for the developer deploy the technology through a new application of the current EVX technology that enables lower initial CapEx and demonstrate the flexibility of the technology to be adapted to various LAN topologies pending customer side availability.

Speaker 2

While we're talking about licensing and royalties, our model is central to commercialing 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 light and asset light 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 EBXGravity Energy Storage solution in Snyder, Texas, marking our first commercial demonstration here in North America.

Speaker 2

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 And software innovations focused on lowering both initial CapEx and thus levelized cost over time. We anticipate an uptick in opportunities to expand the EVX platform in North America. Our strategic partner and customer DG Fuels Recently welcomed 2 Japanese investors and a third securing $30,000,000 in equity. Given this financing and their DOE loan progress, DG Fuels announced that they plan to initiate construction of their $4,200,000,000 SAF facility in Louisiana in the first half of twenty twenty four.

Speaker 2

This follows recent public announcements of offtake agreements made by Air France, KLM, Royal Dutch Airlines and Delta Airlines, as well as another large energy trading partner that will be purchasing 100% of the production Of the Louisiana facility. We're enthusiastic about DG 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 and 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, Chart Industries and Plug Power.

Speaker 2

Chart is supplying an 80,000 gallon liquid hydrogen storage tank ensuring 48 hours of 5. While Plug provides 8 megawatt of fuel cells, making it one of the largest planned hydrogen fuel cell projects In the United States, in one of the earliest to COD is planned for Q2, 2024. We chose these partners for their unparalleled solutions allowing design flexibility to optimally serve our clients. Central to integrating these technology is EnergyVault's proprietary software platform, Highlighting our unique technology agnostic stance, we anticipate site mobilization and construction efforts on the PG and E project to begin in the Q4 Before handing it over to Janke for a detailed walk through of our financial performance, I'd like to hit on a few highlights. Our revenue for the Q2 reflected continued construction progress and execution across our battery project in United States under a build commission and transfer model.

Speaker 2

As such, we recognize the revenue associated with that progress of $39,700,000 while continuing to post 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 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.

Speaker 2

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 $850,000,000 loan from the Department of Energy Loan Program Office To help finance the construction of Core Power's advanced battery cell manufacturing facility in Buckeye, Arizona. This facility will be capable of producing an estimated 6 gigawatt hour battery cell storage capacity annually.

Speaker 2

And as an early investor, we will benefit significantly from this access to domestically produced content and take advantage of the IRA legislation It improved 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 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 high level 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.

Speaker 2

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 EnergyVault 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 twenty twenty three and our largest revenue quarters and customer deliveries ahead of us. With that, now I'll hand it over to Jan Kees for a detailed financial update. Jan Kees?

Speaker 3

Thanks, Rob. Good morning, everybody. For the Q2 of 2023, revenue was $39,700,000 Primarily reflecting revenue earned from the progress and execution of our battery projects. As we progress through the year, we will see a significant revenue inflection in the 3rd Q4 as we begin to recognize Revenue from the Jupiter Power and NV Energy Projects that are still scheduled for on time completion in the 3rd Q4 of the year. We achieved gross profit of $3,900,000 reflecting a gross margin of just under 10%, Driven by our differentiated approach to the battery energy storage market combined with a strong execution on our battery projects.

Speaker 3

Operating loss was $28,400,000 an improvement over the Q1 of 2023 of $32,900,000 Driven by continued focus on operating expenses and business costs. Adjusted EBITDA for the quarter Of negative $18,000,000 was a slight improvement quarter over quarter. The key non cash item that we added back was $10,100,000 of stock based compensation and the key non cash items that we deducted was $2,300,000 in interest income. We continue to anticipate adjusted EBITDA and operating expenses to stay within our guidance range As we remain acutely focused on managing costs. As of June 30, 2023, We had $165,000,000 in cash, cash equivalents and restricted cash, leaving us well positioned to continue our growth strategy and execute on our projects.

Speaker 3

As we mentioned before, the primary Use of cash will be the cash operating expenses of between $20,000,000 to $25,000,000 per quarter With any other fluctuations, mainly the result of working capital needs for equipment purchases for our battery storage projects, which will translate into revenue, gross margin and cash in future quarters. Lastly, today, we are reiterating our full year 2023 financial guidance. This includes revenue of $325,000,000 to $425,000,000 gross margins of 10% to 15% And adjusted EBITDA of negative $70,000,000 to negative $50,000,000 Our forecast is supported Via strong contracted backlog activity as well as our offering mix of energy storage projects and IP licensing agreements. We will continue to complement this with various consulting and construction services based on customer needs and demand. We will also maintain a disciplined approach to our operating expenses.

Speaker 3

With that, And I'll now turn the call back to Rob.

Speaker 2

Thank you, Jan Kees. Before getting to questions, I want to again thank the entire team want to continue to thank our investors and partners who continue to support our growth and mission of de carbonization. I'm happy of our continued progress on developing and deploying With that operator, we are now ready for questions.

Operator

Thank you, sir. Ladies and gentlemen, we will now be conducting a question and answer session. The first question we have

Speaker 2

Hi, Joe. How are you?

Speaker 4

Good morning.

Speaker 5

Just fine. Thank you. A couple of questions for me. First, I want to drill down a bit on this core power Relationship is the idea that you're going to buy sales from them and then work with Someone else in the contract side to make tax or are you going to make tax or is core going to make tax for you? I just want to make sure I understand The logistics of this arrangement.

Speaker 5

Thank you. And then I do have one other question.

Speaker 2

Okay. Sure, Joe. Yes, to be very clear, we are not Getting into the battery manufacturing business. So we are not doing any type of integration ourselves. We We're an early investor in Core and their first equity raise.

Speaker 2

And then you saw the announcement of their Success in getting conditional approval on their DOE loan and we are therefore both an early investor and a prioritized customer. So for supply continuity, so they would be providing to us the integrated battery modules Without any need for us to do any type of final system integration on our own, we also Because of the nature of our investor status with them, we also garner other financial benefits as a part of that early relationship.

Speaker 5

Okay. Thank you. But it's all right. That's helpful. Moving to the gravity Sai, you're continuing to make progress commissioning with Dong.

Speaker 5

So I have two questions. First, given The insights you've gleaned so far, do you have some sense as to what a target might be in terms of Costs, they cost per kilowatt hour as you start to put up additional systems. Is that a number you can share?

Speaker 2

We built the first system there completely locally in China. So it sourced everything from there locally, Joe. So we have a We do have indications on what the first system unit cost is going to be. In addition, They did not implement 100% of all of our cost reduction roadmap, for example, with the fixed frame solution that we have using Fiber reinforced concrete, for example, some of those things are going to be implemented first in the U. S.

Speaker 2

So we have Initial indications from local Chinese manufacturing and local Chinese construction costs there. And then we're going to have the implementation of For North America, the EBX system with our latest roadmap innovations. And I mean, essentially, with the first system and unit, we were building that out somewhere between $3.50 to $500 kilowatt hour basis. That's on a 4 hour system recall, which for our first unit, as you know in this business, you typically take a fairly significant drop between 30% to 50% off of the initial first system basis. We're also, Joe, expanding our supply chain team, Including not only China, but India and ensuring now in the U.

Speaker 2

S. That we're going to have access to 100% Local content for construction of the entire system here. So we're expecting to be as we look to move from 4 to 6 hour to 8 hour longer duration systems, that's obviously going to therefore lower the power component of that cost And some of the energy components of the cost will be lowered through the lower cost of the fixed frame that we're going to be implemented in Texas. Hopefully that's

Speaker 6

a range. Okay.

Speaker 4

And

Speaker 5

then the That's very helpful. Thank you. It is. And then just if we can have some sense In Texas, perhaps when you expect to break ground on that project and when just I know it's early days yet, what a Initial target might be in terms of when that system begins to operate?

Speaker 2

Sure. Yes. We broke ground actually last year. So we broke ground At the officially at the end of Q3 in September last year with pilings in the ground and have worked getting the foundation in place to the front end of this year. So we expect to have that system in the second half of twenty twenty four to be Essentially starting all of our commissioning activities.

Speaker 2

So I would say in about a year 12 to 15 months from now, we expect to be beginning commissioning activity On the system in Texas.

Speaker 5

Okay. Thank you very much.

Speaker 4

Okay. Thanks.

Operator

Thank you. The next question we have comes from Thomas Boyce from TD Cowen. Please go ahead.

Speaker 6

Thanks. Appreciate you taking the questions. Maybe first, obviously, nice to see the licensing agreement in the U. S. But Could you give us a bit more insight maybe to where these additional systems could be located?

Speaker 6

I know you said multi state, but I'm just trying to get a sense of is it West Coast, Northeast, How should we think about that?

Speaker 2

Yes. The first parts of this agreement for the states are will be in the western part of the United States. So And that's what I guess I'll share at this point. So it'll be Western U. S.

Speaker 6

Great. And then does that specifically domestically, does that kind of impact the way you think about your go to market strategy? Are you still looking to kind of build and sell projects longer term or is this one customer because of their Kind of novel application of the gravity storage technology, more of a one off?

Speaker 2

Yes, by the way, great question. So first of all, We absolutely will be building these directly ourselves, in particular in North America. For sure, this is a Specific application and architecture of the gravity energy storage technology that this specific developer Has been talking to many customers about developing and implementing. So we did a specific license agreement with them And essentially, we'll begin that and those implementations in the western part of the U. S.

Speaker 2

So it is not necessarily that all gravity will be licensed, but in some parts of the world as we've seen, for example, with China, we announced Egypt, Greece and Cyprus. And for some aspects of the technology, the license model fits really well because we're obviously not in the construction business ourselves. Obviously, we'll manage EPC relationships and manage the builds of the projects. And this is essentially a larger construction Projects with electronics integration, power integration and software, and actually tends Be a very logical frame for doing these types of license agreements and for investors, Tom, they're fantastic because we not only benefit from essentially 90 plus gross margin on the license portion alone, But then there's the follow on royalty streams, that as we publicly announced before, these are done at about 5 And again, those are screens that will be at 90% plus gross margins as well. And we're not taking Execution risk in that case, and I think from a business model perspective, it allows us to monetize Our technology and our IP, especially for certain applications or iterations or new architectures in a way that has us garner that profit And even have that a lot of that profit, a little more risk free, let's say, as others can focus on getting the technology

Speaker 6

Great. Yes. And if maybe if I could sneak one quick one in there as a follow-up. Is there any exclusivity in that licensing agreement based on application, probably not on geography? I just wanted to check.

Speaker 2

Yes, we're not commenting on the details of the agreement just yet and nor as you noticed there, we didn't name who the counterparty is, but We'll be giving some updates on that, I'd say, in the coming 1 to 2 quarters as that develops.

Speaker 6

Perfect. I'll jump back. Thank you.

Speaker 4

Thank

Operator

you. Thank you. The next question we have comes from Brian Dobson from Chardan Capital Markets. Please go ahead.

Speaker 7

Hi, thanks very much. So Congratulations on the new licensing and royalty agreement in the United States. I guess as you're looking out over the next Year or 2 in the U. S. Market, how do you see it developing in terms of long duration energy storage?

Speaker 7

And Would you characterize the DOE as a good partner in the development and promotion of that technology in terms of the programs it's devised to that end?

Speaker 2

Sure. Let me take the first one on how we see long duration developing. So we're as I noted in some of my Earnings comments, we are seeing with the IRA and with certain segments of the market, As we mentioned around sustainable aviation fuel, I think there are going to be factors and Accelerators to long duration here in the United States. I think green hydrogen and the production of green hydrogen where essentially you can utilize solar and Long duration storage to power electrolyzers and electrolysis, to make a green hydrogen in a cost effective way relative to the various incentives that are out there. So those types of things, we're seeing more inbound and more customer engagement And developer engagement around the application of long duration.

Speaker 2

You would have seen that one of our customers, DG Fuels announced not only their progress on financing in their DOE progress, but as well off taker agreements For a segment of the market that is tremendously underserved for sustainable aviation fuel. So I think those types of segments for industrial Applications or powering, 8 to 12 hours of need, whether that be overnight for 20 fourseven type of power needs or manufacturing. Those things are going to push along long duration as well as just more renewables on the grid. So we're already seeing sort of moves in some markets from 2 to 4 hour to 4 to 6 hour. So we're Beginning to see that, here in the United States.

Speaker 2

And I think while that I think overall, the long durations developed a little slower than what people have thought. I think we're beginning to see some encouraging signs For more projects in development. The second part of your question on the DOE, I definitely think that With the programs and the priorities that Jiggersha and the administration has about getting capital deployed It's definitely a help to the industry. I mean, I use the term, do you see them as a good partner? I mean, I absolutely see that There's a willingness and desire and even motivation to try to get the capital deployed for its intended purpose.

Speaker 2

And we're participating in various parts of those programs and all of that is going to be Not helpful to us. And we just saw from, as we mentioned, CorePower, they announced their conditional approval with the DOE moving along and that's for That's for $850,000,000 to build their facility in Arizona. So everything we're seeing tells us that there's a strong commitment there, Not only commitment, but funds are flowing and companies are progressing through that process.

Speaker 7

Yes, excellent. Thanks very much for that color.

Speaker 2

Thank you.

Operator

Thank you. The next question we have comes from Noel Parks from Tuohy Brothers. Please go ahead.

Speaker 4

Hi, good morning.

Speaker 2

Hey, Nino. How are you doing?

Speaker 4

Great. Thanks. Just a few things. As you look into the longer term of some of the projects that You have in queue or are working on negotiating. Just wondering if you could talk a little bit about the EPC vendor Piece of that, I just wonder as you look further out, Are there any issues as far as just availability, staffing availability, anything like that, that gives you any As you look out beyond for just the next couple of years in your planning?

Speaker 2

Zernal, it's a great question. What I'd say is initially as we entered and went into the second half of twenty twenty two and the first half of this year, One of the adjustments we had to make is to be a little more directly involved in some of the management of the project from a Construction perspective, and by that I mean, as far as EPC goes, we're handling the E, We're playing a very active role in the P or the procurement side because there's just a few major pieces of equipment between transformers and inverters. If it's short duration batteries, if it's the longer duration, it's the large motor. So we aren't talking about A massive amount of things to procure or things in high volume, okay? Because of that, it lends itself for us to be a little bit more actively involved with minimal cost To manage some of those vendor relationships and roadmaps on the procurement side, so we can get priority on what we need.

Speaker 2

And That engagement we've had in the P side of EPC has helped us execute and deliver well. That's why we, if you look at our Q4 last year, we did $100,000,000 quarter because we did very well on managing that execution side a little more hands on. So We played a little more active role in there, which I think is where your question is going than we had intended. Also on side in the sense of the larger EPC companies we're seeing are very busy and They have a lot on their plate and therefore, if you're looking at competitive pricing, we initially saw pricing that was above what we were planning and That was above what we were planning and expecting. And as a result of that, we chose to play a little more active role in Being more directly involved with some of the management of the construction contractors themselves, I'd say on the shorter duration solution, it's easy to do that because you don't need massive VPC companies To build those projects out, you can use a smaller localized construction companies and we found that to be a good way To get competitive solutions to the table, having multiple local companies that either the customer has familiar with or we would have And one of the cases actually one of them we were able to reuse on a second project already, that's just about to get started.

Speaker 2

So I'd say to net all that out, we're managing and prioritizing our resource in order to ensure we have Not only the most competitive solutions, but as well as priority from the local players on schedule and the ability For us to essentially manage the whole equipment side of that in a way that can meet our customer commitments. And I'd say, If you look at our results and what we've guided here even for the second half of the year, we've got some 2 massive quarters coming and we've got 2 Very large, triple digit, 1,000,000 quarters. So this we've been very careful about the selection of our partners working with our customers and expect to execute well.

Speaker 4

Great. Thanks a lot. And that was Touching on really what I was wondering about because I just heard anecdotally, a number of large projects by companies that Sort of that stage of early commerciality, it just started some anecdotes of sort of the EPC selection Out there for them not being as robust as they had expected, plenty of bids from competitors. But when it came down to the detail And in particular, the staffing, finding that while we're really down to essentially only one candidate that worked. And So that kind of was behind the question.

Speaker 2

Yes. I'll make just one comment on that, if I can. You're right on. We had that experience A year ago, as we were we started thinking about things on a global basis and talking to some larger And it's between getting priority and pricing that just wasn't going to work. And anytime you're Implementing new technology is a smaller company.

Speaker 2

The bigger ones don't want to take risk, number 1, and it does limit your options as a company. That's one of the reasons we Funded up heavily in our Series B, with the commitment we had from SoftBank and then A large Series C, so the reason we did that is to ensure we were going to have the capital to do some of these things ourselves Given, it's a tough market when you're a young company and trying to get the attention of some of the larger folks. I think Right now, we're in a little different position. I'd say we executed well our 1st year and are executing this year. And I think, we're actually seeing Some players come and work with us that want to learn how we're innovating, for example, in the civil and structural engineering and are willing to do that At their own cost.

Speaker 2

At their own cost. At their own cost? Yes. So which is a reflection, I think of what we're doing In and around automation, constructability, material science and the very advanced structural engineering that is not being done in the world around in a general way and others really want to learn about that and are willing to work with us in that regard. And that's definitely going to economically help us out.

Speaker 4

Terrific. And if I could just touch on one more thing. You did mention That the future shows Energy Vault solving a multitude of customer problems. And I was wondering, Is there a distinction between your utility customers looking, for example, to integrate with Renewables at the large scale and maybe industrial customers or others that are maybe looking At your storage solutions more as you mentioned data centers earlier in the call, more as like a micro grid type application where it's not so much about the integration, it's about sort of the resiliency for their own operations. Are those Essentially, very similar discussions depending, I mean, no matter what the motivation or are there some meaningful differences?

Speaker 2

Yes. It's different based on the customer set and every customer set has their own applications. And I'll just Give you a few of them. When we're dealing with utilities, most of them and most of the market in the U. S, they're solving for this 2 to 4 hour peak essentially that takes place and hence this focus on short duration.

Speaker 2

However, Some of those same utilities have coal plants that they're going to be shutting down. They have all that infrastructure sitting there And they want to essentially try to use renewable and put in longer duration storage and leverage that existing large interconnects that connect to the coal plants, for example. So that same utility that has that short term need To manage the peak shaving in those the early evening or the early morning, They have other needs as they do their long term planning, for shutting down their fossil fuel assets. And then, I'll give you a third example Again, sticking with utilities, look at Calistoga, you've got utilities in certain parts of the world that have to be able to provide solutions in the event of fires earthquakes. And in some cases, that means a multi day storage type of application.

Speaker 2

And hence, we brought green hydrogen to the table, Integrated with tanks, fuel cell and a small amount of lithium ion for grid forming and black start To create a renewable solution that didn't exist. So what I just walked through, If you look at just with the utility segment, I walked through the short duration need, the long duration need that's coming as we're shutting down fossil assets And the multi day storage need when they're trying to do backups for events or what's called PSPS, The planned safety power shutdowns and outages. So that's just one segment. I would say if you go to The industrial segments, I mean, sustainable aviation, fuel or green hydrogen, you're looking at long duration there. This can be required 8 to 12 hour.

Speaker 2

And if you look at our investor base, I think you're aware that Saudi Aramco, BHP, Korea Zinc and their group of companies, Sun Metals and Arc Energy, These are big industrials that are looking at 6 to 12 hour need, whether that be because they want to green hydrogen or they want to power themselves 20 fourseven in a renewable way. So it is very diverse. I mean, I've just talked through our sets of Customers in utilities and some of the industrials, there's the IPPs that are that fit more the utility model or serving the Utility model, but as you can see, it's very diverse. And hence, if you look at Energy Vault, I think we're unique as a company in Energy Storage Addressing short, long and multi day or ultra long duration, no one else is doing that. The insights we're getting from our customers That have to solve multiple problems.

Speaker 2

It is amazing and we listen and we're prioritizing our R and D efforts to ensure we can support them whether that It was something we develop or an integration of other best in class technology that's sustainable and low cost. We can integrate and bring those solutions to the customer.

Speaker 4

Terrific. Thanks a lot. Thank you.

Operator

Thank

Speaker 2

Sorry, operator. Are there any more further questions or no? We're all done.

Operator

There are no further questions.

Speaker 2

Okay. All right. Operator, thank you very much. And I want to thank everyone for joining this call and listening in here and look forward to continuing The dialogue here and another quarter and updating everyone on our progress. Thank you very much.

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Key Takeaways

  • Energy Vault commissioned its first 25 MW / 100 MWh EVX system in China and achieved triple-digit sequential revenue growth from $11.7 M to $39.7 M in Q2 while meeting or exceeding technical performance on its initial U.S. projects.
  • The company’s sales funnel expanded by 27% to ~48 GWh, translating to over $7 billion in potential opportunities, and booked a 400 MWh contract with Jupiter Power, bolstering its 2024-25 backlog.
  • Energy Vault launched its first U.S. licensing deal, generating $33 M in upfront revenue and securing 90% gross-margin royalty streams, reflecting its shift toward an asset-light, high-margin IP model.
  • In Q2, the firm reported a 10% gross margin on battery projects, improved adjusted EBITDA compared to Q1, held operating expenses flat, and reaffirmed full-year guidance of $325-425 M in revenue and 10-15% gross margins.
  • Innovation in materials, structural engineering and software is driving down CapEx and levelized costs, while Energy Vault pursues long-duration storage applications like green hydrogen integration and sustainable aviation fuel partnerships.
AI Generated. May Contain Errors.
Earnings Conference Call
Energy Vault Q2 2023
00:00 / 00:00