ESS Inc. Announces Second Quarter 2022 Financial Results

Rhea-AI Summary

ESS Tech, Inc. (NYSE:GWH) reported revenue recognition of $686,000 for the second quarter of 2022, marking significant progress in its operations. The company has secured a partnership with Energy Storage Industries Asia Pacific, which has ordered over 70 Energy Warehouses™. Additionally, ESS signed a contract with Tampa Electric Company for an Energy Center™ to support solar projects. Despite operational achievements, supply chain challenges may affect the planned delivery of 40 to 50 Energy Warehouses™ this year. The second manufacturing line is now operational, increasing annual capacity to 500 MWh.

Positive

• Recognized $686,000 in revenue for Q2 2022.
• Secured partnership with ESI for over 70 Energy Warehouses™.
• Entered contract with Tampa Electric for an Energy Center™.
• Operational second manufacturing line increasing capacity to 500 MWh.

Negative

• Supply challenges may impede delivery of 40 to 50 Energy Warehouses™ planned for this year.

Achieved Revenue Recognition on Energy Warehouses™

Announces Partnership with Energy Storage Industries Asia Pacific

Announces Energy Center Deal with Tampa Electric Company

WILSONVILLE, Ore.--(BUSINESS WIRE)-- ESS Tech, Inc. (“ESS,” “ESS, Inc.” or the “Company”) (NYSE:GWH), a leading manufacturer of long-duration iron flow batteries for commercial and utility-scale energy storage applications, today announced financial results for its second quarter of 2022 ended June 30, 2022.

“Q2 marked another quarter of meaningful achievements for ESS across product installations, customer wins and operational improvement. Importantly, we reached a significant milestone in recognizing $686 thousand in revenue. Further underscoring the value proposition of our long-duration iron flow battery technology, ESS was chosen as the partner of Energy Storage Industries Asia Pacific, or ESI, an Australia-based renewables company, to supply local energy storage demand. ESI has already ordered more than 70 Energy Warehouses™ and we began shipping them in July. With backing from the local government, ESI plans to invest $60 million to develop a manufacturing facility to deliver an expected 400 MW of annual capacity for that region, with the production ramp starting in 2024. In addition, I’m thrilled that we secured a key deal with Tampa Electric Company to deliver an Energy Center™ to help enable their transition to a decarbonized grid. Clearly, the trajectory of our business is stronger than ever,” said Eric Dresselhuys, CEO of ESS.

“While our operational initiatives to lower costs and increase capacity remain on track, we have encountered supply challenges with certain vendors that may impact our ability to deliver to our plan of 40 to 50 Energy Warehouses™ this year. With that said, our second semi-automated manufacturing line is now fully operational, adding another 250 MWh of annual production capacity. Additionally, the development of our customer success team is progressing well and we are already seeing incremental value in customer deployments.”

Recent Business Highlights

• Recognized $686 thousand in revenue for three Energy Warehouses™ in the second quarter.
• On August 9, hosted Secretary Jennifer M. Granholm of the U.S. Department of Energy, U.S. Senators Ron Wyden and Jeff Merkley, and Oregon Governor Kate Brown for a tour of our Wilsonville, Oregon manufacturing facility and headquarters.
• Ramped our second semi-automated manufacturing line in the second quarter, which doubles our annual production capacity to 500 MWh.
• Completed delivery of all six of the Energy Warehouse™ units ordered by SDG&E in the second quarter. These Energy Warehouses™ will be coupled with solar energy to supply the Cameron Corners Microgrid and deliver the benefits of energy shifting and mitigate the effects of power safety shutoffs for critical services.
• Delivered one Energy Warehouse™ to partner TerraSol Energies in the second quarter. This unit will be deployed next to Sycamore International, a technology recycling firm in Pennsylvania, where it will complement a solar installation to provide business continuity and energy cost savings. TerraSol has also contracted for a second Energy Warehouse™ to site next to Sycamore International so that Sycamore can participate in the local frequency regulation market.
• Entered into a relationship with Energy Storage Industries Asia Pacific, or ESI, where ESS will supply Energy Warehouses™ and ESI will develop sales, manufacturing and on-site service of Energy Warehouses™ and Energy Centers™ in Queensland, Australia for Australia and neighboring countries. ESI has placed multiple orders for more than 70 Energy Warehouses™ and ESS began shipping in July. ESI will build the manufacturing infrastructure to deliver an expected 400 MW of annual production capacity with ESS delivering the core IP of our technology, assembled and shipped from Oregon.
• In the second quarter, signed a contract to deliver an Energy Center™ to Tampa Electric Company (TECO) to support TECO’s Big Bend Solar Project, which powers 3,300 homes. The Energy Center™ is expected to ship next year, will deliver up to 10 hours of total capacity, and is intended to be used for solar peak shifting and fossil fuel displacement.

Conference Call Details

ESS will hold a conference call on Thursday, August 11, 2022 at 5:00 p.m. EDT to discuss financial results for its second quarter 2022 ended June 30, 2022.

Interested parties may join the conference call beginning at 5:00 p.m. EDT on Thursday, August 11, 2022 via telephone by calling (844) 200-6205 in the U.S., or for international callers, by calling +1 (929) 526-1599 and entering conference ID 179422. A telephone replay will be available until August 18, 2022, by dialing (866) 813-9403 in the U.S., or for international callers, +44 (204) 525-0658 with conference ID 519615. 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.

ESS, Inc. (NYSE: GWH) designs, builds and deploys environmentally sustainable, low-cost, iron flow batteries for long-duration commercial and utility-scale energy storage applications requiring from 4 to 12 hours of flexible energy capacity. The Energy Warehouse™ and Energy Center™ use earth-abundant iron, salt and water for the electrolyte, resulting in an environmentally benign, long-life energy storage solution for the world’s renewable energy infrastructure.

Established in 2011, ESS, Inc. enables project developers, utilities and commercial and industrial facility owners to make the transition to more flexible non-lithium-ion storage that is better suited for the grid and the environment. For more information visit www.essinc.com.

Use of Non-GAAP Financial Measures

In this press release, 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 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. For guidance purposes, the Company is not providing a quantitative reconciliation of forecasted non-GAAP operating expenses in reliance on the “unreasonable efforts” exception for forward-looking non-GAAP measures set forth in SEC rules because certain financial information is not available and cannot be reasonably estimated without unreasonable effort and expense.

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 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”, “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 and the Company’s partnerships with third parties. 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 partnership with third parties; 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 Consolidated 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,
		2022				2021				2022				2021
Revenue:
Revenue		$	404			$	—			$	404			$	—
Revenue - related parties			282				—				282				—
Total revenue			686				—				686				—
Operating expenses:
Research and development			16,165				6,222				29,063				11,874
Sales and marketing			1,900				701				3,402				1,213
General and administrative			6,797				3,231				14,586				5,351
Total operating expenses			24,862				10,154				47,051				18,438
Loss from operations			(24,176	)			(10,154	)			(46,365	)			(18,438	)
Other income (expense):
Interest income (expense), net			247				(54	)			218				(111	)
Gain (loss) on revaluation of warrant liabilities			8,158				(6,378	)			23,823				(14,804	)
Loss on revaluation of derivative liabilities			—				(73,847	)			—				(211,988	)
Gain on revaluation of earnout liabilities			438				—				1,278				—
Other income (expense), net			(255	)			(9	)			(251	)			(19	)
Total other income (expense)			8,588				(80,288	)			25,068				(226,922	)
Net loss and comprehensive loss to common stockholders		$	(15,588	)		$	(90,442	)		$	(21,297	)		$	(245,360	)
Net loss per share - basic and diluted		$	(0.10	)		$	(1.35	)		$	(0.14	)		$	(3.81	)
Weighted average shares used in per share calculation - basic and diluted			152,723,980				67,132,287				152,206,773				64,427,702

ESS Tech, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except share data)
	June 30, 2022				December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	112,708			$	238,940
Restricted cash, current		1,167				1,217
Accounts receivable, net		2,490				451
Accounts receivable, net - related parties		57				66
Short-term investments		79,456				—
Prepaid expenses and other current assets		3,496				4,844
Total current assets		199,374				245,518
Property and equipment, net		12,461				4,501
Operating lease right-of-use assets		3,980				—
Restricted cash, non-current		75				75
Other non-current assets		234				105
Total assets	$	216,124			$	250,199
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,435			$	1,572
Accrued and other current liabilities		8,445				6,487
Accrued product warranties		1,158				—
Operating lease liabilities, current		1,345				—
Deferred revenue		6,803				3,663
Notes payable, current		2,828				1,900
Total current liabilities		22,014				13,622
Notes payable, non-current		—				1,869
Operating lease liabilities, non-current		3,264				—
Earnout warrant liabilities		198				1,476
Public warrant liabilities		2,508				18,666
Private warrant liabilities		1,190				8,855
Other non-current liabilities		96				552
Total liabilities		29,270				45,040
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred stock ($0.0001 par value; 200,000,000 shares authorized, none issued and outstanding as of June 30, 2022 and December 31, 2021)		—				—
Common stock ($0.0001 par value; 2,000,000,000 shares authorized, 152,815,648 and 151,839,058 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)		16				16
Additional paid-in capital		748,745				745,753
Accumulated deficit		(561,907	)			(540,610	)
Total stockholders’ equity		186,854				205,159
Total liabilities and stockholders' equity	$	216,124			$	250,199

ESS Tech, Inc.
Reconciliation of GAAP to Non-GAAP Operating Expenses
(Unaudited, in thousands)
		Three Months Ended June 30,				Six Months Ended June 30,
		2022				2022
Research and development		$	16,165			$	29,063
Less: stock-based compensation			(587	)			(1,173	)
Non-GAAP research and development		$	15,578			$	27,890
Sales and marketing		$	1,900			$	3,402
Less: stock-based compensation			(125	)			(179	)
Non-GAAP sales and marketing		$	1,775			$	3,223
General and administrative		$	6,797			$	14,586
Less: stock-based compensation			(2,233	)			(4,353	)
Non-GAAP general and administrative		$	4,564			$	10,233
Total operating expenses		$	24,862			$	47,051
Less: stock-based compensation			(2,945	)			(5,705	)
Non-GAAP total operating expenses		$	21,917			$	41,346

ESS Tech, Inc.
Reconciliation of GAAP Net Loss to Adjusted EBITDA
(Unaudited, in thousands)
		Three Months Ended June 30,				Six Months Ended June 30,
		2022				2022
Net loss		$	(15,588	)		$	(21,297	)
Interest income (expense), net			(247	)			(218	)
Stock-based compensation			2,945				5,705
Depreciation			261				457
Gain on revaluation of warrant liabilities			(8,158	)			(23,823	)
Gain on revaluation of earnout liabilities			(438	)			(1,278	)
Other income (expense), net			255				251
Adjusted EBITDA		$	(20,970	)		$	(40,203	)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220811005355/en/

Investors:

Erik Bylin

investors@essinc.com

Media:

Morgan Pitts

+1 (503) 568-0755

Morgan.Pitts@essinc.com

Source: ESS, Inc.

FAQ

What were the financial results for GWH in Q2 2022?

ESS Tech reported $686,000 in revenue recognition for Q2 2022.

What is the partnership between GWH and Energy Storage Industries Asia Pacific?

ESS partnered with ESI, which ordered over 70 Energy Warehouses™ for local energy storage.

What impact do supply challenges have on GWH's production?

Supply challenges may affect ESS's ability to deliver the planned 40 to 50 Energy Warehouses™ this year.

What is the expected production capacity from GWH's manufacturing efforts?

The new manufacturing line increases annual production capacity to 500 MWh.

When is the conference call to discuss GWH's Q2 2022 results?

The conference call is scheduled for August 11, 2022, at 5:00 p.m. EDT.