ESS Tech, Inc. Announces Fourth Quarter and Full Year 2023 Financial Results
- 50% decrease in Q4 Adjusted EBITDA loss YoY
- Record revenue of $7.5M in FY 2023
- Exited 2023 with over $100 million in cash
- Successful delivery of Energy Warehouses to key partners like Honeywell
- Plans to reduce EW unit costs by 40% in 2024
- None.
Insights
The announcement by ESS Tech, Inc. of a significant reduction in their Q4 adjusted EBITDA loss and the maintenance of a robust cash and short-term investments balance above $100 million is a strong indication of the company's improving financial health. The ability to lower Energy Warehouse manufacturing costs by 60% in 2023 and set a target for a further 40% reduction in 2024 is a testament to the company's operational efficiencies and cost management. These improvements are crucial as they directly contribute to the company's path towards non-GAAP gross margin profitability.
From a financial perspective, the cost reductions and cash conservation strategies suggest a proactive approach to managing the company's burn rate and extending its operational runway. This is particularly significant given the capital-intensive nature of the energy storage industry. The strategic focus on shipping to customers with the greatest long-term opportunity, rather than volume, indicates a prioritization of quality partnerships over short-term revenue maximization. This could bode well for sustainable growth, although it may affect short-term revenue projections.
Investors should note that the company's record revenue of $7.5M for FY 2023, while a positive development, needs to be evaluated in the context of the company's overall financial position, including its net loss figures and cash flow statements. Additionally, the expected revenue of approximately $2 million in Q1 2024, which was delayed from Q4 2023, highlights the importance of understanding the timing and certainty of revenue recognition in evaluating the company's performance.
The deployment of the first Energy Warehouses under a partnership with Honeywell and the expected commissioning of the Energy Center for Portland General Electric later this year represent strategic milestones for ESS Tech, Inc. in the long-duration energy storage (LDES) market. The LDES market is gaining traction as utilities and other stakeholders seek to integrate more renewable energy sources into the grid, which requires storage solutions capable of balancing supply and demand over longer periods.
The Energy Center's ability to provide up to eight hours of energy storage is particularly noteworthy, as it addresses a gap in the market for storage solutions beyond the short-duration capabilities of lithium-ion batteries. The scalability of ESS's technology could position the company favorably in a market that is increasingly looking for flexible and long-term storage solutions.
Furthermore, the company's engagement in projects like the Burbank Water and Power EcoCampus and the Turlock Irrigation District's Project Nexus demonstrates the versatility of its storage solutions in different applications, from pairing with renewables to tactical microgrids for military use. These projects not only serve as proof of concept for the technology but also help in establishing a track record of successful deployments that can attract additional customers.
It is crucial to understand that the LDES market, while growing, is still at a relatively early stage of development. The pace of regulatory changes, technological advancements and cost declines will significantly influence the adoption rate of LDES solutions and, consequently, the performance of companies like ESS Tech, Inc.
ESS Tech, Inc.'s focus on long-duration energy storage systems is a critical component of the transition to a more sustainable energy grid. The company's efforts to reduce the cost of its Energy Warehouse systems by 60% in 2023, with a further 40% reduction targeted for 2024, are significant for the affordability and scalability of renewable energy solutions. The cost reductions in energy storage are essential for making renewable energy sources like solar and wind more viable and reliable, as they enable the storage of excess energy for use when production is low.
The company's projects, such as the pairing of an Energy Warehouse system with solar panels over irrigation canals, showcase innovative approaches to integrating energy storage with renewable energy generation. These initiatives not only generate clean energy but also contribute to water conservation by reducing evaporation, demonstrating the multifaceted benefits of such sustainable practices.
Additionally, the deployment of ESS's iron flow battery technology within a tactical microgrid at a US Army Corps of Engineers facility underscores the broader implications of LDES for energy security and resilience. The ability to reduce fuel consumption at Contingency Bases through the use of LDES is an example of how sustainability measures can also align with strategic and economic objectives.
Stakeholders should consider the environmental and social governance (ESG) implications of ESS Tech, Inc.'s advancements, as these factors are increasingly relevant to investors and may influence the company's valuation and access to capital in the long term.
Lowered Q4 Adjusted EBITDA loss by More Than
Exited 2023 with Cash and Short-Term Investments over
Delivered First Energy Warehouses to Honeywell
Energy Warehouse manufacturing cost lowered by
Target
“During 2023 our team made significant progress towards our most important objectives, including securing transformative partnerships with LEAG and Honeywell, optimizing our internal operations, and pursuing design initiatives to lower production costs by improving manufacturability and scale. While we faced customer-related delays that impacted our financial results, the team’s work during the year laid a solid foundation for us to scale the business, launch the Energy Center and move toward unit profitability in 2024. In fact, our strategic decision to make fewer Energy Warehouses (EWs) and ship them to customers with the greatest long-term opportunity allowed us to conserve cash and exit the year with a cash and short-term investments balance over
Recent Business Highlights
-
Achieved record revenue of
$7.5M -
Delivered first Energy Warehouses™ under the partnership with Honeywell in Q4 2023 and recently cleared previously announced customer delays in
Australia , which we expect will result in revenue of approximately$2 million - At the end of 2023, ESS successfully “lifted” its first Energy Center™ (EC), a key milestone in the manufacturing process. The EC is a utility-scale, front-of-the-meter long-duration energy storage product which provides up to eight hours of energy storage with a flexible, scalable platform to meet the LDES needs of utilities worldwide. We expect this inaugural EC system will be commissioned and delivered to Portland General Electric later this year.
- Delivered an Energy Warehouse™ system to the Burbank Water and Power (BWP) EcoCampus, BWP’s first utility-scale battery storage project. This EW will be paired with an on-site solar array where ESS technology will demonstrate the critical role of LDES in a fully renewable grid.
-
Delivered two Energy Warehouses™ to Turlock Irrigation District (TID) in
Central California to support TID’s Project Nexus. At TID, the EW will be paired with a proof of concept of solar panels over irrigation canals. which aims to conserve water resources by reducing evaporation while generating clean energy, reducing diesel generation and reducing energy costs. -
Completed commissioning of an Energy Warehouse™ system at the Contingency Base Integration Training Evaluation Center (CBITEC) operated by the US Army Corps of Engineers Engineer Research and Development Center in
Fort Leonard Wood, Missouri . This EW has been incorporated into a tactical microgrid at CBITEC and will demonstrate the key role that LDES, specifically iron flow battery technology, can play to reduce fuel consumption at Contingency Bases such as Forward Operating Bases or other temporary use locations providing humanitarian assistance or disaster relief.
Conference Call Details
ESS will hold a conference call on Wednesday, March 13, 2024 at 5:00 p.m. EDT to discuss financial results for its fourth quarter and full year ended December 31, 2023. Interested parties may join the conference call beginning at 5:00 p.m. EDT on Wednesday, March 13, 2024 via telephone by calling (833) 927-1758 in the
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
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”, “will” “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 such as Amsterdam Airport Schiphol, BWP, CMS, ESIAP, the Sacramento Municipal Utility District and the Turlock Irrigation District. 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.
Statements of Operations and Comprehensive Loss
(Unaudited, in thousands, except share and per share data)
|
Three Months Ended December 31, |
||||||
|
|
2023 |
|
|
|
2022 |
|
Revenue: |
|
|
|
||||
Revenue |
$ |
2,796 |
|
|
$ |
15 |
|
Revenue - related parties |
|
— |
|
|
|
1 |
|
Total revenue |
|
2,796 |
|
|
|
16 |
|
Cost of revenue |
|
10,312 |
|
|
|
— |
|
Gross profit (loss) |
|
(7,516 |
) |
|
|
16 |
|
Operating expenses: |
|
|
|
||||
Research and development |
|
3,842 |
|
|
|
22,789 |
|
Sales and marketing |
|
2,096 |
|
|
|
1,721 |
|
General and administrative |
|
5,611 |
|
|
|
6,902 |
|
Total operating expenses |
|
11,549 |
|
|
|
31,412 |
|
Loss from operations |
|
(19,065 |
) |
|
|
(31,396 |
) |
Other income (expenses), net: |
|
|
|
||||
Interest income, net |
|
1,525 |
|
|
|
1,188 |
|
Gain on revaluation of common stock warrant liabilities |
|
1,375 |
|
|
|
5,273 |
|
Other income (expense), net |
|
35 |
|
|
|
(140 |
) |
Total other income, net |
|
2,935 |
|
|
|
6,321 |
|
Net loss and comprehensive loss to common stockholders |
$ |
(16,130 |
) |
|
$ |
(25,075 |
) |
|
|
|
|
||||
Net loss per share - basic and diluted |
$ |
(0.09 |
) |
|
$ |
(0.16 |
) |
|
|
|
|
||||
Weighted average shares used in per share calculation - basic and diluted |
|
173,552,254 |
|
|
|
153,414,471 |
|
ESS Tech, Inc.
Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
|
Years Ended December 31, |
||||||
|
|
2023 |
|
|
|
2022 |
|
Revenue: |
|
|
|
||||
Revenue |
$ |
7,537 |
|
|
$ |
610 |
|
Revenue - related parties |
|
3 |
|
|
|
284 |
|
Total revenue |
|
7,540 |
|
|
|
894 |
|
Cost of revenue |
|
20,495 |
|
|
|
— |
|
Gross profit (loss) |
|
(12,955 |
) |
|
|
894 |
|
Operating expenses: |
|
|
|
||||
Research and development |
|
42,632 |
|
|
|
71,979 |
|
Sales and marketing |
|
7,744 |
|
|
|
6,938 |
|
General and administrative |
|
22,574 |
|
|
|
27,469 |
|
Total operating expenses |
|
72,950 |
|
|
|
106,386 |
|
Loss from operations |
|
(85,905 |
) |
|
|
(105,492 |
) |
Other income (expenses), net: |
|
|
|
||||
Interest income, net |
|
5,262 |
|
|
|
2,187 |
|
Gain on revaluation of common stock warrant liabilities |
|
2,292 |
|
|
|
25,788 |
|
Other income (expense), net |
|
773 |
|
|
|
(452 |
) |
Total other income, net |
|
8,327 |
|
|
|
27,523 |
|
Net loss and comprehensive loss to common stockholders |
$ |
(77,578 |
) |
|
$ |
(77,969 |
) |
|
|
|
|
||||
Net loss per share - basic and diluted |
$ |
(0.48 |
) |
|
$ |
(0.51 |
) |
|
|
|
|
||||
Weighted average shares used in per share calculation - basic and diluted |
|
159,958,645 |
|
|
|
152,676,155 |
|
ESS Tech, Inc.
Balance Sheets
(in thousands, except share data)
|
December 31, 2023 |
|
December 31, 2022 |
||||
Assets |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
20,165 |
|
|
$ |
34,767 |
|
Restricted cash, current |
|
1,373 |
|
|
|
1,213 |
|
Accounts receivable, net |
|
1,990 |
|
|
|
4,952 |
|
Short-term investments |
|
87,899 |
|
|
|
105,047 |
|
Inventory |
|
3,366 |
|
|
|
— |
|
Prepaid expenses and other current assets |
|
3,305 |
|
|
|
5,657 |
|
Total current assets |
|
118,098 |
|
|
|
151,636 |
|
Property and equipment, net |
|
16,266 |
|
|
|
17,570 |
|
Intangible assets, net |
|
4,923 |
|
|
|
— |
|
Operating lease right-of-use assets |
|
2,167 |
|
|
|
3,401 |
|
Restricted cash, non-current |
|
945 |
|
|
|
675 |
|
Other non-current assets |
|
833 |
|
|
|
271 |
|
Total assets |
$ |
143,232 |
|
|
$ |
173,553 |
|
Liabilities and Stockholders’ Equity |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
2,755 |
|
|
$ |
3,036 |
|
Accrued and other current liabilities |
|
10,755 |
|
|
|
14,125 |
|
Accrued product warranties |
|
2,129 |
|
|
|
1,643 |
|
Operating lease liabilities, current |
|
1,581 |
|
|
|
1,421 |
|
Deferred revenue, current |
|
2,546 |
|
|
|
6,168 |
|
Notes payable, current |
|
— |
|
|
|
1,600 |
|
Total current liabilities |
|
19,766 |
|
|
|
27,993 |
|
Notes payable, non-current |
|
— |
|
|
|
315 |
|
Operating lease liabilities, non-current |
|
957 |
|
|
|
2,535 |
|
Deferred revenue, non-current |
|
3,835 |
|
|
|
2,442 |
|
Deferred revenue, non-current - related parties |
|
14,400 |
|
|
|
— |
|
Common stock warrant liabilities |
|
917 |
|
|
|
3,209 |
|
Other non-current liabilities |
|
— |
|
|
|
85 |
|
Total liabilities |
|
39,875 |
|
|
|
36,579 |
|
Stockholders’ equity: |
|
|
|
||||
Preferred stock ( |
|
— |
|
|
|
— |
|
Common stock ( |
|
18 |
|
|
|
16 |
|
Additional paid-in capital |
|
799,496 |
|
|
|
755,537 |
|
Accumulated deficit |
|
(696,157 |
) |
|
|
(618,579 |
) |
Total stockholders’ equity |
|
103,357 |
|
|
|
136,974 |
|
Total liabilities and stockholders’ equity |
$ |
143,232 |
|
|
$ |
173,553 |
|
ESS Tech, Inc.
Consolidated Statements of Cash Flows
(in thousands)
|
Years Ended December 31, |
||||||
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
||||
Net loss |
$ |
(77,578 |
) |
|
$ |
(77,969 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
||||
Depreciation and amortization |
|
6,513 |
|
|
|
1,523 |
|
Non-cash interest income |
|
(3,635 |
) |
|
|
(1,349 |
) |
Non-cash lease expense |
|
1,234 |
|
|
|
1,134 |
|
Stock-based compensation expense |
|
10,635 |
|
|
|
11,889 |
|
Inventory write-down and losses on noncancellable purchase commitments |
|
11,932 |
|
|
|
— |
|
Change in fair value of common stock warrant liabilities |
|
(2,292 |
) |
|
|
(25,788 |
) |
Other non-cash income and expenses, net |
|
(60 |
) |
|
|
483 |
|
Changes in operating assets and liabilities: |
|
|
|
||||
Accounts receivable, net |
|
3,633 |
|
|
|
(1,886 |
) |
Inventory |
|
(14,661 |
) |
|
|
— |
|
Prepaid expenses and other current assets |
|
2,422 |
|
|
|
(311 |
) |
Accounts payable |
|
(229 |
) |
|
|
1,464 |
|
Accrued and other current liabilities |
|
(3,378 |
) |
|
|
6,789 |
|
Accrued product warranties |
|
486 |
|
|
|
1,643 |
|
Deferred revenue |
|
11,500 |
|
|
|
1,881 |
|
Operating lease liabilities |
|
(1,418 |
) |
|
|
(1,123 |
) |
Net cash used in operating activities |
|
(54,896 |
) |
|
|
(81,620 |
) |
|
|
|
|
||||
Cash flows from investing activities: |
|
|
|
||||
Purchases of property and equipment |
|
(5,790 |
) |
|
|
(14,180 |
) |
Maturities and purchases of short-term investments, net |
|
20,861 |
|
|
|
(103,704 |
) |
Net cash provided by (used in) investing activities |
|
15,071 |
|
|
|
(117,884 |
) |
|
|
|
|
||||
Cash flows from financing activities: |
|
|
|
||||
Proceeds from issuance of common stock and common stock warrants, net of issuance costs |
|
27,132 |
|
|
|
— |
|
Payments on notes payable |
|
(1,733 |
) |
|
|
(1,900 |
) |
Proceeds from stock options exercised |
|
237 |
|
|
|
— |
|
Repurchase of shares from employees for income tax withholding purposes |
|
(310 |
) |
|
|
(2,808 |
) |
Proceeds from contributions to Employee Stock Purchase Plan |
|
541 |
|
|
|
492 |
|
Proceeds from warrants exercised |
|
— |
|
|
|
165 |
|
Other, net |
|
(214 |
) |
|
|
(22 |
) |
Net cash provided by (used in) financing activities |
|
25,653 |
|
|
|
(4,073 |
) |
|
|
|
|
||||
Net change in cash, cash equivalents and restricted cash |
|
(14,172 |
) |
|
|
(203,577 |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
36,655 |
|
|
|
240,232 |
|
Cash, cash equivalents and restricted cash, end of period |
$ |
22,483 |
|
|
$ |
36,655 |
|
ESS Tech, Inc.
Consolidated Statements of Cash Flows (continued)
(in thousands)
|
Years Ended December 31, |
||||
|
|
2023 |
|
|
2022 |
Supplemental disclosures of cash flow information: |
|
|
|
||
Cash paid for operating leases included in cash used in operating activities |
$ |
1,670 |
|
$ |
1,625 |
Cash paid for interest |
|
— |
|
|
154 |
Non-cash investing and financing transactions: |
|
|
|
||
Common stock warrants issued for the acquisition of intangible assets |
|
4,990 |
|
|
— |
Purchase of property and equipment included in accounts payable and accrued and other current liabilities |
|
704 |
|
|
1,358 |
Right-of-use operating lease assets obtained in exchange for lease obligations |
|
— |
|
|
4,534 |
Right-of-use finance lease assets obtained in exchange for lease obligations |
|
— |
|
|
123 |
Warrant vested under contracts with customers |
|
— |
|
|
46 |
|
|
|
|
||
Cash and cash equivalents |
$ |
20,165 |
|
$ |
34,767 |
Restricted cash, current |
|
1,373 |
|
|
1,213 |
Restricted cash, non-current |
|
945 |
|
|
675 |
Total cash, cash equivalents and restricted cash shown in the statements of cash flows |
$ |
22,483 |
|
$ |
36,655 |
ESS Tech, Inc.
Reconciliation of GAAP to Non-GAAP Operating Expenses
(Unaudited, in thousands)
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||
|
|
2023 |
|
|
|
2023 |
|
Research and development |
$ |
3,842 |
|
|
$ |
42,632 |
|
Less: stock-based compensation(1) |
|
(295 |
) |
|
|
(2,696 |
) |
Non-GAAP research and development |
$ |
3,547 |
|
|
$ |
39,936 |
|
|
|
|
|
||||
Sales and marketing |
$ |
2,096 |
|
|
$ |
7,744 |
|
Less: stock-based compensation(1) |
|
(290 |
) |
|
|
(816 |
) |
Non-GAAP sales and marketing |
$ |
1,806 |
|
|
$ |
6,928 |
|
|
|
|
|
||||
General and administrative |
$ |
5,611 |
|
|
$ |
22,574 |
|
Less: stock-based compensation(1) |
|
(1,502 |
) |
|
|
(5,370 |
) |
Non-GAAP general and administrative |
$ |
4,109 |
|
|
$ |
17,204 |
|
|
|
|
|
||||
Total operating expenses |
$ |
11,549 |
|
|
$ |
72,950 |
|
Less: stock-based compensation |
|
(2,087 |
) |
|
|
(8,882 |
) |
Non-GAAP total operating expenses |
$ |
9,462 |
|
|
$ |
64,068 |
|
(1) For purposes of calculating Non-GAAP total operating expenses, stock-based compensation is allocated on a departmental basis based on the classification of the award holder. |
|||||||
ESS Tech, Inc.
Reconciliation of GAAP Net Loss to Adjusted EBITDA
(Unaudited, in thousands)
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
||||
|
|
|
2023 |
|
|
|
2023 |
|
Net loss |
|
$ |
(16,130 |
) |
|
$ |
(77,578 |
) |
Interest income, net |
|
|
(1,525 |
) |
|
|
(5,262 |
) |
Stock-based compensation |
|
|
2,962 |
|
|
|
10,635 |
|
Depreciation and amortization |
|
|
3,326 |
|
|
|
6,513 |
|
Gain on revaluation of warrant liabilities |
|
|
(1,375 |
) |
|
|
(2,292 |
) |
Other expense, net |
|
|
(35 |
) |
|
|
(773 |
) |
Adjusted EBITDA |
|
$ |
(12,777 |
) |
|
$ |
(68,757 |
) |
Source: ESS Tech, Inc.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240313875100/en/
Investors:
Erik Bylin
investors@essinc.com
Media:
Morgan Pitts
503.568.0755
Morgan.Pitts@essinc.com
Source: ESS, Inc.
FAQ
What was the percentage decrease in Q4 Adjusted EBITDA loss YoY for ESS Tech, Inc. (GWH)?
What was the record revenue for ESS Tech, Inc. (GWH) in FY 2023?
How much cash did ESS Tech, Inc. (GWH) exit 2023 with?
Which key partner did ESS Tech, Inc. (GWH) successfully deliver Energy Warehouses to?
What are ESS Tech, Inc.'s (GWH) plans regarding reducing EW unit costs in 2024?
