ESS Tech, Inc. Q4 FY2024 earnings call

• Fourth quarter results didn't meet expectations due to a partner's inability to secure funds for orders and timing delays with the Florida utility customer project. • Delivered six EC systems to a Florida utility customer in December 2024, with site construction ongoing. • Achieved break-evens on the latest energy center design at the end of Q4 2024, reducing battery pack costs by nearly 50%. • Soft-launched the Energy Base product, which decouples power and energy, allowing customization of capacity, power, and duration. • Actively working with partners like Honeywell and South Bank Energy, with over 98% of components domestically sourced. • Pursuing capital raise to bolster balance sheet and working with financial advisors.

For the fourth quarter and fiscal year 2024, ESS reported revenue of $6.3 million, which was below the guidance range of $9 million to $11 million. In the fourth quarter, revenue was $2.9 million. The Energy Center product saw deliveries, with six EC systems delivered to a Florida utility customer in December 2024, and two more delivered in the quarter. The new Energy Base product was soft-launched. Absolute revenue for the year was $6.3M, short of the expected range, with the shortfall due to partner funding issues and timing delays.

• Anticipate revenue in first quarter tied to EC deliveries to utility customer, with moderate first half revenue. • Expect scale-up in revenue in the back half of 2025, primarily tied to EC production and sales. • Actively bidding on projects with the Energy Base and working to raise capital to fund operations through cash flow break-even.

• Challenges with raising capital. • Issues with partnerships affecting revenue realization. • Uncertainties in the market, economy, and geopolitical situation. • NYSE listing status below market cap requirements, with efforts to remedy this within an 18-month cure period.

Q: Given the ramp in EC deliveries in Q4 and Q1, how should we think about revenue growth trajectory over the next few quarters and 2025 revenue compared to 2024?

A: At this stage, not providing 2025 guidance, but anticipate first half revenue moderate, with back half seeing scale-up in revenue tied to ECs.

Q: Dig into margins, trend in GAAP gross margins in 2025, and volume/revenue milestones for inflection in gross margin profile?

A: Still a lot of indirect overhead to cover with direct margins on ECs, etc., and not anticipating U.S. GAAP gross margin positive in 2025, expecting post-2025.

Q: Sense for capital raise amount needed to fund CapEx plans in 2025 and access to export-import bank financing?

A: Looking to raise enough capital to get well into 2026, need at least $50M to access export-import bank loan, anticipate drawing on it in Q2 with other facilities like ATM.

Q: Anecdotes on product performance in the field and OpEx going forward?

A: With new tech deployment, issues in operability and software/documentation being worked on. OpEx run rate slightly lower than last year, with selective investment in needed resources for Energy Base.

Q: Evaluation of manufacturing partners for the Energy Base?

A: Energy Base has two discrete systems. Plan to manufacture power block unit (core components) and leverage partners with expertise in balance of system components like pumps, tanks, actuators, actively exploring with Honeywell.