ESS Tech, Inc. Q4 FY2025 earnings call

Company Overview

ESS is a leading manufacturer of long - duration iron flow energy storage solutions. Founded in 2011, its iron flow technology uses abundant materials. Flagship product is the Energy Base for various applications.

2025 Milestones

• Commercial: Awarded $9.9 million contract from Concurrent Technologies Corporation and U.S. Air Force, announced Project New Horizon with Google as off - taker.
• Leadership: Kelly Goodman transitioned to Chief Strategy Officer and General Counsel, Kate Suhodelnik became permanent CFO, acquired Bolt Storage's IP and assets, appointed new Chief Commercial Officer, and had leadership changes.
• Balance Sheet: Closed $40 million financing, launched ATM equity offering, closed $15 million registered direct offering.

Market Opportunity

Large and growing long - duration energy storage market, with AI data center demand projected to increase 165% by 2030 and grid needing 8 terawatt hours of long - duration storage by 2040.

Financial Performance

Costs coming down, adjusted EBITDA improving, structural cost reductions in place.

For the full year 2025, revenue was $1.6 million, down from $6.3 million in 2024. This reflects the deliberate transition away from legacy product lines to the Energy Base. Gross loss for the year was $27.7 million, an improvement of 39% compared to 2024's $45.4 million loss. Total operating expenses decreased 33% year - over - year to $29.7 million. Net loss for the full year was $63.4 million, an improvement of 26% compared to 2024. Adjusted EBITDA improved 38% year - over - year to a loss of $44.3 million from $71.3 million in 2024. As of December 31, 2025, unrestricted cash and cash equivalents were $14.5 million, other liquid assets were $7.5 million, combined liquidity was $22 million. Accounts receivable was essentially zero and inventory was $0.1 million.

Revenue Ramp

2026 will focus on commercializing Energy Base, with most revenues expected in 2027 and 2028 from tier one customers.

Salt River Project

Project New Horizon has a 10 - year PPA agreement, expected to start recognizing revenues in 2028.

Capital and Funding

Current liquidity improved, but has further capital needs, will be thoughtful and strategic about future capital raising.

Q: Hi. Good afternoon. Thanks for taking our questions. So I wanted to first start off here. I was looking in the press release. It indicates that you're anticipating delivery for kind of the three key projects that you have to start in 2027. So just considering the timeline, how should we think about the outlook for the ramp up in revenues associated with those projects? Could we see any revenue in 2026? Or is it more likely a contribution in 2027? And then just should we anticipate any legacy unit sales in 2026?

A: Justin, it's true. Thanks for the question. Yeah, so our focus for 2026 will be commercializing the new product, the energy base, so that we can deliver for tier one customers that have signed up to take delivery in 27 and 28. Those customers alone represent revenues and megawatts installed that are multiples higher than the company's achieved on a cumulative basis since listing in 2021. So it's a really big deal for us, and we're really excited about it. The pipeline, to look at that for a second, it remains quite exciting. But we're going to take a pragmatic approach in 2026 to ensure that when we start shipping energy base, it's a product of the highest quality. So I would expect 2027 and 2028 when you see most of those revenues to come in.

Q: Gotcha. Okay. That's helpful. And just on the Salt River project, wondering if you provide an update on how you're thinking about the ownership structure there. Are you intending to retain ownership of that project? And then I think there's a 10 - year energy storage agreement there. So, you know, I think the completion date is December 2027. So then would we anticipate, you know, recurring revenues starting in the 2028 timeframe for that one?

A: Yeah, I think we're still in the planning phase for that and deciding how we want to. So the agreement in and of itself is a PPA agreement for 10 years, like you said. I think, you know, we're exploring avenues on how we want to complete that project overall from a sort of financial and structural perspective. So we've got a few ideas, nothing that I can update you on concrete for now. But as it stands, the contract is a 10 - year PPA. So we would start recognizing revenues in 2028 on that. And we're looking at, you know, potential different options that we can take to make it more of an equipment sale versus just a PPA. But more we can update on you with that, you know, as we get closer.

Q: Got it. Okay. Okay. And then associated with that project, how should we think about the potential for, you know, follow - on deployments? Would we need to see kind of the completion of the pilot project along with some operational data before you might see a follow - on? Or is there potential for something to move faster than that?

A: Yeah, so there's a follow - on potential project with SRP of a much larger size. I can't comment on their, the way that they're going to go about, you know, the RFP and the entire process for that. But our hope is to have that project operational and have some really good data by the middle of 2028 and to have the data, you know, good data by the middle of 2028 to be clear to put it in in the end of 2027 as of right now. And we think that's a good timeline to have it open for any follow - on opportunities. And again, that goes back to the idea of focusing on the pilot right now, making sure that we execute well and the technology and the product is of the highest quality to set ourselves up for success for this pilot. And then we think the future opportunities around that are really significant. And so what I could say is that with that execution, we think we'll be in a good spot to be in the process for that follow - on project.

Q: Got it. Okay. And then so maybe just one more here, shifting gears. Sure. To, you know, the liquidity. I wonder if you just speak to plans to potentially repay the second tranche of the promissory notes or plans to use the ATM or contemplate an additional capital raise here. How do you feel about the balance sheet and the strategy going forward?

A: Yeah, absolutely. Our financial runway, it's significantly improved since our last conference call in November. The funds we've raised put the balance sheet in a much healthier position here. And we do have further capital needs, to your point, to support our plans in 2027 and beyond. But with the current cash we have on the balance sheet, there's no real rush. And we're trying to be much more thoughtful and strategic about how we're thinking about raising capital into the future. As you mentioned, we do have the ATM in place. But I wouldn't say that we're looking to tap that immediately. What we want to do overall is be very thoughtful and, you know, strategic about how we access capital into the future. And we feel like we have a pretty good handle on things and a good runway for now.