Q2 2023 Energy Vault Holdings Inc Earnings Call
Okay.
Good morning, and welcome to the energy ball second cultural change.
Cool.
At this time, all participants are in listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference.
Please press Star then zero telephone keypad.
As a reminder, this conference is being quoted.
It is not my pleasure to introduce your host right.
Got it. Thank you. Please go ahead Paul.
Thank you Hello, and welcome to image, both second quarter 2023 earnings Conference call.
As a reminder, <unk> second quarter earnings press release and presentation is now available on our Investor website.
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.
In any way please disconnect now.
Please note that.
Earnings release, and this call contains forward looking statements are subject to risks and uncertainties.
These forward looking statements are estimates and may differ materially from the actual future events or results to be a variety of factors. We talking everyone speak guys isn't it in their analysis of LNG go by referring to our 10-Q filing.
Is that who's our results to differ from those anticipated any forward looking statements.
We undertake no obligation to publicly update or revise any forward looking statements.
As required by law.
Please note that we will be presenting and discussing certain non-GAAP information.
Please refer to the safe Harbor disclaimer and non-GAAP financial measures measures presented in our earnings release for more details, including a reconciliation to comparable GAAP measures. Joining me today on the call is rolled up the Kennedy, our chairman and Chief Executive Officer, and Yang Zheng.
Got it.
Our Chief Financial Officer at this time I'd like to hand the pool.
Tony.
Great. Thank you Laurence I'd like to welcome everyone to our second quarter 2023 earnings call.
I'll begin today by highlighting the quarter's main operational commercial and financial milestones as a more detailed in our earnings release that we announced this morning.
First our priority. This year has been and remains our execution of the cost of our commitment on our first projects.
Following a 2022 year, which saw a sign and close multi gigawatt hour of new customer wins with some of the largest utilities in global I P. P. This year was about executing to those contractual commitments and specifically commissioning and turning over in the operation The first system on time.
Or about the technical performance and profitably with strong unit economics.
Our first results are coming in and we did not disappoint.
Second on sticking to the theme of execution deploying our gravity storage technology at scale with a new E B X system.
As previously announced earlier this month, the first 25 megawatt 100 megawatt hours and commissioning phases now powered renewable you buy an adjacent wind farm and will serve the state grid and local town.
Third 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.
I have a 400 megawatt hour project with Jupiter power from the award category to the booking category in the U 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 billion an opportunity in the last six 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.
Last quarter, we had double digit percentage growth in both overall funnel size and bookings growth categories, including almost tripling the growth and progressing proposed project from submitted proposals to being Shortlisted a category that now totals seven six gigawatt hour, which equates to over 2 billion and <unk>.
Cancel awards alone.
Fourth I'm happy to share continued expansion of our high margin and expanding IP licensing segment of our business 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 cost while improving the overall economics on a level is cost basis.
And in the case of the U S market, where we have the benefit of the IRA legislation incentives, we are seeing increasing interest for long duration storage toward renewable fed production of green hydrogen generally as well as very attractive end markets like sustainable aviation fuel for example.
As our gravity energy technology is 100% local U S content in any of that.
We can maximize the various I R. A incentives as a non lithium energy storage medium and long duration technology.
Okay.
Fifth and very importantly regarding the financial results in Q2, we continue to deliver on the planned revenue ramped specifically triple digit percentage growth in revenue sequentially from 11, 7% approximately $40 million, 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 progress. 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.
Asian.
And final net income.
We expect strong continued improvement sequentially and adjusted EBITDA and net income as we enter an admittedly steep cliff for the second half of 2023, where we expect the jumped at triple digit revenue as planned in the coming Q3, and Q4 quarters as we approach final commercial operation date for U S based storage.
Project, 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 you our investors. What we are capable of when it comes to profitably scaling its business for growth.
As we demonstrated this past quarter with final testing of our first 69 megawatt 275 megawatt hour system, where the wellhead in California.
Performance levels that met or exceeded our formal contractual commitments and then less than nine 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 2020 three.
In the end it comes down to the talent experience and dedication of the people in energy are all that are obsessed with delivering for our customers is the most important part of delivering on our mission of de carbonization and enabling our renewable world.
The final proof of course is not only the numbers, but in the words of our customers.
Al Detmer, 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 we're working at energy ball and saying in the end and I quote there were supply chain issues across the board, but we chose the energy balls as they were the only company that was able to promise and then deliver what was needed for the.
<unk>.
With that I'll mention a few other highlights from the quarter before turning it over to our CFO Young caisson Golen Who'll review the details of the financial results and then we'll open it up for questions.
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.
Additionally, we grew bookings by $33 million related to the signing of a licensing and royalty agreement for our gravity energy storage technology with a new customer in the United States and our recent 400 megawatt hour contract booking with Jupiter power as we build backlog for 'twenty 'twenty, four and 'twenty 'twenty five.
I'm also encouraged by continued geographical expansion and customer diversity with a recent award from Southeast Asia Sustainable Energy company for two energy storage projects totaling 500 megawatt hour that we expect to be booked in the second half of 2023 as part of a broader framework to purchase a minimum.
'twenty 700 megawatt hours of energy storage in total over the next three years alone.
Moving into the latter half of this year, we entered turn our growing commercial final into contracts that bolster our backlog for 2024 and 2025.
We are focused on prioritizing contracts with high returns and favorable gross margins that meet our internal requirements.
We will 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.
The proliferation of the energy storage industry and demand that was accelerated post irate gives us flexibility in the projects and contracts in which we sign to drive both revenue and gross margin expansion.
We remain committed to selectively participating in only high growth high margin commercial opportunities.
Turning to China last week, we proudly shared that Atlas renewable and C. N T Y China tightening began commissioning the world's first commercial <unk>.
And located and Bugong judging in Shanghai, The 25 megawatt hour 100 megawatt hour G. E. S. S system next to a wind farm in national grid, interconnection and will enhance China's energy grid easing.
Using stored renewable energy.
Commissioning starting in June honest advanced electronics, and the new ribbon living system.
By Q4, we expect the system to be fully grid interconnected.
Building on the success of the E V. One tower in Switzerland in 2020.
With over 75% round trip efficiency, the AVX has enhanced designing for over 80% positioning it at the forefront of energy storage efficiency.
There is more on the horizon with over two gigawatt hour of E. B X deployment plan in China.
For example in June China, tightening agreed with Wildlife County government to construct another 100 megawatt hour gravity storage project in Hebei aiming to bolster our carbon goals and support regional data centers. This partnership underscores the bx has potential promising high margin returns for energy Volte.
We're eager to assist our partners and realizing more AVX initiative in the future.
Yeah.
Our commitment to global deployment of our gravity energy storage technology is unwavering as we executed our first gravity energy storage license and royalty agreement for the United States with a U S based renewable developer for multiple named states.
The license only portion of the contract will generate revenue of $33 million, coupled with project royalty streams of 90% gross margin tied to all future project deployment within the named States.
Importantly, this agreement allows for the developer deploy the technology through a new application of the current AVX technology that enables lower initial capex and demonstrates the flexibility of the technology to be adapted to various land topology pending customer site availability.
While we're talking about licensing and royalties.
Our model is central to commercially 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 S is utilized data from diverse asset 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, bottomline growth due to the high margin licensing and ongoing royalties, but also amplify shareholder value as we near positive cash flow.
Importantly reduces external capital alliance that he has 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 AVX gravity energy So our solution inside our Texas, marking our first commercial demonstration.
Here in North America.
Leveraging cutting edge tack and research insights, we aimed for cost efficiency to foster widespread adoption globally.
The cider facility stands as evidenced by our potential clients now and in the future, where we will implement our latest structural engineering materials science and software innovation focused on lowering both initial capex and that level is cost overtime.
We anticipate an uptick in opportunities to expand the <unk> platform in North America, our strategic partner and customer D. G. Fuels recently welcomed two Japanese investors and a third securing 30 million in equity.
Given this financing and their D. O loan progress do you think fuel's announced that they plan to initiate construction of their $4.2 billion.
S. A facility in Louisiana in the first half of 2024.
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, they will be purchasing 100% of the production of the Louisiana facility the <unk> facility.
We're enthusiastic about DG fuel strides and remain committed to supporting Mark Dr. Mark <unk> and his team for fulfillment of their sustainable aviation fuel endeavors.
Okay.
I'd like to touch a little bit on our multi day, an ultra long duration storage announcement with Pacific gas and electric is an update.
Our technology agnostic approach paired with top tier partners showcased in our hybrid energy and Green storage project with Pacific gas and electric Importantly, Q2, we received both the California PUC approval as well as the local Calistoga municipal approvals.
The project forward at full speed for P. Janie and the residents of Calistoga in.
In the first half of this year, we procured the hydrogen storage tank and fuel cells for the system from industry leaders chart industry and plug power.
Started supplying an 80000 gallon liquid hydrogen storage tank, ensuring 48 hours of supply while plug provide eight megawatt fuel cells, making it one of the largest plant of hydrogen fuel cell project in the United States and one of the earlier to C. O D is planned for Q2 2024 weeks.
We chose these partners for their unparalleled industry solution, allowing design flexibility to optimally serve our clients.
Entrail to integrating these technology as energy vaults proprietary software platform, highlighting our unique technology agnostic stance.
We anticipate site mobilization and construction efforts on the PGE project to begin in the fourth quarter. This year and remain on schedule for a project completion by mid 2024.
Before handing it over to young K for a detailed walk through of our financial performance I'd like to hit on a few highlights.
Our revenue for the second quarter reflected continued construction progress and execution across our battery projects in United States under a build commission and transfer model.
As such we recognize the revenue associated with that progress of $39 7 million, 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 to deliver attractive margins.
We anticipate the gross margin on our B S project deployments will continue to be financially accretive as we pursue strategic investments 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 content for energy vaults U S customers supporting our short duration battery and even hybrid energy storage solutions on a preferred economic basis.
Since that time core received the conditional commitment for an $850 million alone from the department of Energy loan program office to help finance the construction of course core powers advanced battery cell manufacturing facility in Buckeye, Arizona.
This facility will be capable of producing an estimated six gigawatt hour of battery cell storage capacity annually and as an early investor we will benefit significantly from this access to domestically.
Produced content and take advantage of the IRA legislation.
It improves the economics for all stakeholders holders, including core power, our customers and ourselves.
This access to domestic content supply has allowed us to sign a long term partnership with Super power to supply 10 gigawatt hour of domestic U S content battery modules for their projects over the next two to five years.
Developers are looking for local supply to support U S manufacturing efforts, but also it has to be competitive from a cost standpoint that allows for them to be competitive and we feel very good that the sebastien will allow us to be positioned in the market to be the preferred partner for utilities.
PS 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 our high level of confidence in our ability to deliver the projects to our customers on time and on budget. We are reaffirming our full year financial guidance, including revenue gross margin and adjusted EBITDA.
In summary, we're poised to grow and become a prominent player in the energy storage market with our diverse solutions.
Our current foundation supports faster and more profitable growth in the market as our financial and operational performance shows.
I'm excited about progressing in supporting the outstanding talent and team here at energy of all that in the end is what sets us apart.
While we have made significant industry strikes in the last 18 months and delivering our first revenue as a new public company. Our best is yet to come as we enter the second half of 'twenty 23, and our largest revenue quarters and customary customer deliveries ahead of us.
With that now I'll hand, it over to young K for a detailed financial update.
Thanks, Rob.
Morning, everybody.
For the second quarter of 2023.
Revenue was $39 $7 million.
<unk>, reflecting revenue earned from the progress and execution of our battery projects.
As we progressed through the year.
We will see a significant revenue inflection in the third and fourth quarter as we begin to recognize.
Revenue from new Jupiter power and NV energy projects.
Still scheduled for on time completion in the third and fourth quarter of the year.
We achieved gross profit of $3 9 million.
Reflecting a gross margin of just under 10% driven.
Driven by our differentiated approach to the battery energy storage market.
Combined with strong execution on our battery projects.
Operating loss was $28 4 million an improvement over the first quarter of 2023 of $32 9 million driven.
Driven by continued focus on operating expenses and business costs.
Adjusted EBITDA for the quarter of negative $18 million was a slight improvement quarter over quarter.
The key non cash items that we added back was $10 1 million of stock based compensation.
And the key non cash items that we deduct it was $2 3 million and interesting.
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 32023.
We had $165 million in cash cash equivalents and restricted cash leaving.
Leaving us well positioned to continue our growth strategy and execute on our projects.
As we mentioned before.
I'm Mary use of cash will be to cash operating expenses of between $20 million to $25 million per quarter with any other fluctuations mainly the result of working capital needs for equipment purchases for a battery storage projects, which will translate into revenue gross margin.
Cash in future quarters.
Lastly.
Today.
We are reiterating our full year 2023 financial guidance.
This includes revenue of 325 million to $425 million.
Gross margins of 10% to 15%.
And adjusted EBITDA of negative 70 to negative $50 million.
Our forecast is supported by our strong contracted backlog of activity as well as our offering mix of energy storage projects and IP licensing agreements.
We will continue to complement it with various consulting and construction services based on customer needs and demand.
We will also maintain a disciplined approach to our operating expenses.
With that.
And I'll now turn the call back to Rob.
Great. Thank you young case.
Before getting into questions I want to again, thank the entire team here at energy vault for their intense focus on delivering and executing for our customers and thus our shareholders.
I also 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 our disruptive energy storage solutions that are solving a multitude of customer problem as they embark on their own clean energy journey.
With that operator, we are now ready for questions.
Okay.
Thank you, Sir ladies and gentlemen.
Conducting a question and answer session.
If he would like to ask a question. Please press star and then one now.
All information telling them what indicates your line is in the question queue.
You May press Star and then two if you would like to move your question.
Cool part of Centurylink.
Equipment you may begin.
Okay, you can pick up your kind of typical Christmas stocking.
She would like to ask a question today.
And then one.
My first question here comes from Joe Osha from Guggenheim Partners. Please go ahead.
Hello, Good morning, everyone.
Hey, Joe how are you doing just fine. Thank you.
Couple of questions for me first I wanted to drill down a bit on this core power relationship is the idea that you're going to buy cells from them and then work with someone else in the contract size to make packs or where you're gonna make packs are as core gonna make packs for you I just want to make sure I understand.
But what just thinks of this arrangement. Thank you and then I do have one other question.
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.
<unk>.
We're an early investor in core and their first equity raise and then you saw the announcement of their <unk>.
And getting conditional approval on their daily loan and we are therefore, both in an early investor and prioritize customer so for supply continuity. So they would be providing us 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 investors status with them. We also garner other financial benefits.
Part of that early relationship.
Okay. Thank you, but its alright that's helpful.
Moving to the the gravity side, you're continuing to make progress commissioning dong.
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 its cost a cost per kilowatt hour as you start to put up additional systems is is that a number you can share.
We built the first system, they're completely locally in China sourced everything.
Theyre 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 with the fixed frame a solution that we have using fiber reinforced concrete for example, some of those things are going to be implemented first in the U S. 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 <unk> for North America. The <unk> system with our latest roadmap innovation does that mean essentially with a first.
As demand unit, we were building that out somewhere between 350 to $500 kilowatt hour basis, that's on a four hour system recall of which for 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 S that we're gonna 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 four to six hour to eight hour longer duration system. That's obviously going to therefore lowered the power component of that cost and some of the energy components of the cost will be lowered through the you know the law.
Cost of the fixed frame that we're going to be implemented in Texas.
So hopefully that okay, and then in the cycle.
A little bit better.
That's very helpful. Thank you. It is in and then just if we can have some sense.
In Texas.
Perhaps when you expect to break ground on that project and when.
I know it's early days, yet what are sort of initial target might be in terms of when that system begins to operate.
Sure Yeah, we we broke ground actually last year. So we broke ground at the officially at the end of the third quarter in September last year with pilings in the ground and have worked getting the foundation in place into the front end of this year. So we expect to have that system in the second half of 2024.
To be essentially starting all of our commissioning activities. So I would say about it about a year a year 12 to 15 months from now we expect to be beginning commissioning activity on the system in Texas.
Okay. Thank you very much.
Hi, gentlemen.
Thank you. The next question comes from some from Keybanc. Please go ahead.
Thanks, I appreciate you taking the questions.
Maybe first.
Nice to see the licensing agreement in the U S. But could you give us a bit more insight into where these additional systems could be located I know you said multistate, but I'm just trying to get.
Is it west coast northeast, how should we think about that.
Yes, the first parts of its agreement for this day start will be in the western part of the United States. So.
And that's what I guess I'll I'll share at this point, so it'll it'll be western U S.
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 was this one customer because of their kind of novel application of the gravity search technology more of a one off.
Yes by the way Great question. So first of all we we absolutely will be building needs directly ourselves in particular in North America.
For sure this is a.
Vic application and architecture of the gravity energy storage technology that.
That this person specific developer.
<unk> 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 Western part of the U S. So it is not a necessarily a reflection that all gravity will be license, but in some parts of the world is 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 a essentially a larger construction project with electronics integration power integration and software.
And actually tends to.
<unk> be a very logical.
Frame for doing these types of license agreements and for investors. Tom There are 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 if we publicly announced before.
<unk> done it at about 5% and again those are streams 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.
A business model perspective perspective, it allows us to monetize our technology, and our IP, especially for certain applications or iterations or new architectures in a way that had this garner that profit and even have that you know a lot of that profit.
A little more risk free, let's say as others can focus on getting the technology built out.
Great Yeah, and if maybe if I could sneak one quick one in there as a as a follow up just is there any exclusivity in that licensing agreement based on application.
<unk> I just wanted to check.
Yeah, 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 that in the coming one to two quarters as that develops.
Perfect ill jump back in queue.
Thank you.
Thank you.
Kipp Terry Mangan, if he would like to ask a question.
God only one well.
The next question comes from Brian Thompson from Chardan capital markets. Please go ahead.
Alright, thanks very much.
So congratulations on the new licensing and royalty agreement.
In the United States, I guess as Youre looking.
Looking out over the next year or two in the U S market.
How do you see it developing in terms of long duration energy storage.
Would you characterize the D. O is a good partner in the development and promotion of that technology in terms of the the program since the bias to that.
Sure Let me take the first one on how we see long duration developing so were as I noted in some of my.
Earnings comments.
We are seeing with the IRA.
And with certain segments of the market as.
As we mentioned around sustainable aviation fuel I think there are going to be factors in accelerators to long duration here in the United States I think green hydrogen in the production of green hydrogen where essentially.
You can utilize solar and long duration storage to power Electrolyze, there's an electrolysis.
To make green hydrogen in a in a cost effective way relative to that the various incentives that are out there. So those those types of things, we're seeing more inbound and mark customer engagement and developer engagement.
The application of long duration.
You you would have seen that one of our customers a D. G fuel's announced not only their progress on finance financing and their progress, but it's well offtake agreements for a segment of the market that.
Is tremendously underserved for sustainable aviation fuel. So I think I think those types of segments for industrial applications or powering.
8% to 12 hours of need whether that be overnight for $20 seven type of power needs or manufacturing.
You know those things are going to 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 two to four hour to four to six hour. So we're just beginning to see that here in the United States and and I think well that I think overall the long durations developed a little slower than what people had thought I think where we're beginning to see some encouraging signs.
For four more projects in development.
And the second part of your question on the D O N E.
I definitely think that.
With the programs and the priorities at the junior shot and the administration has about getting capital deployed.
It's definitely a help to the industry I mean, I use the term or.
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 and we're participating in various parts of those programs.
And all of that is going to be net net helpful to us and you know we just saw from as.
As we mentioned core power they announced their conditional approval with the D O moving along and that's for that's for $850 million to build their facility and in Arizona. So.
Everything we're seeing it tells us that there's a strong commitment there, but not only commitment but you know funds are flowing in and companies are progressing through that process.
Excellent thanks, very much for that color.
Thank you.
Thank you.
The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.
Hi, good morning.
Do you know how are you doing.
Great. Thanks.
Just a few things.
As you look into.
In the longer term of of some of the projects that are you you have in Q or are working on negotiating.
Just wondering if you could talk a little bit about the B E T C vendor piece of that.
Just wondering if as you look further out.
Are there any issues as far as Jeff.
Availability staffing availability anything like that that.
Cause you any concern as you as you look out beyond the next couple of years in your planning.
There are no it's a great question.
What I'd say is initially as we entered.
And went into the second half of 2022 in 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 the EPC goes we're handling the E. We're playing a very active role in the P or the procurement side because of that.
Just a few major pieces of equipment between Transformers and burgers, if it's short duration batteries.
If it's the longer duration is the large motor so we arent talking about.
Massive amount of things to procure or or things that are high volume okay.
Or 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 road maps on the procurement side. So we can get priority on what we need and that that engagement. We've had in the P side of EPC has helped us execute delivery.
Well that's why we.
If you look at our Q4 last year, we did 100 million quarter, because we we did very well on managing that execution side, a little more hands on so we we played a little more active role in there, which I think is where your questions going than we had intended also on the construction 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 youre looking at competitive pricing.
We initially saw pricing 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 it.
Being more directly involved with some of the management of the construction contractors themselves I would say on the shorter duration solution, that's easy to do that because.
You don't need massive EPC companies.
To build those projects out you can use a smaller localized construction companies and we found that to be a good way to to get competitive solutions to the table, having multiple local companies that either the customer is familiar with or what we would have a direct relationship with and one of the cases actually one of them, we were able to reuse on that.
On a second project already.
Just about to get started so.
So I'd say, it's a net all that out we're managing and prioritizing our resources 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 two massive quarters coming and we've got two very large triple digit million quarter. So this week.
We've been very.
Careful about the selection of our partners and working with our customers and expect to execute well.
Great. Thanks, a lot and that that was touching on really what I was wondering about because I just heard anecdotally a number of large projects by accompany that.
Sort of that stage.
Early commerciality, but just sort.
I'll start with 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 particularly the staffing.
Finding out while we're really down to essentially only one one candidate that works and so that's kind of what's behind the question, Yes, no 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 in <unk>.
And talking to some larger players and it between getting priority in pricing that just wasn't going to work and and you know anytime you're implementing new technology as a smaller company and the bigger ones don't want to take risk number one.
And it does limit your options as a company that's one of the reasons we.
Funded up heavily in our series B.
Ed.
With the commitment we have from Softbank and then a large series C. So the reason we did that is to ensure we were gonna have to capital.
To do some of these things ourselves given you know it's a it's a 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 would say, we executed well our first year and are executing this year and and I think.
But we're actually seeing.
Some players come and work with us that they want out learn how we're innovating for example in the civil and structural engineering and are willing to do that at their own cost.
Their own co op.
Yeah, So which is a reflection I think of what we're doing.
In and around automation construct ability material science and and the very advanced structural engineering that is not being done in the world around in it and in a general way and and others really want to learn.
About that and are willing to to work with us in that regard and that's definitely going on economically help us out.
Terrific.
Touch on one more thing you did mention.
That's the future shows LNG work solving a multitude of customer problems and.
I was wondering.
Is there a distinction between your.
Our utility customers looking for example to integrate with renewables.
You know, that's a large scale and and maybe industrial customers or others that are made.
Maybe looking at your storage solutions more ads.
He mentioned Datacenters earlier in the call more as like a micro grid type application, where it's not so much about the integration it's about serve their resilience for their own operation.
That does it.
It's actually very similar to discussions to kind of I mean, no matter, what the motivation or are there meaningful differences.
Yeah, it's different based on the customer set and and every customer has their own applications and I'll just give you a few of them.
You know when we're dealing with utilities.
Most of them in most of the market in the U S. They're solving for this.
Two to four hour peak essentially that that takes place and hence the focus on short duration. However, some of those same utilities.
Coal plant that they're going to be shutting down they have all that infrastructure sitting there.
And they wanted to essentially try to use renewable and put in longer duration storage and leverage that existing you know that those large interconnects to connect to the coal plants for example.
So that that same utility that that has that short term need to.
To manage the peak shaving and those.
They're 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 you know I'll give you a third example against 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 a.
Fires earthquakes and in some cases that means a multi day storage type of application and hence we brought green hydrogen to the table are integrated with you know tanks fuel cell and 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 a long duration need that's coming and sort of shutting down fossil assets and the multi day storage need when they're trying to do backups.
For for events or what's called P. S. P. S. 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 youre looking at long duration there.
This can be required eight to 12 hour and if you look at our Investor base I think you're aware of the Saudi Aramco BHP Korea zinc in their group of companies fundamentals in arc energy. These are big industrials that are looking at six to 12 hour need.
Whether that be it because they want to make green hydrogen or they want a power themselves 24, seven in a in a renewable way. So so it is very diverse.
Talk through our sets of customers and utilities.
And some of the industrial so there was the <unk> that are that fit more of the utility model are serving the utility model, but as you can see it is very diverse and hence if you look at energy Volte I think we're unique as a company an 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 they have to solve multiple problems. It is amazing and we lifted and we're prioritizing our R&D efforts to ensure we can support them whether that be with something we develop or an integration of other best in class technology that sustainable and low cost, we can integrate and bring.
Those solutions to the customer.
Terrific. Thanks, a lot.
Thank you.
Thank you.
Just a final reminder.
This is Mike.
Anyone know.
But for the moment it seems to be happening.
Okay great.
Sure Juan.
Okay.
Okay.
Sorry, operator are there any more further questions or no. We're all done.
There are no further questions.
Okay.
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 in another quarter and updating everyone on our progress. Thank you very much.
Thank you Phil.
Gentlemen, I think.
Today's conference. Thank you for joining US you may now disconnect your lines.
[music].
Sure.
Okay.
[music].
Yes.
[music].
[music].
Sure.