Q3 2024 Energy Vault Holdings Inc Earnings Call
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Speaker Change: Interview with Michael Beer, Jan Gaalen, Robert Piconi, Michael Beer, Unknown Executive Interview with Michael Beer, Jan Gaalen, Robert Piconi, Michael Beer, Unknown Executive
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Speaker Change: Greetings and welcome to Energy Vault's third quarter 2024 earnings call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Speaker Change: If you should require any operator assistance during the conference, please press star zero on your telephone keypad. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Michael Beer, Chief Financial Officer. Thank you, Michael. You may begin.
Michael Beer: Thank you. Hello, and welcome to Energy Vault's third quarter 2024 financial results conference call. As a reminder, Energy Vault's third quarter earnings press release and presentation are available now on our investor website, and we'll be referring to the presentation during this call. A replay of this call will be available later today on the investor relations portion of our website.
Speaker Change: This call is now being recorded. If you object in any way, please disconnect now.
Speaker Change: Please note that Energy Vault's earnings release and this call contain forward-looking statements that are subject to risk and uncertainties. These forward-looking statements are only estimates and may differ materially from the actual future results, and they may vary due to a variety of factors.
Speaker Change: Please refer to our 10-Q filing for a list of factors that cause our results to differ from those anticipated in any forward-looking statement.
Speaker Change: We undertake no obligation to publicly update or revise any forward-looking statements except as required by law.
Speaker Change: In addition, 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 presented in our earnings release for more details, including a reconciliation to comparable GAAP measures.
Speaker Change: Joining me on the call today is Robert Piconi, our Chair, Chairman, and Chief Executive Officer. At this time I'd like to hand the call over to Robert Piconi.
Robert Piconi: Great, thank you, Michael, and good afternoon and morning and evening to everybody here on the call. Thanks for joining.
Robert Piconi: I'm going to break precedent a little bit and start with how I normally finish my calls on our quarterly earnings, and that's starting with our people. And one word comes to mind, resiliency, not a new word or concept working in the energy storage world for us, and generally storage solutions and grid resiliency. But in this case, we'd like to recognize
Robert Piconi: is a word that applies to our people here at Energy Vault. In the last 90 days in particular, we've seen tremendous change in volatility in the capital markets.
in the geopolitical landscape, which continues to bring uncertainty.
Robert Piconi: Unprecedented energy demand to support what we see driven by data center expansions and the resurgence of interest in any cleaner fossil power to meet it.
Robert Piconi: We've seen a lot of the news on SMRs, even Microsoft taking its interest in the Three Mile and nuclear plant. A gap in power that clearly needs to be closed in terms of an economical solution for 24-7 dispatchable renewable energy.
Speaker Change: So it seems this future has arrived a little earlier than planned and it will take the most resilience of all of us and companies and Leadership and courage and the people that make up the foundation here of Energy Vault that I'm so proud to work alongside
Speaker Change: We've just had the U.S. elections complete last week. Always can be polarizing in some cases, as we've seen in the last elections.
Speaker Change: but in particular around our national commitment to renewable energy and to clean power and meeting that rising power demand, which I believe in any outcome of the election will still support a healthy clean energy transition and it will prevail.
Strong, tough, robust.
flexible. These are all synonyms for resiliency.
Speaker Change: As I was writing some of my thoughts and comments, it actually came up in the spell check.
at Synonyms.
Speaker Change: But really these words represent the foundational core of my colleagues here at Energy Vault that I work with.
Speaker Change: and I'm humbled to support every day due to the impact that we can have and that we see.
Speaker Change: Starting with our local communities that make up the global communities that our teams touch every day
Speaker Change: I want to touch on a few examples from some recent travels on these themes and sticking with the theme of resiliency. I just spent the last few days late last week in the community of Calistoga, California, where what we call our CRC, our California Resiliency Center.
Speaker Change: has achieved mechanical completion and beginning soft commission activities of what's the largest hybrid green hydrogen energy storage system in the world.
Speaker Change: Craig Horn who leads our advanced energy storage technology group was there to host me along with Erwin Tantu.
Speaker Change: These timeframes, I would say, not by accident, but through an approach we have taken, due to the experience of our software development and team, that experience that, while new as a company at Energy Vault, brings people with 15 years plus experience in energy storage,
Speaker Change: During its infancy and its growth, in particular, the last five to seven years, also on a multi-technology battery storage integration experience.
Speaker Change: and the ability to turn up these systems quickly and efficiently.
Not by any luck, of course, but through
Speaker Change: Cell level monitoring, for example, to detect problems well before they're going to manifest themselves.
Speaker Change: even pre-building digital twins of the site design and environment. So no stone is left unturned as we go from mechanical completion to system turn up.
Speaker Change: This planning enhances all of our execution in the field that our customers uniformly would speak to.
Speaker Change: Very happy other supporters to visit there, including interactions up in Calistoga with the local business owners and community advocates that are excited to have a sustainable solution.
Speaker Change: to the noise and pollution from diesel generators that were part of their past now, wielding every year for the fire season, for example, or to deal with what's called PSPS or public safety power shutdown events.
Speaker Change: But a healthy amount or two of wait and see as I've spent and interacted in the local community. Is it safe? Will it be noisy?
Speaker Change: and that 150-foot-long tank filled with green hydrogen. In the end, we're very excited, as is the local community there, to bring up this system, be the first of a kind in a microgrid, first of a kind for green hydrogen energy storage, and something that we'll be replicating.
Speaker Change: But it all starts here with the local communities and that impact, and as I reflect in particular on the last 12 to 18 months, Reed Gardner in Nevada was a large
Speaker Change: Coal plant, one of the largest polluters in the state of Nevada, and us delivering a 440 megawatt hour system there in a precedented time frame from four months from taking control of the site.
Speaker Change: The hybrid system delivered with Wellhead Electric in California, the local Stanton, Orange County, Southern California residential community.
Speaker Change: where our four-hour, 275-megawatt-hour system allows the gas beaker plant to operate less frequently, reducing GHGs by up to 70 to 90 percent.
Speaker Change: Hal Dittmer, for those of you that might have heard the name, a real pioneer in the state of California and the community. 84 years old, I hope he doesn't mind me saying that, but would not put him past the age of 55 if you see him on the street.
Speaker Change: All about the impact here and I would really be remiss with not spending a few minutes there for my recent visit to Australia and the team there regionally led by Lucas Sadler on the commercial side and McCann on the execution side.
Speaker Change: We've talked about the Australian market and have made a few announcements here in the last couple of weeks.
Speaker Change: All of fairly large-scale and given the size and importance of that market, the coexistence of many of our strategic investors, including Korea Zinc, the largest non-ferrous metals producer in the world, and their wholly owned subsidiary, ARK Energy, BHP, one of the largest
Speaker Change: mining and iron ore companies in the world, just to name a few, all investing in their own clean energy transition.
Speaker Change: But I was most fascinated by the local government support from the meetings in Melbourne, for example, with the Victorian Energy Minister, Lily D'Ambrosio, head of the State Electricity Grid, or called the SEC.
Speaker Change: and the longest tenured energy minister in all the Australian states, a woman of great vision, great passion, focused on what needs to be achieved and ever cognizant of the how things are accomplished as more important necessarily than the final result that's achieved.
Speaker Change: We look forward to large partnerships and projects there and have built a tremendous pipeline well over the five gigawatt hour range now of projects that we'll be executing upon over the next 12 months in the coming years.
Speaker Change: While I was there we announced the first of what we believe will be many project partnerships with Ross Warby and the team from EnerVest. The first one gigawatt hour project at Stoney Creek in New South Wales for the sample.
Speaker Change: excited about the potential given the development and the portfolio focus that we have is a core strategy in working earlier in the pipeline development with companies and people that bring the expertise to pinpoint the grid weak points and opportunities to support better grid resiliency.
Speaker Change: Anyway, it was a great week. Much of our core leadership team was there in person. We did a lot of planning.
Speaker Change: For the coming years for the Australian market including immediate investments and doubling the size of that team in the very near near term and Tripling the size of our investment in Australia over the next year given the opportunities We see in the projects that we have underway
Speaker Change: Shifting a bit now to our results before turning it over to Michael who will go over some of the details of the financials.
Speaker Change: just very encouraged by what we've seen in the last three to four months in the progress, starting with probably one of our most important criteria and indicators of the future, which is our revenue backlog, which grew by over 33% in the quarter.
Speaker Change: Supporting now as we look to the revenue ramp we have coming in 2025 plus.
Speaker Change: Well, Australia, of course, will play an important part. Very happy to announce new projects in the United States. We recently announced the gridmatic offtake agreement.
Speaker Change: of our Texas site, a battery site that we'll be building, owning, and operating. Fairly quick turnaround there is we'll be COD in the second quarter of 2025, but also announced for the first time here on this call, a new project with Jupiter Power.
Speaker Change: and always nice to be announcing additional projects with prior customers. I think a great example of building the faith and the confidence and trust of customers that have built projects with us that we've delivered to.
Speaker Change: and feel very good about what the team has earned there in delivering for the first project and now a second project with Jupiter.
Speaker Change: I also feel great about our execution on our strategy to not only build and deploy these systems, but also to own and operate these storage assets.
Speaker Change: With the right development partnerships and the knowledge we have in designing, commissioning, and maintaining these systems, that experience allows us to reduce the capital expenditure up front through optimal design.
Speaker Change: Allows us to reduce the operating expense it takes to operate these systems and to maintain them.
Speaker Change: and at the end of the day to ensure the availability of these systems and the uptime to ensure we're meeting customer needs, we're meeting the grid needs.
Speaker Change: and meeting the needs of our expectations of our investors on the returns on these investments, which of course bring long-term revenue streams at very attractive margins.
Speaker Change: From a revenue perspective, this was clearly a transitional quarter as we get into our Q4 ramp now underway as we've previously guided, but now coming in Q4.
Speaker Change: But maintain the strong gross margins as we were finishing projects. Gross margins achieved at 40% plus, and on a year-to-date basis, 28%, which obviously bodes well for our finish for the year and our guidance.
Speaker Change: of finishing the entire year at 15 to 20% unit economics and gross margins.
Speaker Change: Encouraged to continue to see our OPEX reduce both on a year-over-year basis 13% and 7% reduced on a quarter-over-quarter basis.
Speaker Change: This reflects some of the changes we made in our technology and business model as we looked at our licensing models back at the first half of the year and the areas we're going to be investing in and therefore adjustments we made to our organization and the team supporting that strategy.
Speaker Change: Michael will talk more about some of the project financing that we announced and kicked off working with Jefferies on some of our first wholly owned projects in the United States specifically.
Speaker Change: in California and also in Texas. And while this reduced our revenue in terms of turning over projects and recognized revenue on the year, we've been very clear since we announced at our investor analyst meetings in May of why that strategy is so fundamental.
to the intermediate to the long term and the growth
Speaker Change: and the interests of our shareholders in our long-term operating model. We believe this model will have a lot of dividends for the shareholders, but in particular as we look into our planning as a company in the coming three to five years.
Speaker Change: We also have added more global assets for this new operating model, including what we are announcing in Australia, the development partnership we have with Enervest.
Speaker Change: But also, we announced three months ago, the hundred megawatt system in Italy at their largest coal plant in Sardinia, Carbon Suchus.
Speaker Change: where we'll be installing and have just installed the first EV0 gravity system there and are beginning commissioning and has a future for an integrated hybrid site with the coexistence of our gravity with batteries to deliver 100 megawatts of power to the local community.
Speaker Change: I'd be remiss if I didn't mention a few of our innovation milestones as well, already discussed.
Speaker Change: about the green hydrogen system in Calistoga and where that is and what's going to be the first of a kind and turned over here in the next two to three months.
Speaker Change: But also applying our gravity with what we announced with Skidmore, Owings & Merrill and integrating gravity energy storage in the future of superstructures.
Speaker Change: and in particular using our modular pumped hydro approach with gravity and integrating these in these structures where for the first time we'll be able to have a carbon payback in very short periods in the building sector.
Speaker Change: There's some very interesting statistics. If you do study what creates most of our greenhouse gases, it may surprise you to know that almost 30 to 40% of the greenhouse gas emissions come from both the building and the operating of buildings.
Speaker Change: And because of that, we're very excited to work with Adam Semel.
Speaker Change: and the team Bill Baker, Scott Duncan from Skidmore Owens Merrill and the work they're doing jointly with our team and our gravity technology expertise combining that together
Speaker Change: and you'll be seeing more to come in the coming years as we look at the first projects for these superstructures across the world.
Speaker Change: I was also very excited to announce today, as hopefully some of you have seen, some of the performance data from our Rudong gravity energy storage system, 25 megawatt, 100 megawatt hour in China.
Speaker Change: and with performance measures as we previously guided in the 80 to 85 percent range on initial data on the round trip efficiency.
Speaker Change: This is massively significant I think for the world and in particular in the long-duration energy space
of the first
Speaker Change: milestone achieved and one of the highest round-trip efficiency measures in long-duration energy storage in the world.
Speaker Change: Very excited what that means, not only for China and the other four gigawatt hours plus of projects that have already been announced there in China alone, but also what it means for some of the other regions where we've announced initial gravity.
Speaker Change: Very excited about what these initial performance measurements are telling us about the role that gravity can and will play as part of many solutions and technologies for the clean energy transition.
Speaker Change: Finally, it was just announced last week and I'm excited to recognize the team by what Time Magazine recognized as one of the best inventions in 2024.
Speaker Change: And really a tribute, I'd like to mention Bill Gross, who was
Speaker Change: really the founder of Energy Vault. I know myself and Andrea Pedretti carry the titles of co-founder of the company, but it really started with Bill Gross, his vision.
Speaker Change: his passion, his never give up attitude to look at different ways to solve unique problems in energy storage. Really appreciated the role that Bill has played both in my career in renewables as well as as a
Speaker Change: co-founder is the founder and energy volunteer with our gravity energy storage technology Really just a tremendous motivation for our entire team
Speaker Change: And I think these recognitions now that are coming as we begin to build out and people begin to see that some of the gravity energy storage.
take form on the planet.
Speaker Change: and the recognition from Time Magazine is really a tribute to him, Andrea Pedretti.
Speaker Change: others that are carrying that on in different places and from different companies. Jose Andrade, for example, who is the chair of all the Civil Engineering and Structural Studies at Caltech, who's been working with Energy Belt now for many years, since actually the very beginning of the company. Unknown Speaker
Speaker Change: and people like Bill Baker. Bill Baker from Skidmore Owens Merrill is the chief architect of the Burj Khalifa building, currently the largest building in the world at over 800 meters tall.
Speaker Change: I'm really excited to work with Bill and his practicality as you look at structures and design, and he's working pretty much full-time now with Energy Vault as we look at building structures and optimizing design for different structures across the world.
Speaker Change: Gravity Energy Storage Technology, everything from the mechanical, the civil side, all the material science needed to avoid, for example, the production of concrete.
Speaker Change: All of these things have come together with the software that automates everything and makes it all cost effective and economical. A big call out to all those folks for this recognition.
Speaker Change: And finally, before turning it back to Michael to go over some of the numbers, I'm very happy to be reaffirming our annual guidance here as we've done all year. We're tightening up that range a bit as we get into
Speaker Change: Obviously this quarter, and now we're within six and a half weeks of looking at the end of the year. So we.
Speaker Change: See the shipments on their way. That's going to tie to the revenue recognition, of course, a lot.
Speaker Change: happening here in this last six weeks, as we look at that, but feel very good about reaffirming that range and nearing that a bit here, as we look forward, and look forward to a strong quarter delivery that's both on
Speaker Change: our recognition of some of our range guidance that we had given previously, but also in continuing to build our bookings cadence and building that revenue backlog as we look at a large revenue ramp into 2025 and beyond.
Speaker Change: And with that, I'll turn it back over to Michael Beer.
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Michael Beer: Many thanks, Rob. As you noted, the company currently maintains a revenue backlog of $350 million, which increased 33% from the figure reported during our 2Q earnings results.
Speaker Change: Reflecting an equipment contract with Jupiter for another 200 megawatt-hour battery energy storage project and a 10-year offtake agreement with Gridmatic for the 57-megawatt, 114-megawatt-hour cross-trails battery energy storage project in Schneider, Texas, the latter of which will remain on balance sheet as part of our build, own, and operate strategy.
Speaker Change: As part of this strategy, discussed during our Investor & Analyst Day back in May, management expects to retain ownership of approximately $100 million in cash-generative storage assets, such as Cross Trails and the Calistoga Resiliency Center.
Speaker Change: rather than generate legacy EPC and equipment-related revenue through the one-time sale of those projects this year. While this will impact near-term revenue in exchange for long-term value creation for our shareholders, we are encouraged by the pace of this transition over the past two quarters.
Speaker Change: With construction of two battery storage projects in Texas and Nevada now complete and new projects ramping in the fourth quarter, the company reported minimal project revenue in 3Q and down notably year over year, with software and services contributing about $1.2 million in the period.
Speaker Change: As noted previously, we continue to expect revenue this year to be back and loaded, due mainly to the timing of equipment deliveries for our new project in Texas and in support of the ASIN project in Australia.
Speaker Change: Excluding the projects on our balance sheet, we expect full year revenue to be at the lower end of the guidance range, with upside associated with the timing of revenue recognition from existing and potential license agreements within our gravity business in Southern Africa and Brazil, respectively.
Speaker Change: Our gross margin was 40.3% for the third quarter, up from 4.2% a year ago, reflecting favorable revenue mix largely associated with software and services, albeit on a significantly lower base of revenue.
Speaker Change: Through nine months of the year, gross margin is tracking at 28.3%, above the guided range of 15 to 25% for the full year 2024.
Speaker Change: However, given the anticipated back-end loaded mix of business in 4Q from equipment deliveries for our battery project in Texas, we expect the four-year gross margin to normalize towards the low end of the guidance range, pending the timing of revenue recognition from high margin license agreements within our gravity business.
Unknown Speaker .
Now on to Adjusted OpEx and EBITDA.
Speaker Change: During the third quarter, our adjusted operating expense was $15.2 million, which improved 13% year-over-year and 7% sequentially quarter-over-quarter, reflecting the organizational realignment in the first half of 2024.
Speaker Change: 3Q Adjusted EBITDA was negative $14.7 million, which improved 5% quarter over quarter, but weakened versus a year ago due to the timing of project completion and lower overall gross profit in the period.
Speaker Change: Management continues to expect adjusted EBITDA within the range of negative $45 million and negative $60 million for the full year.
Speaker Change: On cash and project financing, as of September 30th, 2024, the company had $78 million in cash, cash equivalents and restricted cash versus $113 million in total on June 30th.
Speaker Change: Restricted cash increase to $26 million associated with a letter of credit for a project that has since received final completion.
Speaker Change: Our primary uses of cash are cash operating expenses and working capital needs associated with equipment purchases for our energy storage projects and expenditures for those projects we have chosen to own and operate, which will likely be largely offset by anticipated project finance and monetization of tax credits.
Speaker Change: Year-to-date use of cash from investing activities increased to $48.3 million, mainly from construction and progress associated with our Build, Own, and Operate strategy.
Speaker Change: Management still expects our year-end cash balance to be within the range of 75 to 125 million dollars depending upon the timing of those project financings.
Speaker Change: And the company maintains bonding capacity in excess of $1 billion to facilitate additional growth for projects both in the U.S. and in Australia.
Speaker Change: With the project financing for Calistoga and Cross Trails now underway with Jeffries, we expect to bring $60 to $80 million in cash back onto the balance sheet once completed, including monetization of tax credits.
Speaker Change: We expect to return 30 million dollars from the Calistoga project anticipated to close by year-end Meanwhile, we expect to return another 40 million dollars from the cross trails project over the next two quarters
Speaker Change: The company continues to execute on the build, own and operate strategy and has identified a strong development pipeline for storage asset ownership and infrastructure projects in the US and Australia totaling over 30 gigawatt hours.
Speaker Change: We also see a host of advantages and synergies across our legacy business as we leverage our project management expertise, solutions-based approach, and diversified storage product portfolio.
Speaker Change: While inherently more capital intensive than the EPC business, these accretive owned and operated projects enhance earnings visibility and our margin profile.
Speaker Change: Once completed, we expect these projects to deliver unlevered double-digit IRRs and project EBITDA margins in the 70-80% range, underpinned by long-term offtake agreements.
Speaker Change: We then look to optimize the capital structure of each project, depending on the nature of the offtake agreement, available tax credits, and use of project finance.
With that, I'll hand the call back over to Rob.
Robert Piconi: Great, thank you, Michael. I think one last thing I'll just emphasize there that you just went through. We've gotten some questions from investors asking to understand a bit how some of the own and operate projects will work and how the working capital flows, how the returns work. And Michael just walked through that. But just to highlight.
Robert Piconi: These are projects and things, as we look at building projects as well, and understanding the dynamics of the CapEx and the OpEx for them, the returns on these projects that are our criteria for investing in them.
Robert Piconi: have been and will be and continue to be in this low double digit unlevered operating range.
Robert Piconi: The EBITDA margins as they go forward then especially with as you add project financing as we announced with Jeffrey's Just a few weeks back Something that is very attractive. We believe for creating these long-term revenue predictable
Robert Piconi: We've built, I think, a strong reputation on the execution side, as you've seen since the very beginning of our company. We've always maintained positive unit economics, positive growth margins.
Robert Piconi: That's not something that's common in our industry, for those of you that follow energy storage, and I think was one of the surprises as we came out and started to execute projects. So that is a strength.
Robert Piconi: that we will continue to leverage with the expertise with our team.
Robert Piconi: And then as it comes to the commissioning of these projects, bringing them up the experience and the way we've developed and design.
Robert Piconi: Our software platform, Shaheen Fakhar, who leads our EMS software development with his team, brings a lot of experience, by the way, across industry, not only from some energy storage, but also from the aerospace industry.
Robert Piconi: and things that we do to ensure that when we do get to the field, we do not have surprises.
Robert Piconi: I mentioned earlier on about creating digital twins in our own operating environment, our cell level technology for monitoring systems so important when it comes to safety and
Robert Piconi: dealing with lithium ion as a fundamental technology and things our customers have come to appreciate. And as we look at it, as we have brought up our systems on our first projects,
Robert Piconi: I've done it very, very quickly, rapidly from mechanical completion to the uptick.
Robert Piconi: here as we look to manage and get to pool COD.
Speaker Change: on these battery projects. It's something that we see as an opportunity and uniquely positioned to leverage, whether that be positioned in doing that work for some of our customer sets, where we deliver some of our product innovation, or other projects where we will invest and own and operate over time. Unknown Speaker
Speaker Change: With that again I want to I want to thank all the people at Energy Vault and thank all of our investors and all of our partners that have supported our company and as we've executed here just the last few years and with that I'd like to turn it back to the operator for questions.
Speaker Change: Thank you, sir. At this time we will be conducting the question and answer session. If you would like to ask a question, please press the star key followed by 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 to remove a question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please, while we poll for questions.
[inaudible]
Speaker Change: Robert Piconi, Jan Gaalen, Robert Piconi, Michael Beer, Unknown Executive Michael Beer, Unknown Executive
Speaker Change: And the first question comes in the line of Justin Clare with Roth Capital Partners. Please proceed with your question.
Hi, good afternoon.
Hey, Justin.
Speaker Change: Hey, so first, I just wanted to ask about the different, you know, ownership opportunities that you're looking at here, and wanted to see if you could share, you know, how much capacity could you potentially be looking to add to your balance sheets in, you know, 2025, or 2026, just trying to think of the volume and, and, and then also the capital that would be needed in order to finance these projects and how you're thinking about the funding sources.
Speaker Change: Sure, thanks Justin. So as we announced previously there with Jeffrey's, we're in the market and raising the funds associated with the attractive project opportunities. I think one of the things we see operating well in the market
is the Availability of Capital for Attractive
Speaker Change: and good returning high RRR projects. So we do not see.
Speaker Change: really any shortages of capital there, and also attractive, attractively priced capital given the market environment we see, and I would not restrict that only to the U.S. market. I mentioned Australia a bit, and from our perspective, I think we've mentioned some of the
Speaker Change: multi gigawatt hour, in particular in Australia, with the pipeline there and the types of projects we're looking at there that are all quite large. We've announced a few that are in the multi hundreds, including the last one we announced, which is a full gigawatt hour, so.
Speaker Change: We don't see a shortage of opportunities to get capital deployed.
Speaker Change: We built a reputation here over the last two years in particular to be able to execute well
Positive Unit Economics and get
Speaker Change: projects turned over that are all operating well for our customers today. Uh, and that is attracting a lot of investor interest. And, you know, would, to answer the latter part of your question, um, you know, we, we don't really limit our.
Speaker Change: are thinking there for attractive projects in the way we've already been able to scale the company. So looking at things in the hundreds of millions of dollar range in terms of putting capital to work.
Speaker Change: and especially given if you look at our cap table and some of the strategic investors on it We've got a lot of different sources And and a lot of investors that are very interested in working with us on getting capital deployed Given the experience that we bring in the table
Okay, got it. And then, just to follow up...
Speaker Change: Curious, you know, given that you could own projects, or you could essentially deliver the batteries and do the EPC for a project and recognize revenue, essentially, immediately. Wondering how you're thinking about the different approaches and how that might affect the outlook for 2025 and the targets that you've provided at this point.
Speaker Change: Sure, by the way, it's a great question. In all cases, we're looking at, of course, the commitments that we made that came out of our
Speaker Change: First Investor and Analyst Meeting, why we're happy to be reaffirming and tightening a bit that guidance here as we look at this year, but as we think about next year and the guidance that we've given and given
Speaker Change: The backlog that we've announced that has grown quarter over quarter and the opportunities that we see You know, we'll be making decisions essentially in what's going to be in the best
Speaker Change: Long-term interest of the company and our customers and our shareholders and we did that this year
and I know I think from an analyst perspective.
Speaker Change: you know, some folks were a little surprised that we, you know, had a year where we took our revenue down to a 50 to a hundred million range as we did this year. But a lot of that was foregoing.
Some immediate revenue we could have had at say
Speaker Change: I don't know, 10, 12% gross margin in return for, you know, nice lower double digit unlevered IRRs and long term.
Speaker Change: streams and EBITDA streams that would be anywhere in the 60 to 75% range with the right project financing. So I would say to answer your question in terms of the guidance for next year, we're going to be cognizant of the commitments that we made. We take those things very seriously and we'll make decisions on whether we decide to build and turn over projects to customers.
Speaker Change: So that may result in scenarios where we may decide to turn cash and deliver projects or otherwise, given the access to capital that we have holding them for the long term.
Okay, great. Thank you.
Speaker Change: And the next question comes from the line of Alex Scheibelhofer with Stiefel. Please proceed with your question.
Speaker Change: Thanks everyone and thanks for taking my question here. So I just want to focus in a little bit on the 2040 guidance here, you know, naturally, the quarterly revenue progression could be a little lumpy here, but I was just wondering if you could provide a little benchmark with, you know, what you expect to hit in the fourth quarter, where you feel the most confident, well, and just some of the timing on the projects that you have pending.
Speaker Change: Yeah, we this was formally in our announcement I think they're in the specific guidance and Michael referenced this as well, but we're tightening up the range a bit. I think we said to the to the mid.
Speaker Change: Mid to lower end of that range is based on how we see shipments coming in and revenue recognition in what we see today So we feel very good on that lower end of the range and then
Robert Piconi, Jan Gaalen, Robert Piconi, Michael Beer, Unknown Executive
Speaker Change: I wouldn't rule out other things and good things that can happen in the quarters as they did in our
Speaker Change: 2022 year where we had about 80 million additional revenue come in just through you know shipments that we were able to expedite so it remains a bit of a dynamic side but feel very good on the visibility we have into getting that low end of the range and then
Speaker Change: And then, you know, depending on how other the operational items and the shipping items go, we'll determine where we get in that into that mid part or upper part of that, that, that guy.
and the United States.
Speaker Change: Got it. Appreciate the color there. And then just kind of a follow up, you know, naturally during your investor conference in May, and as you've highlighted during the call today, kind of building out that own and operate strategies, kind of a hallmark of just trying to
Speaker Change: enshrine some of the choreographic progression and get a little bit more visibility. I was just curious, when we think about 25,
Speaker Change: How is that going to progress on a quarterly basis and just what would you expect to kind of fall into that 2020 timeframe versus slipping into maybe 26 or longer term?
Speaker Change: Yeah, yeah, I'll give you a little color on that and obviously we aren't we're going to be at our next Quarterly for Q4 as usual giving that full formal update to the to the 2025 guidance that we gave before but as you're building and operating Projects is it's just really math if you're signing long-term 10 to 15 year agreements
Speaker Change: Obviously, those are going to build over time. And the way we're going to start looking at that is this quarterly run rate.
of EBITDA that's going to be coming from
Speaker Change: Those tolling agreements or those PPA agreements and if you look at those on a quarterly basis
Speaker Change: Times four and annualize them You know, we want to be getting up to a you know, an annualized rate of EBITDA in the 50 75 100 million On a quarterly annualized basis, you know here over the next 12 to 24 months and that's just on those Project sets, you know, we're still going to be
Speaker Change: executing around, you know, supporting some of the gravity license build outs and the royalties that will be coming. We gave some guidance on that.
Speaker Change: And that is unique, I think, with us as an energy storage company, that we have technology that we can actually monetize in long duration.
Speaker Change: on licenses and royalties. So that's exciting. I think some of the things I mentioned.
Speaker Change: around gravity and the partnerships that we've built and formed in some regions of the world where gravity is going to play a role. So we're excited.
to have that continue to evolve.
Speaker Change: We also have been innovating in new projects, leveraging our expertise that spans different technologies and different technology domains.
Speaker Change: Leveraging our knowledge, for example, of civil and structural engineering and material science.
Speaker Change: and using that to help optimize our battery products, not only for core straight execution, but looking at new solutions to address energy density in a way that's been difficult to address before and in tight spaces.
Speaker Change: and especially as we think about the data center build-out and what's unique about that. You know, not all data centers are built out in the middle of the desert or in the middle of, you know, large landscapes. There's a lot of places and places in the grid and where there are data centers and desires to have data centers.
Speaker Change: So thinking about our expertise we bring to the table across various technologies, bringing that creativity. I think Calistoga is a great example of an RFP that came out that didn't say, give me a green hydrogen microgrid solution.
Speaker Change: It said, we need a backup. It's not diesel generation for the city for two days in case of a PSPS event. Uniquely, our team.
Speaker Change: Brought a solution together to sustainably design a system with green hydrogen
Hybrid with Lithium-Ion to address
The Gridforming Needs and Goldwell's Black Start.
Speaker Change: That's expertise we have focused on solving a customer problem and not focused on shoving a product down a customer's throat because we happen to make it.
Speaker Change: I think that's unique to Energy Vault. I think with our software experience, we bring that expertise to the table, and I would say that that part of the business
Speaker Change: Complimenting what we're going to choose to own and operate is going to be quite formidable I think as a company and as an investment thesis for investors that are looking at really driving that innovation home with you know getting to a larger percentage of our revenue that's going to be predictable and recurring and high margin.
Speaker Change: Excellent. That's great color. Appreciate the taking my questions here and I'll turn it back.
All right. Thanks, Alex.
Speaker Change: And the next question comes from the line of Chris Ellinghaus with Siebert William Schenck. Please proceed with your question.
Chris Ellinghaus: Hey, good afternoon, everybody. Have you guys made any adjustments at all to the Snyder project in terms of capacity or your thoughts on, you know, capital costs or anything along those lines?
Speaker Change: There's been some adjustments on that that I would say initially as we announced that project with Enel and working in cooperation with their R&D team, they had a series of asks of us of what they wanted to see in our gravity energy storage technology. We did end up buying that interconnect there, that's what we announced in the...
The Crosstales Project.
Speaker Change: Chris, so that's one of the sites that we're going to own and operate because we bought the land and that interconnect out there. But we also did that in line with NL's request.
Speaker Change: to not only look at our EVX technology and get it demonstrated at full scale, but also other applications of our gravity. And that includes the products we announced at our Investor and Analyst Day, so the EVY, which is our slope-based technologies, which you can apply to different landscapes and pre-existing slopes.
Speaker Change: As well as what we announced in our, what we call our EB0, which is the modular pump tiger technology. So,
Speaker Change: That equipment, for example, for EB0 arrived at the site about a month ago in Snyder.
Speaker Change: The EVY is going to be the first technology actually up and running, and we have customer visits planned, and that'll all be up and running before the end of the year. And then EVX will be coming online just after EVY in Q1.
Built in Snyder now is a multi-asset multi-technology
and
Speaker Change: represent all of our latest innovations with our software capabilities. So we put a one of our b-vault
Speaker Change: Battery systems there that is doing energy storage as well as that'll be
Speaker Change: taking the power generation from PV that we're building at the site, be charging those systems, orchestrating the discharging, and we'll be highlighting other capabilities of our software.
We have essentially developed into more technologies on gravity than.
than just CVX, and that's been in collaboration.
Speaker Change: with Enel, but in addition, we're using that site more broadly to demonstrate a lot of other capabilities and then using that interconnect as well to build out one of the assets we're going to own and operate. So very
Speaker Change: Excited for that and in the next essentially two to three months We'll be bringing some of those systems up and would be excited to to host you out at the site if you ever Get into that area there. It's about a four-hour drive outside of Dallas there in Snyder
Speaker Change: Okay, great. That's helpful. Do you have any insight that you can provide on the unannounced Australian 200-kilowatt-hour project when that might be public?
Speaker Change: Chris, I'm sorry, there was some breakup in the line. I'm getting some feedback here. I don't know if it's on my end, but would you mind repeating the question? I heard about Australia and projects, but I didn't get specifically the color you wanted. Can you repeat the question? Yeah, the unannounced 200 megawatt hour project, do you have an insight into when that might be publicly announced?
Unknown Speaker 05.
Speaker Change: Yeah, sure. We're expecting that announcement this quarter. So I was just there in Australia and met with some of the principals of that project, but we expect that to be announced this quarter.
You know, as far as
Speaker Change: financing goes going forward. You're working on project financing and monetization of credits at the moment. Is that what you foresee for the foreseeable future as the paradigm, or do you see adding other things to the toolkit as well?
Speaker Change: Yeah, I'd say it's a great question. So we'll be continuing to do what I'll call is more standard.
Speaker Change: project financing mechanisms. It's, as I mentioned earlier, those models are quite well proven, attractive, including there's a very liquid market on the tax equity and the ITC side. So I think Michael referenced.
Speaker Change: Some of that already and in what he just walked through, but we are also is announced working with Jeffrey's on on other mechanisms in order. So, you know, we're gonna be creating abilities for us to be able to execute multiple projects.
Speaker Change: that we see, and not only the US, you know, Australia, we mentioned.
Speaker Change: the pipeline that we're working on there, which is is quite large. So it's this is not going to be the case. We're going forward like it happened this past year, where we're financing as off of our own balance sheet, as we did the first two projects and then.
Speaker Change: Putting the cash back as we mentioned. We've obviously Having no debt. We we've had the flexibility to make the choices to go ahead and invest
Speaker Change: For us to look at having sources of capital that may include partners, for example, and, you know, that may include strategic partners, meaning people that have invested in the company, whether, you know, pre IPO or post.
Speaker Change: Okay, that's great. You guys seem to gloss over the December 11th, 12th dates.
Speaker Change: I was kind of curious if you had any other details for that and since you bring up Snyder, are you thinking about doing some kind of event at Snyder next year?
Speaker Change: Yeah, by the way, it's a great comment and question. We did not mean to for sure to gloss over. I was going to finish.
with some of that, but we are we're excited about.
Speaker Change: The event there in Calistoga and hosting folks. So there'll be more about that, you know, we.
Speaker Change: We chose there in Calistoga, given the uniqueness of the micro grid.
Speaker Change: I think the passion and the, I don't know another word, how to say it at the local community, the excitement they have to have the system online, but we're choosing a time.
Speaker Change: Prior to the full hot commissioning. So actually it allow us to interact
and more.
Speaker Change: type of project of its kind. And to your to your point on Snyder, absolutely, I think as we
Speaker Change: Get some of the other and the full set up. It'll be three different gravity technologies between EVX, EVY, and the modular pumped hydro
Speaker Change: Up and running in the next two to three months combined with the software that's going to be orchestrating that including
Speaker Change: the coexistence of the generation TV in this case with multiple storage technologies. We will absolutely be planning something there and I appreciate the proactive.
Speaker Change: Push, and Ideasat there. We have not announced that yet, but I guess you're announcing that for us now, and we'll make sure it's on our action list here for the coming quarter and next.
Speaker Change: And the next question comes from the line of Noel Parks with Tui Brothers. Please proceed with your question.
Speaker Change: Hi, good afternoon. I had a battery storage question and a gravity storage question. So, you did mention
Speaker Change: applying your expertise to look at achieving greater energy density. And I was thinking about
Technology improvements in general on the battery storage side.
and what would...
such advances as
say also something that could increase battery life.
What would those do to project economics?
Speaker Change: I'm thinking if you have longer contracts, over time as you replace modules and so forth, maybe be able to upgrade them, what might that look like in terms of an impact?
Speaker Change: Look, I think, first of all, we are looking at and we'll be announcing some very innovative things relative to new ways to achieve very high or ultra high density relative to integrating, for example, structural options with our.
Civil Structural Material Science expertise combined with
Speaker Change: What I'll say broadly battery energy storage, so think about that as any container based energy storage that may be
short duration.
Speaker Change: and with a focus on on low cost, which we've had a lot of experience in in that optimization and, for example, reducing volume of concrete through eliminating rebar and steel and the structural design of concrete and replacing it with fiber reinforcements, for example.
Speaker Change: The second aspect around ensuring we're looking at safety and working
Speaker Change: with the right constituents there as we design new systems. That's, you know, again, fundamental and foremost, Nolan.
and I'll go back to what I mentioned with Tallastoga.
Speaker Change: and other ways we approach customers, we think about solving the customer problem, okay? So if you look at areas in higher density cities, for example, or even on just the outskirts where that energy density is at a premium and where you could have a...
you know, a light fit.
Speaker Change: to function technology that historically has not been able to achieve those energy densities and thinking about how we.
Speaker Change: Think about building and using structures to do that. These are things that are actively on our mind that customers are interested in. We're collaborating with a few customers with some new solutions there. And it's, you know, we're not ready to announce those yet. As you know, when we announce things, we announce them with customers.
Speaker Change: Okay, you haven't seen you know necessarily product announcements from us that aren't accompanied by some customer with it and You can accept that
Speaker Change: to be the case here. I'm sorry, there's some feedback on the line. Hopefully you could hear me. But in any event, so that's what we're thinking about there on energy density. I will also tell you that
Speaker Change: With what's happening in the battery world and and pricing we've seen at least 50% drops over the last year
and and fundamental you know LFP batteries and
Speaker Change: and other technologies that are attempting to get to market and and scale potentially, you know looking at longer duration, but but generally
Speaker Change: You know, we're not going to be someone that drives that innovation curve, meaning that there's plenty of people out there much bigger than us.
that are going to be focusing on that.
Speaker Change: You can consider some of that, you know, commodity technology that's about volume and getting price down. We're going to be focused on a lot of this around the value add, that wrapper, the ability to not only manage what's happening.
Speaker Change: In and around those systems with safety, reliability, available, guaranteeing availability of power, but but also something that's going to move up that stack for broader asset management and even getting the higher level software functions.
Speaker Change: Unknown Speaker ...in bidding, for example, and optimization around bidding platforms as we've built our software team the last few years, and the ...
Speaker Change: I was just thinking about Rudong and you mentioned the additional data that's becoming available and so forth.
Speaker Change: You know, it's not a new project anymore since it's been up and running.
Speaker Change: better efficiency, you know, might see reduced timelines and so forth. I'm just wondering if there's anything that stands out for you that you know you can look forward to in future China gravity storage projects.
Speaker Change: I'm also great question and let me let me share a few things here because it's been a Real learning there and as we license technology, okay
Speaker Change: When you do that, you're allowing a certain level of flexibility for that region or country to customize the technology to its own individual needs. So, for example, in China, while we've.
You know, we licensed the core technology there.
Speaker Change: We had a lot of innovation that we licensed, for example, in and around fiber reinforced concrete, which.
Speaker Change: serves to take out some of the volume you would other there have in pure cast in place. Um, so we've have a lot of, uh, innovation in the precasting, for example, that we've proven out in Snyder and at our R and D site in Switzerland, in China, they chose to go with cast in place because.
Speaker Change: That's what they do. That's how they've always done it. That's how they do it very low cost. For example, due to the cost of labor being so low there, we had a lot of automation, even in construction.
Speaker Change: that in some cases they chose to use labor because again, it was cheaper and known. So I think first of all, to your, it's a great question. We, the iterations of our gravity technology will look different.
Speaker Change: dependent on how it's going to be customized locally. And that's one of the beauties.
Speaker Change: of Gravity Energy Storage and the way we've designed it, because in countries like China, like India, like, for example, in the region in South Africa, there
Speaker Change: where they can basically source 100% of all the components and build it locally. It gives them the flexibility to choose, you know, where they want to maximize.
their efficiency and performance and cost.
Speaker Change: sticking with China, for example, too, on a on an efficiency basis, they made changes to the design just based on their own local safety standards. And in some cases that
Speaker Change: involved increasing the weight of the cage that carries the block and therefore increasing the counterweight, for example. And all of these things
Speaker Change: may have an impact on the scope of the, let's say the full innovation design that we did, but all of that doesn't have a large impact in terms of performance, which is why I was very excited to share what I shared, which even with those changes I just mentioned.
Okay, the changes of
Speaker Change: I'm increasing that safety factor a bit, increasing the weight, that increases the thickness for example of this.
Innovative Ribbon System, which they did choose to implement.
Okay, they chose to implement the most innovative.
Speaker Change: The fact that they're achieving 82, 83% from some of the initial data.
that we have there is unprecedented in any.
Speaker Change: thermodynamic process, any, you know, type of compressed air, liquid air, any other mechanical storage, any pumped hydro. It's the largest, it's the most efficient data point in the world that's not lithium-ion.
Okay, and that's exciting and so
Speaker Change: Just to close on your question, we've learned a lot in both core design, but also the practicality.
Speaker Change: of How It's Built, Andrea Pedretti, our CTO, and our software team, and Chris Wiese.
Speaker Change: who runs our our engineering and our labs group. They were just in China the last 10 days. That's where this data
Speaker Change: actually came out. We had our partners, Hebeling, which is a engineering, software engineering group out of Switzerland, there as well, the third party with us.
Speaker Change: and really interesting. I think their implementation and and how they're developing it and, and will be different and customized, I think, by region and all of that I'll finish with.
All this experience is helping us think through.
Speaker Change: how to apply these designs and the innovations in civil and structural engineering working with, for example, Bill Baker from Skidmore, Owings & Merrill and Jose Andrade, who's from Caltech, that spends, let's say, a good chunk of his time with us from his research and academic side and has been with us. So all of that innovation is what we're putting into
Speaker Change: Where you started your last question, which is new innovations, achieving energy density, and we're excited about sharing more about that in the future.
Speaker Change: Ladies and gentlemen, at this time we have reached the end of the question and answer session. Now I would like to turn the floor back over to Robert Piconi for any closing comments.
Robert Piconi: Great. Well, look, I again want to thank everybody for their time. And I'm sorry we didn't get to all the questions here, but we'll be following up with.
Robert Piconi: Folks, as normal post the call. We're excited. Hopefully, as you get a sense of and in the progress we're making and and going in here to a
Robert Piconi: Definitely an exciting finish on the year, but I think more importantly, seeing the execution of our strategy.
Robert Piconi: for the long term and how that's getting built out and manifests itself I think in
Robert Piconi: and now what you're seeing in a lot of the recent announcements and more to come there. And finally, just to thank again all the people and employees at Energy Vault and their support and all of our investors, partners, and the customers that keep us doing what we do. So thank you everyone very much.
thank
Speaker Change: And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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