ESS Tech Inc (GWH) 2023 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. (Operator Instructions)

女士們先生們，謝謝你們的支持。（操作員說明）

I would now like to turn the conference over to our host, Erik Bylin. Please go ahead.

現在我想將會議轉交給我們的主持人 Erik Bylin。請繼續。

Welcome to ESS's fourth quarter and fiscal year 2023 financial results conference call. Joining me on the call today from ESS are Eric Dresselhuys, CEO; and Tony Rabb, CFO. Following management's prepared remarks, we will hold a Q&A session.

歡迎參加 ESS 第四季和 2023 財政年度財務業績電話會議。今天與我一起參加電話會議的是 ESS 執行長 Eric Dresselhuys；和財務長托尼·拉布。在管理階層準備好發言後，我們將舉行問答環節。

Earlier today, ESS released financial results for the fiscal year 2023. The earnings release is available in the Investor Relations section of the company's website.

今天早些時候，ESS 發布了 2023 財年的財務表現。收益發布可在公司網站的投資者關係部分查看。

As a reminder, the information presented today will include forward-looking statement, including without limitation, statements about our growth prospects, partnership's, financial performance, and strategy for 2024 and beyond. The forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call, in particular, those described in our risk factors set forth in more detail on our most recent periodic reports filed with the Securities and Exchange Commission, as well as the current uncertainty and unpredictability in our business, issues with our partnerships, inflation, the markets, the economy, and the current geopolitical situation.

提醒一下，今天提供的資訊將包括前瞻性聲明，包括但不限於有關我們的成長前景、合作夥伴關係、財務業績以及 2024 年及以後策略的聲明。前瞻性陳述受到已知和未知的風險和不確定性的影響，這些風險和不確定性可能導致實際結果與本次電話會議期間預測或暗示的結果有重大差異，特別是我們在最近的定期報告中更詳細地闡述的風險因素中所述的結果向美國證券交易委員會提交的報告，以及我們業務當前的不確定性和不可預測性、我們的合作夥伴關係、通貨膨脹、市場、經濟和當前地緣政治局勢的問題。

You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law.

您不應依賴我們的前瞻性陳述作為未來事件的預測。我們在本次電話會議中所做的所有前瞻性陳述均基於截至本新聞稿發布之日的假設和信念，除法律要求外，我們不承擔更新任何前瞻性陳述的義務。

During the call, we will also present certain financial information on a non-GAAP basis. Management believes that non-GAAP financial measures taken in conjunction with US GAAP financial measures provide useful information for both management and investors by excluding certain items that are not indicative of our core operating results. Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Reconciliations between US GAAP and non-GAAP results are present within our earnings release.

在電話會議期間，我們也將提供某些非公認會計原則的財務資訊。管理層認為，結合美國公認會計準則財務措施採取的非公認會計準則財務措施通過排除某些不代表我們核心經營業績的項目，為管理層和投資者提供了有用的信息。管理階層在內部使用非公認會計準則衡量標準來了解、管理和評估我們的業務並做出營運決策。美國公認會計原則和非公認會計原則結果之間的對帳已包含在我們的收益報告中。

With that, I will turn the call over to ESS's CEO, Eric (inaudible).

接下來，我會將電話轉給 ESS 執行長 Eric（聽不清楚）。

Welcome, and thanks for joining the call. ESS continues to make substantial progress on our strategy, building a world-class, scalable company that is well positioned to serve the immense long-duration energy storage market in front of us. Although we had numerous accomplishments and grew the business to record levels in 2023, due to unforeseen customer delays, we ultimately came up short of our revenue goal for the year. In spite of this shortfall, I expect the milestones achieved in the course of the year bode well for our future.

歡迎，並感謝您加入通話。ESS 繼續在我們的策略上取得實質進展，打造一家世界一流的、可擴展的公司，為我們面前巨大的長期儲能市場提供服務。儘管我們取得了許多成就，並將業務發展到 2023 年創紀錄的水平，但由於不可預見的客戶延誤，我們最終沒有達到今年的收入目標。儘管有這樣的差距，我預計今年所取得的里程碑對我們的未來來說是個好兆頭。

Our market opportunity and customer engagement remain robust. Energy providers are increasingly recognizing that there is a vast hole in their plans to get to carbon neutral that only long-duration storage can fill. And I believe utilities are increasingly recognizing the limited options they have to supplement their renewable portfolio with a commercially viable LDES solution. Thanks to the decision ESS made more than a decade ago to hone in on our iron flow technology, we have a seat at the table with many of the largest, most forward-thinking utilities today.

我們的市場機會和客戶參與度仍然強勁。能源供應商越來越認識到，他們的碳中和計畫存在巨大漏洞，只有長期儲存才能填補。我相信公用事業公司越來越認識到他們必須透過商業上可行的 LDES 解決方案來補充其再生能源產品組合的有限選擇。感謝 ESS 十多年前做出的決定，專注於我們的鐵流技術，我們今天在許多最大、最具前瞻性的公用事業公司中佔有一席之地。

As you have seen from our announcements, we delivered numerous systems to these partners in 2023, including SMUD, Army Corps of Engineers, Burbank Water and Power and more. We see extraordinary opportunity for ESS in the near term and well into the future, and thanks to the great work of the team here. Even with the intentionally measured pace we are developing the business, I believe we can make the case that we are ahead of other LDES companies as we look across the landscape today. Indeed, we are poised to ramp our shipments and revenue late in 2024 and into 2025 while maintaining a sizable financial cushion, which should bolster our market position.

正如您從我們的公告中看到的，我們在 2023 年向這些合作夥伴交付了許多系統，包括 SMUD、陸軍工程兵團、伯班克水電公司等。我們看到了 ESS 在近期和未來的巨大機遇，這要感謝這裡團隊的出色工作。即使我們刻意衡量了業務發展的速度，但我相信，當我們縱觀當今的情況時，我們可以證明我們領先於其他 LDES 公司。事實上，我們準備在 2024 年末和 2025 年增加我們的出貨量和收入，同時保持相當大的財務緩衝，這應該會鞏固我們的市場地位。

The road to building a company in a new space is bumpy, particularly during the early stages when companies are more reliant on the timing of revenue and shipments and often things don't happen as quickly as one would like. And certainly, we've experienced that as we've been ramping up here at ESS.

在新領域建立公司的道路是坎坷的，特別是在早期階段，公司更依賴收入和發貨的時間，而且事情往往不會像人們希望的那麼快發生。當然，當我們在 ESS 不斷進步時，我們已經經歷過這一點。

However, the behind-the-scenes work to execute on our strategy has progressed to plan. Our near-term challenges to maintain moderate and consistent scale shipping and installing energy warehouses have led to inconsistent financial results. As we have shared on virtually every earnings call, most of these challenges are caused by customer-related delays that are unavoidable in our industry and not a reflection of customer engagement or market demand.

然而，執行我們策略的幕後工作已按計劃進行。我們近期面臨的維持適度和一致規模的運輸和安裝能源倉庫的挑戰導致了財務表現不一致。正如我們在幾乎每次財報電話會議上所分享的那樣，大多數挑戰都是由與客戶相關的延誤引起的，這在我們的行業中是不可避免的，而不是客戶參與度或市場需求的反映。

That said, we, as a team, ultimately take ownership of the outcomes. And we are certainly disappointed we were not able to deliver the expectations we set for the back half of 2023. Two key customers, ESI and Honeywell, were expected to be material contributors to achieving our fourth-quarter revenue target, but were delayed and not able to be included as part of Q4 revenue. However, I can share that we did through these delays in the first quarter.

也就是說，我們作為一個團隊，最終對結果負責。我們當然對未能實現 2023 年下半年的預期感到失望。ESI 和霍尼韋爾這兩個主要客戶原本預計將為實現我們第四季度的收入目標做出重大貢獻，但它們被推遲了，無法計入第四季度收入的一部分。然而，我可以分享我們在第一季克服了這些延誤。

While we were expecting roughly $2 million in revenue from these two customers in the fourth quarter to meet our full-year objective of $9 million, we now expect to include that revenue as a part of our Q1 results. In fact, we continue to make great progress with these customers, and I'll share more on that in a moment.

雖然我們預計第四季度來自這兩個客戶的收入約為 200 萬美元，以實現我們 900 萬美元的全年目標，但我們現在預計將該收入納入我們第一季業績的一部分。事實上，我們繼續與這些客戶取得巨大進展，我稍後將分享更多相關內容。

While delays are frustrating in the near term, especially as an early-stage company, we expect that as we grow and diversify our business across customers and work to continue to standardize our contracts and operations, these pumps will smooth and our path to scale remains intact.

雖然短期內的延誤令人沮喪，尤其是作為一家早期公司，但我們預計，隨著我們在客戶之間發展和多元化業務，並努力繼續標準化我們的合約和運營，這些泵將順利進行，我們的規模化之路仍然存在完好無損的。

We are building ESS with a very distinct strategy in mind, focusing on refining our iron flow battery design for optimal manufacturability, namely the lowest cost, coupled with the highest quality and throughput, while conserving our cash. This should allow us to capitalize on the fundamental cost advantage we enjoy using iron, salt, and water to store electricity.

我們在建造ESS 時考慮了一個非常獨特的策略，重點是改進我們的鐵液流電池設計，以實現最佳的可製造性，即最低的成本，加上最高的品質和產量，同時節省我們的現金。這將使我們能夠利用我們利用鐵、鹽和水來儲存電力所享有的基本成本優勢。

As we work to reduce our product costs, we strategically chose to moderate the number of energy warehouses we build and ship, focusing on the customers and the segments that provide the greatest long-term opportunity. And this strategy is working as it has allowed us to conserve our cash balance while making great strides on the design initiatives to lower material and labor costs and enable us to reach non-GAAP gross margin profitability on a unit basis, an objective we still believe is achievable by the back half of the year.

在努力降低產品成本的同時，我們策略性地選擇減少建造和運輸的能源倉庫數量，並專注於提供最大長期機會的客戶和細分市場。這項策略正在發揮作用，因為它使我們能夠保留現金餘額，同時在設計舉措上取得重大進展，以降低材料和勞動力成本，並使我們能夠實現單位基礎上的非公認會計準則毛利率盈利能力，這是我們仍然相信的目標下半年即可實現。

Given our strong cash balance and the progress we've made with the design of our products and operations, I feel the team has been extremely successful. In parallel, we are proving the necessity of long-duration energy storage by signing large multi-year deals that could deliver well north of $1 billion in revenue from future orders as we execute on scaling our technology. Let me repeat, simply executing on our existing customers and partners can deliver all of the volume we need over the next few years.

鑑於我們強勁的現金餘額以及我們在產品設計和營運方面取得的進展，我認為我們的團隊非常成功。同時，我們正在透過簽署大型多年期協議來證明長期能源儲存的必要性，隨著我們執行擴展我們的技術，這些協議可以從未來訂單中帶來超過 10 億美元的收入。讓我再說一遍，只需對我們現有的客戶和合作夥伴執行即可滿足我們未來幾年所需的所有數量。

In 2022, we landed Sacramento Municipal Utility District, a utility with one of the most aggressive and detailed plans to get to carbon neutral. And we have already delivered and commissioned our first six units with them. We signed a partnership with Energy Storage Industries Asia Pacific and Australia, whose initial customers include Stanlow and Energy Queensland in support of a very exciting initiative announced by the government of Queensland to deploy over 3 gigawatts of batteries to reach their decarbonization goals.

2022 年，我們收購了薩克拉門托市政公用事業區，這是一個擁有最積極、最詳細的碳中和計畫的公用事業公司之一。我們已經向他們交付並調試了前六台設備。我們與亞太和澳洲能源儲存工業公司簽署了合作夥伴關係，其最初客戶包括斯坦洛和昆士蘭能源公司，以支持昆士蘭州政府宣布的一項非常令人興奮的舉措，即部署超過3 吉瓦的電池以實現其脫碳目標。

In 2023, we signed an agreement with LEAG, the second largest electricity generator in Germany, whose plan is to deploy 500-megawatt-hour iron flow battery building blocks coupled to renewables to supplant coal generation plants. All told, they expect to build 20 to 30 gigawatt hours of storage. We're pleased to share that we have now completed the first stage of engineering design with LEAG.

2023年，我們與德國第二大發電商LEAG簽署了一項協議，其計劃部署與再生能源相結合的500兆瓦時鐵液流電池模組，以取代燃煤發電廠。總而言之，他們預計將建造 20 至 30 吉瓦時的儲存容量。我們很高興地告訴大家，我們現在與 LEAG 完成了工程設計的第一階段。

While these are extraordinary validations of our market and technology, the deal we completed with Honeywell in September of last year is probably the most transformative. Honeywell took an equity position in ESS at a premium to the market price, entered into a co-development agreement for energy storage, and most importantly, plans to resell our technology into their channels with an initial target of $300 million in the first six years, which included a prepayment of $15 million.

雖然這些都是對我們市場和技術的非凡驗證，但我們去年 9 月與霍尼韋爾完成的交易可能是最具變革性的。霍尼韋爾以高於市場價格的價格收購了ESS 的股權，簽訂了儲能聯合開發協議，最重要的是，計劃將我們的技術轉售給他們的管道，最初的目標是在前六年達到3 億美元，其中包括 1500 萬美元的預付款。

In the fourth quarter, we hit the ground running, and as mentioned, we have already delivered their initial order. Our go-to-market teams are deeply engaged, and we are moving towards our first joint development projects, all designed to improve the cost, performance, and scalability of our solutions. This partnership was more than six months in the making and Honeywell did extensive due diligence into our technology, operations, IP, and customer base. So this rings true as an incredible proof point for our technology, our operations, and the progress we've made.

在第四季度，我們開始運作，正如前面提到的，我們已經交付了他們的初始訂單。我們的市場推廣團隊深入參與，我們正在邁向我們的第一個聯合開發項目，所有這些項目都是為了提高我們解決方案的成本、效能和可擴展性。這次合作歷時六個多月，霍尼韋爾對我們的技術、營運、智慧財產權和客戶群進行了廣泛的盡職調查。因此，這確實是我們的技術、我們的營運以及我們所取得的進步的令人難以置信的證據。

Encouraged by the belief of these influential customers and partners, we remain convinced that ESS has a strong right to win in the market. The long-duration energy storage market has tremendous tailwinds, and the primary alternative technology, lithium-ion, is rife with flaws. There are numerous nascent technologies trying to climb that mountain to scale viability, but ESS has a substantial lead on all of them, improving our solutions and scaling our processes.

在這些有影響力的客戶和合作夥伴的信念的鼓舞下，我們仍然堅信 ESS 擁有在市場上獲勝的強大權利。長期儲能市場有著巨大的推動力，而主要的替代技術鋰離子電池卻充滿了缺陷。有許多新興技術試圖攀登這座山峰以擴大其可行性，但 ESS 在所有這些技術上都處於領先地位，改進了我們的解決方案並擴展了我們的流程。

We have been developing a unique technology for more than a decade and have surrounded it with an incredible IP moat. ESS is blessed with a solution that stores energy and some of the most abundant and inexpensive raw materials available: iron, salt, and water. It doesn't catch fire, explode, or require difficult-to-source raw materials, and is manufactured with a very capital-efficient process, creating a fundamental cost advantage at scale. Executing on our manufacturability initiatives and our customer relationships is the key to our success, and that is why I am so pleased with our operational progress.

十多年來，我們一直在開發一項獨特的技術，並為它建立了令人難以置信的智慧財產權護城河。ESS 擁有一種儲存能源和一些最豐富、最便宜的原材料的解決方案：鐵、鹽和水。它不會著火、爆炸，也不需要難以取得的原料，並且採用資本效率非常高的製程製造，從而在規模化方面創造了根本的成本優勢。執行我們的可製造性計劃和客戶關係是我們成功的關鍵，這就是為什麼我對我們的營運進展如此滿意。

While we have given you glimpses into the progress we have been making operationally, I would like to recap some of the highlights from our accomplishments in 2023. At the top of the list, our cost-out initiatives have resulted in tremendous savings for each EW we build. We brought down the cost to build in EW by almost 60% in 2023. This improvement included numerous noteworthy highlights, including lowering labor hours to build the balance of system by 45% and decreasing cycle times for power modules by 52% and proton pumps by almost 70%, all of which lowered EW build cycle time by 73% while reducing the hours required by more than a third.

雖然我們已經向您介紹了我們在營運方面取得的進展，但我想回顧一下我們 2023 年取得的成就的一些亮點。最重要的是，我們的成本削減計劃為我們建造的每個電子戰節省了大量成本。到 2023 年，我們將電子戰建設成本降低了近 60%。這項改進包括許多值得注意的亮點，包括將建造系統平衡的工時減少了45%，將電源模組的週期時間縮短了52%，將質子幫浦的週期時間縮短了近70%，所有這些都將EW建造週期時間縮短了73%，同時所需時間減少三分之一以上。

We improved our electrolyte so that our energy density increased by 25%. Additionally, we did great work optimizing our bill of materials and vendor base. Our customer success team dropped the time to commission an EW at the customer site by 50%. We continued to fortify our intellectual property moat and filed an additional 82 patents, while also having 52 patents granted within the year, bringing the total to 367 patents filed and 77 patents granted.

我們改進了電解質，使能量密度提高了 25%。此外，我們在優化物料清單和供應商基礎方面做了出色的工作。我們的客戶成功團隊將在客戶現場調試電子戰的時間縮短了 50%。我們持續強化智慧財產權護城河，年內新增專利申請 82 項，授權專利 52 項，申請專利總數達 367 項，授權專利總數達 77 項。

We vastly improved our revenue recognition process and shifted out of development accounting. We accomplished this while almost cutting our Q4 adjusted EBITDA loss in half year over year, which enabled us to end the year with $108 million in cash on our balance sheet.

我們大幅改善了收入確認流程並放棄了發展會計。我們實現了這一目標，同時幾乎將第四季度調整後 EBITDA 損失同比減少了一半，這使我們在年底時資產負債表上的現金達到 1.08 億美元。

Our rate of operational execution improved dramatically in 2023. And with the team hitting their stride, we have detailed plans to lower the cost to build an EW by up to another 40% in 2024. This includes further dramatic simplification of the design and assembly along with optimization of our power module automation. In fact, as we move to our next round of our EW design, I can share some details that you'll [listen] how we are lowering cost and time of assembly.

2023 年，我們的營運執行率顯著提高。隨著團隊的不斷進步，我們制定了詳細計劃，計劃在 2024 年將電子戰的建造成本再降低 40%。這包括進一步大幅簡化設計和組裝以及優化我們的電源模組自動化。事實上，當我們進入下一輪電子戰設計時，我可以分享一些細節，您將[聽]我們如何降低組裝成本和時間。

Simplifying the design to make it easier to manufacture means lowering the number of touches and pieces. And as we move through 2024, we are lowering our pipe couplings by 34% and paid bonds by 18%, lowering our hardware count by 44% and lowering the wiring in any EW by 28%. This simplifies every step of the manufacturing process from procurement to assembly to final test. All told, this should also increase our capacity by another 20% without further investment, simply from optimizing the design.

簡化設計以使其更易於製造意味著減少接觸和零件的數量。到 2024 年，我們將管道接頭數量減少 34%，支付保證金減少 18%，硬體數量減少 44%，電子戰中的佈線數量減少 28%。這簡化了從採購到組裝再到最終測試的製造過程的每一步。總而言之，只需優化設計，無需進一步投資，我們的產能就能再增加 20%。

Perhaps most importantly, as we shared last quarter, we are building our first energy center with Portland General Electric. This process has gone well, and we are currently testing the CC and expect to complete validation this quarter. The energy center delivers greater energy capacity and density, and we expect it to be a preferred incarnation of our technology for utilities and other large energy providers due to its scalability and value proposition.

也許最重要的是，正如我們上季度分享的那樣，我們正在與波特蘭通用電氣共同建造我們的第一個能源中心。這個過程進展順利，我們目前正在測試 CC，預計本季完成驗證。該能源中心提供更大的能源容量和密度，由於其可擴展性和價值主張，我們預計它將成為公用事業公司和其他大型能源供應商的技術的首選體現。

We expect to start delivering the first commercial energy centers late this year to TECO and Sacramento Municipal Utility District. And with this, we remain on track to start ramping ECs as we head out of 2024 and into 2025.

我們預計今年底開始向東元和薩克拉門托市政公用事業區交付第一批商業能源中心。正因如此，我們仍有望在 2024 年進入 2025 年時開始擴大 EC。

I hope I conveyed our excitement about the progress we've made this year and the trajectory we are up. As we look forward to this fiscal year, our focus remains consistent. We plan to develop scalable processes that lower costs, manage our growth to conserve cash, build our long-term book of business, and continue to demonstrate the critical role we expect LDES to play in the energy transition. The lessons we learned in 2023 as we made progress scaling the business should be invaluable in helping us successfully execute on our vast long-term potential.

我希望我表達了我們對今年所取得的進展和未來發展軌蹟的興奮之情。當我們展望本財年時，我們的重點仍然是一致的。我們計劃開發可擴展的流程來降低成本，管理我們的成長以節省現金，建立我們的長期業務，並繼續展示我們期望 LDES 在能源轉型中發揮的關鍵作用。我們在 2023 年在擴大業務方面取得進展時所學到的經驗教訓對於幫助我們成功發揮巨大的長期潛力來說應該是非常寶貴的。

Given the variability with our customers' deployment activity, we are taking a conservative view toward our external projections in 2024, and we'll defer giving specific guidance at this time. But we'll share that we expect to grow substantially in 2024 driven by an inflection point in the second half that is enabled by achieving our cost-out targets and beginning the initial commercial shipments of our energy center, allowing us to dramatically increase our growth rate and drive efficiencies across the business.

鑑於客戶部署活動的可變性，我們對 2024 年的外部預測持保守態度，目前我們將推遲提供具體指引。但我們將分享的是，我們預計在下半年拐點的推動下，在2024 年將大幅增長，這是透過實現我們的成本目標並開始能源中心的初始商業發貨而實現的，這使我們能夠大幅提高成長評估並提高整個企業的效率。

We expect to triple or quadruple our 2023 levels in the coming year, but project timing is still in flight. As our visibility improves during the year, we hope to be more specific about our ramp plans. This is an exciting and dynamic market space, and we look forward to continuing to scale our business to meet the growing demand.

我們預計來年將 2023 年的水平提高三倍或四倍，但專案時間仍在安排中。隨著今年我們的知名度不斷提高，我們希望能夠更具體地介紹我們的坡道計畫。這是一個令人興奮且充滿活力的市場空間，我們期待繼續擴大我們的業務以滿足不斷增長的需求。

We feel that with the team we've built, the technology we're developing, and a market driven by the strong tailwinds provided by the IRA rate and increasing regulatory imperatives, ESS is positioned to capitalize on its first-mover advantage in this new category of long-duration storage. And as we've seen in other industries, early leadership can deliver enduring competitive advantage long into the future.

我們認為，憑藉我們已經建立的團隊、我們正在開發的技術，以及由 IRA 利率和日益嚴格的監管要求提供的強勁推動力推動的市場，ESS 能夠在這一新領域充分利用其先發優勢。長期儲存的類別。正如我們在其他行業所看到的那樣，早期的領導地位可以在未來很長一段時間內帶來持久的競爭優勢。

And with that, I'll turn it over to Tony.

有了這個，我會把它交給東尼。

Thanks, Eric. Unless otherwise noted, all numbers we discuss today will be on a non-GAAP basis. You'll find the reconciliation of GAAP to the non-GAAP financial measures in our earnings release, which is posted on our Investor Relations website.

謝謝，埃里克。除非另有說明，我們今天討論的所有數字都將基於非公認會計原則。您可以在我們的收益報告中找到 GAAP 與非 GAAP 財務指標的調整表，該報告發佈在我們的投資者關係網站上。

In the fourth quarter, we delivered eight energy warehouses across a number of customers. However, there were certain delays that caused revenue we expected to come in during Q4 to get pushed out to the first quarter. This was across two customers, Honeywell and ESI, and amounted to approximately $2 million in revenue. As a result, our revenue fell short of expectations, coming in at $2.8 million for the fourth quarter and $7.5 million for the full year.

第四季度，我們向多家客戶交付了八個能源倉庫。然而，存在某些延遲，導致我們預計第四季度的收入被推遲到第一季。這涉及兩個客戶：霍尼韋爾和 ESI，收入約為 200 萬美元。結果，我們的收入未達到預期，第四季營收為 280 萬美元，全年營收為 750 萬美元。

In spite of these disappointing top-line results, I'd like to reiterate what Eric said about the significant headway we've made in the last year in scaling the business, streamlining our revenue recognition process, reducing costs, and improving manufacturing efficiency. The team has worked tirelessly to position ESS for continued growth in the coming year, and we remain confident in our ability to execute successfully on our long-term strategy.

儘管營收結果令人失望，但我想重申艾瑞克所說的話，也就是我們去年在擴大業務、簡化收入確認流程、降低成本和提高製造效率方面取得的重大進展。團隊孜孜不倦地努力使 ESS 在來年實現持續成長，我們對成功執行長期策略的能力充滿信心。

As a reminder, beginning in Q3, we transitioned out of development accounting and into commercial inventory accounting. So we are now reporting our cost of revenue separately from our operating expenses and beginning to report inventory on our balance sheet. Our cost of revenue was $10.3 million in the fourth quarter.

提醒一下，從第三季開始，我們從開發會計過渡到商業庫存會計。因此，我們現在將收入成本與營運費用分開報告，並開始在資產負債表上報告庫存。第四季我們的收入成本為 1,030 萬美元。

In addition, as we detailed last quarter, as part of the transition from R&D accounting to inventory accounting and the associated LCNRV adjustments, there are a fair number of items included in COGS that dramatically impact our current COGS results that would not be material contributors as we reach scale. Due to this, our COGS results will not fully reflect our cost reduction progress, thereby making it difficult to assess our progress towards profitability.

此外，正如我們上季度詳細介紹的那樣，作為從研發會計向庫存會計過渡以及相關LCNRV 調整的一部分，銷貨成本中包含相當多的項目，這些項目對我們當前的銷貨成本結果產生了巨大影響，但這些項目不會對我們目前的銷貨成本結果產生重大影響，因為我們達到了規模。因此，我們的銷貨成本結果將無法完全反映我們的成本削減進度，從而難以評估我們的獲利進度。

As we increase scale and approach adjusted gross margin breakeven on our EWs in the second half of 2024, we expect the impact of the LCNRV adjustment to our non-GAAP gross margins to decrease.

隨著我們在 2024 年下半年擴大規模並接近調整後的 EW 毛利率盈虧平衡，我們預計 LCNRV 調整對我們的非 GAAP 毛利率的影響將會減少。

Our non-GAAP operating expenses for Q4 were in line with our expectations at $9.5 million, and our non-GAAP R&D came in at $3.5 million, which we believe is reflective of our current run rate. With that, we reported Q4 adjusted EBITDA of negative $12.8 million, another significant sequential and year-over-year improvement and indicative of our trajectory to profitability.

我們第四季的非 GAAP 營運費用為 950 萬美元，符合我們的預期，我們的非 GAAP 研發費用為 350 萬美元，我們認為這反映了我們目前的運作率。由此，我們報告第四季度調整後 EBITDA 為負 1280 萬美元，這是另一個顯著的環比和同比改善，表明我們的盈利軌跡。

Following the cash infusion of $42.5 million in Q3 from Honeywell, we ended the fourth quarter with $108.1 million in cash and short-term investments. We plan to continue to effectively manage our cash burn rate in the coming quarters, and the cash on hand should last us well into the first half of 2025.

繼霍尼韋爾在第三季注入 4,250 萬美元現金後，我們第四季末的現金和短期投資為 1.081 億美元。我們計劃在未來幾季繼續有效管理我們的現金消耗率，手頭現金應該可以維持到 2025 年上半年。

While not pressing, we expect to continue to opportunistically look to strengthen our balance sheet through dilutive and non-dilutive means to provide the necessary capital to give us operational flexibility to respond to market demands. We feel very good about our current cash position and liquidity and the extended runway we now have to push towards our longer-term goal of getting to cash flow breakeven.

雖然不緊迫，但我們預計將繼續機會主義地透過稀釋和非稀釋方式加強我們的資產負債表，以提供必要的資本，使我們能夠靈活地應對市場需求。我們對目前的現金狀況和流動性以及我們現在必須推動實現現金流收支平衡的長期目標的擴展跑道感到非常滿意。

And with that, I'll open it up for questions.

接下來，我將開放提問。

(Operator Instructions) Thomas Boyes, TD Cowen.

（操作員說明）Thomas Boyes，TD Cowen。

Perfect. Thanks for taking my questions. Maybe first, I wanted to just touch on the project delays. With customers, is this primarily an interconnection issue or are there supply chain impacts? We've heard from a lot of project developers that are being stymied by transformer availability. Since some of those lead times are over two years at this point, so just wondering if you could kind of talk through maybe the nature of some of those delays or if the market at large, what you're seeing.

完美的。感謝您回答我的問題。也許首先，我想談談專案的延誤。對客戶來說，這主要是互連問題還是對供應鏈有影響？我們從許多專案開發商得知，他們正因變壓器的可用性而受到阻礙。由於目前其中一些交付時間已經超過兩年，所以想知道您是否可以談談其中一些延遲的性質，或者整個市場，您所看到的情況。

Sure, Thomas, Eric here. I'll take that. It's a great question. And it's, I think, as you point out, something that's happening across the industry. It's a combination of impacts. There's no one thing. In some cases, it's inverters and transformers and delays, other delays related to site readiness.

當然，托馬斯、埃里克在這裡。我會接受的。這是一個很好的問題。我認為，正如您所指出的，這是整個行業正在發生的事情。這是多種影響的結合。沒有一件事了在某些情況下，是逆變器和變壓器的延遲，其他延遲與現場準備有關。

So we'll have a project plan with the customer, and they'll say, I'm ready for the products to arrive on a certain date. And then they'll call at the 11th hour and say, well, wait a minute, the civil works aren't done yet and the pads aren't in place. So sometimes it's things as simple as that.

因此，我們將與客戶制定一個專案計劃，他們會說，我已準備好產品在特定日期到達。然後他們會在第 11 個小時打電話說，好吧，等一下，土木工程還沒完成，墊子還沒就位。所以有時候事情就是這麼簡單。

In some cases, it's delays in getting a contracting done or other kind of operational things in terms of the logistics of the planning. So far, we haven't had any short-term problems with interconnect, but as the projects are getting bigger, we're paying a lot of attention to that because we've seen what other folks have gone through.

在某些情況下，在規劃的後勤方面，會延遲完成合約或其他類型的營運事務。到目前為止，我們還沒有遇到任何互連方面的短期問題，但隨著專案變得越來越大，我們對此給予了很多關注，因為我們已經看到了其他人經歷過的事情。

Got it. That's helpful. And maybe as my follow-up, I just wanted to maybe understand how you're thinking about 45X credits. Is this something that you would think about as self-consuming or are there plans to take advantage of the transferability of the credit?

知道了。這很有幫助。也許作為我的後續行動，我只是想了解您如何看待 45X 學分。您是否認為這是自我消費，或是否打算利用信用的可轉讓性？

We've been hearing about ranges of about 10% to 5% discounts on the dollars -- pennies on the dollar, depending on the size of credits that one would be able to transfer. Just wondering if you have any thoughts.

我們聽說過大約 10% 到 5% 的折扣，這取決於一個人能夠轉移的信用額度的大小。只是想知道你是否有任何想法。

Hey, Thomas, yeah, this is Tony. So we've elected to go with direct pay on the production tax credits. We've already realized some in 2023. And the expectation with our volume ramping up this year would be substantially bigger impact. And based on some conversations we've had with folks, we do believe that there will be a market for us to be able to finance those production tax credits. And so we're evaluating those options and alternatives now.

嘿，托馬斯，是的，這是托尼。因此，我們選擇直接支付生產稅收抵免。我們已經在 2023 年實現了一些目標。今年我們的銷售增加預計會產生更大的影響。根據我們與人們的一些對話，我們確實相信我們將有一個市場能夠為這些生產稅收抵免提供資金。因此，我們現在正在評估這些選項和替代方案。

Great. Appreciate it. I'll hop back in the queue.

偉大的。欣賞它。我會跳回到隊列中。

George Gianarikas, Canaccord.

喬治·賈納里卡斯，Canaccord。

Hi, everyone. Thank you for taking my questions. I just want to make sure I heard it correctly. Did you say that you expect a tripling or quadrupling of revenue in calendar '24?

大家好。感謝您回答我的問題。我只是想確保我聽到的是正確的。您是否說過您預計 24 年的收入將增加三倍或四倍？

Hey, George, Eric here. That's a range that we expect to see. As we've shared, because of some of these lumps and the timing, we're being a little cautious on being too specific about it. But it's certainly going to be substantial growth in the year.

嘿，喬治，埃里克在這裡。這是我們期望看到的範圍。正如我們所分享的，由於其中一些問題和時間安排，我們對過於具體的情況持謹慎態度。但今年肯定會大幅成長。

Got it. And I think you also said that you expect that to ramp in the back half of the year. What specific projects do you expect to push the revenue higher in the back half? If you can share that. Thank you.

知道了。我想您也說過，您預計這一數字將在今年下半年增加。您預計下半年哪些具體項目將推動營收成長？如果你能分享的話。謝謝。

Yeah, I think about it -- from our standpoint, the two biggest drivers to it are where we are on our cost-out curve. As we shared, we made really great progress on driving costs out of the product in '23 and have very ambitious plan to continue that here in '24. So the EW on the existing EW products that hitting that trigger to hitting the lower cost points is frankly more important than any one customer or another customer in driving our ambitions for volume.

是的，我想了一下——從我們的角度來看，兩個最大的驅動因素是我們所處的成本曲線。正如我們所分享的，我們在 23 年在降低產品成本方面取得了巨大進展，並製定了非常雄心勃勃的計劃，將在 24 年繼續這一目標。因此，現有電子戰產品上的電子戰，坦白說，在推動我們實現產量目標方面，擊中觸發器以達到較低成本點比任何一個客戶或另一個客戶都更重要。

And then the second thing is starting to ship the ECs. So as we've shared, we've got the initial project with Portland General Electric. That's going to pace, so we feel great about that. And the current plan is for TECO and SMUD to receive their first EC units in the second half of the year. So it's really the combination of those two things that drives that inflection point in the second half.

然後第二件事是開始運送 EC。正如我們所分享的，我們已經與波特蘭通用電氣公司達成了初步計畫。這將會加快步伐，所以我們對此感覺很好。目前東元和 SMUD 的計畫是在今年下半年接收第一批 EC 單位。因此，正是這兩件事的結合推動了下半年的轉折點。

Got it. And maybe as a follow-up, I'm just curious on pricing. Given the pretty much a collapse that we've seen in lithium prices and in lithium-ion cell prices, are you seeing a stable pricing environment from your perspective? Or is that pricing umbrella impacted you? Thank you.

知道了。也許作為後續行動，我只是對定價感到好奇。鑑於我們看到鋰價格和鋰離子電池價格幾乎暴跌，您認為定價環境是否穩定？或者說定價保護傘對你有影響嗎？謝謝。

Sure. So far, I think it's been pretty stable on our side. But we're certainly watching what's happening in the lithium market and monitoring the impact that that will have. We have a very ambitious cost-out plan that extends through this year and beyond. And we know that we've got a great long-term cost entitlement. But certainly, competitive price is falling -- continues to drive the imperative to stay on schedule.

當然。到目前為止，我認為我們這邊的情況相當穩定。但我們當然正在關注鋰市場正在發生的事情，並監控其將產生的影響。我們有一個非常雄心勃勃的成本支出計劃，該計劃將持續到今年及以後。我們知道我們擁有巨大的長期成本權利。但可以肯定的是，具有競爭力的價格正在下降——繼續推動著按計劃進行的必要性。

Thank you.

謝謝。

Colin Rusch, Oppenheimer.

科林‧魯施，奧本海默。

Thanks so much, guys. With these adjustments on the design, can you talk a little bit about how different the supply chain is and what the supply chain looks like in terms of single-source components and your ability to navigate to a complete set with the existing suppliers?

非常感謝，夥計們。透過對設計的這些調整，您能否談談供應鏈有多麼不同，供應鏈在單一來源組件方面是什麼樣子，以及您與現有供應商導航到完整套件的能力？

Sure. I'll take the crack at that, and Tony can add in if need be. We certainly have transformed a lot of our supply chain to try to take out some of the risk and variability that we've seen in the past. And we've talked about that on these calls a number of times.

當然。我會盡力解決這個問題，如果需要的話托尼也可以補充。我們當然已經改變了很多供應鏈，試圖消除我們過去看到的一些風險和變化。我們已經在電話會議中多次討論過這一點。

That equates to a lot more domestication, and it also equates to a lot of our transformation has been to higher-volume manufacturers who have, by definition, in most cases, multiple facilities. So what we've been trying to do is drive lower prices with more reliable suppliers who have built-in redundancy into their products.

這相當於更多的馴化，也相當於我們的許多轉型是向產量更高的製造商轉變，根據定義，這些製造商在大多數情況下擁有多個設施。因此，我們一直在努力做的是與更可靠的供應商一起降低價格，這些供應商在其產品中內建了冗餘功能。

And then separately, we've been looking to find places to have alternative sources of supply for key components wherever that's practical. Now as we get the higher and higher volumes, the idea of diversification in the supplier base gets a little easier to execute than it is for us today. But we think we can get a lot of that diversification and surety of supply by working with larger vendors who have multiple facilities in the first place.

然後，我們一直在尋找可行的地方來尋找關鍵零件的替代供應來源。現在，隨著我們的銷售量越來越大，供應商多元化的想法比我們今天更容易執行。但我們認為，透過與擁有多個設施的大型供應商合作，我們可以實現供應的多元化和保障。

That's actually super helpful. And then in terms of debt providers and underwriting standards along with potential insurance providers for some of these projects, can you talk about the maturity of those processes to really look at performance of the assets in the field and how comfortable those underwriters are getting with the technology and how these assets are performing at this point?

這實際上非常有幫助。然後，就債務提供者和承保標準以及其中一些項目的潛在保險提供者而言，您能否談談這些流程的成熟度，以真正了解該領域資產的表現以及這些承銷商對這些項目的適應程度如何技術以及這些資產目前的表現如何？

Yeah, sure. So I'll answer it in two parts really. We've had a lot of engagement with people who do underwriting at the project level, and that's both for independent power producers but also kind of more traditional legacy producers.

好，當然。所以我真的會分成兩個部分來回答。我們與在專案層級進行承銷的人員進行了許多接觸，這既適用於獨立電力生產商，也適用於更傳統的傳統生產商。

And we've broken that out into two parts. There's one kind of just a general product breakdown where I think we're very mature and certainly the agreement we have with Munich Re and all of the diligence we've been sharing with people for years gives a lot of comfort on that front.

我們將其分為兩部分。有一種只是一般的產品細分，我認為我們非常成熟，當然我們與慕尼黑再保險達成的協議以及我們多年來與人們分享的所有努力在這方面給了我們很大的安慰。

As we get more and more operating cycles in the field, that helps drive the bankability study in terms of performance, the number of cycles that we got. I look at that -- I think it's getting increasingly comfortable for people, but there's almost no more -- no limit to it. The more product you get in the field, the more different operating environments that you demonstrate in, the more cycles you put on the unit, the better that gets. And so it's just kind of part of our everyday work.

隨著我們在該領域獲得越來越多的操作週期，這有助於推動我們在性能和週期數方面的可融資性研究。我看著這一點——我認為人們變得越來越舒服，但幾乎沒有——沒有限制。您在現場獲得的產品越多，演示的不同操作環境越多，在設備上進行的循環次數越多，效果就越好。所以這只是我們日常工作的一部分。

Thanks so much, guys.

非常感謝，夥計們。

Corinne Blanchard, Deutsche Bank.

科琳‧布蘭查德，德意志銀行。

Hey, good afternoon. Could you talk -- a few days ago there was a filing saying that the stock price basically doesn't go further much up. I think there is maybe a risk of you being deleted or going on the OTC. So just trying to get a little bit of color and what could be the different scenario happening from that filing.

嘿，下午好。可以談談嗎？前幾天有一份文件說，股價基本上不會再漲太多。我認為你可能有被刪除或上OTC的風險。因此，我只是想了解一下該文件中可能發生的不同情況。

Sure, no, thanks for the question. Yeah, we've received a notice from the NYSE, which we've responded to. It's got a relatively long observation and cure period to it of about six months. So there's no immediate action that's required. So we're monitoring that. We have a number of options to address it if it doesn't cure on its own. But we certainly don't have any intention of being delisted or trading down to alternative platforms.

當然，不，謝謝你的提問。是的，我們已收到紐約證券交易所的通知，我們已對此做出回應。它有一個較長的觀察和治療期，大約六個月。因此不需要立即採取行動。所以我們正在監控這一點。如果它不能自行治愈，我們有多種選擇來解決它。但我們當然無意被摘牌或交易到其他平台。

Okay, thank you. And maybe the second question, and sorry if I missed it earlier in the Q&A, but can you give a little bit more color as well about the 40% cost reduction and maybe the timing and how you're thinking of implementing it?

好的謝謝。也許是第二個問題，很抱歉，如果我在問答環節之前錯過了它，但是您能否提供更多有關 40% 成本削減的信息，以及可能的時間安排以及您如何考慮實施它？

Yeah. Hey, Corinne, this is Tony. The 40% cost reductions that we're expecting to achieve this year are similar to what we saw last year in terms of the various projects that we have associated with cost reduction initiatives. So again, there's going to be some more divine-related initiatives and generation changes that will simplify the EWs as well as remove some of the material that's in there. And we also expect to continue to reduce the cost of our electrolyte.

是的。嘿，科琳，這是東尼。我們預計今年將實現 40% 的成本削減，這與我們去年在與成本削減措施相關的各種項目中看到的情況類似。再說一次，將會有一些更多與神聖相關的舉措和世代變化，這將簡化電子戰並刪除其中的一些材料。我們也期望繼續降低電解液的成本。

So there's a number of projects that are all going to be realized throughout the year as there are multiple of these projects in addition to some supply chain-related projects where we're continuing to evaluate alternative vendors who can provide us better or cheaper materials. And so as we realize those throughout the year, that's how we're going to be able to take the cost of the product down by 40% by the end of the year.

因此，有許多項目都將在全年實現，因為除了一些與供應鏈相關的項目之外，還有多個項目，我們正在繼續評估可以為我們提供更好或更便宜材料的替代供應商。因此，當我們全年實現這些目標時，我們將能夠在年底前將產品成本降低 40%。

Great. Thank you very much. That's it for me.

偉大的。非常感謝。對我來說就是這樣。

Thanks.

謝謝。

Brian Dobson, Chardan Capital Markets.

布萊恩·多布森，查丹資本市場。

Yeah, thanks very much. So you had mentioned earlier in the call that your 4Q delivery misses were mostly from client disruptions. Would it be safe to assume that we should view those deliveries as delayed rather than missed entirely?

是的，非常感謝。因此，您之前在電話中提到，第四季度的交付錯誤主要是由於客戶中斷造成的。是否可以安全地假設我們應該將這些交付視為延遲交付而不是完全錯過？

Absolutely. In fact, both of those have already subsequently been delivered, and we expect to recognize them in Q1.

絕對地。事實上，這兩個產品隨後都已交付，我們預計將在第一季獲得認可。

Yeah, very good. I think that that's an important point.

是的，非常好。我認為這是很重要的一點。

And just shifting gears a little bit to your agreement with Honeywell, have you seen any -- I know it's early, but have you seen any early synergies from having access to that company's sales channels? Or have you received any early feedback from your new partner?

只是稍微改變一下你與霍尼韋爾的協議，你有沒有看到任何——我知道現在還為時過早，但是你有沒有看到通過進入該公司的銷售渠道而產生的任何早期協同效應？或者您是否收到了新合作夥伴的任何早期回饋？

Sure. No, think there's been really positive feedback, and a couple of things have popped up. Certainly, Honeywell has a vast experience technically on products similar to ours across a range of industries. And so the interactions with our technical teams have had on a joint development project basis and evaluating things to do together is the first thing.

當然。不，我認為確實得到了積極的回饋，並且出現了一些事情。當然，霍尼韋爾在多個行業的類似產品方面擁有豐富的技術經驗。因此，與我們的技術團隊的互動是在共同開發專案的基礎上進行的，評估要一起做的事情是第一件事。

From a channel's perspective, they have great access to tons of channels across the space. I'd say two things have come up. One, of course, very large customers sometimes have a strong preference to dealing with very large suppliers. And so Honeywell has a lot of great relationships with very large customers, and that's opening up some doors.

從頻道的角度來看，他們可以輕鬆存取整個空間的大量管道。我想說有兩件事發生了。當然，非常大的客戶有時強烈傾向於與非常大的供應商打交道。因此，霍尼韋爾與大客戶建立了良好的關係，這打開了一些大門。

But then also things like, I think military bases and government contracts, there's a lot of connections into those. So I think you're absolutely right, it's early days and they're a big ship. So we're working hard across the teams on both the commercial and the technical side to get specific things locked in and ramped up. But we feel really good about the progress we've made so far.

但我認為軍事基地和政府合約也有很多關聯。所以我認為你是完全正確的，現在還處於早期階段，而且他們是一艘大船。因此，我們的團隊在商業和技術方面都在努力工作，以鎖定並加強特定的工作。但我們對迄今為止所取得的進展感到非常滿意。

Excellent, good to hear. Thanks very much.

非常好，很高興聽到。非常感謝。

Thomas Boyce, TD Cowen.

托馬斯·博伊斯，TD·考恩。

Yes, thanks again. Just one more. It's great to see the improvements on the system commissioning times. I was wondering if you could rank order the actions that led to those improvements. Is changing to the contracts the overwhelming component there? Or is a lot of it the team that you had put in place to assist with commissioning?

是的，再次感謝。還有一個。很高興看到系統調試時間有所改善。我想知道您是否可以對導致這些改進的操作進行排序。改變合約是壓倒性的部分嗎？或者其中大部分是您為協助調試而組建的團隊？

Yes, Thomas, this is Tony. A lot of it has to do with how we're out in the field as we're getting set up to do the startup and the commissioning. So there's productivity on our field service engineers part, and part of it is productivity from just implementing more units throughout the year. Part of it is that we've changed some of the procedures that we follow as we are out in the field and starting up and commissioning the units.

是的，托馬斯，這是托尼。這很大程度上與我們在現場進行啟動和調試的方式有關。因此，我們的現場服務工程師的生產力部分是透過全年實施更多單元來實現的。部分原因是我們改變了我們在現場啟動和調試設備時遵循的一些程序。

And then it's also because of the simplification and the work we've done to improve the reliability and durability of the units as they're put out there. So it's a number of things, but a lot of it is a testament to the learnings that our customer success team has been able to realize throughout the year from the the early units that were installed to the units later in the year.

這也是因為我們為提高設備的可靠性和耐用性所做的簡化和工作。因此，這涉及許多方面，但其中許多都證明了我們的客戶成功團隊在這一年中從早期安裝的設備到今年稍後安裝的設備所學到的知識。

And more specifically, with something like SMUD, where there's multiple units out at a site and you're able to get quite a bit of productivity when you're working through multiple units at one time. And so as we see that type of increase going forward, we would anticipate that we'd be able to continue to make progress on those types of field initiatives. And that will significantly reduce our cost and allow us to spend -- be a lot more productive with our field service engineers as we scale up the business.

更具體地說，對於 SMUD 之類的東西，一個站點上有多個單元，當您同時處理多個單元時，您可以獲得相當高的生產力。因此，當我們看到這種類型的成長向前邁進時，我們預計我們將能夠繼續在這些類型的實地計劃上取得進展。這將顯著降低我們的成本，並讓我們在擴大業務規模時提高現場服務工程師的工作效率。

Appreciate the color there. Thanks again.

欣賞那裡的顏色。再次感謝。

I'll now pass the call back to the management team for any closing remarks.

現在我將把電話轉回給管理團隊以供結束語。

Well, we'd like to thank everybody for joining the call today and for your interest in ESS. We are now almost a quarter into 2024. I'm really excited about how the business continues to progress. Our really great progress around the key initiatives around driving costs out and keeping us on our path to profitability. We look forward to talking to everybody again in just a few weeks as we talk about Q1 results.

好吧，我們要感謝大家今天加入電話會議以及對 ESS 的興趣。現在距離 2024 年已經過了四分之一。我對業務的持續發展感到非常興奮。我們在降低成本和保持獲利的關鍵措施方面取得了巨大進展。我們期待在幾週內再次與大家討論第一季的結果。

That concludes today's conference call. Thank you all for your participation. You may now disconnect your line.

今天的電話會議到此結束。感謝大家的參與。現在您可以斷開線路。