ESS Tech, Inc. (NYSE:GWH) Q4 2022 Earnings Call Transcript

Tony Rabb: Yeah, hey, this is Tony. So those are going to be recognized in 2023. So, these units, as company’s been working aggressively to get those units out at the end of the year. We met contractual terms, legal terms to transfer, title and risk of loss to the customer at the end of the year. They are under various different types of contractual terms, the exact timing of when that that revenue will be recognized will occur in the year. However, basically, for us to recognize revenue and those units, the control of those units must pass fully to the customer. And that either occurs when the customer picks it up from our dock all the way to once it gets on the ship, or truck or train, all the way to the point where it could be arriving at the port for that customer. So, there’s various titles, that impact when that revenue will be recognized, and it will be in 2020.

Joseph Osha: And can you remind me who those units were headed for?

Tony Rabb: I think what we disclosed so far is that there’s a unit that were going to ESI and to Schiphol Airport. And I believe all that’s been prepped so far.

Joseph Osha: And some of them in the Q4 units were the CMS unit, which was also announced as part of the delivery?

Eric Dresselhuys: Correct.

Joseph Osha: Okay. And then the last question for me before I jump back in queue, if you look at the rate of cash burn here, obviously spent some, you’ve been building some stuff, and it sounds like that’s slowing down that you burn about $100 million since the December quarter of last year, that’s probably not sustainable, given what it sounds like I’m hearing about this year. So, can we assume that you’re going to take some steps to attenuate that rate of cash burn?

Tony Rabb: Look, I think, if you think about that cash burn, a lot of that is ramp up of manufacturing yields, rework, scrap, and material use that earlier units, and warranty costs associated with those. And as the company ramped up the business, and our objectives this year are going to be to focus on reducing the cost of the unit and continuing to improve yields and reducing our scrap rates. So obviously, a big push for us will be to be a lot more efficient with how we manufacture, which is a big point of our big usage of our cat.

Joseph Osha: Okay. Thank you.

Operator: Next question is from the line of Chip Moore with EF Hutton. Your line is now open.

Chip Moore : I want to follow-up maybe on that, that last one, just question, you talked about driving towards unit profitability, I think over the next 12 to 18 months. Maybe just expand on key initiatives there? Is it sort of the blocking and tackling that some of the things you just talked about? Or anything else we should take into account?

Eric Dresselhuys: I think it’s really a lot of blocking and tackling. It’s some of it is I think comes from volume. And some of it comes from the design improvements. So, it’s that the balance, which is the blocking and tackling balance is to implement the upgraded designs would make it more manufacturable improves quality. And then as we hit those and implement each of those changes, the profitability story of each unit gets better, which narrows bet loss gap, and we kind of cross over, you know, somewhere outside of 12 months from now. And so, but it’s not a cliff. It ramps down over time as you approach the crossover point. And I should point out, doesn’t end there, then we just keep driving and driving to keep taking costs out as we ramp up volume and that’s what builds the margin story of the company.