ESS Tech Stock

Good afternoon, and welcome to the ESS Tech Second Quarter 2026 Financial Results Conference Call. [Operator Instructions]

During today's call, ESS may make statements relating to its future financial performance, anticipated growth strategies and trends in its business. These may include statements regarding: the company's sodium-ion strategy and the early-stage opportunities approaching $1 billion identified for its sodium-ion solutions; the time line for development and market rollout of the Bridge system; the letter of intent with Juniper Energy and the potential deployment of 500-megawatt hours or more of energy storage systems; the letter of intent with Alsym Energy; the timing of the company's projects; the company's plan to streamline its Wilsonville operations and reduce expenses and cash burn; statements regarding the proposed business combination, including the timing, terms and potential benefits; the company's 2026 outlook and beyond; its cash position; the market opportunity; the potential and capabilities of the company's technology and platform; and its ability to execute on Project New Horizon, including the timing of manufacturing and delivery. These statements constitute forward-looking statements within the meaning of federal security laws and are based on management's current expectations and beliefs concerning future developments.

These forward-looking statements involve a number of risks, uncertainties and assumptions, including, but not limited to: barriers the company faces in producing its energy storage products; its products being in the early stage of commercialization; aspects of technology not having been fully field tested; the company's dependence on third-party suppliers; delays, disruptions or quality control problems in manufacturing operations; the company's ability to control its costs and achieve its cost reduction strategy; its history of losses and substantial doubt regarding its ability to continue as a going concern; its ability to raise capital in the near future; the non-binding nature of LOIs; risks related to the proposed business combination, including the non-binding nature of the letter of intent; the party's ability to complete due diligence and to negotiate and execute definitive agreements and the realization of benefits; the market opportunity for ESS' production; its ability to satisfy the continued listing standards of the New York Stock Exchange; and other risks and uncertainties described more fully in the company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 10-K filed on March 5, 2026, its quarterly report on Form 10-Q for the quarter ended June 30, 2026 and its current reports. Actual results may differ materially from those expressed in or implied by forward-looking statements made on this call. Except as required by law, ESS undertakes no obligation to update or revise any forward-looking statements.

In today's discussion, the company will reference adjusted EBITDA and non-GAAP financial measures. A reconciliation of adjusted EBITDA to the most directly comparable GAAP measure is provided in the presentation accompanying this call in our earnings release. A press release detailing these results was issued earlier today and is available in the Investor Relations section of the company's website at investors.essinc.com. A replay of this call and today's presentation will also be posted to that same site following the call.

Hosting today's call are Drew Buckley, Chief Executive Officer; and Kate Suhadolnik, Chief Financial Officer. I would now like to turn the call over to Drew Buckley. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Welcome to ESS Tech's Second Quarter 2026 Earnings Conference Call. We appreciate you joining us today. I will start with a brief overview of the company and how we are positioned. From there, I will walk you through our second quarter highlights and the commercial progress behind them.

And I will introduce Bridge, our new sodium-ion battery energy storage system. I'll also give you an update on the proposed business combination we announced last week. Kate Suhadolnik, our Chief Financial Officer, will then take you through our financial results for the quarter, the reconciliation of GAAP net loss to adjusted EBITDA and our cash and financing position. I will close with a summary of our priorities and the milestones ahead, and then we will open your line for questions.

Before we get to the quarter, I want to spend a moment on how we're positioning the company because it frames everything else you will hear today. ESS is an energy storage company specializing in sodium-ion and iron flow battery technology. We design, produce and integrate battery technology, and we build our products with Earth-abundant materials.

We now operate two complementary platforms. The first is Bridge, our new sodium-ion battery system. It's a 1.2-megawatt hour AC modular block purpose-built for short- and medium-duration applications, and we are targeting data centers, critical infrastructure and utilities. The second is Energy Base, our iron flow platform. It delivers from 10- to over 20-hour long-duration storage for 24/7 renewable power in applications where lithium-ion is too costly, too unsafe or too inefficient.

Both platforms share the same core advantages. Neither one carries thermal runaway risk. Iron flow stores energy using iron salt and water, and our sodium-ion cells are non-flammable. Both are built on a domestic platform with U.S. design, assembly, software and controls. To support that, we have signed a letter of intent with Alsym Energy to add 8.5 gigawatt hours of U.S.-made sodium-ion cells to our portfolio.

Underpinning all of it is our Tier 1 opportunities anchored by Salt River Project and Google, an existing Florida utility customer, a major California utility opportunity in partnership with Juniper Energy and by the U.S. Air Force Research Laboratory through Concurrent Technologies Corporation. I will come back to those relationships in a few minutes.

But now let me explain why this matters, and I would point you to the three themes at the bottom of the slide. The first is CapEx acceleration. Hyperscalers are scaling data center investment at a pace this industry has not seen before and doing it on a compressed time line. The second is power constraints. Generation additions are not keeping pace with AI-driven load growth, which leaves developers competing for capacity that doesn't exist yet. The third is the storage imperative. Batteries are moving inside the data center and becoming core infrastructure. We believe sodium-ion is essential to closing that gap and that safe non-lithium solutions are positioned to scale across grid-level applications.

The second quarter marked an inflection point for ESS. We accelerated our expansion into sodium-ion batteries, and we did it while maintaining the disciplined execution and capital focus that have defined our reset. Let me start with the left side of this slide.

The demand we are seeing for sodium-ion is unlike anything in our company's history. During the quarter, we announced that we were accelerating development of our U.S.-made sodium-ion battery energy storage system, and we did that in direct response to strong early customer interest across data centers, critical infrastructure and utility markets. We have now developed early-stage opportunities approaching $1 billion, and we have aligned our resources behind an expanded focus on AI infrastructure and data center market specifically.

To supply that demand, we signed a letter of intent with Alsym Energy to add 8.5 gigawatt hours of U.S.-made sodium-ion cells to our portfolio. This agreement extends our non-lithium platform into the short- and medium-duration applications that have historically been served by lithium-ion systems.

Subsequent to quarter end, we began the market rollout of Bridge, our modular sodium-ion battery. I'll discuss that product in a moment. Also subsequent to quarter end, we signed a letter of intent with Juniper Energy LLC for the deployment of 500 megawatt hours or more of sodium-ion battery systems, establishing a framework for long-term partnership. The collaboration will begin with a planned 10-megawatt/80-megawatt hour project for a major California utility, targeted for commercial operation in 2027. We believe this represents a clear validation that the market interest we have been discussing is translating into tangible customer commitments.

The two statistics at the top of the slide highlight why this opportunity is emerging now. U.S. data center power demand is expected to double by 2030, while industry estimates suggest 20 to 25 gigawatts of battery storage capacity could be deployed inside data centers by the end of the decade. This market was largely nonexistent just a few years ago, and it is still being built today.

Now let me turn to the right side of the slide. We also streamlined our Wilsonville operations to reduce expenses and cash burn, and we reallocated that capital towards sodium-ion-related solutions that complement iron flow and carry greater near-term revenue potential. As of today, we have repaid $37 million of the $40 million principal amount outstanding under our promissory note with Yorkville. Deleveraging has been a priority for us, and that progress is real.

On August 6, we announced a non-binding letter of intent for a proposed business combination with a private company in the energy sector. The contemplated transaction implies an expected combined enterprise value of approximately $515 million, with the allocation to ESS at a premium to our market capitalization at the signing of definitive agreements. I'll come back to it in more detail in a few minutes. But next, I'll give you some more detail on the Bridge modular system.

Bridge is ESS' entry into short- and medium-duration storage, and it meaningfully expands our addressable market beyond our established position in long-duration energy storage. We began the market rollout subsequent to quarter end, and it is the system Juniper expects to deploy with the California utility. You can see the unit pictured on the right side of our slide here.

Bridge is a 1.2-megawatt hour AC building block, and the 4 figures across the top of the slide capture the essentials. It is modular, meaning customers can stack 4 together to deliver 4.8 megawatt hours on a standard 20-foot pad, delivering similar energy density to a lithium system. It supports durations from roughly 2 hours to 16 hours, and it is engineered to a 20-year design life.

Looking at the specifications on the left side of the slide, you'll see we've intentionally kept the system simple. It uses sodium-ion cells, a standard 480-volt AC grid connection and supports flexible cycle rates and duration. That flexibility allows the same hardware to serve both power and energy applications. It's designed to operate in temperatures from minus 40 to plus 50 degrees Celsius, fits into a stackable 10-foot container and includes fully integrated battery management and energy management systems.

I also wanted to give you a tech update on our progress toward our first fully functional sodium-ion demonstration system. We have built module-level hardware in-house in our own lab under our own controls, and testing a full cycle of charge and discharge is underway. That's a step where technology stops being designed and starts being a product, and we've taken it. There's integration and testing work ahead of us before we call the module done, but getting a real module cycling is a major milestone in the development toward the Bridge product. We are targeting to have our first full-scale Bridge operating in-house toward the end of 2026.

Now let me turn to the center of the slide and why we believe that Bridge has a right to win in the market. First is safety. The chemistry is non-flammable with no thermal runaway and no toxic off-gassing. Second is simplicity. Because Bridge does not require complex HVAC or liquid cooling, it is far easier to install and to maintain, and it performs reliably across a wide temperature range. Third is speed of deployment. Bridge ships as a plug-and-play AC block. It's forklift-installable, and it connects at a standard 480-volt AC connection.

Fourth, and this is the one I would underline, its wide operating temperature range is particularly well suited to the duty cycle of an AI data center. GPU clusters swing tens of megawatts in a matter of seconds, and that kind of micro cycling degrades lithium chemistries quickly. This is a real pain point for data centers and a major underlying reason why we are seeing such strong demand.

And fifth is supply. Our letter of intent with Alsym Energy adds 8.5 gigawatt hours of U.S.-made cell supply to our portfolio, giving us the opportunity to supply a fully U.S. manufactured system free of FEOC concerns and able to take advantage of U.S. tax credits for us and our customers. Early-stage opportunities for this platform are approaching $1 billion. I want to be clear that these are early stage and unconverted at the time of recording, and we will remain very disciplined about how we characterize them.

Moving on. This slide frames three commercial relationships that matter the most to us right now: a signed framework; a broadening customer base; and secured supply. On the left is Juniper Energy. As I mentioned, this letter of intent establishes a framework for long-term partnership covering 500 megawatt hours or more of sodium-ion battery energy storage systems by 2032. It's anchored by a planned project for a major utility in California of 10 megawatts and 80-megawatt hours, which is expected to use the Bridge modular sodium-ion AC solution and is targeted for commercial operation in 2027. This is our first large sodium-ion product, and it validates both the product and our route to market.

In the center is our broader customer base, and this is where our opportunities are building. We are seeing strong interest from existing customer relationships as well as from new prospective customers, and active discussions are underway on additional energy storage opportunities. Those conversations span data center, critical infrastructure and utility counterparties. And then on the right is Alsym Energy. As discussed, we see this as a key supply agreement to build a U.S. manufactured battery free of tariffs, free of foreign entity restrictions and able to take advantage of the tax credits for us and our customers.

Now let's talk a little bit more about the LOI we announced last week. We signed a non-binding letter of intent for a proposed business combination with a private company. I'll be measured given where we are in the process, but I want you to understand why we're very excited about it. The proposed partner is highly complementary to what we do. It is commercially active in our sector with an established operating platform and proven commercial execution. That matters. This isn't two development stage companies coming together. It pairs the platform and market position we've built with revenue-generating operations, and we believe it offers compelling strategic and financial benefits with the potential to be transformational.

On terms, the transaction implies an expected combined enterprise value of approximately $515 million, with ESS stockholders receiving an allocation at a premium to our fully diluted market cap at the time of signing the definitive agreement. Subject to final valuations, which can change before the definitive agreement is signed, our stockholders would own approximately 5% to 10% of the combined company at close. We expect to announce a definitive agreement by the end of September and are targeting a close before year-end, but this is subject to significant additional work, including completion of the diligence process, negotiation, execution of a definitive transaction document and required approvals. The non-binding letter of intent can be terminated at any time.

Again, we believe this opportunity offers compelling strategic and financial benefits and has the potential to be a transformational part of the strategic reset we've been embarking on. And to be clear, we are not slowing down in the meantime. Everything Kate and I discussed today, including the sodium-ion platform, the Bridge rollout, the customer opportunities, Alsym, all of that continues.

With that, I'll turn it over to Kate to discuss the financials.

Thank you, Drew, and good afternoon, everyone. Our second quarter results reflect the transition Drew just described. As we wind down legacy contracts and invest in the Bridge and Energy Base platforms, it's important to view this quarter's reported results in that context.

Revenue for the second quarter of 2026 was $73,000 compared with $2.4 million in the prior year period. That decrease reflects significantly fewer equipment deliveries as we wind down existing contracts while developing our next generation of products. Cost of revenue was essentially flat at $7.5 million in both periods, resulting in a gross loss of $7.4 million compared with $5.1 million a year ago.

Operating expenses increased 19% to $7.7 million compared with $6.5 million in the prior year period. The increase was driven primarily by a $1.2 million increase in general and administrative expense, primarily driven by legal expense associated with contingent liability accruals, and an $800,000 increase in research and development, partially offset by a $700,000 reduction in sales and marketing expense.

Those last two items are worth highlighting. Sales and marketing expense declined 57% year-over-year on lower personnel costs, reduced outside services and lower marketing and trade show spending. Research and development rose 55%, driven by personnel-related investment as we build out the team advancing the Bridge platform and our expanded technology portfolio.

Loss from operations was $15.1 million compared with $11.6 million in the prior year period. Net loss for the quarter was $15.6 million or $0.46 per share compared with $11.1 million or $0.90 per share in the prior year period. While our net loss increased in dollar terms, loss per share improved 49% because of our larger weighted average share count in the current year. Adjusted EBITDA was a loss of $7.9 million compared with a loss of $7.8 million a year ago. I'll walk through the reconciliation of that on the next slide.

Before I do, I direct your attention to the three metrics at the bottom of the slide because they provide a better picture of the progress we're making year-to-date. For the first 6 months of 2026, operating expenses declined 12% year-over-year to $14.5 million, even as we increased investment in product development during the second quarter. Loss per share improved 58% to $1, and net cash used in operating activities declined 27% to $22.4 million.

We define adjusted EBITDA as net loss before interest expense or income, stock-based compensation, depreciation, amortization and asset abandonment, changes in the fair value of warrant liabilities, legal contingency and other nonoperating items. We believe excluding these items provides investors with a clearer view of the underlying operating performance of the business.

Turning to the reconciliation. We begin with a GAAP net loss of $15.6 million for the second quarter. We then adjust for $600,000 of net interest expense, $700,000 of stock-based compensation, $5 million of depreciation, amortization and asset abandonment, a $200,000 gain on the revaluation of warrant liabilities, $1.5 million of legal contingency accruals and a nominal amount of other income. That results in an adjusted EBITDA loss of $7.9 million for the quarter compared with a $7.8 million loss in the prior year period.

Turning to the balance sheet. We ended the second quarter of 2026 with $10.8 million in unrestricted cash and cash equivalents. That compares with $14.5 million of cash and $7.6 million of short-term investments or $22 million combined at December 31, 2025. Including accounts receivable and inventory, total liquid assets were $11.0 million at quarter end compared with $22.2 million at year-end.

Net cash used in operating activities was $22.4 million for the first 6 months of 2026 compared with $30.6 million in the prior year period. That represents an $8.2 million or 27% improvement and is perhaps the clearest demonstration of the cost discipline Drew discussed earlier. Net cash provided by financing activities was $12.9 million during the first half. That includes $13.6 million of net proceeds from our January registered direct offering, $9.2 million from other financing arrangements and $4.9 million raised through our at-the-market program, partially offset by $14.8 million of repayments on financing obligations. As Drew mentioned, we have repaid $37 million of the original $40 million principal outstanding under the Yorkville note to date.

I also want to be direct about our liquidity position. As we disclosed last week, we had approximately $5.6 million in cash, cash equivalents and short-term investments as of July 31, 2026. We are actively pursuing additional financing alternatives, including the proposed business combination Drew described, while continuing to manage spending carefully.

Our Form 10-Q includes expanded disclosure regarding liquidity and the existence of substantial doubt about our ability to continue as a going concern, and we encourage investors to review that discussion in full. As we execute our strategy, we remain focused on disciplined spending, preserving liquidity and maintaining the financial flexibility needed to support commercialization and long-term growth.

With that, I'll turn the call back over to Drew for some closing remarks.

Thanks, Kate. This slide summarizes the progress we made during the quarter and the priorities that will define the balance of the year. First is commercial momentum. We signed a letter of intent with Juniper Energy covering 500 megawatt hours or more of sodium-ion storage, anchored by a planned 10-megawatt/80-megawatt hour utility project in California. We signed a letter of intent with Alsym Energy for 8.5 gigawatt hours of U.S.-made sodium-ion cells, and active discussions with existing and prospective Tier 1 customers continue to build and remain robust.

Second, our expanded product platform. The rollout of the Bridge is underway, extending our reach across the full 0- to 24-hour storage spectrum. At the same time, Energy Base remains our flagship solution for long-duration applications of 10- to 20-plus hours. Together, these platforms significantly expand our addressable market. And today, we see early-stage sodium-ion opportunities approaching $1 billion.

Third, on the balance sheet. First half operating expenses declined 12% year-over-year to $14.5 million. Operating cash burn declined 27% to $22.4 million. We have repaid $37 million of the original $40 million Yorkville note and ended the quarter with $10.8 million of unrestricted cash and streamlined our Wilsonville operations to further reduce expenses and cash burn.

And fourth, the milestones ahead that we believe will change our story. Our first sodium-ion module is fully built, and we have started charging and discharging and testing protocols this week. We expect to build our first full Bridge product toward the end of 2026. And finally, the proposed combination, which would be a significant step for this company, pairing what we've built with a complementary partner, and we're focused on working towards a definitive agreement in the weeks ahead.

With that, I'll turn the call back to the operator to begin the question-and-answer session.

[Operator Instructions] Your first question comes from the line of Alex Hantman with Sidoti & Company.

My first question was on the LOI that you just shed more light on. I know on the slide, you touched on some of the work streams between now and more definitive agreements in September. Could you talk a little bit more about what that process looks like? And is there any interim support for you guys? Or are you more self-funding through that date?

Yes. Sure. Thanks, Alex. Good question. So the time line as it sits right now, the way we're looking at it is that we expect to reach a definitive agreement with the counterparty by the end of September and then close potentially on the final transaction toward the end of the year. So that's what we're working with right now. We're going through that entire process.

And in terms of the funding side, we expect that in the near future, we'll be self-funded for the time being. As I said before and as Kate kind of remarked on, we've reduced our expenses and cash burn, have paid back most of our promissory note with Yorkville. So we believe we're in a good position to continue to execute on that as well as continue to push forward on the sodium-ion business. But expect to hear more information about the combination in a month's time, in a few weeks' time, I would say.

Great context. And I guess in terms of pushing forward, I know you guys have talked about a variety of opportunities approaching $1 billion. Can you give us a feel for the pipeline composition, the mix across data center, critical infrastructure, utility and maybe how far along some of those conversations are?

Yes, sure. I would say that the -- it's a pretty good mix between utilities, AI infrastructure and data center, between those two buckets, utility and data centers. Look, it's early-stage opportunities across this part, not yet to bookings and not contracted revenue.

But I think what I'd say, Alex, is that the velocity is really high. The pipeline was developed in a matter of months since the Alsym letter of intent. So we really haven't pushed hard on the marketing side of this or we haven't really pushed too hard into -- deeper into these customers. A lot of it is coming from initial conversations and a lot of excitement around sodium-ion.

And the big reason for that is, like we said before, there's just a real need in the market for a battery with a wider operating temperature range that can handle these spikes in power that data centers produce. So the kind of way it will work is, if we take Juniper as an example, we've got our letter of intent there. We've got our definitive supply agreement with Alsym. You can -- and then from there, we'll move towards a full commercial agreement that we have with Juniper, which we expect to come in the coming months.

And one other thing I'd say is the demand side of it isn't just coming from new customers. A lot of our existing customers in areas that we have relationships are interested in the technology. And what that tells us is just, again, the demand and the velocity of demand is really high. There's a huge power imbalance problem in the United States that needs to be filled, and batteries are going to be a great way to do that. And we think sodium-ion has a very clear place in that market.

Good color. And last one from us. So I guess as you're going out to the data center buyers, the utility center buyers that you mentioned, could you talk a little bit about procurement? Are they typically sourcing single supplier or multiple suppliers? And what gets ESS sort of onto that supplier list and on to the top of that list in a crowded field?

Yes. I think there -- I think like any of these customers, what's most important to them is speed to power right now. So all of your AI data centers or utility customers, they care a lot about speed to power, especially in this space of battery storage systems.

So critical for us is just showing that we have the ability to bring product to the market in the time frame that they need it. And relying on some of the historical strengths that ESS has around understanding the momentum and pace between in-house all the way to commercial execution, what does that take in terms of certification, how do we make sure that we're interacting well with the customers' own grid and connecting to them, all of that know-how that we have from history and bringing product to the market is really going to help us in this field.

And that's why we designed the product around a 480-volt AC connection is that we really do think it's going to be plug-and-play, drop the box in. And that will be a lot easier for customers to take on. So all of our design efforts and the way we're bringing this product to market is built around that speed to power and ease of power. So we shouldn't have too much in the way of difficulties of bringing the product to the customer site. Again, learnings that we've gotten from the long history we have of bringing products into the customer site with iron flow.

We will now move on to our text Q&A session. I hand the call to Jack Greenberg.

Jack, you might need to unmute. I had the same problem at the beginning of the call.

Hey, everyone. Sorry about that. First webcast question is, where exactly is Bridge in its development today? And what are the milestones between now and the first revenue that you'll see?

Yes. Good question, Jack. Thanks. So look, we're -- the first module is complete. Initial charge and discharge testing is happening right now in our headquarters in Oregon. We're doing full charge and discharge cycling. The market rollout has begun, and the first operational Bridge, we expect toward the end of 2026.

So we're really excited about the pace that things are coming along. And I think the engineering team at ESS has worked quite hard to bring the product to life as quick as possible. We're excited to offer more information and testing KPIs and things like that over the coming quarters. But so far, we're moving at the pace that we expect to be able to get the Bridge out toward the end of the year and have our first system available for customers to see in the fourth quarter.

Got it. So next webcast question is on the business combination LOI. Without getting ahead of the process, what attracted you to this partner? And what does the combined platform look like?

Sure. So the counterparty is an energy sector company built on an established platform with a track record of proven commercial execution. The logic here is that we want to combine ESS' technology manufacturing base and non-lithium portfolio with an operating platform that already has commercial infrastructure and customer reach. The goal is scale and speed to market, not just not to consolidate any duplicate capability.

And then on the process side, it's a non-binding letter of intent. Diligence is underway, and parties are working toward definitive agreements. And we hope to give more information as that's available in the coming weeks.

And the next webcast question is also on the LOI. The release cites an expected enterprise value of roughly $515 million with ESS valued at a premium to market cap. How should investors think about that valuation and eventual ownership split?

Yes, sure. So the value expected to be attributable to ESS in the contemplated structure represents a premium to ESS' market capitalization at the time the definitive agreement is signed. So we're looking to sign definitive agreements in September, and the structure represents a premium to our current market cap at the time we signed the agreement.

That's the measurement point, not any single day's trading price. The final exchange ratio and resulting ownership percentages will be set in definitive documentation and disclosed in the proxy materials. And then just on the strategic value to ESS shareholders, it's not just the implied valuation, but it's combining an established platform and technology that has commercial execution and scale.

And our next webcast question is, you've aligned resources towards AI infrastructure and data centers. How does the Bridge product compete against other lithium incumbents?

Sure. So non-lithium, non-flammable chemistry. As we were saying earlier, it avoids thermal runaway risk. So for storage, for batteries that are sited or adjacent to data centers, you can think of an urban critical infrastructure setting, that -- it increasingly becomes like a permitting and siting and risk underwriting question more than just cost. So can you get the batteries in and installed is just as important at times than if you have the lowest price.

And that's where we think sodium-ion is structurally advantaged is that sodium-ion doesn't have the thermal runaway. There's not as much permitting issue around it. And then the other thing is the lack of HVAC and liquid cooling means that it's a pretty quiet system. And if anyone's read the news, they can see that some of these larger battery systems do create a lot of humming and noise. So I think it is an attractive product to be in an urban setting around homes.

And I want to highlight what I said earlier. The Bridge's wide operating temperature range is well suited for AI data centers. Again, the GPUs can demand large amounts of power in a matter of seconds, which creates heat and degrades lithium batteries faster. It's a new and very real pain point for AI customers and a major reason why we're seeing such demand.

And finally, hyperscalers and developers are actively managing tariff exposure and supply chain concentration. That makes U.S.-made cells and modules and our Bridge product a criterion that the data centers have to solve in their own right. So that form factor is designed to be dropped in very quickly and with very repeatable deployment. It's not a replacement for lithium. It can be very complementary and serve a different workload, which is growing and very large and a huge opportunity for us.

And the final webcast question we will take is, second quarter operating expenses rose 19%, even though first half expenses are down 12%. And cost of revenue was $7.5 million against $73,000 of revenue. How should we think about the cost structure from here?

Kate, do you want to take that?

Yes, I'll take that one. Thanks, Jack. Maybe just to start by touching on the Q2 increase you noted. So the increase in our operating expenses in the second quarter, as I mentioned previously, was driven primarily by a $1.2 million rise in G&A expense, which is tied to legal expenses associated with contingent liability accruals. That $1.5 million legal contingency is added back in our adjusted EBITDA and is largely nonrecurring in nature. So I wouldn't place too much emphasis on that as far as go-forward is concerned.

We did also see an $800,000 increase in R&D expense as we expanded our technology platform and work to move our new product offerings along. And those were partially offset by a reduction in sales and marketing expenses, as I mentioned previously. I think year-over-year, the adjusted EBITDA loss was essentially flat despite that investment step-up. So that, I think, is a good sign there.

As far as current cost of revenue, I would say our current cost of revenue is dominated by fixed manufacturing overhead and really, our underutilized capacity at our Wilsonville headquarters during a quarter with very minimal deliveries to customers. So it's really not a read on unit economics, and it's not representative of Bridge's expected margin structure going forward.

The structural levers are the Wilsonville streamlining, which is already underway and we've discussed previously and the modular Bridge approach, which carries lower fixed capacity intensity. The $4.3 million of asset abandonment in the first half reflects that footprint rationalization working through the P&L. But overall, I wouldn't say that our current cost of revenue is a read on our unit economics into the future.

And that concludes our webcast Q&A. I'm now going to hand it over back to Drew Buckley.

Thanks, Jack. Thanks, Caleb, for all your help, and thank you to everyone who joined us today. We really appreciate your continued interest and support of ESS.

As a reminder, our Investor Relations team is available to schedule one-on-one calls and to answer any follow-up questions you may have. You can reach out to MZ Group at [email protected]. We look forward to updating you on our continued progress next quarter. Thank you again, and have a great afternoon.

This concludes today's call. Thank you for attending. You may now disconnect.

Hi, everyone. Thank you very much for joining us today. We are here with Part 2 in Clean Energy Group's Beyond Lithium webinar series. Today, we will be hearing about ESS Tech's iron flow battery. We have Drew Buckley with us from ESS Tech, and we're very excited to hear from him.

Before we -- I get to that, I'd like to go over a few very quick webinar logistics. [Operator Instructions] We're going to put a speaker bio for Drew Buckley in the chat pretty soon.

And a final note, our most frequently asked question, yes, this webinar is being recorded. We'll send you a copy of the webinar recording and a link to a PDF of the webinar slides either today or tomorrow, and we'll also be posting these materials on Clean Energy Group's website, cleanegroup.org/webinars. And we'd love to hear any feedback that you have for us about this webinar in our post webinar survey or via email.

So with that, I'm happy to pass it over now to my colleague, Seth Mullendore. Seth is the President and Executive Director of Clean Energy Group, and he will be moderating our webinar today.

Great. Thank you, Sam, and thanks, everyone, for joining us today. We have a lot of folks registered, so we're going to have probably a great Q&A at the end here. I'm going to start off with just a brief introduction to Clean Energy Group. We are a nonprofit organization working across the country with the vision of enabling affordable, reliable, clean energy for all. At Clean Energy Group, we provide innovative technical, economic and policy solutions to enable communities to participate equitably in the clean energy transition. We get a lot of information out there in webinars like this, and we have a lot of different initiatives that you can learn more about on our website across several areas, although we do specialize a lot on distributed energy, solar and energy storage as well as accelerating the transition away from fossil fuel infrastructure.

So Sam, if you can go to the next slide, please. We're really excited to have you all here today for the second installment of our Beyond Lithium webinar series. This, we try to, every other month, every 2 months, have another installment. This is, as I said, the second one. We are really excited to have Drew Buckley with us today. He's the CEO of ESS Tech, and he's going to tell us all about their iron flow battery. Our first installment was with Hydrostor, talking about compressed air energy storage. And our next one in August is going to be with Form Energy, talking about iron-air batteries.

So next slide, please. This -- I should say this series is meant to highlight technologies, non-lithium technologies. Lithium-ion batteries are great for a lot of things, but there are some things they're not as good at, and we are highlighting technologies that offer alternatives that meet some of the challenges that today's lithium-ion are not as well positioned to meet. So as I mentioned today, we are talking with Drew Buckley at ESS Tech.

So with that, I'm going to stop talking and turn things over to Drew. I'll be back for question-and-answer to moderate those. Please do enter your questions as they come to mind as we go along. And we'll get back to it at the end. Thanks. All right, Drew. Over to you.

Thanks, Seth. I appreciate it. First of all, I just want to say thanks for everyone -- thanks to everyone for joining. Thanks to Seth and Sam and the entire Clean Energy Group for having us on. It's an honor to be here, some other very cool technologies that we get to share this webinar series with. So I'm excited, and I'm excited to hear your questions and give you a view of where ESS Tech is today and where we're going in the future.

So I have some slides, and I'll walk through those and then, of course, save time for questions. But maybe first, I can give everyone a little bit of background on myself, Drew Buckley, CEO of ESS Tech. We trade on the New York Stock Exchange under the ticker GWH. And then just a bit about myself. I think it's important as it sort of shapes how I think about the future of ESS and where we want to go. So I spent 17 years on the buy side as an investor at a company called William Blair. I was a partner there, and I covered small-cap technology. I've spent my career underwriting business models in the tech space, forecasting the uptake of new technologies. And then I joined ESS full-time in January of this year. And I came here because I think there's a big gap in the market for non-lithium storage solutions. And for us, for all of us to solve the energy transition over the next decade, we're going to need more commercially and economically viable solutions than just lithium batteries. So a great place for us on the Beyond Lithium webinar series to talk about that.

Let me pull my slides up here for a second. Give me 1 sec. I'll try to do this right. Okay. Hopefully, everyone can see that. If you can't, I'm sure Seth or Sam will let me know. But just to give you guys a bit of background on us, ESS is the leading manufacturer of long-duration iron flow energy storage. In plain terms, this means that we build batteries out of iron, salt and water that are focused on longer duration discharge. Think about 10 to 20 hours or even 30 to 40 hours.

Today, I'm going to cover the market that's pulling us forward, why we see long-duration as the fastest-growing gap in storage. I'll talk about our technology, of course, and then where we are commercially and talk a bit about flagship customers that we've signed over the past 9 to 12 months like Salt River Project. For those of you who may not know, that's the largest utility company in the Phoenix, Arizona area. Google, and then the U.S. Air Force. And then, of course, happy to take any of your questions.

This is a slide that gives you kind of the entire company in one slide. We make long-duration iron flow systems. Our main product right now is called the Energy Base. It's a 10- to 24-hour system, 24/7 renewable power where lithium is too costly, too unsafe or too inefficient. The chemistry that we use is iron, salt and water. It's very safe. It's very durable. And one of the main things is it can be domestically and easily sourced within the United States.

The architecture we use is open and non-containerized, which lets us decouple energy from power. I'll come back to that in a little bit and why that matters. And we've got about 100 megawatts of scaled manufacturing capacity in place today and the Tier 1 pipeline, as I talked about already. And that's about 3 contracts with about total contract value of $50 million expected to deliver between 2026 and 2028. So this isn't a science project. It's a commercial company. We've got real contracts converting that we're expecting to deliver over the next couple of years.

To give some background on the company time line and how things have progressed for ESS since 2011. So in the first 10 years, this is very much a founder-led R&D story. They wanted to prove that iron flow works and that this could actually be -- this technology or this chemistry could actually be turned into a battery. And then 2021 is when things really hit the accelerator button. If any of you remember, this was coming out of the COVID when doors started to reopen. There's a lot going on in the energy space, and it was a bit easier time to raise money and the company decided to go IPO via SPAC in 2021.

As we look back on that, it might not have been the perfect time to do so, but a very smart and rational decision to make -- to take that at the time because it allowed the company to get well-capitalized and really improve the technology beyond just an R&D experiment and to think about commercial viability.

What happened over that next 4-year period was a lot of pressure being a public company, as I know from my experience, it's very difficult. There's a lot of pressure from the investors to hit the milestones that you talk about hit the revenue targets that you've put out there in order to maintain your valuation and your market cap. And so what the company was doing at that time is they had done a great job of going to prove that the technology actually worked, but we hadn't made that transition from technology working inside the R&D lab to showing that we had a commercially viable product. So because of the pressures at the time from the investors and the big targets that had been put out in 2021 to raise capital on top of that, the company was effectively trying to put product into the market at the same time they were taking that final step toward commercial viability.

So over that 4 years, it was a lot of that -- exactly that, trying to figure out exactly where the product fit, trying to figure out how we could sell that and then continuing to improve it as you shift product out. It's a very difficult position for a company to be in, especially a new company, having to ship commercial product as well as trying to fix some things while the airplane is in flight effectively to make the commercial product viable. It all kind of came to a head in 2025 or sort of at the end of 2024 when the company had used up most of the capital that they had raised at the IPO, and it was time for a strategic reset.

The strategic reset actually came at a very good time because I think the lessons that the company learned both on how to make the product and then how to make it commercially viable were really helpful. And as we know from other examples, technology like this, especially in the energy space, it takes a long time to bring it to market. There's a lot of different regulatory aspects. Customers are very cautious to adding new things into the grid because they don't want to create instability. And so taking all of those lessons learned that we had had over the past 14 years was really important to look at the market in 2025 and say, where does this technology actually fit? And that's the energy-based product, which we came up with.

And the reason it fits very well is the original idea for our iron flow and battery was to put it inside of a shipping container. And why did we do that in the beginning is because we wanted to put the iron flow battery in the exact same specification that lithium comes in and be able to compete head-to-head with lithium. What we found out over time as we learn more about the technology and we learned what the customers were looking for, 2 things happened. We realized that actually, our technology doesn't work really well inside of a shipping container. You've got pumps. You've got flow going on in terms of water and electrolyte and iron. And all these things you need to service pretty regularly and make sure everything is operable. And especially when the product is new, you want to be able to get to and service that stuff very easily. Also, the reaction in the chemicals creates a lot of heat. So having electronics inside of that shipping container was very difficult. You'd have to really control the temperature, vent well, et cetera, et cetera.

So the original genesis of thinking, let's put it inside of a shipping container and compete with lithium, which also comes in a box effectively was a novel one. But what we found is the product didn't really like to be in a box very much. And then the second thing is that the price of lithium just came way down. And I think lithium is an amazing product and what they've done and how we've been able to as -- in the world, be able to build up huge scale in terms of producing lithium and bring the cost down very quickly. That wasn't super evident when the product was being developed in the mid-2010s, now very clear for us right now.

So instead, as you look at 2025 and you look at the reboot of the company and thinking how we can go forward, we leaned really on the strengths of what iron flow does, and we thought where do we compete from a cost perspective? Where can we offer something that lithium, the main battery technology that out there cannot really offer? And then where does our technology fit the best? And we put all of those 3 things together, and that's where we delivered -- that's where we brought out our new product and the product we sell now, which is the Energy Base.

And I think the true proof of that is in the pudding and that we've signed some very serious contracts with some very serious counterparties when we talk about SRP and Google, when we talk about the Air Force. These are real contracts with real counterparties that we're really excited about. And to be able to do that with this solution that we have, I think, is a bit of the proof in the pudding that there is a market fit for this, and we can offer something that's a bit different than lithium.

And so what is on the horizon for us over the next 2 years? This year, in 2026, it's really about completing the design work and using all those lessons that we've learned over the last 14 years, 15 years to develop the product and make a very strong commercially viable product and then deliver it to our customers. And as we do that, we think that the market for a long-duration battery continues to open up.

Now maybe I'll take a step back now and talk a little bit about how we see the energy markets at ESS. It's really important and things are really changing under the hood. I think everybody on the call probably feels a lot of this, but let me just give you my view on things. So if we step back to 2005, 2010 time period, for the next 10 years from that, so from, call it, 2008 to 2018, electricity demand was essentially flat. You had a lot of efficiency gains coming into the market, whether it was LED lighting, better appliances. Overall, things were more efficient, and that offset the growth that was coming in, in terms of people putting more -- needing more electricity in their homes, et cetera. That era is now over. The EIA now projects U.S. power demand to hit record highs, rising to over -- about $4.2 billion -- or 4.2 billion kilowatt hours in 2025 and even more in 2026. Those are both record numbers over about 4.1 billion kilowatt hours in 2024. That reversal of a decade of flat demand is the single biggest structural change we have going on in our market.

What is driving that? It's artificial intelligence. Electricity demand from data centers has jumped 17% in 2025 and AI-focused data center demand grew even faster, outpacing global electricity. The AI-specific data center consumption surged about 50% in 2025 alone, and that's not a blip. Data center electricity consumption is set to double by 2030. And with AI-focused power, use is poised to triple. To put capital behind that perspective, the large -- the 5 largest tech companies exceeded $400 billion in capital spending in 2025 and is expected to jump another 75% in 2026. Capital spending from the big guys like Google, Meta, et cetera, Microsoft is going to be larger than global investment in oil and gas production next year.

And that's -- now here's the part I really want to land is how different the generation mix is versus 20 years ago. Two decades ago, baseload was coal and gas and you match supply to a predictable demand curve. Today, that picture is totally inverted. Coal fleets are being retired. Coal capacity is expected to fall over the next couple of years. And what's replacing it isn't more coal. It isn't more very clear, very firm baseload power. It's going to be solar and it's going to be wind power. And so simultaneously, you're losing something that's very firm on the baseload and adding a lot more enormous intermittent power that's coming on. And that's the exact moment that demand is going up. So you've got demand going up, you've got some very firm power coming out of the system, and you've got much more intermittent power coming into the system.

And that creates a real problem that didn't exist 20 years ago. You have a grid that's increasingly on the intermittent side. Demand is running 24 hours a day. So if you thought 20 years ago, most of the power was being used during the day. AI workloads don't stop. They actually work through the night. So power demand and the demand curve is totally different and changing. And something has to bridge that gap reliably, and it has to happen for many hours at a time. And that, to me, is long-duration storage.

20 years ago, you might have built a gas peaker plant. And today, increasingly, you can't do that. You need a clean, firm alternative that can discharge power for 10, 15, even 20 hours to match it with solar and wind. And that total opportunity to me is enormous. Global energy storage demand is projected to exceed 3 terawatt hours and over $200 billion of cumulative system value by the early 2030s. And that's driven by renewable penetration, electrification and rising power demand overall. And we move on to another slide here.

And so this is a slide you can see kind of where we fit and where we think that we can offer, our Energy Base solution can offer something into the market. And that's in the 24-hour a day problem. Long-duration batteries are what support that baseload when the wind isn't blowing or when the sun isn't shining. And if you think about it as a spectrum of demand, lithium-ion batteries are really strong at that under 10-hour space, as you can see in that middle chart on the left side. And there's no reason -- lithium is an amazing technology at an amazing price point. It's very bankable. It work -- we understand how it works very well, especially utility companies and hyperscalers understand how it works very well. So that's a very easy thing that they can put in at the under 10 hours. And it's going to be very difficult, I think, for another technology in the near future to really compete at scale versus lithium. Maybe something like sodium ion can be in that area as well. And there are some advantages to it. But for now, lithium is truly one of the only battery games in town and where it works best is under 10 hours.

As you look out a little further into the 10- to 20- and 20-plus hour band, that's multi-day. That's where utilities are now looking and thinking about what they can do because they know that just having a 4-hour battery or stacking 4-hour lithium batteries on top of each other might not be as cost effective as other solutions. And also, there's a huge CapEx investment. There's a huge lithium investment and critical minerals. Most of lithium production is ex U.S. So they're looking for other solutions in this 10 to 20, 20-plus hour space, not only because it can be capital effective, but also because there might be a more resilient supply chain out here that we can think about.

This slide just gives you a quick overview of the long-duration total addressable market by customer. I'm not going to go -- I'll go through it very quickly, but it's a $3.5 billion market in 2025, growing to about $8.7 billion in 2034. It's a 10.6% CAGR. I actually think that this is probably underestimating the potential demand from long-duration energy storage. If you look at a lot of the forecasts from really smart people who have done work on this like Wood Mackenzie, Bloomberg, they all have the long-duration market at about 8% of total energy storage.

And I think the main reason for that is because we haven't yet seen a product that can really deliver at scale in the long-duration market, ourselves included, and that's what we're working towards. But once we're able to show a 10-, 16-, 20-, 24-hour battery that the customer can use and can deliver and put in at scale, I think you're going to see that demand curve changing a little bit, and you're going to have a lot bigger growth in that 8%. So I think the market is really just waiting for the technology.

There's been a lot of failures and a lot of promises that haven't been delivered in this area of long-duration energy storage. So I think a lot of the forecasters out there are wary that something can be delivered there. But I do think that when it happens, it's going to be really positive for the market overall and probably for ourselves and companies like Form, et cetera, there's just going to be a lot of opportunity there because we know that the customers need this going back a couple of slides to the demand picture that I was talking about.

Okay. Let me talk a little bit about our product now, switch it down to the micro level and talk about ESS and our product. There's 3 core pieces of our product. It's the battery module or the stacks. That's the high complexity component that stores and discharges electricity. Actually, let me -- yes, that's the next slide. Yes. Let me talk about this slide and then maybe I'll come back to the last one. So this gives you the 3 core pieces of what we're doing, as you can see on the right side. We've got the battery module or the stacks. That's the high complexity part that stores and discharges the electricity.

On the proton pump side, that's a moderate complexity. These are what enable reliable daily cycling. And then the electrolyte, that's a very important part. That's essentially just a mixture of iron, salt and water with some additives. There's no lithium. There's no cobalt. There's no exotic supply chain. So it truly is iron, salt and water. All of these materials are very abundant on earth. All of these materials can be sourced here within the U.S.A. And that's why this product, we think, has a really nice place in the market outside of the cost perspective and outside of the window where we think it operates really well is that it's a very easy -- the supply chain here is very simple and a lot of it can be sourced here within the United States. This is all protected by this -- but by us with over 100-plus patents, creates a meaningful IP moat for us. And again, the simplicity of the electrolyte and how we're able to craft that, we think is a strategic competitive advantage in sourcing.

Maybe I'll move just to talk a bit about real-world validation because these are a couple of customers who have recently put out reports or have commissioned some of their projects. And I think it's important because it just tells -- it leans to that story more that our technology is less about a science experiment, and it's really at that almost critical stage where we go to commercialization, and that's what we're working on right now. These are independent real-world deployments that validate the iron flow chemistry underpinning our Energy Base. They're demonstration products. First, the APPA and Burbank Water and Power was a 21-month utility demonstration under APPA's DEED program. It was third-party validated. The system was installed, energized and ran for 21 months, co-located with solar and the final report from the APPA concluded that iron flow works and has a real place in utility storage -- in a utility storage strategy.

Second is a Turlock Irrigation District on the right. Two systems were commissioned in California Central Valley in an innovative solar-over-canal configuration. That also reduces evaporation from those irrigation canals. That's another example of iron flow proving itself in a reliably critical infrastructure setting. So both of these things are ones that we're very proud of, very excited to talk about because these are real-world validated programs backed by APPA with a report out there that anyone can read if they want.

So maybe just to talk about lithium versus iron flow. I've kind of touched on a few of these things already, but this is kind of to bring it all together is that for iron flow, as you can see on the right, the cost and technology advantages increase with duration. So for lithium, as you want to create a longer duration, if you want to go from 4 to 8 hours, 8 to 12 hours, you effectively have to stack another block of lithium on top of the other or next to the other. So you can think of the CapEx scaling for duration with lithium as scaling on a linear basis. If you want to go to 4, it's 1 block. If you want to go to 8, it's 2. If you want to go to 12, and that's just an example, of course. But just to think about how the scaling effect happens with lithium, it's effectively like that. For us, it's very different. And it's a little bit about that decoupling of energy and power.

So what creates the power for us is that stack that I was talking about, which sits in the middle. But the energy is created, but the energy comes from the electrolyte and is sort of governed by how much electrolyte you have. So if you think about it as the power-block unit is in the middle, and that's how you store and that's how you charge and discharge power within. The actual thing that stores the energy is the electrolyte. So in order to make your duration longer, you just add more electrolyte to the system. So instead of scaling linearly, there's actually a cost advantage as you go to a longer duration for our product.

There is a theoretical maximum. You can't just scale infinitely with electrolyte and have it be 100- or 200- or 500-hour battery. For us, in our testing, we think that the scaling effect stops and the maximum that you can do with iron flow is probably around 50 hours, 48 hours. But the core principle is the same is that if you want a 10-hour battery, it's X amount of electrolyte with the same stack. If you want a 20-hour battery, it's just 2x the amount of electrolyte with the same stack in it. So the longer duration that you go towards, the more effective the product -- or the more cost effective the product is. And I'll show you a little bit of that on this next slide.

This is a levelized cost of storage comparison from iron flow and lithium, as you can see. And the blue parts are iron flow at scale, not where we are right now, but when we're at a full-scale system or when we're at full-scale production. And you can see that as we go up further on the curve, as you go towards the right, the iron flow battery just becomes a lot more cost effective. And to us, we think that the real sweet spot of competition is in the 12- to 24-hour space. We think that's where utilities really want us to be, and that's where their peak demand is going to be as you pair us against solar and wind. And that's also where we think we're very cost effective. So at 8 hours at scale, we can be slightly more cost effective, depends on where the lithium price goes. And as you go up that duration, we should be more effective. And again, 12 to 24 hours is really where we see the sweet spot for our technology.

Okay. Let me go to the next slide here. Yes. Perfect. I want to spend some good time on this slide because I think it's the heart of how we make money in cost control. And I think it's something that we haven't communicated well to the market so far. But the model is pretty -- is split quite well between what we build and what we source. So the core technology, as you can see on the left, is ours, and that's what we protect with intellectual property. That's where all of our intellectual property and patents are. And this is what we think of as the high-value area of the technology, the battery stacks, the iron enclosure, proton pumps, the electrolyte and then, of course, the design specs for the entire system. And we make these at our factory on a prefab modularized basis. Our production capacity is up to 1 gigawatt currently on Line 1 with our next-generation Line 2 coming in over the next 12 to 18 months, and we can scale quickly from there. So the real core of our technology is understanding that power unit in the middle, knowing how the electrolyte works and then specifying how the entire system works.

The other half is what we call balance of plant and system. This is electrolyte tanks, plumbing, mechanical, standard site equipment. And that's not stuff we make. We use qualified EPCs and development partners for that. There's a long -- there's a very strong ecosystem around this area of balance of system. You can think the plumbing and mechanical stuff is very similar to the oil and gas industry in refining. It's just moving liquid around. Tanks are very -- tanks, there's a well-worn path in terms of tanks, if you want. Plastic, steel, steel-lined plastic, there's a lot around that. So that's nothing that we have as a core competency and then, of course, enclosures as well. So making the core technology ourselves and then balancing that with the noncore parts coming from well-worn paths of players who can make it at a very good cost and EPC developers who know how to put this in.

And this is -- here's what it matters strategically, and I'd really like to emphasize this again, which is that ESS' iron flow project looks a lot like a simple industrial processing plant. And that's not a coincidence. That's a design choice for us. It means we don't need to have a very specialized exotic installed base. We can leverage the existing infrastructure that's out there in oil and gas, in EPC. There's a very mature and deep pool of contractors in this country, in the U.S., who build exactly this kind of stuff day in and day out. So we can get them to do that part, which they're very good at and know how to do it at a good cost and scale, and we can just focus on the core technology of us. And that way, if you think about speed to commercialization, if you think about speed to install of new product, both of those things should be better because of how we're splitting the work up.

Maybe I'll do one more slide just to talk about the SRP-Google project, and then we can start in with questions. So this is -- I would call this like our flagship proof-point of the new Energy Base technology. It's a contract that we signed last year with Salt River Project. Google is going to be the offtaker of this power. It's down in Florence, Arizona. So we're going to build our batteries and there's going to be a solar array next to it, and we're going to deliver to Google, hopefully, 24/7 baseload power overall. It's really exciting because it's the biggest project that we've done so far. If you look over the years of 2021 to 2025 when we were a public company, overall revenues was about $10 million over that 4 years, and this project is going to be multiple times bigger than that. And if we do a good job, there's also follow-on opportunities that are potentially there for us as well.

So we look at this as like a really important validation point for our technology. We're really excited about it. And it's all about execution for us. So if we can get here and hit this, then we think all those things fall into places I was talking about before. The utility customer sees the product in action and they have a proven validation point that the technology works. And then that 8% that's focused on LDES in terms of growth forecast for how big the market is going to be, that just expands because I think utilities, once they know that there's a product out there that works, they're going to be much more open to thinking about their own needs and how they can use long-duration energy storage and especially iron flow batteries in there.

So I'll stop there and happy to open it up for questions.

Great. Thank you, Drew. And we do have a lot of questions. Some of them are very specific. So I'll kind of jump around a bit. Well, actually, I'll start at the top, though. The question came in early on. You had the graph showing the cost comparison to lithium ferro phosphate, LFP. Can you talk at all about where you compare with other long duration, specifically folks mentioned iron air, compressed air and pumped hydro?

Yes. That's a great question. And unfortunately, I'm not going to give you a great answer for it only because we don't have the information on those other technologies. What I would say is, first of all, on iron air, I think it's a really cool technology, and everyone's probably seen Form signed a big deal with Google in, I think, Minnesota. That technology, the way I would think about it is it's not specifically -- let me go back to maybe this slide. Yes. That's not specifically competitive with us. And the reason for that is duration. So what Form is focused on is 100-plus hours of duration. And they -- so they -- for them, like what they say is noncompetitive to them or where their technology doesn't work well from an LCOS basis is 100 hours and under. So for us, we're saying 10 hours and under, we're not really competitive with lithium, which is the giant in the room, and they can do that really well. And Form is saying that their 100 and under is not really in that space.

So hard for me to give you a great LCOS figure relative to all the other technologies out there. And the main reason is that a lot of them we don't really know. I don't have good detail on Hydrostor or Form. And believe me, we tried to look and they want to protect their information as much as we do. But I would just say from a competitive standpoint, I think the problem that they're solving is very real and very important, but it may be a different problem than what we're trying to solve in the 10 to 24, 10- to 30-hour space.

Yes. Yes. And I'll say the other ones mentioned like the pumped hydro, of course, there's a lot of geographic constraints on that, a lot of the compressed air as well. There are some more modular ones. But I'd say in that note, there was a question just about what does the footprint look like? This one was said, could you do something on 22 acres in an urban area. But like what does the standard project look like? Like what is the capacity per acre or some metrics that people can get a vision of the kind of energy density there?

Yes, sure. 22 acres would be great. We could definitely do a project on 22 acres. I'd say our 200-kilowatt, we're building inside of our factory plant headquarters in Wilsonville, Oregon. We're building a 200-kilowatt, 10-hour battery that is probably -- I want to say it's probably the size of like half of -- like, call it, 3/4 of a basketball court, if you would, to give sort of a frame of reference for people. So the energy density, to answer that question as well, you can say we're probably around 100 megawatt hours per acre.

So it's definitely not dense. You will never get to the density of lithium. Again, that's a great product if you want energy density. But our product is definitely you can make it in a much more modular way. So we could do a 200-kilowatt. We could even go smaller in terms of the systems. I think the containerized solution that we made when we made it in a shipping container was somewhere in the 40-kilowatt range. So think of it as we can go as small as we want or as big as we want, and that's kind of the cool part of using iron flow is there's millions of different size pumps. There's millions of different size tanks. And then one stack for us, I think, is 12.5 kilowatts. So we can go as low as that with one stack. But then you can scale it up to be as big as you want, 500-megawatt hours, 500 megawatts at a 10-hour battery, will be 5 gig. So -- but the energy density part is about 1 acre to 100-megawatt hours of energy.

Great. There's multiple-part questions here. I'm just going to start with the first part of it, though, and maybe we can come back. What's the biggest challenge now for Energy Base to be commercially successful? Is it technical design, manufacturing limitations, integration or others? And they also want to know specifically how you're going about addressing the challenges to commercialization.

Yes, sure. So I'd say it's a little bit of everything, but the main thing, I think, for us is ensuring around technical design. And so let's call it this is -- the most important part for us is taking all the lessons we learned, and we actually bought a company in February called VoltStorage, who did iron flow batteries. They were based in Munich. The company went into receivership in Munich, unfortunate for them, great opportunity for us because there's not many companies out there doing iron flow batteries. So it was really neat for us because it gives you an opportunity to see how somebody else was attacking the problem over the last 5 years, and they really thought about it very differently than us. So integrating those 2 technologies together and taking the best of both is something that we're working on right now.

For me, I think what we -- what's really taking on the lessons learned and what we -- how we thought about it before. So the biggest hurdle for us right now is just completing the technical design and commercial viability from that path. I can't remember, you said technical design and there was one other part, and I was going to comment on both.

Technical design, manufacturing limitations.

Manufacturing limitations. So yes, technical design, I think, is the biggest part. And it's -- when you take it out of the box and you want to build a bigger system, you want to make sure that it's extremely, extremely reliable. And one of the things that we learned when you hand over a product to the utility customer is, everybody knows this, but you don't control how they're going to use the product. So there are certain things that we probably need to -- that we learned from that, perhaps we're running the battery at too high of a current density and we can back off of the current density part because one of the original genesis of the product putting in a container was to say we want to compete with a lithium container. In order to do that, you want to have high current density so you can get as much power out of that little container as you can.

What we found is that when you run it kind of at that coffin corner, it's difficult, right? Because if you're running at a super high current density, any little wobble in the system can create a catastrophic failure or something very difficult. And so while it works really well for us in the lab with people and in our warehouse with people who know exactly how to run it, when you hand it over to the customer, it's not exactly the same. And you can build as much software as you want and as many controls as you want around it, but that doesn't mean that the customer is going to operate at the same. They don't have the same paradigm as us when they think about it. So stepping into that customer lens and really designing the product for the customer's use, I think I would call that technological because it's important for us to think about the product in that way.

So when you remove the container and you go to a bigger system, it's just those final design elements. How do you want to size certain components? How do you want to stack them? Do you want to have a bunch of 200-kilowatt systems next to each other? Or can you scale it even more exponentially than that with a much bigger tank? What kind of tank do you use? So all of these key questions, I think we have a lot of the know-how and knowledge to push against, but we just have to keep going and continue and make sure we have a system that is the highest quality, which means it's available as much -- the uptime is super high, the downtime for cleaning is super low and that opportunity for catastrophic failure is really, really low, so that you don't kill your system because of the operational parameters that you're using.

On the manufacturing side, I actually think we're really strong. We've built a lot of stacks. We built a lot of different configurations over the last 5 or 6 years. The nice thing about the sort of capital that we had and trying to make the product work is the manufacturing team was trying a bunch of different things and the engineering design team was doing the same. So I think we -- on the manufacturing side, we really understand well how to make a reliable quality product. So really, it's that earlier step of just making sure that the design fits and the way we want the customer to operate the battery has a lot of -- has a decent amount of wiggle room so that the system can operate within their parameters, not ours.

Great. That's great. And somebody actually asked about the VoltStorage acquisition. So you addressed that as well. On the manufacturing side, you had mentioned the price point at full-scale production. So what is that level of production for you? And where do you -- where are you growing your manufacturing capacity, too? Like where are your targets?

Yes, sure. I think that to me, it's -- I think if we had -- if we were fully utilized and we were doing the 100 megawatts that we talked about of power in our current system we -- or in our current manufacturing capability, we would be able to deliver what I said or what you saw in terms of the LCOS chart. I think another part of it, too, is what I call like the road to 50 megawatts. So like the first 50 megawatts that we make are going to be the most expensive because we have to -- we're going to -- there's going to be mistakes, learnings, changes that we need to do et cetera, et cetera.

So to me, it's 2 parts, right? It's getting to full -- that would be full capacity within our factory where you hit those LCOS numbers because that's when we could produce at that price point. And then the other part is just we need to do whether it's 25 or 50 megawatts of power through our factory to really kind of understand the production, make sure that the system is fully locked, like that first SRP deployment next year, I'm certain that there will be things that we're going to want to change for version 1.1, if you will. So I think about it kind of in 2 parts is we've got to get to -- we've got to put enough -- we got to put enough stacks through our manufacturing system and our design system to really have that full knowledge of how we want to do things. And then if we fill up our current 100 megawatts, we could definitely hit those LCOS numbers.

And then on the second part, in terms of growing our manufacturing capacity, another nice thing about having a lot of money over the last 4 years is there's -- there were plans to really grow and build more capacity into the future so that we could really scale up and hit some of those targets. So I think we've got -- we're probably 80% of the way through some of that capital spending to bring on, call it, 3 to 4x more manufacturing capacity with better automation. We haven't done the last 20% because we want to make sure that we're scaling this up in the right way from a financial perspective, even though we spent a lot, there's still changes going on with our product. So if we hold off on that last 20%, there's still tweaks we can make to the fully automated line before we bring it on to ourselves. And so we're just waiting to really finish that technological development. And once we do that, then we'll start to really lean into scaling.

I think the company in the history kind of did it a little backwards. And again, it was a lot because of the pressures of the market and the money and where the technology was at the time and where they wanted to compete with the product. But they pushed the scaling up maybe a little bit before the technological completeness was there. And so we're just flipping that and trying to finish the technological completeness and then worry about scale up.

Great. So I would say, based on the information we have, is -- are your batteries eligible for federal tax credits, the ITC?

Yes, which is great. If you put the PTC and the ITC together, it's something around slightly over 50%. One of the really nice things for battery manufacturers, unfortunate for solar and other green energy is if you look back, batteries -- with the One Big Beautiful Bill, batteries kind of avoided getting hit with a lot of the tax credit reductions that some of those other things did. My personal view on that is twofold. One, I think that the recognition from the U.S. government as to how much we need batteries and how there really is this gap in the market besides lithium, like lithium is the 8-million pound gorilla in the room, but there's a big gap in there between lithium and everything else. So I think -- I can't speak for anyone, but I think they recognize that there is that gap and so they want to support battery production in the U.S.

And there's also something where if we look solar was a technology that was really pioneered in the U.S. and then now has gone to China and most is produced in China because they can do it at scale, at quality, at price. And lithium is kind of the same way, right? So it's in China at scale, at cost, at price. They even own the critical mineral behind it. So you can think 95-plus percent of lithium is China-based and maybe even more given that they control the critical minerals.

So anyway, the answer -- I know I'm answering your question in a long way, but the point I'm trying to say is I think the recognition that batteries are important there. And yes, if you combine the production tax credit and the ITC, it's somewhere in the 50% plus range. And then so that's sort of the total credit to the customer, if you will.

Great. A couple of electrolyte questions. One, is there any freezing issues with the electrolyte, liquid electrolyte?

Yes. So it's a much better question for one of my -- one of our engineers. But yes, the electrolyte does freeze at a certain temperature. I'm going to say a number, but I'm probably going to misquote it. But I think the electrolyte, it has a wide operating range. I'm not even going to say a number because I feel like I'm going to misquote it, and I don't want to do that. But I'm happy to publish it again or you can look on our website, and I'm happy to update it there. But yes, the electrolyte, there's a couple of ways that you can think about electrolyte, right? So the more salt and iron you can put into the water, the better the electrolyte will operate. The less resistance you have, the more energy you can bring into it, et cetera. And so there's this trade-off between electrolyte and what I would call current density in electrolyte, right?

So in that end -- and in the end, that depends on also like where are you going to use the battery. Like if you're going to use it in Arizona, in the south of Arizona, where it's hot all the time, the electrolyte actually likes to live at a very hot temperature. It's better for those things I said, resistance and you can pack more salt into it if it's hotter, which means you get better energy into the system. In a cold place like Alaska, you might want a different electrolyte configuration because if you use the same one that you're using in Arizona, you'd likely have to heat it or use some kind of heater in order to make sure that it doesn't freeze or what you get is the salt actually coming out of the water at certain temperatures, so they like -- it like separates.

So the point I would make is electrolyte is one of those variables that is truly variable. It will change the current density, but you can change it relative to the environment that you're in. And the second thing I'll say is the reaction itself, the chemical reaction itself produces a lot of heat. So another thing to think about is depending on how much you run the battery will also tell you what kind of electrolyte you can use. So we have a couple of different formulations we use. And I think in the future, the idea is going to be like you have to really be thoughtful about where you're operating, how much you're operating, like ambient temperature, how much you're operating, and that can kind of tell you what current density you can get. And it will change a lot of those factors like round-trip efficiency, energy density per acre, et cetera.

Yes. That leads into another question about round-trip efficiency. I mean is there an average round-trip efficiency that you have for your batteries?

Yes. We -- there's a wide range that we've tested in the lab, but I'd say in the high 60s is where we think about our round-trip efficiency for the Energy Base that we're trying to -- that we're hoping to send to customers in -- or that we're working towards sending to customers in late 2027. So high 60s round-trip efficiency. I think theoretically, we can go into the low 70s. But everything in our research says that high 60s is the right -- that's where we think we are right now, and we think there is some efficiency gains that we can do with that. And that's, again, another factor that leads to why you want longer duration for our battery.

Okay. So you mentioned that your current projects will take approximately 2 years to complete. The question is, why so long? What are the reasons for that? Is the -- yes, if you could just talk about that.

Yes, of course. It's a great question, and it's deliberate on my part, the Board's part, the executive team's part, so the team of people who are making these decisions, it's deliberate, right? Look, we think we have this really great opportunity right now where the market, the investors aren't -- we're in a point in our company where the expectations are super low and where we have a decent capital position that we can focus on completing that technology over the next 6 to 9 months, and we can do all the design and technology work that we think we need and maybe was skipped over or is new because we've got -- we've taken it out of the box.

So for all these reasons, we don't want to sell batteries really until 2027 because we want to take this time. We have this little window of time, which we're very fortunate for to be able to just focus on bringing the technology to a commercial scale. And so if we can just do that and stay focused on that, super, that's a great time for us to do, and then we can start to scale up from there. So it's completing some of that technological road map.

The other thing I would say is that SRP, they want delivery toward the end of next year. And I do think that there is -- there are other customers along the way between today and the end of 2028. So it's not do nothing and then SRP shows up in end of 2027. I think there are other customers and opportunities on a smaller scale that we can slot in over the next -- towards the beginning of 2027 that will sort of help us build that road map to 550-megawatt hours. So to go from sort of nothing on the energy base to go to 550 megawatts at that time point, that's a big jump, right? So what we're thinking about now is what do we want to do inside of our own factory to prove that the technology works to give customers more excitement that they can actually purchase stuff from us and get on our road map of delivery. And then there are some other customers in there where we think they would be interested. We've seen some interest in smaller systems, which we think we can bring in towards the end of this year, early next year, I'd say, early 2027.

Great. So there's a very technical question, I'll ask that, but I'm partly asking because I don't think we got into just the estimated period of performance or like the life cycle of the system. This one is asking if you'd be willing to speak to the limitations of stack lifetime due to membrane failure rates. And if membrane failure occurs, how do you maintain electrolyte integrity? So that's very specific to the membrane failure. So if you can speak to that, but also just the full estimated lifetime of the system or replacement over years of certain parts?

Yes, sure. Look, I think I'll probably not answer that membrane question as best as I can, but I'll do my best since somebody asked it and always happy to give it a try. Look, I think you have to minimize stack failure as much as you possibly can. And there's a lot of reasons a stack can fail and a lot of reasons our stacks have failed over the last 15 years. Dendrite formation is one, running at too high BDC leaks. So to me, it kind of goes back to that current density question. And what we really need to be doing and what we spent a lot of time talking about and thinking about is what is the right operating paradigm for our system so you don't -- like I would consider a stack failure like a catastrophic failure because then like the question asker is saying, how do you preserve the electrolyte, how do you replace a stack, how do you do all these really expensive things while maintaining the integrity of the system. All very great questions, which we could talk for hours about how you do certain things.

But I guess the point I would like to make is we need to make sure that we're not killing stacks. And the most important thing is to create an operating paradigm for the chemistry and the technology that is least likely to create catastrophic failure. I think if you go back, the real mentality of the -- was to try because you're operating within a box was to try and get the most out of the stack you possibly could, push it right to the limit where you would start to see catastrophic failure and then try and run the system right below that. I think that from what we found is that, that's super catastrophic and super expensive. So if you can back off of that and make some other adjustments along the way, perhaps you don't operate the system at 99% where it can go. But if you're operating at 80% or 85% or 86%, I'm just giving numbers, then you allow the health of the system to stay much higher and you avoid catastrophic failure.

So to me, the idea, the mentality that we have at ESS now that we're trying to continue to push is avoid catastrophic failure and let's run the system where the chemistry and everything works really well, and you're getting the most out of it, but not pushing it past that point.

Great. We're getting towards the end here. I'm going to ask one more question that came up in a number of different forms on here. Just related to environmental safety, potential health impact. So what are the risks? I know you talked some about the lower risk than lithium-ion, but are there fire risks if there is a failure of some kind? Are there hazardous materials or potential contaminants? And what's been your experience working with emergency managers, local authorities and first responders?

Yes. Look, I think one of the things that we really like to lean on, and I probably didn't do a good enough job in the presentation, but happy to address it now. So thank you to whoever asked or whomever asked these questions. It's a very safe system. So there's no fire risk. I mean it's not a system where it gets that hot where you can light it on fire. And it's very much -- the materials are very nonflammable, water, iron salt. These aren't things that are high fire risk.

So one of the things that you have with lithium is you've got a ton of thermal runaway, and you have to put cooling systems around it and everything like that. It's actually the opposite for us, like we like to use the heat that comes off of the reaction to keep the electrolyte warm because it runs better at that level. So you don't have that same fire risk that you would from a lithium system.

Again, nothing against lithium. That's just part of the chemistry. It's an amazing chemistry, and it works quite well. But one of the things we try and lean on is not -- easier supply chain, much safer. You don't have the same sort of -- you can pack the energy in as dense as you possibly can, whereas lithium has rules about where you can put it. So we don't have that. But yes, the salt itself is quite corrosive and the iron, salt, water mixture, it stains everything, and it's quite corrosive. So if you come to our plant, like we spend so much time just trying to keep things clean and it's hard.

The best thing to say is it's -- we put it inside of an enclosure. And so if you do have sort of a -- and I don't mean like a box, but more like there's a wall around it so that if you do have some leakage or in the unlikely event of catastrophic failure and a big leak and electrolyte spilling everywhere that it's contained in one area. So it's one of the -- the electrolyte dissolves iron. So it's very corrosive to any metal. So everything around it is plastic. But yes, so what I would say is it's very -- it's a very safe technology though. And if you get it on your hands or your clothes, like it's not that big of a deal. But you wouldn't want it sort of spilling all the way into the environment. It's not -- there's not a huge risk there, but we do maintain an enclosure around it for that.

And then I was going to ask, there was one question I think I forgot to ask from your last question was on lifetime. We think about it 20,000 cycles or 15 to 20 years, if you -- that's the longevity of the product. If you're doing sort of daily cycling, you get 15 to 20 years. All the parts around it are rated for that. So it's not a thing where like 8 years in, you got to replace all the pumps or like all the joints on the plastic are welded, everything is there, so that it maintains a full enclosure.

And that's another selling point relative to lithium and a good place maybe to end this -- your question is there's no degradation over time because the nature of the system is you're adding electricity and then the iron plates inside of the stack and then you're taking electricity away and it de-plates. So it's very much like just a very fluid reaction. The system itself is closed. So you don't have a lot of escape there. And you should be able to get -- if you run the system correctly, you should be able to get 15- to 20-year life without having to replace anything. So we use 15-year pumps. We use all the things that you would think at an industrial grade.

And again, like the last thing I'll say, because I know we're out of time is it's a very well-worn path for a lot of the parts that we use around it. Outside of the stack, this is pipes and pumps and the ratings on these things and the understanding that comes from the oil and gas industry, like it's all very, very -- it's a well-worn path, which is really nice. For us, it's about making sure that we're setting up the system right and making the stacks correctly.

Excellent. Thank you so much, Drew. This has been extremely informative. I really appreciate your thorough responses to the questions that came up. Thanks, everybody who attended today and for putting your questions in. I hope you found it as informative and helpful as I did.

So we're going to end it there. We do have another one coming up in August, where we'll be talking to Form Energy about iron air, different technology, marketing and targeting a different space than ESS. So I hope you'll join us for that one, too. Again, thank you, Drew. I really appreciate it.

Thanks, Seth. And see you on the Form one. I'm excited to hear that one, too. So I really appreciate you guys putting on the series. So thanks again for all your help.

Excellent. Thanks, everyone.

Good afternoon, and welcome to the ESS Tech's First Quarter 2026 Financial Results Conference Call. [Operator Instructions].

During today's call, ESS may make statements relating to its future financial performance, anticipated growth strategies and trends in its business. These may include statements regarding ESS' future financial metrics, potential future orders, ESS' potential pipeline, ESS' potential market opportunity, ESS' ability to achieve future goals, ESS' timing of launching manufacturing and manufacturing capacity, the future potential of ESS' technology and the timing of manufacturing and delivery for Project New Horizon. These statements constitute forward-looking statements within the meaning of federal securities laws and are based on management's current expectations and beliefs concerning future developments.

These forward-looking statements involve a number of risks, uncertainties and assumptions, including, but not limited to, barriers ESS faces in producing its energy storage products, ESS' projects being in the early stages of commercialization, aspects of its technology not having been fully field tested, ESS' inability to develop its business and effectively commercialize its energy storage products; ESS' dependence on third-party suppliers, delays in manufacturing operations, ESS' ability to control its costs and achieve its cost reduction strategy, ESS' history of losses, ESS' ability to raise capital in the near future, and other risks and uncertainties described more fully in the company's filings with the U.S. Securities and Exchange Commission. Actual results may differ materially from those expressed in or implied by the forward-looking statements made on this call. Except as required by law, ESS undertakes no obligation to update or revise any forward-looking statements.

In today's discussion, the company will reference adjusted EBITDA, a non-GAAP financial measure. A reconciliation of adjusted EBITDA to the most directly comparable GAAP measure is provided in the presentation accompanying this call and in our earnings release. A press release detailing these results was issued earlier today and is available in the Investor Relations section of the company's website at investors.essinc.com.

Hosting today's call are Drew Buckley, Chief Executive Officer; and Kate Suhadolnik, Chief Financial Officer. I would now like to turn the call over to Drew Buckley. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Welcome to ESS Tech's First Quarter 2026 Earnings Conference Call. We appreciate you joining us today. On today's call, I will provide a corporate overview, walk through our first quarter operational updates, and discuss the real-world technology validation we achieved during the quarter. Kate Suhadolnik, our Chief Financial Officer, will then take you through our financial results for the quarter and our cash and financing position. I will then return with a closing summary before opening the call for your questions.

ESS is a leading manufacturer of long-duration iron flow energy storage solutions. Our flagship Energy Base product delivers 10- to 22-hour long-duration energy storage systems designed for 24/7 renewable power applications where lithium-ion is too costly, unsafe or inefficient. Our Iron Flow technology stores energy using iron, salt, and water with a chemistry that is inherently safe, durable and U.S. sourced, providing a true alternative to lithium-ion. Our open architecture, non-containerized design is purpose-built for utility scale and large industrial and infrastructure projects, and we have scaled manufacturing capacity in place today to support deployment. Importantly, we have built a Tier 1 pipeline anchored by flagship projects with Salt River Project, Google, and the U.S. Air Force Research Laboratory through Concurrent Technologies Corporation, which I'll discuss in more detail on the next slide.

The first quarter and subsequent period to date reflected meaningful progress across our 3 core priorities: commercial momentum, technology validation, and strengthening our balance sheet, as we continue to execute on the operational reset we initiated coming into 2026. On the technology validation front, our Iron Flow technology was independently validated at Burbank Water & Power and successfully commissioned at Turlock Irrigation District during the quarter, both of which I will discuss in more detail on the next slide.

In addition, we signed a letter of intent for a strategic partnership with Alsym Energy, a pioneer in nonflammable high-performance sodium-ion batteries, to jointly develop next-generation battery solutions designed to address use cases traditionally served by lithium-ion systems, but without the inherent thermal runaway risks associated with lithium chemistries. This solution does not require complex HVAC systems. It demonstrates high round trip efficiency, employs fast charge and discharge capabilities, and offers a simpler, safer deployment profile for customers seeking superior stationary storage solutions. Importantly, this partnership marks ESS' entry into the short- and medium-duration battery energy storage segment, a market historically dominated by lithium-ion and meaningfully expands the company's addressable market beyond its established position in long-duration storage.

While Iron Flow remains foundational to our long-duration strategy, this partnership introduces a complementary chemistry that enables ESS to address short- and medium-duration applications, effectively extending our solution set across the full 0- to 24-hour storage spectrum. Together, ESS and Alsym aim to deliver alternatives to lithium-ion systems without the inherent thermal runaway risks, offer high round trip efficiency, fast charge and discharge capabilities, and simplified system design that reduces the need for complex HVAC infrastructure. This strategic expansion positions ESS to compete across a significantly broader range of stationary storage applications and meaningfully increases the company's total addressable market.

Also in the first quarter, we acquired the intellectual property and assets of VoltStorage, a pioneer in iron salt battery technology. This transaction added VoltStorage's patents, technical development work and key personnel to ESS' existing platform, meaningfully strengthening our intellectual property base. On the commercial front, we appointed Randy Selesky, who brings more than 25 years of experience and deep ties in the energy storage industry, as our Chief Commercial Officer, where he is leading our global commercial strategy, sales, marketing, product management and business development initiatives.

We announced our Project New Horizon collaboration framework with Salt River Project and Google for a 5-megawatt/50-megawatt hour pilot deploying ESS' Energy Base technology at SRP's Copper Crossing Energy and Research Center in Florence, Arizona. Manufacturing for Project New Horizon is expected to begin in 2026 with delivery targeted for December 2027, and the pilot will sell capacity to SRP under a 10-year energy storage agreement. This is a landmark project for ESS, pairing a leading public power utility with one of the world's largest hyperscale customers, validating both the commercial appetite for long-duration iron flow storage and the role of our Energy Base in supporting 24/7 carbon-free electricity.

We were also awarded a $9.9 million contract with Concurrent Technologies Corporation and the United States Air Force Research Laboratory for a large capacity energy storage system of up to 27 megawatt hours to support the U.S. This contract underscores the strategic value of ESS' domestically manufactured nonflammable iron flow technology in mission-critical defense and remote infrastructure applications.

On governance and leadership, we announced the appointments of myself as Chief Executive Officer; Kelly Goodman as Chief Strategy Officer and General Counsel; and Kate Suhadolnik as Chief Financial Officer. This leadership reset continues to focus on governance, execution and financial discipline.

From a balance sheet perspective, in January, we closed a $15 million registered direct offering at $1.75 per share, priced at a premium to the prior day's closing. This financing supports general corporate purposes and working capital and provides important runway as we execute against our commercialization priorities. We ended the first quarter with $15.5 million in unrestricted cash and cash equivalents and $6 million in short-term investments for a total of $21.5 million in liquidity. Finally, we are engaging with international Investor Relations specialist, MZ Group, to lead a comprehensive strategic IR and financial communications program across all key markets.

This slide highlights 2 important technology validation milestones we achieved this quarter, both of which provide independent real-world support for the iron flow chemistry that underpins our commercial Energy Base product. The American Public Power Association, or APPA, working with Burbank Water & Power, completed a 21-month utility demonstration of our iron battery system under APPA's Demonstration of Energy and Efficiency Development, or DEED program. The system was installed, energized and operated for 21 months co-located with a solar resource. The final report concluded that ESS' iron flow battery technology works as intended and that there is a clear use case for this battery technology in the utility's overall energy storage strategy. Importantly, the report validated our nonflammable iron saltwater chemistry, our domestic manufacturing approach and the projected long operating life of our systems.

We also successfully commissioned 2 ESS iron flow battery systems at Turlock Irrigation District, or TID, in California's Central Valley. This deployment is particularly distinctive because it features an innovative solar-over-canal configuration that pairs renewable generation with long-duration storage and supports TID's water conservation objectives by reducing evaporation from active irrigation canals. It also demonstrates the suitability of iron flow technology in a reliability critical infrastructure use case. As noted at the bottom of the slide, these developments are demonstration projects, but they represent independent third-party validation of the iron flow chemistry that underpins our commercial Energy Base product. Taken together with the APPA report and the Project New Horizon framework, these reinforce our conviction that long-duration Iron Flow energy storage is ready to scale as a meaningful complement and alternative to lithium-ion.

I'd like to now turn to our technology road map, which we created to help visualize not only the progress that ESS has made so far, but the progress that we intend to make in the near future. This slide illustrates the path from our field-tested iron flow foundation to delivery of the 5-megawatt/50-megawatt hour Project New Horizon system for Salt River Project at the end of 2027. Each milestone on this time line represents a deliberate step in scaling our technology from validated demonstration into commercial deployment at utility scale.

ESS' deployments at commissioned sites through 2025 generated more than 2 gigawatt hours of transacted energy, providing extensive real-world data on the durability and operating profile of our iron flow chemistry. Building on that base, we launched our next-generation Energy Base architecture at the end of 2025, and as I mentioned earlier, acquired the intellectual property and assets of VoltStorage in February of 2026, further strengthening our iron salt battery technology platform. Where we sit today in the first quarter of 2026 marks an important inflection point. Our full-scale Energy Base components have met the performance specifications required for the Salt River Project pilot. This is a critical engineering milestone and underpins the time line for the remainder of the program.

Looking ahead, we plan to commission a 200-kilowatt Energy Base system at our Wilsonville, Oregon, facility by the third quarter to validate full system performance. In the first half of 2027, we expect to deliver our first 800-kilowatt 10-hour client system ahead of delivery of the 5-megawatt/50-megawatt hour Project New Horizon system to SRP at the end of 2027. Taken together, this road map reflects a clear milestone-driven path from our field-tested foundation to commercial delivery at utility scale with each step building on the last and demonstrating consistent execution on our commercialization strategy.

With that, I will turn the call over to Kate to walk through our financial results.

Thank you, Drew, and good afternoon, everyone. Our first quarter financial results reflect the continued cost discipline and operational reset that we have been undertaking for the past several months. Revenue for the first quarter of 2026 was $128,000 compared with $599,000 in the prior year period due to fewer deliveries of equipment to customers. This is consistent with our expectations given our transition to the Energy Base product offering.

Below the revenue line, our cost discipline drove meaningful year-over-year improvement. Cost of revenue decreased $1.6 million or 18% to $7.2 million compared with $8.7 million in the prior year period, reflecting fewer deliveries of equipment to customers given our transition to the Energy Base product offering. Total operating expenses decreased $3.3 million or 33% to $6.7 million compared with $10 million in the prior year period. The decrease was primarily driven by a $1.7 million reduction in sales and marketing expenses and a $1.7 million reduction in general and administrative expenses, reflecting the continued cost saving actions we have taken as part of our operational reset.

Net loss for the first quarter of 2026 was $15.9 million compared to $18 million in the prior year period, an improvement of $2.1 million or 12%. Adjusted EBITDA improved by $4.7 million or 31% to a loss of $10.3 million compared with a loss of $15 million in the prior year period, consistent with the operating expense and net loss trends I just described. I will walk through the full reconciliation of GAAP net loss to adjusted EBITDA on the next slide.

We define adjusted EBITDA as net loss before interest, stock-based compensation, depreciation and amortization, gain or loss on revaluation of common stock warrant liabilities, financing costs and other income or expense items that we believe are not indicative of our ongoing business operations. As I noted on the prior slide, GAAP net loss improved by $2.1 million year-over-year and adjusted EBITDA improved by $4.7 million or 31% to a loss of $10.3 million from a loss of $15 million in the prior year period, consistent with the broader cost discipline reflected across the income statement. The full line item reconciliation is shown on this slide and in the financial tables included in our earnings press release.

We ended the first quarter of 2026 with $15.5 million in unrestricted cash and cash equivalents and $6 million in short-term investments for a total of $21.5 million compared with $22 million as of December 31, 2025. Including other liquid assets, total cash and liquid asset position at quarter end was $21.6 million compared with $22.1 million at year-end 2025. Net cash used in operating activities for the first quarter of 2026 was $13.5 million compared with $18.2 million in the prior year period.

As we have discussed, our $15 million registered direct offering supports general corporate purposes and working capital, and we remain focused on the strategic allocation of capital as we advance our operational and commercialization priorities. Across the business, we remain focused on expense control, liquidity and maintaining financial flexibility as we support the company through its transition and commercialization efforts.

With that, I will turn the call back over to Drew for closing remarks.

Thank you, Kate. I want to summarize the key areas where we made meaningful progress this quarter and where we are focused going forward. On commercial momentum and pipeline, we announced the Project New Horizon collaboration with Salt River Project and Google for a 5-megawatt/50-megawatt hour pilot, deploying our Energy Base technology with manufacturing expected to begin in 2026 and delivery targeted for December 2027. We secured a $9.9 million contract for a large capacity energy storage system to support a U.S. operation station, and we signed a letter of intent for a strategic partnership with Alsym Energy to develop next-generation battery solutions.

We also improved our financial performance and balance sheet. Net loss improved 12% to $15.9 million in Q1 2026 compared with $18 million in Q1 2025, as total operating expenses decreased 33% to $6.7 million compared with $10 million in Q1 2025. Adjusted EBITDA loss improved 31% year-over-year to $10.3 million, consistent with the cost discipline reflected across the rest of the income statement.

We also strengthened our team and technology. Iron flow technology was independently validated at Burbank Water & Power and successfully commissioned at Turlock Irrigation District. We acquired VoltStorage's intellectual property and assets and appointed Randy Selesky as Chief Commercial Officer. We announced our new leadership team, myself as CEO, Kate as CFO; and Kelly Goodman as Chief Strategy Officer and General Counsel.

Taken together, these accomplishments better position ESS to convert growing demand for safe, long-duration American-made energy storage into meaningful commercial progress. We remain focused on execution, capital discipline and scalable commercial opportunities as we advance into the company's next phase, and we look forward to updating you on our continued progress.

Over the next 18 months, investors should watch several important derisking milestones across our road map, including new commercial wins, pilot systems that generate data on performance and commercial viability at scale, progress on our 200-kilowatt and 800-kilowatt development path, and continued execution toward the SRP project targeted for 2027. As those milestones are achieved, we believe there may also be an opportunity to host an Analyst Day alongside a future pilot data release to provide the investment community with a deeper look at our technology, our road map, and our long-term market data.

With a strengthened balance sheet, a refreshed leadership team, and over 500 megawatts of scaled manufacturing capacity in place to support our recent commercial wins, we are focused on executing and converting our pipeline into revenue.

With that, I will turn the call back to the operator to begin the Q&A session.

[Operator Instructions] There are no further questions at this time. I will now turn the call back to Drew Buckley for closing remarks.

Thank you, operator, and thank you, everyone, who joined us today. We appreciate your continued interest and support of ESS. As a reminder, our Investor Relations team is available to schedule one-on-one calls and to answer any follow-up questions you may have. You can reach out to Chris Tyson at MZ Group at [email protected]. We look forward to updating you on our continued progress next quarter and hope to see some of you at the upcoming Sidoti Microcap Conference, which we will be attending on May 20. Thank you again, all, and have a great afternoon.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, and welcome to the ESS Tech Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] During today's call, we may make statements relating to our goals and objectives for future operations, financial and business trends, business prospects, future financial metrics, statements relating to timing for project, New Horizons, manufacturing and delivery, potential future orders from customers, potential future partnerships our future manufacturing capacity and management's expectations for future performance that constitute forward-looking statements under federal securities laws. Any such forward-looking statements reflect management's expectations, based upon currently available information, and are not guarantees of future performance and involve certain risks and uncertainties that are more fully described in our SEC filings. Our actual results, performance or achievements may differ materially from those expressed in or implied by such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call.

On this call, we will also discuss financial measures derived from our financial statements that are not determined in accordance with U.S. GAAP, including adjusted EBITDA. A reconciliation of each of the non-GAAP measures discussed on this call to the most directly comparable GAAP measure is presented in our earnings release and investor presentation posted on our website today. A press release detailing these results was issued this afternoon and is available in the Investor Relations section of our company's website, investors.essinc.com.

Hosting today's call will be ESS' Chief Executive Officer, Drew Buckley; and Chief Financial Officer, Kate Suhadolnik.

With that, I'll turn the call over to Mr. Buckley.

Thank you, operator, and good afternoon, everyone. Today, we'll walk through 4 areas: a company overview; our FY '25 operational updates; our pipeline and go-forward strategy; and a financial review from Kate. Let's get started.

ESS is a leading manufacturer of long-duration iron flow energy storage solutions, traded on the New York Stock Exchange under the ticker GWH. Founded in 2011 with a mission to accelerate decarbonization safely and sustainably, ESS' iron flow technology uses iron, salt and water, some of the most abundant and easy to source materials on earth, to store energy in a way that is safe, sustainable and built to last.

Our flagship product is the energy base, a 10- to 22-hour long-duration energy storage system designed for applications where lithium iron is too costly, too short in duration or simply not safe enough. The energy base is a noncontainerized and open architecture system, purpose-built for utility-scale grids, hyperscaler data centers, industrial microgrids and defense installations, Unlike lithium iron, our iron flow technology is designed to deliver unlimited cycling with 0 capacity degradation over a 25-year life. All of our products are manufactured right here in Wilsonville, Oregon with over 98% domestic content, making ESS 1 of the only American-made, American-sourced long-duration storage solutions available today. We have scaled manufacturing capacity in place and a Tier 1 pipeline that includes Salt River Project, or SRT, Google and the U.S. Air Force.

2025 was a year of [indiscernible] transformation. The headline is straightforward. ESS has executed on restructuring, made meaningful commercial progress and significantly strengthened our balance sheet, let me walk through the key milestones. On the commercial side, we were awarded a $9.9 million contract from Concurrent Technologies Corporation and the U.S. Air Force Research Laboratory for a long-duration energy storage system to be deployed at U.S. clear space [indiscernible] station in Alaska, this is a landmark win. It demonstrates that American Made iron [indiscernible] is ready for mission-critical defense applications.

We also announced Project New Horizon a 5-megawatt -- 50-megawatt hour system to be installed at SRP's Copper Crossing Energy and Research Center in Florence, Arizona. Google has been confirmed as an off-taker and will provide cost [indiscernible] and multiyear operational testing. Manufacturing is expected to begin this year in 2026 with delivery targeted for December 2027. This is a transformational partnership, a major Southwest utility backed by one of the world's largest energy loads with significant sustainability and resiliency goals.

On the leadership front, we made important changes. Kelly Goodman transitioned to the role of Chief Strategy Officer and General Counsel; and Kate Suhadolnik was appointed as our permanent CFO.

In February of 2026. We acquired the intellectual property in assets of Bolt storage, a pioneer and iron salt battery technology. This acquisition deepens our technological moat and adds meaningful patent coverage in the long-duration iron flow space in addition to highly valued human capital. Both storage gives us a further platform to continue building the strength of our leadership team. We appointed [ Randall Seleski ], former Chief Commercial Officer of Bill Storage as our new Chief Commercial Officer. Chief Operating Officer, Gigas Trivedi, will be departing to ESS. We want to thank Mr. Trivedi for his contributions during his tenure, including his leadership during our strategic pivot to energy based, and we wish him well in his future endeavors. Brian Lisicki, current Chief Information Officer, will serve as Interim Chief Operating Officer while we conduct a formal search process.

On the balance sheet, we closed a $40 million financing transaction with Yorkville Advisors launched an ATM equity offering program, raising approximately $8.6 million in gross proceeds and to date have repaid approximately $28.5 million or 95% of the first $30 million tranche each under the Euro [indiscernible] note.

In January 2026, we closed a $15 million registered direct offering priced at a premium to the market, and as of March 1, we have drawn the second $10 million tranche under the Yorkville promissory note. We continue to see a large and growing long-duration energy storage market opportunity. Demand from AI data centers alone is projected to increase 165% by 2030, and the grid will need to deploy 8 terawatt hours of long-duration storage by 2040 to meet clean energy targets. We have the right team in base and the right technology to execute on our near and midterm objectives.

With that, I'll turn it over to Kate to walk through the financials.

Thank you, Drew. I'm pleased to be speaking with you today as ESS' CFO. Revenue for the full year 2025 was $1.6 million, down from [ $6.8 million ] in 2024. As Drew noted, this reflects the deliberate transition away from legacy product lines, the Energy warehouse and Energy Center, as we refocus on the energy base. Revenue recognized during the year included deliveries of legacy units primarily to related parties, engineering services and extended warranty, partially offset by the wind down of active contracts for legacy business activities in connection with the shift to the energy-based product offering.

Gross loss for the year was $27.7 million, an improvement of 39% compared to a loss of $45.4 million in 2024.

Total operating expenses decreased 33% year-over-year to $29.7 million, down from $44.4 million. This reduction reflects the organizational reset we undertook.

Research and development expenses declined $3.5 million. Sales and marketing declined $5.3 million and G&A declined $5.9 million as we reduced personnel costs and streamlined operations. We made the smallest cut to R&D to prioritize investment in our product development.

Net loss for the full year was $63.4 million, compared to $86.2 million in 2024, an improvement of 26%.

Adjusted EBITDA improved 38% records of $44.3 million from a loss of $71.3 million in 2024. [indiscernible] coming down meaningfully. And as revenue ramps with the energy base in 207 and beyond, we believe we are on the path to positive EBITDA. Compared with the prior year, we significantly improved adjusted EBITDA by $27 million. That improvement reflects the significant cost reduction work being done across every line of the business. The quality of those reductions is important. They are structural, not temporary, and they carry forward directly into the energy-based cost profile.

Turning to the balance sheet and liquidity. As of December 31, 2025, we had $14.5 million in unrestricted cash and cash equivalents and $7.5 million in other liquid assets for a combined liquidity position of $22 million.

[indiscernible was essentially 0, and inventory was $0.1 million, consistent with the wind down of legacy product line. Subsequent to year-end, in January 2026, we closed a $15 million registered direct offering priced at a premium to the market. During 2025, we completed the $40 million Yorkville financing, receiving $30 million immediately and drawing on the second $10 million tranche in February 2026. We raised approximately $8.6 million through our ATM and have repaid approximately $28.5 million or 95% of the first $30 million tranche under the Yorkville promissory note as of March 1, 2026. We will continue strengthening the balance sheet and managing expenses so that we can execute our strategic priorities over the near and long term.

With that, I'll turn the call back over to Drew.

Thank you, Kate. SP1 Let me leave you with 3 takeaways from today's call. First, our commercial momentum in and building. Google is confirmed as an offtaker on Project New Horizon and the $9.9 million CTC and Air Force contract is underway. These are not promises, they are signed agreements with sophisticated counterparties. Second, our financial performance is improving across key metrics. Adjusted EBITDA improved 38% year-over-year, while operating expenses were down 33%. The organizational reset we undertook in 2025 is showing up in the numbers, and those savings are structural. Third, the team and technology are in place to execute. We have a permanent CEO in a permanent CFO, a new Chief Commercial Officer with deep iron flow experience and several other experienced senior employees joining the team and a strengthened IP portfolio following the [indiscernible] acquisition. The energy base is the right product for the market and we are ready to deliver. We look forward to updating you on our progress. And with that, we will now open for questions. Operator?

[Operator Instructions] The first question comes from Justin Clare with ROTH Capital Partners.

I wanted to first start off here. I was -- kind of in the press release, it indicates that you're anticipating delivery for kind of the 3 key projects that you have in -- to start in 2027. So just considering the time line, how should we think about the outlook for the ramp-up in revenues associated with those projects, could we see any revenue in 2026? Or is it more likely a contribution in 2027? And then just should we anticipate any legacy unit sales in 2026?

Justin, it's Drew. Thanks, Justin. Yes, so our focus for 2026 will be commercializing the new product, the energy base so that we can deliver for Tier 1 customers that have signed up to take delivery in '27 and '28. Those customers alone represent revenues and megawatts installed that are multiples higher than the company has achieved on a cumulative basis since listing in 2021. So it's a really big deal for us, and we're really excited about it. The pipeline to look at that for a second, it remains quite exciting. But we're going to take a pragmatic approach in 2026 to ensure that when we start shipping energy base, it's a product of the highest quality. So I would expect 2027 and 2028, when you see most of those revenues to come in.

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

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

5

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

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

Got it. Okay. And then -- so maybe just 1 more here, shifting gears. For the liquidity. I wonder if you could just speak to plans to potentially repay the second tranche of the promissory notes or plans to use the ATM or contemplates an additional capital raise here? How do you feel about the balance sheet and the strategy going forward?

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

[Operator Instructions] There are no other questions registered at this time. So I'll pass it back over to Drew Buckley for any additional remarks.

Thanks, operator, and thank you all for joining us today. We're building something important at ESS, technology that the world genuinely needs, manufactured in America with a team that is focused and fully aligned on execution. The commercial wins we've already seen in early 2026 give me confidence in what this year will bring. And we look forward to sharing more on our developing story at the upcoming 38th Annual Roth Conference on March 22 to 24 in Dana Point, California. And if we're unable to address any of your questions today, please reach out to Chris Tyson at MZ Group. His contact details are on the back of today's presentation, and he will be happy to follow up. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

Ladies and gentlemen, thank you for standing by. [Operator Instructions]

I would now like to turn the conference over to [ Mary Horn ]. Please proceed.

Welcome to ESS' Third Quarter Fiscal Year 2025 Financial Results Conference Call. Joining me on the call today from ESS are Kelly Goodman, Interim CEO; and Kate Suhadolnik, Interim CFO. Following management's prepared remarks, we will hold a Q&A session. Earlier today, ESS released financial results for the third quarter of 2025. The earnings release is available in the Investor Relations section of the company's website.

As a reminder, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects, partnerships, Energy Base product, financial performance, capital raising, including under our ATM program, and strategy for 2025 and beyond and the impact of regulatory and legislative developments. The forward-looking statements are also 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 in our most recent periodic filings filed with the Securities and Exchange Commission as well as the current uncertainty and unpredictability in our business, challenges with raising capital, issues with our partnerships, the markets, the economy, the current geopolitical situation and the development and launch of the energy base.

You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call today 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.

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 U.S. 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 U.S. GAAP and non-GAAP results are presented within our earnings release.

With that, I will turn the call over to Kelly.

Thank you, Mary, and good afternoon, everyone. Before we dive into the quarterly results, I want to take a moment to reaffirm who we are as a company and the value we deliver.

ESS is a technology leader in long-duration energy storage. Our iron flow battery platform delivers safe, sustainable, non-flammable storage capable of 10 or more hours of discharge. Built with abundant U.S. sourced materials, iron, salt and water, our systems are designed to cycle over 20,000 times without capacity fade. That combination of durability, safety and sustainability positions ESS to meet a critical market need as data centers expand, electrification accelerates and utilities seek reliable clean power at scale. Short-duration and lithium-ion technologies simply cannot fill that gap cost effectively or sustainably.

We have built strong relationships with Tier 1 customers, including SB Energy, Honeywell, Portland General Electric, Sacramento Municipal Utility District and most recently, Salt River Project. These partnerships validate our technology and highlight its readiness for real-world deployments, giving ESS a strong foundation as we move from development into execution.

The third quarter was an important continuation of the strategic plan we have been executing throughout 2025. We advanced key customer programs, strengthened our capital position and laid the foundation for the delivery of our first Energy Base system.

Most notably, we announced a 50-megawatt-hour Energy Base pilot project with Salt River Project, or SRP, one of the nation's leading utilities and a recognized innovator in long-duration storage. This project represents the first commercial scale deployment of our next-generation Energy Base platform and is a powerful validation of our technology and our team.

Shortly after the SRP announcement, we completed a $40 million financing with Yorkville Advisors. That transaction reinforced our balance sheet and gave us the flexibility to move forward with confidence as we prepare for manufacturing and delivery in the next 18 months. Since closing that transaction, we have already repaid $15 million of the original $30 million drawn to date.

For additional capital to support execution, we are launching a $75 million at-the-market equity program with a syndicate, including Yorkville, BMO Canaccord, Needham and Stifel. This is intended to provide efficient access to capital to support growth and execution as needed.

As I step back and look at where we are, the progress this year has been clear and deliberate. We started 2025 with a focus on strengthening our leadership team and tightening our cost base. From there, we aligned our organization around the Energy Base, a product designed and manufactured in America to meet the growing need for 10-plus hour storage. Today, we are executing with customers who understand that long-duration storage is essential to a decarbonized and resilient grid.

We are particularly encouraged by the strength of our commercial pipeline. Since launching the Energy Base earlier this year, 100% of our active opportunities are centered on this platform, with RFP activity and proposal volume continuing to increase. These engagements are larger in scale, longer in duration and more strategically aligned with the needs of major utilities, data center developers and industrial customers.

Looking forward, our focus over the next 18 months is on execution, building, delivering and validating performance in the field. We are continuing to drive operational discipline, scale manufacturing capabilities and demonstrate to customers that our technology delivers safe, sustainable, long-duration energy storage at competitive costs.

Finally, I am pleased to share that we plan to host an Investor Day in early 2026, where we will provide an in-depth look at our progress, the Energy Base program and our road map into 2026 and beyond.

With that, I will turn it over to Kate for the financial update.

Thank you, Kelly, and good afternoon, everyone. Unless otherwise noted, all figures I'll reference are on a non-GAAP basis and reconciliations can be found in our earnings release.

For the third quarter of 2025, we reported revenue of $200,000 compared to $2.4 million in the second quarter. The year-to-date trend reflects our ongoing transition from Energy Warehouse and Energy Center deliveries to the Energy Base platform, which will become the foundation of our commercial activity going forward.

GAAP cost of revenues totaled $4.9 million while operating expenses were $5.1 million, consistent with our commitment to disciplined cost control. Net loss for the quarter was $10.4 million or $0.73 per share.

We ended the quarter with cash, cash equivalents and short-term investments of $3.5 million which, as a reminder, does not include the $30 million of proceeds from the Yorkville financing, which closed after quarter end. These funds provide a solid runway to continue advancing manufacturing readiness and support early project execution.

As Kelly noted, we are launching a $75 million at-the-market program, which we view as an additional tool, not a requirement for accessing capital. With the funding we secured earlier this quarter, we have the flexibility to time any use of the ATM strategically based on market conditions and our progress towards key milestones. Together with continued cost control, this positions us to execute from a position of strength.

Operationally, we continue to focus our resources on productization of the Energy Base, vendor optimization and supply chain readiness for 2026 delivery. At the same time, we remain highly selective in spending, aligning every dollar to programs that directly support execution, delivery or validation in the field.

In summary, Q3 was another step forward in strengthening our financial and operational foundation. We have greater visibility, improved efficiency and growing customer momentum, all key ingredients as we prepare for our next phase of growth.

With that, I'll hand it back to Kelly for closing remarks.

Thank you, Kate. To close, ESS' priorities remain clear. One, deliver on customer commitments, starting with SRP and our early Energy Base programs; two, execute with discipline, controlling costs scaling responsibly and ensuring operational excellence; three, convert momentum into long-term growth, validating performance and building durable relationships with leading utilities and developers.

We are proud of what the ESS team has achieved this year. The pieces we have put into place, technology, capital, customers and people are setting the stage for the next chapter of growth and value creation.

Thank you for your continued support. And with that, we will open the line for questions.

[Operator Instructions] We have a question from Justin Clare of ROTH Capital Partners.

So first, I wanted to start out with the Energy Base product here. I was wondering if you could just talk about the scale of the projects that you're currently pursuing with the Energy Base? And what kind of durations your customers might be looking for?

And then also, just in recent RFPs, could you talk about the technologies that you're most frequently competing against? Is this lithium-ion potentially? Or is it primarily alternative long-duration technologies that you're seeing?

Sure. Thanks, Justin. This is Kelly. So to answer your questions in order, as far as scale, our strategy over the next couple of years is to deliver projects similar in size to SRP, which is a 5-megawatt -- 50-watt -- 50-megawatt-hour project but projects that have a significant follow-on opportunity in the next couple of years. So by that, I mean 100-megawatt or 200-megawatt project opportunities.

As far as duration, our current Energy Base offering is a 10-hour duration. By 2029, we're targeting having a 16-hour battery. So that's sort of the duration we plan to offer in the later years.

As far as RFPs and technologies, I would divide those into two buckets. We're seeing more and more RFPs that are specifically targeting long duration like SRP. And by that, I mean technologies that offer more than 10 hours. So in those RFP, we're competing against technologies that can actually offer more than what you see in the normal 4-hour space.

In other RFPs that are sort of storage agnostic, we are competing against lithium, other competitors that offer for our storage, where we're really pleased by what we're seeing as an emerging trend and recognition that longer duration 10-plus hours will be needed.

Got it. Okay. I appreciate that. And then I guess, just following up for the RFPs that you are pursuing here, can you talk about the types of customers that are issuing me. So are these utilities, IPPs or are you participating in RFPs directly with data centers, whether it's behind the meter or front-of-the-meter approach?

Sure. So in the RFP space, I would say the customers are either utilities or they are IPPs acting on behalf of the utility. We are not engaged in RFPs behind the meter but rather for data centers and other customer hyperscale like that, those are bilateral conversations.

Got it. Got it. Okay. And then just on the balance sheet here. So you've obviously raised a decent amount of capital. And so wondering if you could just talk a little bit more about the use of proceeds for that capital in the near term. And then just thinking about your liquidity needs, how much runway does that capital provide you? And how are you thinking about liquidity ahead?

Yes. Justin, this is Kate. I'll take that one. I'm happy to give some more details as a lot has definitely changed in the last few weeks since the end of the quarter.

As of today, we have roughly $30 million in cash on hand, and we still do have the ability to draw the remaining $10 million from Yorkville's promissory note at our discretion. So together with that and the new ATM program that we announced today, I think we feel we have significant flexibility to manage liquidity sort of on our terms as we need it over the coming months and quarters.

Over the past 11 months, we've taken a lot of deliberate steps to streamline the company. We're really focused now rather than on survival, which has been kind of our focus on execution and really driving towards delivering on the SRP project, pursuing new opportunities. And as I mentioned, just really executing on those milestones as we move forward.

That seems like all the questions we have. So I'll pass it back over to the ESS team for any closing or further remarks.

Yes. Thanks for that. This is Kelly. Just wanted to say thank you. Thank you for joining. Thank you for the support and look forward to what's ahead of us.

Thank you. That will conclude today's call. Thank you for your participation. You may now disconnect your lines.