Energy Vault Holdings, Inc. quarterly report, Q2 FY2022

Energy Vault Holdings, Inc. — Q2 2022 Form 10-Q

Reporting period: Three and six months ended June 30, 2022. Energy Vault develops grid-scale energy storage, including gravity-based systems and energy-management software. The February 2022 business combination was accounted for as a reverse recapitalization; prior-period financials reflect Legacy Energy Vault.

Financial performance and liquidity

MetricQ2 2022Six months 2022
Revenue$1.0 million$43.9 million
Gross profit / margin$0.4 million / approximately 42%$43.3 million / approximately 99%
Operating loss$22.0 million$1.1 million
Net income (loss)$(6.2) million$(26.3) million
Adjusted EBITDA (non-GAAP)$(14.2) million$17.0 million
Cash used in operating activitiesNot separately stated$26.9 million

Six-month revenue was overwhelmingly a one-time intellectual-property license transfer to Atlas Renewable LLC ($42.9 million); Q2 revenue consisted of construction-support services and reimbursements. The company said it does not expect many similar licensing agreements. Accordingly, the six-month gross margin and positive adjusted EBITDA should not be read as evidence of recurring operating profitability. GAAP net loss includes $20.6 million of merger-related transaction costs and a $4.6 million loss from warrant fair-value changes.

At June 30, cash and cash equivalents were $299.1 million, versus $105.1 million at December 31, 2021. Current assets were $331.4 million and current liabilities $7.5 million. Management said cash on hand was expected to fund operations for at least 12 months, excluding possible cash warrant exercises. Total liabilities were $38.9 million, including a $21.5 million warrant liability; the filing reports no material conventional borrowings. Six-month financing cash flow of $223.2 million chiefly reflected the merger/PIPE financing, partly offset by transaction costs. Operating cash use rose from $8.9 million in the first half of 2021 to $26.9 million in 2022.

Changes, unusual items and outlook

  • Q2 revenue rose from zero in 2021, but the 2022 amount was entirely from Atlas-related support services. First-half revenue was also entirely attributable to Atlas.
  • Operating expenses increased substantially year over year, reflecting higher staffing, research and development, stock-based compensation, and public-company costs. Six-month stock-based compensation was $15.9 million.
  • Q2 net loss was partly offset by a $15.6 million non-cash gain from a decline in warrant fair value. The prior-year Q2 reported net income included a $24.1 million derivative fair-value gain; these items make period comparisons less representative of underlying operations.
  • The company contributed $22.5 million to Atlas in Q2 under a commitment for up to $25.0 million. It expects repayment when Atlas’s first project reaches substantial completion and meets specified performance metrics; the contribution is recorded as a contract asset.
  • On July 1, 2022, the company announced redemption of its public warrants. The redemption was completed August 1: 8.6 million warrants were cashlessly exercised for 2.2 million shares, and remaining public warrants were redeemed. Private warrants remained outstanding.
  • Management expects continuing operating losses as it invests in research and development and growth; it gave no quantified revenue or earnings guidance. Only the Swiss demonstration unit was operating; there were no commercial EVx or EVRC installations. The company cited lengthy sales and installation cycles, uncertain customer adoption, execution and technology risks, permitting, supply-chain constraints, inflation, and COVID-19 effects.
  • The filing disclosed an immaterial $1.1 million stock-compensation error from accelerated RSU vesting at the merger closing, recorded in Q2 2022. Previously identified internal-control material weaknesses related to the predecessor SPAC’s warrant accounting and redeemable-share classification were still being remediated, although management assessed disclosure controls as effective.

Important facts for investors to verify

  • Whether Atlas project milestones are achieved and the $22.5 million contribution is repaid; also verify collection of the remaining $5.0 million of Atlas license fees expected by year-end 2022.
  • Conversion of the company’s development pipeline and non-binding indications into definitive, financeable customer orders, including the timing and terms of DG Fuels projects.
  • Progress, costs, performance, and commercial deployment timeline for EVx/EVRC; the filing describes expected EVx efficiency of 80%–85% as a design expectation, not demonstrated commercial performance.
  • Cash burn and funding needs against management’s 12-month liquidity assessment, including the effect of continued losses and the absence of public-warrant proceeds after redemption.
  • Potential dilution from private warrants, equity awards, earn-out shares, and registered resale shares; common shares outstanding were 134.4 million at June 30 and 137.0 million on August 3, 2022.
  • Remediation and testing of internal controls, and recurring revenue and costs apart from the Atlas license transaction and merger-related accounting effects.