Energy Vault Holdings, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Energy Vault develops grid-scale battery, gravity, hybrid and software-based energy storage solutions. The filing is unaudited.
Key financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $172.2 million | $1.7 million | $223.3 million | $45.6 million |
| Gross profit (margin) | $7.1 million (4.2%) | $0.1 million (4.2%) | $13.5 million (6.1%) | $43.4 million (95.2%) |
| Operating loss | $21.2 million | $36.2 million | $82.5 million | $37.3 million |
| Net loss | $18.9 million | $28.8 million | $76.3 million | $55.0 million |
| Adjusted EBITDA, non-GAAP | $(10.2) million | $(17.2) million | $(47.3) million | $(0.2) million |
Q3 revenue chiefly reflected physical progress on battery storage projects. Nine-month 2022 revenue included $42.9 million of intellectual-property licensing revenue with no associated cost of revenue; this drove the unusually high prior-year gross margin and makes the nine-month margin comparison less representative of current project economics. Q3 2023 cost of revenue was $165.1 million. Nine-month operating expenses rose to $96.1 million, including $34.5 million of stock-based compensation.
Cash flow and liquidity: For the first nine months, operating cash use was $116.1 million, investing cash use $33.2 million, and financing cash use $4.7 million. Operating cash use reflected a $71.3 million decline in operating liabilities, including lower deferred revenue, and growth in contract assets. At September 30, cash and cash equivalents were $74.2 million and restricted cash was $58.0 million, versus $203.0 million and $83.1 million, respectively, at year-end 2022. Current assets were $245.1 million; current liabilities were $58.9 million. Management said cash, cash equivalents and restricted cash on hand should fund operations for at least 12 months.
Debt and commitments: The filing reports $0.9 million of insurance-premium financing payable, included in accrued expenses; it identifies no material conventional borrowing balance. Non-cancelable purchase obligations were approximately $57.0 million. The company had $79.7 million of letters of credit, supported primarily by restricted cash, $198.0 million of performance and payment bonds, and $28.8 million of other bonds outstanding.
Changes, outlook and risks
- Bookings were 400 MWh and $137.4 million in Q3; nine-month bookings were 400 MWh and $170.5 million. Backlog/remaining performance obligations were $255.5 million. The company expects about half to convert to revenue over the next 12 months and the remainder over months 13–24; timing may slip or contracts may be canceled.
- An August 2023 contract calls for construction of a 400 MWh battery storage system in the southwestern U.S., with construction expected to begin in 2024. The filing does not provide formal earnings or revenue guidance.
- The filing says no commercial EVx gravity storage system had been completed and operating as of the report. Project delivery, customer acceptance, supply availability, inflation, construction costs, competition, and permitting may affect execution and profitability. Management expects continued operating losses and says additional financing may be needed for future collaborations, joint ventures or business combinations.
- Revenue and receivables are concentrated: two customers generated 97% of Q3 revenue, and three generated all nine-month revenue. Two customers represented 92% of accounts receivable at quarter-end.
- A $25.0 million refundable contribution to a customer is recorded in contract assets and is due back upon substantial completion of the customer’s first gravity storage system, subject to possible liquidated damages. The allowance for credit losses was $2.6 million at quarter-end; adoption of the expected-credit-loss standard reduced opening equity by $2.4 million.
- Disclosure controls were not effective because of a previously reported material weakness in controls over assessing collectibility for certain licensing revenue. Remediation was underway but not yet complete or validated through a sufficient period of testing.
- The company disclosed ordinary-course legal proceedings that it did not expect to have a material adverse effect. It also cited risks from economic conditions, interest rates, access to capital, foreign exchange and commodity prices.
Important facts for investors to verify
- Whether backlog converts on the stated schedule, and the project-level margin and cash-collection profile behind the large revenue increase.
- Customer credit quality, concentration, contract assets and the recoverability and timing of the $25.0 million refundable contribution.
- Cash burn, restricted-cash requirements, letters of credit, bonds and purchase commitments, particularly against management’s 12-month liquidity assessment.
- Progress on commercial deployment of EVx and the 400 MWh battery project, including construction timing, cost exposure and customer acceptance.
- Completion and effectiveness testing of the remediation for the material weakness; also consider dilution from outstanding options, RSUs, warrants and other potential shares.