Part I - Financial Information Item 1. Financial Statements The company's financial statements reflect a revenue shift to BESS construction, impacting gross margin and net loss Condensed Consolidated Balance Sheets Total assets and liabilities decreased, driven by a significant reduction in cash and accounts payable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $74,236 | $203,037 | | Total current assets | $245,115 | $390,067 | | Total Assets | $300,537 | $416,713 | | Liabilities & Equity | | | | Total current liabilities | $58,923 | $125,323 | | Total liabilities | $62,249 | $129,000 | | Total stockholders' equity | $238,288 | $287,713 | | Total Liabilities and Stockholders' Equity | $300,537 | $416,713 | Condensed Consolidated Statements of Operations and Comprehensive Loss Revenue surged from BESS projects, but a lower margin and higher expenses widened the company's net loss Statement of Operations Summary (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Revenue | $223,307 | $45,555 | | Gross Profit | $13,514 | $43,361 | | Loss from operations | $(82,539) | $(37,343) | | Net loss | $(76,271) | $(55,022) | | Net loss per share | $(0.54) | $(0.46) | Condensed Consolidated Statements of Cash Flows Cash used in operations and investing increased significantly, leading to a substantial net decrease in cash Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(116,050) | $(47,795) | | Net cash used in investing activities | $(33,182) | $(2,679) | | Net cash provided by (used in) financing activities | $(4,655) | $220,207 | | Net increase (decrease) in cash | $(153,960) | $169,610 | Notes to Condensed Consolidated Financial Statements Notes detail the revenue shift to energy storage products, a backlog of $255.5 million, and significant commitments - The company adopted ASU 2016-13 (Credit Losses), resulting in a cumulative effect adjustment to accumulated deficit of $2.4 million50 - As of September 30, 2023, the company's remaining performance obligations (backlog) totaled $255.5 million, with approximately 50% expected to be recognized as revenue in the next twelve months58 - As of September 30, 2023, the company had significant commitments including $57.0 million in non-cancelable purchase obligations, $79.7 million in letters of credit, and $198.0 million in outstanding performance and payment bonds124126129 Revenue by Category (in thousands) | Category | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Build and transfer energy storage products | $222,739 | $1,153 | | Licensing of intellectual property | $0 | $42,884 | | Other | $568 | $1,518 | | Total revenue | $223,307 | $45,555 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the business model shift to BESS projects, which increased revenue but lowered gross margins Key Operating Metrics The company reported bookings of 400 MWh and a total backlog of $255.5 million as of September 30, 2023 - Backlog as of September 30, 2023, totaled $255.5 million, which aligns with the company's remaining performance obligations155157 Bookings Summary | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Bookings [MWh] | 400 | 495 | | Bookings [$ in thousands] | $170,478 | $256,794 | Results of Operations Revenue grew significantly from BESS projects, but gross margin fell sharply from 95.2% to 6.1% year-over-year - The significant increase in revenue for the nine months ended Sep 30, 2023 was primarily due to $222.7 million related to building and transferring energy storage products (BESS projects)174175 - Gross profit margin for the nine months ended Sep 30, 2023 was 6.1%, a sharp decrease from 95.2% in the same period of 2022, which was attributable to high-margin intellectual property licensing revenue180181 - G&A expenses for the nine months ended Sep 30, 2023 increased by $19.0 million year-over-year, driven by a $15.3 million increase in personnel-related expenses, including higher stock-based compensation188 Liquidity and Capital Resources Total cash decreased to $132.2 million, with management asserting sufficiency for the next twelve months - Net cash used in operating activities for the nine months ended Sep 30, 2023, was $116.1 million, primarily impacted by a net loss of $76.3 million and a $71.3 million decrease in operating liabilities201202 Cash Position (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $74,236 | $203,037 | | Restricted cash | $57,986 | $83,145 | | Total | $132,222 | $286,182 | Non-GAAP Financial Measures Adjusted EBITDA was a loss of $47.3 million, a significant decline from a loss of $0.2 million in the prior year Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net loss (GAAP) | $(76,271) | $(55,022) | | Stock-based compensation expense | $34,523 | $26,757 | | Transaction costs | $0 | $20,586 | | Other adjustments | $(5,560) | $7,495 | | Adjusted EBITDA (non-GAAP) | $(47,298) | $(184) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks including foreign currency, inflation, credit, and commodity prices - The company is exposed to foreign currency risk, inflation risk, credit risk from customers, and commodity price risk for materials such as cement, steel, aluminum, and lithium221223224225 Item 4. Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in revenue recognition controls - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2023227 - A material weakness was previously identified related to revenue recognition, specifically the failure to implement effective background check controls for an international customer's ability to pay229 - A remediation plan is underway, but the material weakness cannot be considered remediated until the applicable controls have operated effectively for a sufficient period of time231 Part II - Other Information Item 1. Legal Proceedings Current legal proceedings are not expected to have a material adverse effect on the company's business - The company states that the outcome of current legal proceedings would not individually or in the aggregate have a material adverse effect on its business234 Item 1A. Risk Factors Unfavorable U.S. economic conditions are highlighted as a supplemental risk to business operations - A supplemental risk factor was added concerning unfavorable U.S. economic conditions, including rising interest rates and potential government default or shutdown, which could adversely affect the company's business and ability to raise capital236 Other Items (Items 2, 3, 4, 5, 6) No material information was reported under Items 2 through 5, and Item 6 lists filed exhibits - No information was reported for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)237238239240
Energy Vault(NRGV) - 2023 Q3 - Quarterly Report