ESS Tech, Inc. 2026 Q2 Earnings Call

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. I will introduce Bridge, our new sodium-ion battery energy storage system. I will 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 the 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 timeline. 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 markets 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 20-25 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 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 6th, 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 four figures across the top of the slide capture the essentials. It is modular, meaning customers can stack four 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 will see we have 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 is designed to operate in temperatures from -40 to +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.