ESS Tech (NYSE: GWH) is an energy storage company, designing and producing long-duration batteries using earth-abundant materials. Its batteries provide flexibility to grid operators and energy assurance for commercial and industrial customers. Its technology addresses energy delivery, duration, and cycle-life in a single battery platform that compares favourably to lithium-ion batteries. The company was founded in 2011 and is headquartered in Wilsonville, Oregon.
With endorsements from the likes of Bill Gates, ESS Tech went public through a SPAC listing and became the highest gaining share across the US exchange on 12 October 2021.
ESS Tech reported their Q2 for the year (ending 30 June) on 11 August and for the first time since being founded they reported a revenue - amounting to $686,000 and a landmark moment for the company. Alongside its latest quarterly financial results, ESS Tech also announced a major deal for up to 12GWh of its systems to be deployed in a new Australian partnership. The share value increased by more than 18% during subsequent daily trading. Investors should still note the net loss of ($15.6m), significantly higher than their revenue - representing a net margin loss of 2,274%. Investors could be betting that the net margin loss will improve ahead of a landmark moment for renewable energy in the US. The Inflation Reduction Act expected to soon reach the desk of President Joe Biden could reshape the American energy industry by putting non-fossil fuel alternatives in reach of more people. If signed into law, the Inflation Reduction Act of 2022 (IRA) would allocate $369bn to households and businesses to solely invest in renewable energy sources – a historic amount that scientists estimate will lead to carbon reductions of 40% by 2030, compared with 2005 levels - as well as positively impacting climate-related equity investments. With revenue inflow opening for the first time, ESS Tech is in a unique position to bolster its revenue and build its market share within the renewable battery industry. However, net losses in recent quarters have been as high as ($180m).
The first thing worth checking when a company is seeing consistent net losses is how strained its current assets to current liabilities are becoming.
In the short term, the current assets and current liabilities can measure a company's ability to pay short-term debt or obligations due within one year. ESS Tech's short-term liquidity percentage in Q2 was 6.83% (current liabilities/current assets) - demonstrating significant control over short-term liabilities. This significantly improved compared to last year's quarter, which was 8.97% - showing that although current assets decreased in the last six months, net losses decreased at a quicker rate to improve liquidity margins. Current assets and current liabilities stand at $199.4m and $13.6m, respectively.
Total cash for the company is up significantly from recent times, seeing $8.02m as of 30 September 2021 increase to $239m by the end of 2021. Total cash has since fallen to $112.7m for Q2 - however, softened by liquidity. Total assets were down over the last six months to $216.1m (from $250.2m) - however, total liabilities have also decreased significantly to $29.3m (from $40m). Long-term liquidity percentage decreased in the last six months from 16% to 13.6%.
2021 was also a landmark year for ESS Tech to bolster its balance sheet and get on top of previously elevated liabilities seen in the previous two years. Total assets from FY20 to FY21 increased from $9.02m to $250m (with 95.6% consisting of total cash) - while total liabilities remained fairly flat at $45m.
ESS Tech release its Q3 earnings for the year on approximately 16 November, 2022.