Energy Vault Holdings, Inc. (NRGV) Q4 2022 Earnings Report, Transcript and Summary

Greetings and welcome to Energy Vault's Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce to your host Laurence Alexander, Chief Marketing Officer for Energy Vault. Thank you. You may begin.

Thank you and good afternoon and welcome to Energy Vault's fourth quarter and fiscal year end 2022 earnings conference call. As a reminder, Energy Vault's earnings release and an updated fourth quarter earnings presentation is available now on our Investor website and we will be referring to the presentation during this call. A replay of this call will be available later today on the Investor Relations page of our website. This call is now being recorded. If you object in any way, please disconnect now. Please note that Energy Vault's earnings release and this call contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only estimates and may differ materially from the actual future events or results due to a variety of factors. We caution everyone to be guided in their analysis of Energy Vault by referring to our 10-K filing for a list of factors that could cause our results to differ from those anticipated in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements except as required by law. In addition please note that we'll be presenting and discussing certain non-GAAP information. Please refer to the safe harbor disclaimer and the non-GAAP financial measures presented in our earnings release for more details including a reconciliation to comparable GAAP measures. Joining me on the call today is Robert Piconi, our Chairman and Chief Executive Officer; and Jan Kees van Gaalen, our Chief Financial Officer. At this time, I'd like to turn the call over to Robert Piconi.

Laurence, thank you and thanks to everybody for joining the call today. Just a few weeks ago, we finished our first year as a publicly-listed company, a year that saw us launch in February, while delivering our first $146 million in revenue throughout the year, $100 million of which was achieved in Q4 alone due to strong execution and customer focus by our people in our first start to deployments and project revenue. I was on the floor of the NYSE two weeks ago with Judy Shaw from the New York Stock Exchange who was interviewing me for a year-in review perspective as we have met the year before during the IPO. And it really struck me to step back and look at all that was accomplished. Starting the year having strategic investors like Korea Zinc and Atlas Renewable, step into the IPO with an additional $100 million of investment from the start, to then immediately breaking ground on our first EVx gravity system outside of Shanghai in March 2022 for the highlights of the first quarter. Note that this first 25-megawatt 100-megawatt-hour system once operating this year will be only one of two operating long-duration energy storage systems at this scale that is not a pump hydroelectric facility. And it really just shows you that the energy storage industry is still in its infancy, particularly for longer duration which is in its own early development stages. We're really excited to show the world what we're capable of here as the EVx system comes online this year. Sticking with gravity, we broke ground in Snyder, Texas in September with Enel Green Power with our first US-based EVx system. And we finished the year signing more territory expansions and license royalty agreement territories outside the United States in Europe and the Middle East, all of which set the platform for future builds and subsequent high-margin royalty streams as the longer duration storage markets develop and become more important as renewables become a greater portion of our power generation. Turning to where there is much larger and immediate demand in the short duration energy storage market, our EVx team executed with velocity and quality and development of our energy management system, enabling the signing of about 1.6 gigawatt hours of battery, hybrid, and green hydrogen energy storage projects with multiple regulated utility companies and some of the largest leading independent power players in the world. This is further proof that customers see and value not only our differentiation and unique hardware architectures and software design, but perhaps most importantly they recognize the seasoned operational and prior energy storage project experience of our team trusting us to deliver on very large scale and complex projects as we will be turning over this year. The type of customers that we are working with do not take risks on execution, full-stop. Their jobs are mission-critical providing power and our energy storage needs therefore have to support that. And we are excited this year to turn over our first systems. Our current backlog and awarded contracts now exceeds five gigawatt hours and approximately $2 billion. And I could not be more proud in supporting the team here at Energy Vault. We set some benchmarks in 2022, while executing well with a strong Q4 finish, demonstrating significant market validation via our strategy across short, long and ultra-long-duration storage wins across multiple storage mediums enabled through our software and innovative energy management system. And we look to continue to build upon this momentum in 2023. Let's spend a minute here on Q4. And regarding Q4 we announced our 2022 revenue of approximately $146 million, which is within the midpoint of our pre-announced higher range of revenue with gross margins of approximately 16% reflecting a mix of gravity license revenue from regional expansions in Europe and the Middle East and execution on battery-related projects in the United States. Our adjusted EBITDA of approximately negative $11.4 million was slightly under our prior guidance driven by upticks in investments in employees in Q4 to support the aggressive projects ramping into 2023 as well as some compensation-related expense given the overperformance achieved in Q4 and the year. Jan Kees will be reviewing more financial details of the Q4 performance shortly. Before we get there I do want to talk in some detail about the 2023 forecast which I know many of you are very interested to understand. As we had already announced and pre-announced a stronger-than-expected Q4 revenue, I would like to spend some time talking about that forecast. And before jumping into the specifics and our financial guidance, I first want to outline our framework and philosophical approach as we begin to share more financial details with investors transitioning from a first year in 2022 marked by large contract wins announcements. And deployment starts with top utilities and global independent power providers to now in 2023 where we will be commissioning and turning over our first gravity and battery energy storage systems globally. Let me first talk a little bit about the shape of the year and how we see our progress ramping. As we saw in Q4 with a significant revenue upside achieved through executing ahead of schedule for a 275 megawatt hour California deployment, we continue to expect a level of lumpiness in our results which could result in potential timing shift quarter-to-quarter and really not unusual at all given our stage of executing on our first deployments as a company. Our out-performance in the fourth quarter is expected to result in successive quarterly growth ramps starting low double-digit million revenue to high double-digit revenue into Q2 and getting quickly into triple-digit revenue quarter-over-quarter in the second half of the year. Our second half of 2023 will thus represent our largest quarterly revenues in Q3 and Q4 coincident with our first project turnovers as expected and for contractual commitments to a progressive build to our year based on contracted bookings from 2022. I want to talk a little bit about the macro factors and talk about how those could potentially impact our forecast as well. We are approaching the revenue forecast that we've given and specifically our cash and operating expense management with the level of tightness and conservatism as we prudently plan for: one, continued uncertainty in the macro interest rate inflationary environment and does general financial market volatility; two, the potential for further regional impact of COVID-related pandemic issues and work stoppages; three, general supply chain and labor tightness; and four, the potential for geopolitical and unforeseen escalation that may occur. At the same time and given our strong liquidity and cash position with no debt, we are well-positioned and poised to take advantage of the industry growth tailwinds for energy storage globally. And specific growth in economic accelerators in the US market driven by the passage of the IRA. And we'll talk more about that in just a minute. Third, let's talk about how we're playing to our strengths. Compounding the momentum we're seeing across our business is our portfolio of proprietary and differentiated storage solutions that is unmatched in the market. And our unique ability to address short, long- and ultra-long-duration needs across multiple customer use cases under the same asset management digital platform. The perspectives that we garner from our customers, from their short-term shifting needs given peak demand cycles to fossil fuel asset retirement tied to longer-duration needs and even very specific regional needs for backup and microgrid solutions requiring ultra-long or multi-day storage are all contributing to fortify Energy Vault's role as a true strategic partner, helping our customers manage through this complexity. In fact, we're very proud to have recently had our energy management system selected by one of the largest US public utilities over other current leading platforms which we believe demonstrates our innovation, our advantaged economics and the velocity of our Energy Vault Solutions team. Fourth, I'd like to talk about the IRA which was really a game-changer to our industry and just really refreshing to see the United States lead in this area given the priority on solving the climate change problem. And first to note that we haven't baked any of its expected benefits into our current forecast. In the US market in particular, we uniquely can take direct advantage of the IRA monetizing one the ITC which represents up to 50% CapEx reduction, thanks to our domestic content and project site in energy communities as defined. For our gravity projects in particular given we can be 100% domestic content and for the projects that we initially own for gravity. But in addition the advanced manufacturing credit which is a $45 per kilowatt hour for our hybrid green hydrogen storage solutions that we integrate deliver under EPC contracts. While the general energy storage market is made up of players that are more single-threaded in their technology and selling into broader growth trends, Energy Vault uniquely can capture significant direct benefits on top of the broader market growth for projects we may initially own. And we have optimized our strategy to do just that pending the Treasury guidance that we expected forthcoming, especially with our gravity energy storage portfolio given its optimal positioning enabled through the IRA for the US market. Just to remind, we are not currently including these benefits in our forecast for revenue, cash or margin as we await final guidance from the Treasury Department on the actual mechanics. But we strongly believe the legislation as intended can and will have significant benefits to our company in an outsized way. Fifth, I'd like to dig in a bit more on the unit economics for our business, which is an area that many of you have asked about as we began our project deployments in 2022. And as evidenced in our 2022 project wins, we will continue to generate higher returns than the industry average because we are continuing to focus on large projects with unique needs that we can match with our high-energy storage solutions from a megawatt hour per acre high density and more efficient design for augmentation, as was the case with batteries, no degradation in the storage medium, as is the case for our gravity energy storage solution and for ultra-long-duration in small footprint, as we did with our hybrid green hydrogen solution for PG&E. Generally, this means a move from the mid- to high-single gross margin percentages on our initial projects to mid-teen gross margin percentages across the board on all content and value added that we supply. And in fact our 2023 gross margins will reflect this as our projection reflects of 10% to 15%. This includes allowing customers who wish to do so, or if we strategically decide to contract directly with suppliers to pass through products, such as battery packages and utilize the Energy Vault to deliver our proprietary hardware architecture across the gravity battery and hybrid systems, coupled with our energy management system. Importantly, our business model and approach flexible, to be able to adapt to each specific customer and project, whether customers choose to procure batteries on their own, or not, for example. This may result in lower total revenues for some projects, but importantly in those cases, we will be exclusively focused on the higher-margin opportunity set associated with the project development, which we target in the mid-teen to 20% margin range. While our revenue will be growing in the 2 to 3x range year-over-year, we are holding our operating expense flat off of our annualized Q4 2022 run rate as we exit the year. This will allow us the potential to achieve positive adjusted EBITDA in Q4, 2023, as we exit the year, assuming that we execute within the high end of the revenue range and perhaps, more importantly, allow us subsequently to enter 2024 on pace to achieve positive operating cash flow and adjusted EBITDA for full year 2024 results. Now, back to the specific 2023 guidance that we highlighted in our earnings announcement sent out just 30 minutes ago. We hold all of the factors above to influence our 2023 outlook, but have taken a very conservative baseline approach that we're adopting in how we forecast our business and felt it most prudent to take a very measured approach to 2023, especially given the significant second half revenue ramp that constitutes our range of $325 million to $425 million for the year. At the low end, our updated 2023 revenue forecast of $325 million reflects only contracted revenues, already under execution, with planned CODs within 2023. At the upper end of our range captures the potential associated with projects forecasted to be placed in service later in the year. Some pending gravity and technology portfolio license agreements that are underway, other territory expansions and other potential projects within the short listing or submission phase of our sales funnel. Importantly, we'd emphasize that even at the high end we have adopted a level of conservatism that does not full capture the various projects and discussions our team is working on. We plan to update this and refine this range throughout the year, as we gain greater visibility on the development and completion of our large-scale projects. Additionally, as I noted earlier, our forecast does not assume any benefits as well from the pending IRA legislation, pending the Treasury guidance. Based upon the revenue forecast above and projects contracted and under development and deployment, we are projecting gross margins in the range of 10% to 15% for 2023. This expected gross margin outcome reflects the blend across our wide-ranging project slate, including gravity, battery and hybrid green hydrogen projects. Further, we believe it evidences our thoughtful approach to managing the returns of our business, as well as our ability to remain nimble and flexible in developing the right solution to our customer's energy storage needs. As mentioned above, we are holding our OpEx, our total operating expense relatively flat to our fourth quarter 2022 annualized run rate, given the growth investments made in 2022. While this might be surprising, given the 2 to 3x revenue ramp from 2022 to 2023, we believe this will enable more flexibility, as we ramp the year and ability to continue to invest in the most attractive opportunities that prevent themselves. Taken together, we're currently forecasting adjusted EBITDA in the range of minus $50 million to $70 million in 2023. Importantly, however, there is a significant amount of leverage within our range as we ramp into the second half of the year, of between minus $15 million to positive $1.1 million, allowing us to potentially be adjusted EBITDA positive as we exit the year if revenue approaches the higher end of the range, and thus entering 2024 with a platform for positive operating cash flow. One thing I want to iterate here at the end of some of the specific guidance is our primary focus for this year, which really hasn't changed on our focus from last year, which is executing to customer needs. This year becomes even more critical in that regard as we will be turning over our first systems to customers and demonstrating, not only our innovation and the development of technology, our innovation and execution capabilities to deliver on time and on budget but delivering a quality technical performance and operating performance for our customers for our initial gravity and battery energy storage systems that will be delivered and turned over this year. I want to talk also a little bit now about EVx and turning to some project-specific progress updates. Let's start in China, which is where we broke ground in March of last year with the first 100 megawatt hour system. And China continues to progress. And this success is leading to more opportunities for us in the Asia market, as you may have seen announced. I'm really proud of the Atlas Renewable and the team from China Tianying, as they worked through two long COVID-related shutdowns in particular in the Shanghai area, which is where Rudong is located approximately 45 minutes outside of Shanghai. We've included in the investor presentation some additional pictures from Rudong. And you can see the extraordinary progress being made in such a short period of time. This is also further validation of EVx's economic and technological viability. In a few short years from 2017 and 2018, when we built the first 5-megawatt system in Switzerland, we have been able to develop the new EVx system in a new form factor leveraging all of what was proven in Switzerland with a 5-megawatt system to an interconnected grid system and to now to be close to be commercially developed in our first 25 megawatt and 100 megawatt hour unit in Rudong China that as I mentioned earlier, will be one of the first systems in the world in long duration at that scale that's not pumped hydro. We continue to be very excited about that and excited also about what we're implementing in that system. Let me give you a little bit of a higher level of context as well as we see the present and future market segments for our EVx and how we are maximizing our opportunities for success. Let's start by segmenting the EVx market into two end-use types. The first segment is the utility grid uses and the second being the industrial and micro-grid uses. The first segment for utility grids continues to be heavily biased in the current time to shorter duration needs and use cases that are currently being served as we are serving them with lithium-ion solutions. As time goes by and renewable power reaches a larger percentage of the overall power pool, the need for long duration will drive broader adoption of solutions like EVx in broader deployments. And to address these market realities for establishing strategic relations early on with these same utilities that we're currently integrating some of the shorter-duration projects where we've gained installed footprint. Our strategy is to expand these relationships in the future to include the EVx as their long-duration storage needs emerge and progress. And in fact most of the utilities we're working with have those needs as they were shutting down some of their existing fossil fuel assets over time and will require longer duration storage solutions at the end of the existing grid. Shifting to the industrial and micro-grid applications, we see a lot of strong interest today that requires durations of eight to 12 hour and use cases accordingly and are not well-suited for existing shorter-duration technologies like lithium-ion. We've talked a lot about our metals and mining investors and operations are great examples as they electrify their operations and this has enabled us to work with our strategic partners such as Korea Zinc and BHP to develop ways to implement the EVx to decarbonize their operations. Other segments, such as green hydrogen that are emerging, as well as the strong demand required to meet the need for sustainable aviation fuel, which is a market that we believe is going to be in the multibillions in the coming five to 10 years. In parallel with how we are addressing these segments, we are also executing three initiatives for us to extract both near-term and longer-term economic benefits from EVx. The first as you might expect is our continued cost reduction programs. With the feedback design and construction of the EVx in Rudong, China, which follows all the learnings from Switzerland on our first grid-interconnected five megawatt system in our Arbedo-Castione coupled again with the R&D efforts with our team in Switzerland and the United States led by Andrea Pedretti and Chris Wiese we continue to design test and validate the latest innovations to increase the economics of the EVx system. This includes leadership from Dr. José Andrade, who was a former PhD and Head of the seismic studies department at Caltech and joined us over one year ago bringing tremendous expertise and research to help us continue to optimize the performance of that system. I'm also pleased to share with you that we have retained the services of William Baker the renowned engineer of the Burj Khalifa Tower in Dubai, which is the world's largest building at the height of over 2,700 feet. Bill will be applying his past expertise in development of the world's most innovative high-rise structures to our optimization efforts, but also to specific customer opportunities where his presence and expertise will be welcomed and will also help us accelerate the permitting of the existing range of height of our structures and the potential to even accelerate those same heights of those same structures. Within our gravity focus, we have a team that's supported by over 70 team members. And we're excited to see the development they are able to make throughout 2023 and look forward to share the details of their progress in the coming quarters. Another initiative associated with our EVx systems, as we previously announced our continued licenses and royalty programs that give us the opportunity for attractive recurring revenue at very high margins that will materially and positively impact our overall company blended margins. In addition to the announced opportunities in China and the follow-on opportunities alone in China of up to six gigawatt hours as have been announced in the last six to eight months, I am pleased to announce today two new EVx licensing partners in CITC based in the UAE for Egypt and also New Energy Keepers based in Greece to also develop the Cypress market, which were signed in the fourth quarter. We will continue to pursue these types of businesses globally to make EVx a meaningful margin contributor to the bottom line today, while bridging to the future state of broader market adoption of longer-duration systems, as the grid develops with more renewable power generation, and therefore, the need to address the increased intermittency that comes with renewables. The third initiative is leveraging the IRA as another amplifier and accelerator for our EVx business within the United States as we've discussed above. And perhaps globally, as other nations and even regions may follow suit on the leadership the US has provided in developing incentives to accelerate the deployment of renewable energy and renewable storage. While the legislation has not yet been fully defined at a detailed implementation level, we believe that it will come to market more or less in the same form and function as currently understood. We currently believe that both the advanced manufacturing credit and project investment tax credits could significantly and positively impact the economics of the EVx in particular for the coming years. We believe that the local manufacturing construction of EVx would make it suitable to receive advanced manufacturing credits of perhaps as much as $45 a kilowatt hour. An attractive design and draw of the EVx is the ability to locally source material and label that would enable the system to take advantage of many of the domestic content portions of the ITC as well. You can expect a lot of focus and continued updates in this regard on EVx the U.S. market and development of the IRA in the coming quarters. Just to highlight a few of the commercial activities and progress, as we came out of Q4. We have 1.6 gigawatt hours of signed contracts and booked orders in the backlog. This is a more than 3x increase from the third quarter of 2022, where we exited with 495 megawatt hour. This includes 275 megawatt hour with Wellhead Electric, 220 megawatt hour with Jupiter Power which was acquired by BlackRock Infrastructure in Q4, 440 megawatt hour with Nevada Energy and up to 700 megawatt hour with PG&E in California. Our submitted proposal pipeline, grew more than 50% quarter-over-quarter as energy storage demands and needs as we see remain robust and we remain with a seat at the table in making proposals. Our awarded category shifted by approximately 17% for the quarter-over-quarter, driven by positive factors as projects were converted that were sitting in the awarded category into booked orders. As I mentioned before, the primary focus of 2023 will be on project execution. We are currently on track to deliver all of our signed projects on time. And our team is working very hard to navigate the supply chain permitting and interconnection delays that are prevalent in the industry but thus far, have been able to manage through and working both with our customers and with our supply chain partners. Given the rapid pace, that we are seeing with the energy transition and all the unique use cases and solutions required to meet our customer needs, we continue to believe our differentiated holistic solutions-based energy storage approach is the best one suited for this market and will set up Energy Vault for a very large and unique future, as a major leading player over the next five to 10 years. One last comment on the project we signed with PG&E for hybrid, green hydrogen plus battery storage solution in January really showcases the differing needs of our customers and our ability to deliver on them. In this case, and this is the case in California, they needed a product which could provide a minimum of 48-hour-long duration energy storage to address needs in the event of a power safety shutdown as was evidenced by the wildfires that impacted the utility industry in California some years back. But they also required black-start and grid forming capabilities in the event that there was a public safety shutoff event. And given our technology-agnostic approach with our software we were able to engineer, design, integrate and will in the future operate the system with our proprietary software that will actually enable up to 700 megawatt hour or almost four days of long-duration energy storage. We're very excited to bring and demonstrate and showcase our broad technology expertise to be able to design and architect this solution with our partners and to progress on this project to completion, planned in the second quarter of 2024 and to continue an even broaden this partnership with PG&E, and the city of Calistoga. With that, I'd like to turn the call over, to our CFO Jan Kees van Gaalen, who can provide more details into our financial results from Q4.

Thanks Rob. Turning to our financial results for the fourth quarter of 2022, revenue in the quarter was $100.3 million primarily reflecting $84.5 million in revenue earned from our battery storage projects and $15.6 million from EVx licensing deals. Wellhead construction began in Q4 and we began recognizing revenue for that project during the quarter. Revenue from Wellhead drove battery storage project revenue during the fourth quarter. Licensing revenue in the fourth quarter was driven by $9.7 million in revenue from the Egypt, EVx licensing deal and $5.9 million from the Atlas licensing deal. For the full year 2022, revenue was $145.9 million, primarily reflecting $85.6 million in revenue earned from our battery storage projects and $58.5 million from EVx licensing deals. Fourth quarter 2022, gross profit was $15.9 million driven by licensing revenue recognized during the quarter, bringing full year 2022 gross profit to $59.3 million. Total operating expenses excluding cost of sales were $41.7 million in Q4, up $5.4 million versus the $36.3 million we reported in Q3 of this year. Stock-based compensation was $14.3 million in Q4, up $3.4 million versus Q3 2022. Depreciation expense in Q4 was $0.2 million compared to $5.2 million in Q3. Excluding these non-cash charges, operating expenses were up $7 million versus the third quarter, mainly driven by an increase in headcount. This brings total operating expenses to $122.4 million in 2022 and $81.3 million if we exclude stock-based compensation. Sales and marketing costs for the first -- for the fourth quarter of 2022 were $4.3 million compared to $3.8 million in Q3 of this year. Excluding stock-based compensation, sales and marketing expenses were up $0.6 million sequentially. 2022 total sales and marketing costs were $12.6 million. Excluding stock-based compensation, sales and marketing expenses were up $6.7 million year-over-year primarily due to an increase in head count and an increase in marketing and public relations costs. Now turning to research and development costs. For the fourth quarter of 2022, they were $13.9 million compared to $16.7 million in the third quarter of this year. Excluding stock-based compensation and depreciation, R&D expenses were up $2.7 million versus Q3 driven by an increase in R&D activities and STIP that accounted for $1.9 million. Total R&D expenses for the year were $50.1 million excluding stock-based compensation and depreciation. R&D expenses were up $20.3 million versus 2021, primarily due to higher R&D activity levels. G&A for the fourth quarter increased to $23.5 million compared to $13 million in Q3 of this year. Excluding stock-based compensation, G&A was up $6.6 million versus Q3, driven primarily by an increase in headcount with STIP accounting for $3.5 million of the $6.6 million increase. Year-over-year, G&A increased from $18.1 million in 2021 to $56.9 million in 2022. In line with our business plan, we will exercise continued focus on our operating expenses as we selectively expand globally and position the company for the overall growth of the business. Operating loss for the fourth quarter of 2022 was $25.7 million compared to an operating loss of $36 million sequentially. This brings total operating loss for 2022 to $63.1 million. Fourth quarter 2022 adjusted EBITDA was negative $11.2 million bringing total full year 2022 adjusted EBITDA to a negative $11.4 million in 2022. Our earnings release, which we filed this afternoon, includes a bridge from net income to adjusted EBITDA. The key non-cash or nonrecurring items that we added back were $41.1 million of stock-based compensation, $20.6 million in merger transaction costs, $7.7 million in depreciation and amortization expense and $2.8 million in asset impairment charges. The key non-cash or nonrecurring items that we deducted were $3.7 million in interest income net and $2.3 million gain from the change in the fair value of our warrants. As of December 31, 2022, we had approximately $286.2 million in cash, cash equivalents and restricted cash, leaving us well positioned to continue to progress towards our growth objectives in '23 and beyond. As of December 31, 2022, we still have $5.1 million outstanding private warrants, which are required to be remeasured to fair value each period. I would like to reiterate the 2023 financial guidance that Rob introduced earlier in the call. For 2023, we expect revenue guidance to be in the range of $325 million to $425 million. Our latest forecast reflects more than doubling year-over-year growth at the midpoint, evidencing the strong commercial and financial momentum our team continues to achieve. With that said, our 2023 guidance reflects a more conservative approach to our financial expectation for the year. We have taken a philosophical relook at how we forecast our business better, to better-account for the inherent lumpiness associated with our large-scale projects and their development, compounded by the back-end weighted nature of our expected financial results this year. We remain relentlessly focused on continued measured growth of our infrastructure and organization to further results of our business and that of our customers. We will also target adjusted EBITDA in the range of negative $50 million and negative$70 million with year-over-year difference, a result of the change in revenue mix as we roll off the margin tailwinds from the licensing and royalty deal signed in the first quarter of 2022. And as we continue to build and develop our infrastructure, hiring key resources for the delivery of our projects and expanding in international markets. And with this, I will now turn the call back over to Rob.

Thank you, Jan Kees. And I would like to also welcome and thank Jan Kees for his first quarter under his belt here at Energy Vault. And he's a great addition to our team. And as we're looking at the business, given the growth, we're going to be taking on his global experience let alone his length of tenure across multiple public companies across the world is going to serve us very well.

Thank you.

Look here, we're at the end of the call. A few things I want to reiterate here before we turn it over for questions and a few data points I'll point to. We really tried at this point as we're digging into the forecast for this year to begin to share more information as we now have more visibility with executed contracts and booked orders. And a few data points I want to highlight and reiterate with you. One is on the funnel metrics. We shifted to a more near-term 12-month funnel approach and segmented it in four sections. There is a page within our investor deck that's on the website that summarizes that funnel. I want to point you to a 50% increase in the number of proposal submissions that we've made from 13 gigawatt hour last quarter, now up to 20 gigawatt hour, which is a massive number. I think it's a great leading indicator of what's to come. Not suggesting we're going to be batting 1,000 on those or win all of them. But you can count on the fact that we're going to win some of them. And I think that's a great leading indicator on that front end of that funnel as we move from those submitted proposals to shortlist to project awards and then into bookings. And we've, I think, demonstrated an ability to move that forward with velocity. The other thing I want to highlight, as Jan Kees mentioned right at the end of his review of the results, is liquidity. I think we're in just a fantastic position with no debt on the balance sheet and finishing with actually growing cash quarter-over-quarter is just a fantastic data point and puts us in a great position to now, as we evolve the business, entertain and have discussions as we are to get surety and bonding capacity, for example, for these larger projects and with non-collateralized solutions. So really avoiding letters of credit that require us to restrict cash, but we're working in a very positive way with Marsh which is one of the largest players in the United States, and bringing solutions together for non-collateralized bonding capacity, as well as non-collateralized letters of credit. And that's going to serve us well as we will not restrict cash on our balance sheet. The other thing that, I want to highlight and emphasize is for the first time we shared information about our gross margins and unit economics, but also spent some time about our philosophical approach to how we contract our deals and the blend of our portfolio as well as the mix across customers that we work with where they want us to integrate 100% through our books, of all the third-party equipment and others where we choose not to and focus on the integration component. We're very sensitive about that because we want the highest returns on the work we're doing. It demonstrates value. We should be generating the high returns on what we're doing that shows we are differentiated. And in some cases can command a price and even a premium because of the nature of that differentiation. So it's a very important strategic area for us. It is an incentive for the entire company. So gross margin performance is one of the key incentives this year tied to compensation of our executive team and all of the employees in the company. I also want to highlight here at the end that, hopefully, you can appreciate a much more conservative nature a bit and as we look at our forecast for 2023. And this is just a function of one the world we live in as 2022 demonstrated as the last few years. We joke with the team a bit that as we sit here today, we know that as we sit here a year from now we're going to look back and see that the year went completely different than we thought. Obviously, certain things we know will go as we expect them to in terms of delivery to our customers of projects underway. But in terms of what we're going to book this year the new things that pop into our funnel that, we don't see today maybe some things would fall out. We're very excited about that and we'll continue to capitalize what we believe is a very differentiated solution. However, we have taken an approach and have attempted to share with a lot of you on this call, being sensitive to factors that are a part also of our current growth phase of the company. We're turning over first projects. We're going to be starting more projects the second half of the year. This is the first year we're turning over projects and systems. And so there are certain things we outlined that, I encourage you to think about, and hopefully appreciate as that's reflected in the current forecast we've given. We feel very, very good about the low end of that forecast, because it's made up of what's already contracted and booked. And we feel very good about where we are in that execution. And thus we feel very good about executing toward the higher end of that forecast. And as we mentioned, there are certain things that are not included in that forecast, like the potential benefits, which we believe will be positive of the IRA legislation. Finally, I just want to always thank the employees of this company where our days begin and end every day. I cannot be more humbled and excited about continuing to support this team. We do not limit our thinking, because of the talent that we attract to this company, which is why in Q4 you saw us continue to add at a little greater rate to set ourselves up well for good execution here in 2023, to deliver on our goals. And we will continue to make strategic adjustments and strategic additions to the team as we evolve the company. With that, operator, we are now ready for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] We take our first question from the line of Thomas Boyes with TD Cowen. Please go ahead.

Thanks so much for taking my questions. Great to see the progress, especially, on the gravity storage front with the additional licensing agreements. I just wonder if you could dig a little bit deeper there on just how they're structured? Is this going to be similar to the agreement that you used in China? I think I remember a $15 million licensing payment that was associated with that agreement. Could you just kind of walk us through some of the mechanisms there? That would be great.

Sure. The structure of those agreements number one varies depending on a few factors some that would include exclusivity. Some of them are structured over years that could be as short as 7.5 years as an example and up to 10 years plus. So they'll vary both in length of time, inclusion of certain terms like exclusivity and also in payment structures. But generally what is common across them is there is a license component that is paid, that is typically tied only to the right to deploy the technology. So that is not tied to volume deployment. Typically that license and it would be the case here would involve an exclusivity for these regions. That exclusivity comes though with commitments on volume to retain that exclusivity regardless of the license payment. So that's required in any event. And then following that as deployments get started in those regions comes a royalty stream. We've been public with the royalty percentage as a part of our first deal which is 5% on total project revenue on volume deployments. And we -- essentially from a -- these new agreements you can expect that they would be in that same range.

Perfect. That's very helpful. And then maybe just as my second it sounds like obviously to a certain degree you're still going to be procuring battery storage hardware for some of your customers. Can you talk about the sourcing strategy there, or how far are you looking to contract supply? Are you contracted throughout for 2023 for projects that you are being required to deliver on now, or are you even looking further out?

Sure. We have a few different approaches relative to working with our customers on battery deployments. First of all, like with everything we do we seek to innovate and differentiate around how we think about deployment, integration, software performance and optimization around the economics for our customers. So fundamentally it really starts there. And if you look at the first deals we've won they were not because we had the lowest price. In one of the cases it was because we were able to achieve an energy density that was not able to be achieved by any competitor and this was specific to the Wellhead deal in Stanton where they needed to generate a little over 68 megawatts, but current solutions would only allow them to generate 50 megawatts over a four-hour period. So that's one example. Another example is PG&E where we integrated and responded to a proposal that didn't envision a renewable solution to solve a problem that could have only been solved with natural gas for example for multi-day storage. We developed a solution to integrate batteries with green hydrogen in that case to provide renewable solutions. So I would say first of all we -- from a battery and sourcing perspective we work on ways to innovate with our hardware architecture and unique designs for optimization whether that be with energy density that could be with performance that could be with safety. So ways that with our specific architectures if there is a shutdown for example we can enable ongoing performance of a system even if some specific modules may be shut down. That's not the case in a lot of battery systems where if there is a fire or a safety problem the entire system shuts down. So there's a level of differentiation we look to achieve in implementation and that impacts our sourcing. Our team is led by Akshay Ladwa, who is based on the East Coast with our Energy Vault Solutions team spend significant time with battery suppliers and looking at qualifying even new and upcoming suppliers to focus on differentiation of their specific cell development in batteries with our hardware design and our software design to deliver potential performance benefits that don't exist in the market. So our sourcing strategy will involve some of that direct engagement with suppliers that may not be for example some of the largest names in the world. So we work I would say with and develop with a few suppliers to try to tie differentiation into our solutions. The other way we work with customers in some cases is with customers that have pre-existing relationships with very large battery suppliers. And in some cases, they may even dictate the choice of that battery supplier. In which case we may choose as we have been chosen to be an integrator directly and work directly with that customer-chosen supplier or and we referenced this on our earnings today, we may work with that supplier and integrate their solution, but have it directly procured by the customer, in which case the customer takes the risk on the working capital on delivery any associated liquidated damages et cetera. And as I said we talked a little bit about that today. So the last thing I'd share about our sourcing strategy for batteries which is very important is, we are not standing by and just waiting for domestic battery production to come in the United States. We are evaluating the players that are looking to build in the United States. We are active not just as a potential customer, but as a potential participant in the development of that value chain. We're there because we believe that can be valuable to achieve some sustainable differentiation in terms of both availability and pricing and therefore margin as the domestic supply chain will now be developed very aggressively given the incentives under the IRA. And we'll be sharing publicly here in the very near term some of the results of some of those efforts. So I'd say across those -- that portfolio of areas of battery suppliers is how we're currently working and developing in with in what today is 95% of all energy storage that is being deployed is shorter duration lithium-ion battery. And let's not forget that.

Excellent. No, I really appreciate the insight. I'll drop back in queue. If I could just sneak one more in. Just for the domestic sourcing that you're talking to for lithium-ion batteries. Do you have a sense on when that type of capacity would be coming online? Is that a 2025 event do you think, or could that happen quicker?

We're seeing some coming online as early as the second half of 2024, but in real volumes 2025-plus. So that's from our work in the sector and working with players that are looking to build roughly what we see.

Great. I'll get back in queue. Thanks again.

Thank you. We take the next question from the line of Joseph Osha with Guggenheim Partners. Please go ahead.

Hi. Thank you for taking my question. Two questions. First, I greatly appreciate the detail in terms of the composition of revenue in the fourth quarter. Looking into 2023, it kind of broadly seems like there are three buckets. You've got your BESS revenue. You've got anything that might potentially come from delivery of EVx systems and then EVx licensing. I'm just wondering if you can help us understand how 2023 revenue might fall into those buckets, assuming that I'm thinking of it correctly.

Sure. Yeah, I think you've got the right buckets there. And there's a sort of a fourth bucket that I can give you a little bit of a flavor of Joe. I think as we've announced, we have three larger shorter duration projects that are going to be turned over in 2023 that make up a good chunk of that revenue on the battery side. And when I say batteries, some of those are hybrid-related systems but include lithium-ion battery. For EVx and EVx licensing, we're expecting to continue, let me start with the licenses, we're expecting to continue to develop in particular in the international markets, obviously, we don't expect this in the US for example. But given EVx is a primarily a building right a foundation of fixed frame lifting systems and power electronics because of the local nature of that, and the local suppliers that have to deploy that in local EPC companies, the licensing model is a very interesting business model for us. It also enables us to give the flexibility to the local suppliers without us having to invest in local feet on the street and infrastructure. They are the most knowledgeable in any event based on the type of construction this is. It is as you know primarily a local build. And that model and allowing for domestic jobs and domestic content which as we know in the market most countries are trying to pursue independence in energy and that means energy storage if they're going to use renewables. So, the model we're finding is a lot of interest in this model, which is let's say beneficial for both sides and creates a platform for future and very high-margin royalty streams to come as things get deployed. So, we are expecting to have a percentage of our revenue. I wouldn't say it's a large percentage. For example it's not going to be triple-digit million, although I never rule some large deals that comes as we had with Atlas Renewables for example. But that will be a -- you can consider it something that most likely could be a double-digit million type of revenue stream in 2023. Let me talk about EVx. Interestingly, our first EVx deployments either are going to be done through the royalty license agreement model as Atlas is building out or projects that we are going to own initially in particular in the US market where as I mentioned Joe we see a lot of interesting upside from the IRA tied to gravity because it's on lithium for all the things I mentioned on the call that I know you know very well about the benefits of that and the economics that the IRA can help accelerate and create. So, our ability to develop those projects find points of interconnection and now I think a way to monetize EVx in an accelerated way as long-duration needs become more prevalent is going to be very interesting. However, for this year for 2023, given the nature of both the licensing side as well as the ownership of systems, initially for example, we were looking at ENEL as something that was going to be our standard EPC. And that has shifted to a project we're actually going to own for other reasons that has a lot of benefits for us I think on the -- from a potential IRA perspective and because it's a first system with -- and with the ITCs. But what that does mean as revenue recognition obviously is going to come later in a tolling agreement so after we build it. So, you aren't going to see revenue impact on that in the United States this year. So, those are on the three questions you raised. I would share that as you think about systems like what we announced for example with Pacific Gas & Electric or hybrid systems unique things we're doing that the PG&E system is one has announced that we're owning as an example. And in those cases we definitely plan to get those projects developed and built. We may convert those to where we're into an EPC agreement where we build them. In all cases, we will be the asset manager which is interesting. And at another -- we'll schedule another call I think with you to take you through a little bit of our thinking around the asset management space. But that is an area of growth and an area that we're definitely going to be a player in relative to operating systems on behalf of large IPPs or on behalf of large infrastructure funds. So, that would be just an area that I just tease you a little bit relative to something that we've already announced and will be developed as we progress the year.

Okay. Thank you. And just a quick much shorter follow-up on the IRA. One thing that we've heard some BES system integrators talk about is the idea of not making cells on store necessarily but potentially doing pack assembly right? And there is a manufacturing tax credit associated with that. Any thoughts on whether we might see Energy Vault involved in battery pack manufacturing in the US?

Okay. Sorry I was just -- your question is specifically in and around just assembling integration in the United States versus actual manufacturing?

Well, no, no pack manufacturing because there's a cell credit and then there's a pack -- there's a module credit right? And so we've seen some -- one of your competitors for example talk about sourcing cells but actually doing module assembly in the US where there is an associated credit.

Okay. Sorry about that. Yes, I understand the question. So the answer is yes, in terms of our involvement. And we had announced as an example with Jupiter Power, an agreement to work with them it was 2.4 gigawatt hour of sourcing that we announced to work with them on around domestic content that will be up to, and including looking at leveraging the energy communities' aspect, but as well as sourcing whether that be in the direct manufacturing area or in the packaging and integration area.

All right. Thank you very much.

Thank you. We'll take a next question from the line of Chris Ellinghaus with Siebert Williams Shank. Please go ahead.

Hey, everybody. How are you? Rob can you talk about the change in the two-year revenue guidance and sort of how you have made that more conservative in terms of your view of revenue recognition for this year?

Sure. Yeah, there were three main factors that, I tried to be as explicit as I could in the announcement. So one of them had to do initially with just our acceleration from what was planned in Q1 this year, and due to faster execution went into Q4 of an amount of revenue. So that was one impact that we entered the year with. Secondly, and this is the primary impact has to do with a very large customer that is roughly about a gigawatt hour that initially we were going to be integrating the entire scope through our balance sheet. So as a project where we would contract directly for example for the battery packages in particular. What we chose to do with that customer is have the customer contract directly for that portion of the equipment. We are still the integrator for example of that solution and other aspects of balance of plant. So it's still a very large deal for us. But as you know, I believe, the battery modules themselves typically would make up anywhere from 55% to up to 70% of these deals. So if you remove that, while that's going to reduce the revenue what's very interesting about that for us is it means the mid- to high teens in gross margins for us which we're very happy to do. I've mentioned, this on an earlier question I had about our battery sourcing strategy, but generally, if it's a certain supplier that we're working with where we're including differentiation and how we optimize the solution which means I'll translate that differentiation lower cost for us and therefore generally higher margin for an integrated solution that we own all components of. There are customers that have existing relationships and they're with very large some of the largest battery players, where there's not a lot of value add we put on top beyond being a single throat to choke from the customer. So specifically the second area back to your question of with the revenue the two-year revenue, it was specifically that primary gap I mean almost that entire gap was just related to the choice for us to focus on an integrated and balance of plant capability, and scope versus the battery aspect of it. And there is a third factor that, we hit on here is we have a massive second half ramp coming in the business in terms of we're turning over almost a gigawatt hour of systems in the second half. Two of those actually in Q3 plan and then a larger one in Q4. In addition, we're going to be starting projects. And so as you know can happen, especially, if you have a large part of your revenue that's in the fourth quarter as an example as we do this year, we have a triple-digit million revenue in Q4 this year. If anything moves a little bit, we just wanted to safeguard, if there was any portion of revenue that should shift from Q4 to Q1, which we haven't lost anything. It just means something shifts a quarter. We took a little more conservative approach in terms of, as we looked at full revenue recognition in that quarter even for things that are contracted. So it's the second half ramp of this year that we wanted to provide a level of both visibility, as I'm doing now and transparency on that revenue. And therefore, coming up with something that, I'd say we feel extremely comfortable with our low to even the mid part of our range we provided, because of where we stand with visibility and where we are with customers. We're also quite confident about executing well, as we did last year. Just to share an example, we contracted in the summer last year, in July and August last year, so actually signed deals. One of those deals that we signed that we signed in August ended up with over $80 million of revenue in Q4 last year. So within four months, we actually were able to recognize revenue on almost $80 million. So that -- and we didn't contract those and book those until the summer. So now, am I saying we're going to do that every time, am I saying we're going to -- things are going to execute ahead of plan every time? No. So, I'm sharing that level of detail with you, so you know that, while we've taken a more conservative approach as we've outlined on this call in particular, given the second half ramp, we're confident in our ability to execute to the mid to upper part of that range. And as I said, with IRA and given what we did in our first year of almost $150 million of revenue and 2 gigawatt hours in book deals and up to 5 in awards total of booked and awards, we have a lot, I think, we're going to be able to do in the year regardless.

Okay. That helps a lot. Thanks, Robert.

You’re welcome. Operator, are you there?

Yes. Thank you. We'll take the next question from the line of Brian Dobson with Chardan Capital Markets. Please, go ahead.

Hey, Brian.

Brian, your line is unmuted. You may ask your question.

Thank you, very much. Thanks for taking my question. So just returning to the guidance issue for 2023. As you're thinking about it, would you say it's fair to characterize, call it, the bottom half of your guidance as a conservative approach in that, there is a potential for revenue slip into 2024 and that you're fairly confident as things stand right now that you could be at the mid to high end?

Yes. I would say, that's roughly right. We started with a buildup approach of a low end that is booked and we're executing toward and as I mentioned on track and on schedule to deliver. So that we consider in the bank. And as you move to that mid part and even to the upper part of the range, we have things in play that are well in hand to get there, again, leave the IRA aside. So I realize that, this may appear as, obviously, lower than what, in some cases, expectation with something up to $500 million this year, as we looked at our two-year view before. I mentioned the one deal, where we're taking a much lower part of the content but higher gross margin, which I think is important. But, yes, I think your characterization and in terms of the lower end of the range, we feel, obviously, quite good about, given the nature of where it started from. And then, I think, a very strong confidence in getting the mid to upper part of that range here as we progress a year. And our view on that is to also with every quarter, we're going to be much more knowledgeable. We're going to have another 60 to 90 days of bookings of seeing how we're executing and seeing things that pop in, maybe, that we didn't even see that could be things we could turn around for rev rec in year. So we designed the forecast to essentially, every quarter, tighten that range up and just build that range. And obviously, in an ideal world you -- because of the nature of being conservative here, is that we're going to be able to tighten to the mid to higher end of that range with every quarter. That’s what -- that was the intention of how we built this forecast. And, obviously, as we get into the second half of the year, be executing strongly toward -- ideally toward the higher end. And if the IRA things come in as planned, I think, we're going to have an excellent year.

Right. Understood. And I understand your desire not to include IRA benefits in the guidance range. But do you think you could potentially perhaps draw a range around what that could potentially look like?

Yeah. I would say we have two projects in particular that could garner some benefits and even in the year depending on the way the treasury mechanics come out. So I would say there are some benefits that are definitely in the double-digit millions of benefit. Now how much could we get in the year versus would go into 2024? That's another question. There are ways to monetize those benefits earlier. So I would say, if I had to tell you today and assuming the IRA come through there may be more cash related benefits this year versus revenue recognition benefit, okay. Those revenue recognition benefits may come next year. But given I think some of the alternative structures we're going to look at and taking advantage of it, we may very well see a good strong double-digit million type of cash benefit potentially this year that we wouldn't have in our forecast. And of course we like that. We like the cash flexibility. And we as I said we're trying to be now as we have more information and data be more transparent and sharing with the market so people would understand that we're very happy to take the cash even if the revenue recognition may come later. So those benefits anything that gets in double-digit million is significant. I think whether that's cash or even potential rev rec.

Yeah. Thanks. That's helpful. And then just stepping away from the mechanics of the guidance for a moment and taking I'd call it a 30,000-foot view. As you look around the world at different regions, where do you see the most opportunity? Which regions are you most excited about?

Sure. Well, I have to start in the US because it's definitely -- with the IRA, I think the US has done something to keep a lot of focus here. So that's -- I think that has a lot of upside and is one of the -- as you know one of the largest storage markets. I think Australia is going to be an interesting and important market for us specifically because of the nature of some of our investors. Two of our largest investors have significant operations there. I think the green hydrogen market given its desire and requirement in electrolysis and running electrolyzers for long-duration storage. I think that market and where Australia is going to play a strong role there will be important. I think moving to the European theater, Scotland is ahead of the game and with its offshore wind investments generally. And I think there's large needs and I think a lot of opportunities there that we see as opportunities definitely for us. I'd say also I'd be remised if I didn't talk about the Middle East given what -- not only we've just announced with a license partner, but we're looking at the region very strategically for very large things. As you know in the Middle East nothing is done small. If it's done, it's large and it's done big. And I think as you're aware we have Saudi Aramco Energy Ventures on our cap table. So I think that in that relationship and looking at now how we're thinking about leveraging that I think that's very interesting to us. Our company has done some more recent development I'd say there. And then I'd leave you with -- I think those are the primary main regions that we're excited about. We've announced some things in India that we continue to develop. We had announced an MOU with NTPC, which is the largest public utility and one of the largest power players there I think over 60 gigawatts of generation and a large coal plant infrastructure. So I think looking at alternatives to -- for uses of coal ash and ways we can use waste materials with our EVx, we have a few interactions there right now and looking at how we could deploy and deploy quickly there and even start some initial projects this year. So that's what I'd say generally on some of the new regions. I wouldn't -- I'd be remised if I didn't talk about also our existing customers that given how we execute with them and assuming we continue to execute well, we are in discussions with some of the same customers we've announced on follow-on projects because of how we're performing. Obviously we need to keep up the good performance from an execution perspective. Follow-on good performance will mean that we're going to be perceived well for new deals. We're really excited about that. An example is with Jupiter, we announced a first project, actually two projects with them. They're the largest in ERCOT but we announced two projects, one in California, one in Texas. But in addition, we had announced with them a sourcing collaboration around 2.4 gigawatt hours of batteries for them together. And those are customers. And Jupiter, as you know, was acquired by BlackRock's infrastructure group back in Q4. And so, obviously, no shortage of capital there. But you can assume that our existing customers where we're going to execute well, there are follow-on discussions ongoing with those same customers that will represent a strength and upside for us.

We'll take your next question from the line of Brian Lee with Goldman Sachs. Please go ahead.

Hey, guys. Thanks for squeezing me in. In the interest of time maybe just one question from my end. Can you guys give us a sense of the margin differential between EVx and EVS? And are you currently profitable on EVS, or if not, what's sort of the path forward to become profitable on selling EVS? Thanks.

Okay. We don't sell EVS, so let me just clarify some things. The Energy Vault Solution is actually a group. It's not a product itself so. But just to be clear, I think what you're asking is, are there any things not profitable across between -- or anything not profitable specifically. I think when you say EVS, I think you're referring to some of the battery deployments where they've been leading with software. So to be clear, everything we're doing is profitable on a unit economic basis. Otherwise there would be no way for us to talk about 10% to 50% gross margins. So there's not one project, we've done or taken with a negative gross margin. And for us to forecast here with the visibility we have now of 10% to 15% and given our nature of being conservative relative to as we were looking at our 2023 forecast. We're -- from a profitability perspective, we have unit economics across the board. We're going to have a range of that percentage gross margin pending on things like for example are we taking batteries through our balance sheet at a like a mid-single digit or not. If we're not we're absolutely in the mid to high-teens relative to just our own straight solutions and that's today. And if we're on looking at EVx, for example and solutions on where we're going to be deploying that project as well on the initial deployment, so before we get to volumes or any optimization. As an example we're testing a lot of new cost reduction on the system in China in EVx that all the future systems will benefit from. That range of 10% to 15%, I think is a good range Brian for you to use relative to your modeling. And then the last thing I'd share is, it's really the use case that's the driver. So let me give you the example of PG&E where they -- it was an RFP for this multiday and they were thinking, they were only going to have natural gas as an option. We've proactively given we actually have expertise in hydrogen, both liquid and gas and or gas because of some engineering folks that we've hired in the team. So we proposed an architecture that integrated lithium-ion and green hydrogen. You can assume that because we were unique in being able to do that obviously that's going to be something that we don't take lightly relative to our pricing expectations and therefore the margins. And obviously it's a public utility. So that means that we have to provide a certain level of value to the utility if they -- is what they budgeted to deliver that. So those solutions where we're uniquely bringing hybrid solutions to the table as we did there those are things that are going to be a good part of our profit stream as well. Is that helpful?

Yes. No, appreciate all the additional color, Rob. Thank you.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd now like to turn the call back over to Robert Piconi for closing remarks. Over to you, sir.

Okay. Look, thanks everyone who joined the call today, and we'll look forward to further updates going forward. Thank you very much.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.