ESS Tech (GWH) Q2 FY26 earnings call: guidance and Q&A

What is the timeline for the business combination, and will ESS be self-funded until then?

Management expects a definitive agreement by the end of September and a close before year-end. ESS anticipates being self-funded in the near future due to reduced expenses and cash burn.

“So the time line as it sits right now, the way we're looking at it is that we expect to reach a definitive agreement with the counterparty by the end of September and then close potentially on the final transaction toward the end of the year. So that's what we're working with right now. We're going through that entire process. And in terms of the funding side, we expect that in the near future, we'll be self-funded for the time being.”

asked by Alex Hantman · answered by Drew Buckley

Can you describe the mix of the $1 billion sodium-ion opportunities across data centers, critical infrastructure, and utilities, and how far along these conversations are?

The pipeline is a good mix between utilities and AI infrastructure/data centers. These are early-stage opportunities, not yet bookings or contracted revenue, but velocity is high, with the pipeline developing rapidly since the Alsym LOI. Demand is driven by the need for batteries with a wide operating temperature range for data center power spikes.

“I would say that the -- it's a pretty good mix between utilities, AI infrastructure and data center, between those two buckets, utility and data centers. Look, it's early-stage opportunities across this part, not yet to bookings and not contracted revenue. But I think what I'd say, Alex, is that the velocity is really high. The pipeline was developed in a matter of months since the Alsym letter of intent.”

asked by Alex Hantman · answered by Drew Buckley

How do data center and utility buyers typically procure, and how does ESS differentiate itself in a crowded market?

Speed to power is critical for these customers. ESS leverages its historical strengths in product momentum, certification, and grid interaction. The Bridge's 480V AC connection and plug-and-play design are aimed at quick and easy deployment, making it attractive for rapid installation.

“I think like any of these customers, what's most important to them is speed to power right now. So all of your AI data centers or utility customers, they care a lot about speed to power, especially in this space of battery storage systems. So critical for us is just showing that we have the ability to bring product to the market in the time frame that they need it.”

asked by Alex Hantman · answered by Drew Buckley

Where is Bridge in its development today, and what are the milestones before first revenue?

The first module is complete, and initial charge and discharge testing is underway. The market rollout has begun, and the first operational Bridge system is expected toward the end of 2026.

“So look, we're -- the first module is complete. Initial charge and discharge testing is happening right now in our headquarters in Oregon. We're doing full charge and discharge cycling. The market rollout has begun, and the first operational Bridge, we expect toward the end of 2026.”

asked by Jack Greenberg · answered by Drew Buckley

What attracted ESS to this partner, and what will the combined platform look like?

The partner is an energy sector company with an established platform and proven commercial execution. The goal is to combine ESS' technology and manufacturing with the partner's operating platform to achieve scale and speed to market, avoiding duplicate capabilities.

“So the counterparty is an energy sector company built on an established platform with a track record of proven commercial execution. The logic here is that we want to combine ESS' technology manufacturing base and non-lithium portfolio with an operating platform that already has commercial infrastructure and customer reach. The goal is scale and speed to market, not just not to consolidate any duplicate capability.”

asked by Jack Greenberg · answered by Drew Buckley

How should investors interpret the $515 million enterprise value and eventual ownership split?

The value attributable to ESS in the contemplated structure represents a premium to its market capitalization at the time of signing the definitive agreement (expected September). The final exchange ratio and ownership percentages will be disclosed in definitive documentation. The strategic value is in combining platforms for commercial execution and scale.

“So the value expected to be attributable to ESS in the contemplated structure represents a premium to ESS' market capitalization at the time the definitive agreement is signed. So we're looking to sign definitive agreements in September, and the structure represents a premium to our current market cap at the time we signed the agreement.”

asked by Jack Greenberg · answered by Drew Buckley

How does the Bridge product compete against other lithium incumbents in AI infrastructure and data centers?

Bridge's non-lithium, non-flammable chemistry avoids thermal runaway risk, easing permitting and siting. Its lack of HVAC/liquid cooling makes it quiet. The wide operating temperature range is well-suited for AI data centers' power spikes, which degrade lithium faster. U.S.-made cells also address tariff and supply chain concerns.

“So non-lithium, non-flammable chemistry. As we were saying earlier, it avoids thermal runaway risk. So for storage, for batteries that are sited or adjacent to data centers, you can think of an urban critical infrastructure setting, that -- it increasingly becomes like a permitting and siting and risk underwriting question more than just cost.”

asked by Jack Greenberg · answered by Drew Buckley

Given the Q2 operating expense increase and high cost of revenue relative to low revenue, what is the outlook for the cost structure?

The Q2 operating expense increase was primarily due to non-recurring legal expenses ($1.2M) and R&D investment ($800k). Cost of revenue is dominated by fixed manufacturing overhead and underutilized capacity, not indicative of future unit economics. Structural levers include Wilsonville streamlining and the modular Bridge approach.

“So the increase in our operating expenses in the second quarter, as I mentioned previously, was driven primarily by a $1.2 million rise in G&A expense, which is tied to legal expenses associated with contingent liability accruals. That $1.5 million legal contingency is added back in our adjusted EBITDA and is largely nonrecurring in nature. So I wouldn't place too much emphasis on that as far as go-forward is concerned.”

asked by Jack Greenberg · answered by Kate Suhadolnik