Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Energy Vault Holdings, Inc. (NRGV -8.73%)
Q2 2022 Earnings Call
Aug 08, 2022, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies, and gentlemen, good morning, and welcome to the Energy Vault Q2 FY 22 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded.

I will now turn the call over to Mr. Laurence Alexander, chief marketing officer. Please go ahead.

Laurence Alexander -- Chief Marketing Officer

Thank you and good morning, and welcome to Energy Vault's second-quarter 2022 earnings conference call. As a reminder, Energy Vault's earnings release and 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 earnings release in this call contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only predictions and may differ materially from the actual future events or results due to a variety of factors. We caution everyone to be guided in the analysis of Energy Vault by referring to our 10-Q filing for a list of factors that could cause our results to differ from those anticipated in any forward-looking statement. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law.

10 stocks we like better than Energy Vault Holdings, Inc.
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* 

They just revealed what they believe are the ten best stocks for investors to buy right now... and Energy Vault Holdings, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of July 27, 2022

In addition, please note that we'll be presenting and discussing certain non-GAAP information. Please refer to the Safe Harbor disclaimer, and non-GAAP financial measures presented in our earnings release for more details, including a reconciliation to comparable GAAP measures. Joining me today on the call is Robert Piconi, our chairman and chief executive officer; and David Hitchcock, our interim chief financial officer. At this time, I'd like to turn the call over to Robert Piconi.

Robert Piconi -- Chief Executive Officer

Great. Thank you, Laurence, and welcome everyone to our second quarter 2022 financial results conference call. I want to start my remarks today with an overview of the key highlights from the quarter, including the recently announced project awards you may come across this morning in our release representing approximately 1 GWh of new projects. David Hitchcock, our interim chief financial officer, will then walk you through the financial results in more detail before we open the line for questions.

We made strong progress with what we achieved through the second quarter, as we continue to execute on our 2022 regional priority for deployments as we originally planned in the U.S., Australia, and China. That provide us tremendous momentum going into the second half of 2022 while setting ourselves up well for 2023. Let me start in Australia. We're building on our announced strategic partnership with Korea's Zinc group.

We announced the commencement of site and feasibility planning with Ark Energy. The Australian wholly owned subsidiary of Korea Zinc for multi GWh of both long and short duration storage projects, supporting its sister company, Sun Metals Corp in north Queensland, Australia given their stated commitment to being powered 80% by renewable energy by 2030. In November 2020, Sun Metals joined the RE100 and plans to become one of the first refineries in the world to produce green zinc. More recently, in May 2022, Ark Energy announced a friendly acquisition of Epuron Holdings in Australia, and now has a portfolio of approximately 9GWh of future wind and solar projects to support its strategy to become one of the largest producers of green hydrogen in Australia.

Over to China, we previously announced the groundbreaking of Atlas Renewables 25 megawatt, 100 MWh gravity-based storage solution, and construction continues to proceed as planned. All permitting, side activities, and initial civil works have progressed well through the summer, after some initial delays coming out of the COVID-related shutdown in Shanghai. With all 1200 foundation filings completing this month, the focus now shifts to the foundation, the fixed frame buildup, and the power electronics, which are all under-way in parallel with the composite brick production locally. We expect mechanical completion and the beginning of system commissioning in the fourth quarter this year.

Energy Vault will directly support on-site the 100 MWh project in Q4, and into next year with the power electronics start-up, overall system, mechanical completion, and final system in software commissioning the full operation. I want to provide a bit more color on the local development activities in China as well. Atlas Jiangsu, in collaboration with the Energy Investment Professional Committee of Investment Association in China or referred to as EIPC, has also engaged with China's top five state-owned enterprises power utilities, and energy companies in discussions to support their decarbonization processes, by providing energy evolved resiliency centers based upon our EVS platform. Additionally, multiple 100 MWh projects are under development across China, as well as larger GWh gravity storage projects in other provinces under the Zero Carbon Park Initiative, also sponsored by EIPC.

In collaboration with the EIPC and with additional support from the National Center for Sustainable Development, and the Bush Global Advisors Group. Atlas Renewable will partner with EIPC five Regional Zero Carbon Park Program across China. A key objective of this will focus on the value of the EVx technology storage solution to support local grid and regional industrial renewable power needs. Atlas Renewable is supporting the efforts by EIPC to demonstrate energy evolved gravity energy storage technology for inclusion in the New China Energy Green Standard.

To better ensure direct local support and more financial flexibility, Energy Vault is establishing a wholly owned foreign subsidiary in China, which is expected to be operational in October 22 to support Atlas China Tianying and the China market more broadly. Shifting to the U.S. market, we received a limited notice to proceed with Enel Green Power in May 2022, which continues to be on track with the upcoming deployment of the first U.S. based gravity system in Snyder, Texas, which is expected to break ground in the next 60 days.

In May. We also announced with DG fuels the doubling of size and increased scope of our previously announced project, and providing the production of green hydrogen to support the biomass waste to energy process in the manufacturing of sustainable aviation fuel. Under the terms of the original agreement, Energy Vault agreed to provide 500 MWh for the first three projects starting in Louisiana. This specific project was increased in capacity and now developed to support up to 73 megawatts for 16 hours, reflecting a total of 1.168 GWh and storage capacity for this first project.

DG Fuels plans to follow the Louisiana Project with additional projects in British, Columbia, and Ohio, with an opportunity for total storage capacity of 2.234 GWh overall, and up approximately 735 million in project revenue over time, as previously announced in the quarter. In April, we announced the signing of a Memorandum of Understanding or MOU, for gravity-based energy storage technology and our energy management service platform with NTPC, India's largest power generating utility to support their clean energy transition. The MOU is to collaborate and formalize a long-term strategic partnership for the deployment of energy bolt EVx gravity-based energy storage technology, and its energy management software solutions based on the outcome of a joint feasibility study which is underway now. This is a tremendous landmark day for Energy Vault, and the execution of our software and Energy Vault solution strategy announced just nine months ago with the addition of John Jung and Akshay Ladwa to the Energy Vault team in November 2021.

Today we are making multiple project award announcements totaling nearly 1GWh, progressing our first Energy Vault solutions project integrating battery energy storage systems. Our technology agnostic energy management software platform extends our offering to enable both short and long-term duration storage solutions with diverse underlying storage technologies. EBS now enables our customers to utilize the same software platform across their energy generation and storage platforms, while future-proofing their evolution to longer duration storage as renewable energy continues to grow as a percentage of the power generation mix. We are announcing three project awards today, a 275 MGH project with Wellhead electric and W Power in Southern California.

A 220 MWh project to provide energy and ancillary services to the ERCOT market in Texas, and resource adequacy to the capital market in California with a leading independent power producer. And finally, a 440 MWh project with the large Western U.S. public utility. All of these awards will be followed shortly with customer announcements.

The project with Wellhead electric is a 275 MWh energy storage project in Orange County, Southern California. Through our EVS team, we will deploy a 68.8 megawatt battery energy storage system at Wellhead energy reliability center in Stanton, California, to provide enhanced resources and improved grid reliability to the Southern California Edison Territory. The Stanton energy storage system will be one of the largest energy storage systems in Southern California. All of these projects were based on our EVS proprietary system design and energy management software for optimal economic dispatching.

These contracts reflect successful execution of our EVS technology agnostic strategy, to provide customers with the most flexible and cost-effective energy storage solutions. I want to call it a special thanks to Akshay Ladwa, our chief engineer at EVS, and his team for their innovation and agility, and speed in the development of the new platform, coupled with an intense customer focus to support the project awards announced today. As well as Marco Terruzzin, and his commercial team in winning the trust of the newly announced customers through a relentless focus and a passion to serve their needs while solving complex problems. With a new market introduction of our EVS platform and services, coupled with the ongoing multi-continent deployments of our gravity storage solutions, we are well-positioned to take advantage of what remains a very healthy and growing market.

From an industry perspective, demand trends remain robust for storage technology across durations, supported by carbon neutral and reduction targets from corporations and some of the largest countries across the globe. If you look at the second half of 2022 and full year guidance, we are expecting revenue in the range of $75 to $100 million reflecting gravity project starts as well as newly awarded EVS project starts in Q4 this year. We currently expect adjusted EBITDA in the range of -$10 million to +$3 million for the year. As we look at 2023 and the gravity and the every project awarded and underway, as well as the early development activity in China referenced earlier, we are expecting the aggregate revenue for 2022 and 2023 in line with our original investment plan, for a total of approximately $680 million across both years.

We continue to see many positive regulatory macro trends that will benefit and evolve business trajectory. We are excited about the announcement this past weekend of the approval in the Senate of the Inflation Reduction Act, and believe that the inclusion of the stand-alone storage, ITC and support for clean energy initiatives will continue to greatly benefit our growth strategy and that of our customers. Our gravity and battery storage solutions are seeing heightened demand due to this economic value we are able to create without ITC or tax subsidies, but this legislation will serve to support and accelerate our growth trajectory. Additionally, we continue to make good progress in the build-out of our global supply chain and other infrastructure capabilities, as we execute on our initial projects, and continue working to source, and qualify critical materials, and establish key supplier relationships globally.

For our EVx gravity solution, over 50% and up to 75% of our solution is sourced locally within the region, eliminating some of the challenges facing many other storage providers in the industry, while maximizing the application of the regulatory incentives for local content and job creation. I also want to highlight a key action that the board implemented an extended lock up agreement for 100% of the executive officers, who held equity awards invested on an accelerated basis upon the closing of Energy Vault business combination and IPO in February 2022, impacting equity awards underlying a number of the shares that equal to approximately 5% of the shares outstanding as of June 30, 2022. This underscores our alignment with our shareholders and the long-term vision, and belief we have in our strategy in the team we are building here at Energy Vault. We are all results-driven management team and are all laser-focused on creating long-term shareholder value, and maintaining a disciplined capital allocation approach to ensure profitable growth.

To wrap up, I'm very pleased with the commercial progress we have made across our gravity and the new capabilities we unlock for customers with our new EVS platform. Stay tuned for more exciting announcements to come as we continue to be actively engaged in advanced discussions for multi-gigawatt hours of projects across four continents. I will now turn the call over to David Hitchcock, Energy Vault, interim chief financial officer, to cover our financial results in more detail, David.

David Hitchcock -- Interim Chief Financial Officer

Thanks, Rob. Relative to our financial results for the second quarter of 2022, revenue in the quarter was $1 million, reflecting construction support services to support the 100 MWh project in Rudong China. Second quarter gross profit was $0.4 million, driven by the construction support services revenue. Through six months, we reported revenue of $43.9 million driven by the Atlas license agreement booked in Q1 and gross profit of $43.3 million.

Total operating expenses were $22.4 million in Q2, roughly flat with the $22.1 million reported in Q1 of this year. Stock-based compensation was $6.7 million in Q2, down $2.5 million versus Q1 2022. Excluding stock-based compensation, operating expenses were up $2.8 million versus the first quarter. Sales and marketing costs for the second quarter of 2022 were $1.9 million compared to $2.6 million in Q1 of this year.

Excluding stock-based compensation, sales and marketing expenses were down $600 thousand versus Q1, driven by a decrease in marketing costs related to the IPO. Research and development costs for the second quarter of 2022 were $9.8 million compared to $9.7 million in Q1 of this year. Excluding stock-based compensation, R&D expenses were $900 thousand versus Q1 driven by an increase in EVX  test bed activities. G&A for the second quarter increased to $10.7 million compared to $9.8 million in Q1 of this year.

Excluding stock-based compensation, G&A was up $2.5 million versus Q1, driven primarily by cash compensation, professional fees, and personnel, and recruiting costs. In total, we ended the quarter with 129 headcount across the company, up 38 heads or 42% versus March 31st. As we continue to build out the team to deliver for our customers and execute as a public company. In line with our business plan, we expect that our operating expenses will continue to increase on a sequential basis, as we further expand globally and invest in the overall growth of the business.

Operating income for the second quarter of 2022 was a -$22 million compared to a positive +$20.8 million in Q1 of this year, driven by the lower revenue and margin as we recorded $42.9 million of licensing revenue in Q1. Through six months, our loss from operations was $1.1 million. Second quarter 2022 adjusted EBITDA was a -$14.2 million compared to a positive +$31.2 million in Q1 of this year. Our earnings release in 10-Q, which we filed this morning, included a bridge from net income to adjusted EBITDA.

The key non-cash or non-recurring items that we added back are the $6.7 million of stock-based compensation, and the $14.6 million gain reflecting the change in fair value of our warrant liability relating to our public and private warrants. On a year to date basis, adjusted EBITDA is +$17 million. As of June 30th, 2022, we had approximately $299 million in cash and cash equivalents on the balance sheet, leaving us well-positioned to continue to progress toward our growth objectives in 2022 and beyond. In Q2, we used $10 million of cash from operations, which was partially offset by the cash exercise of warrants in the quarter.

Finally, I am pleased to report that as of August 2nd, 2022, we redeem the $8.9 million of outstanding public warrants as of June 30th, 2022. Starting in Q4, we will no longer be marking these instruments. We still have the $5.1 million of private warrants outstanding. I'll now turn the call back over to Rob.

Robert Piconi -- Chief Executive Officer

Great. Thanks, David. Again, I hope you get a sense from what we discussed earlier in the commercial side of how pleased I am with the progress that the team has made to the first half of this year, and making substantial gains in advancing our goals, and building out a growth platform with the requisite infrastructure and team to deliver with it. We're very well-positioned now through the second half of 2022, driven by the factors we reviewed above, the most of which are important are three.

First, strong customer commercial validation from some of the largest customers in the energy sector. Focused in the highest growth countries and regional market for renewables and energy storage. Strategic investors, who are coincident as customers, and play an active role in helping guide, and support the company through our strategic advisory board, which held its first session this past month in July 2022. I'll also note that this focus on customers and listening to our customers and investors, has served as well as we proved our technology at scale with the first five-megawatt system in Switzerland, and helped influence  the evolution of that to our new EVS platform announced back in 2021.

This has been fundamental that's helped guide our company and keep and maintain our customer focus on the business. Second, a unique and unmatched energy storage portfolio that can serve customer needs across various durations and storage technology mediums, as evidenced by our recent project award announcement. No other energy storage companies are making announcements across both long and short-duration projects. Announcing multi-gigawatt hour development of gravity energy storage projects in one of the largest energy storage markets in the world, in Australia.

And our first three EVS project awards from customers totaling another 1 GWh is not something that comes without dedication and a relentless focus on execution while ignoring the noise. And third, and finally, the foundation of all we accomplish as a company every day starts with our people, who share a passion for our mission of decarbonization and most importantly, serving customers. With that operator, we're now ready for questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] First question is from the line of Joseph Osha from Guggenheim Partners. Please go ahead.

Joseph Osha -- Guggenheim Partners -- Analyst

Hey, good morning, guys, or good evening, or wherever you are. My compliments and all the announcements, I have a couple of questions. First, looking at these Energy  Vault solutions wins that you just announced, are they all hardware integration plus software? And if so, I was just wondering if you could give us maybe some rough sense as to what the contracted software revenue might look like for that gigawatt hour of when you just announced. And then I have a couple other questions.

Thank you.

Robert Piconi -- Chief Executive Officer

OK. So Joe, great to speak again. We are in New York here, so we're on East Coast time, just so you know. For your first question the answer is yes, that those projects include hardware integration, and software both.

They'll also include, as you would expect, long-term service agreements in addition to the initial hardware integration and software that gets implemented. Secondly, relative to those three contracts, you can expect something in the range of $350 million or so of revenue across those three specific projects that we referenced today.

Joseph Osha -- Guggenheim Partners -- Analyst

OK. Are you able to, obviously, some of that, able to talk about contracted software revenue for that, because that's where the [inaudible] is so to speak. Is that something you're able to speak to?

Robert Piconi -- Chief Executive Officer

We're going to be giving more updates on that, on the software component of that revenue, as we get into the specific customer announcements, we'll be able to share more than with you.

Joseph Osha -- Guggenheim Partners -- Analyst

OK. The second question is, looking at the remainder of the year and that 75 to 100 million target that you put out there. And then just sort of looking at timing and so forth, should we think about the remainder of the revenue this year coming from our EVS, coming from additional monetization of this first China Rudong project? Or I see you've got to limit your sounds like you're breaking ground on and now, where should we think about the remainder of that revenue coming from?

Robert Piconi -- Chief Executive Officer

Yeah, it's going to come from a `combination of our gravity project that we announced, and also some of the start on in particular the of the announced awards on the battery side in Q4. So that's what you can expect for the rest of the year. There would also be some additional revenue REC from the initial IP license and that will continue sort of trickle in for the remaining amounts there.

Joseph Osha -- Guggenheim Partners -- Analyst

OK. And then the last question that target for next year is quite something, although I think your previous reference to the $350 million may have given me some sense there. To what extent are you able to help us understand that buildup to that? Now it looks like $580 or so million dollars in revenue for next year. And how much of that might be that $350 you just referred to on the EVS side?

Robert Piconi -- Chief Executive Officer

Yeah, well, look, so that number essentially, as we stated is reflects, if you look at our first two years, 2022 and 2023, essentially a slight shift from 2022 given the ramp-up of the project into 23. And with everything we see today, both in terms of announced project awards, some of those have pretty quick [inaudible] into the mid part of next year. And so that gives us a lot of confidence relative to the revenue that we put out there. In addition, we have and are in advanced discussions on other projects that we see fairly near term closure on in terms of getting the deals done, that then would impact as well next year.

So that's what essentially led to our revenue range there.

Joseph Osha -- Guggenheim Partners -- Analyst

OK. But just, and then I'll go after this question. To what extent can you help us? Maybe, because that's extraordinary, right? You're going from, if you look at this year that was forced, maybe you got another $25, $30 million revenue to $580, that's quite something. So just wondering if you can help us maybe it just a very high level understand what the buildup of that number is for next year.

Robert Piconi -- Chief Executive Officer

Fair well, as I said, we have +$350 million from just those some of the additional EV projects. We also have some gravity projects underway, and as you can imagine, we're involved in a lot of customer activity and discussions across our main regions. And I spent some time on the China talking a little bit about China and the development that's going on there. So there's a lot of government support there locally to get renewables deployed there, targets that, of course, China has put out by 2030 and 2060 that they're really serious about.

And so our local partners there are really focused. If you listened in a bit on the color I provided, we see a lot of strength and opportunity there and in those markets as well. So I'd say that, we don't take that lightly. It is a very large ramp of revenue, but it is something that we have a pretty good line of sight on just relative to both what we have in awards, as well as the discussions we're having with customers.

And as you know, you get a sense of the numbers of the size of these deals? Joe, one thing you imagine you take away there is we are in announcing 50 or 60 megawatt-hour deals. These are multi-hundred-megawatt hours of deals that, again, not something hopefully that is [inaudible] people. So when you look at the size of the projects we focus on, OK, both for gravity, we're focusing on large utility-scale, massive projects. A lot of that's focused too on the industrial segment.

So I think size and scale matter for our focus, we're not really focused on a lot of smaller deals and getting things done there. It takes a lot of time to get deals done right. We saw that this year. I would have loved to have been contracted a quarter earlier on some of these things.

But these deals take time to get done, and there's a lot of complexity that customers are facing. So. you got to get it right for safety as well. And the reliability and customers spend a lot of time with us on that.

And our teams, our technical teams spend a lot of time working with customers and ensuring they have the right architecture set up so that everything can operate effectively. So anyway, that's the color I give you at this point. And of course, as we get into next quarter and I think we're going to be speaking again in November, we'll have more information to share on our progress as far as project awards and bookings and things that will hopefully shed some more light on as we look at 2023.

Joseph Osha -- Guggenheim Partners -- Analyst

OK. Thank you so much for the detailed answers. I will step aside.

Robert Piconi -- Chief Executive Officer

Thank you very much. Good to speak again as always.

Operator

Thank you. Our next question is from the line of Stephen Gengaro from Stifel. Please go ahead.

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Thank you. Good morning, everybody. Good morning, Rob.

Robert Piconi -- Chief Executive Officer

Hi, Stephen, how are you?

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Good, thanks. So a couple of things for me and I was just going to ask one more on the 23 revenue guide. And that is, if you look at it right now, can you tell us how much is contracted? How much is in advanced discussions? And how much is expected? Because one of the big questions we get is sort of the revenue ramp in general. And since you kind of reiterated your kind of two year cumulative revenue guidance, it would be great to get a sense for the visibility there.

Robert Piconi -- Chief Executive Officer

Well, as I referenced, as we announced some of the new EVS projects, you can think about those and the +$350 million type of range on those. And what's interesting about them, two of the three have made 2023 COE. So that I think that's important relative to as we think about recognition. I mean, these are projects that are urgently needed by the utility, a lot of them in California that have urgent needs.

So that's on the one side. Obviously, on the battery system side, those deals tend to turn a little more quickly, obviously, because we're not building gigawatt battery factories where you're buying and integrating our software. So those deals tend to turn quickly. And we have, I'd say, in the hundreds of millions of gravity energy storage projects that we see, and those obviously come over longer periods of time because it takes a little longer to build out those systems.

And they're larger projects. They're larger projects. So, there's a mix of that. That's about all I want to say, at this point, I think as I mentioned to Joe's question, as we get into next quarter and we'll have better visibility, of course, on the progress through this quarter of bookings and new project awards and be able to shed probably a little more color on your question.

I think we felt comfortable saying something about 2023, even though we're only halfway through this year, just by the nature of what we have underway in awards and project awards and what we have in discussion where we've actually been selected and we're finalizing contractor we've been shortlisted getting through a competitive process. So, it's our first year, our first deployment here this year. So obviously it's a little dynamic, but I feel good about the mix of our portfolio here and what we're looking at for next year.

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

OK. Thanks, and when we think about these three projects with sort of battery storage involved, I think it's lithium-ion. Is that a customer decision? Is that an application? And how does that sort of fold in with the overall strategy of the company and the margin profile?

Robert Piconi -- Chief Executive Officer

Well, yeah, these are all customer decisions. So, that's who we work for and that's what our focus is. And in terms of the applications, they're pretty diverse. Some of these customers that we've developed relationships over many years now have shared with us what they're trying to solve for, And they've got, Stephen, they've got both short duration needs, they've got some longer duration needs that are going to be coming, they're looking at hybrid architectures, for example, between long and short duration, and even looking at things like green hydrogen, and hybrid systems with batteries, and looking at a unique ways to solve some of their storage needs, and really ensuring that they're going to have the capacity, the right time.

So I would say, what's interesting and how core this is to your final part of your question on how is this how does this impact in our strategy? And as with what we're announcing around the software side of our business now. It really became clear to us a few years ago, we started to build our first commercial system at scale on the gravity side, if we were getting feedback from customers, that led to, of course, the development and the shift in the form factor to the new EVS platform. They were also sharing with us what they needed to do to manage both generation. So think about that as wind, solar, as well as in some cases their existing fossil fuel that they're managing in the multiple different storage solutions that they're managing.

So you think about that complexity, it became very clear to us back in 2019 and through 20 that we really need to accelerate the part of our vision around the role software was going to play in helping our customers evolve and supporting them. And that's what led to some of the priority on us getting the right team in here. With the announcement back in November of John Jung and Akshay joining the team [inaudible] that moved quickly and that was nine months ago. And here we're announcing gigawatt hour and project awards alone, I don't know if another company has done that.

So, that's what I'd say about your question.

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Great. Thanks. And then just one final one, your original, and I know there were sort of Co-equity investment in a lot of this. So I think that's changed, but your original guidance has give or take [inaudible] million of capital spending in 22 and 23.

Any updates on that? And what the cash use looks like over the next two years?

Robert Piconi -- Chief Executive Officer

Yeah. I think. David, you want to want to comment?

David Hitchcock -- Interim Chief Financial Officer

First of all, provide a little bit of clarity on the rest of this year. As I said in the prepared remarks, we wrapped up the second quarter with roughly $300 million in cash. As we look across the rest of the year and what path we expect to use as we ramp up these initial projects, we expect to end the year with a cash balance between $260 and $280 million. Secondly, when you looked at that original plan, there were a lot of CapEx equity-based deals that the team was expecting at that point in time.

We really haven't seen a lot of those as the business has worked through this initial year. And there is one project that we're looking at now that could be in that space, but we need to continue to evaluate that and make sure we understand exactly where we want to go there. But there's no projection in front of us right now where we're going to be spending $200 million a year on CapEx for that type of build as expected a year ago. And most of the deals that we are talking now, the customer want to own the project, they want to own the system.

So the CapEx, our CapEx view, aside from maybe that one project which we can probably shed some light on by next quarter, our CapEx needs are going to be relatively light across the rest of the year.

Robert Piconi -- Chief Executive Officer

Yeah. And that's one of the beauties of the business model we have. We're very CapEx light in general. And to just say something, David, that our customers want to own these, but they want to own these projects, and that's I think important for us and just allows us to with this $300 million of cash that we have, as you saw in the quarter, we had very limited cash burn, I think a net $4 million and strong cash into the end of the year and with no debt, of course.

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Great. Thank you for all the color. Appreciate.

Robert Piconi -- Chief Executive Officer

Thank you, Stephen.

Operator

Thank you. Our next question is from the line of Thomas Boyes from Cowen. Please go ahead.

Thomas Boyes -- Cowen and Company -- Analyst

Thanks for taking my questions. A couple of them. First, given the progress in China, I just wondering if you could talk about what your expectations are around construction and commissioning of the change at all from initially? You know, that was like 12 months or something to the facility, but still fair expectation.

Robert Piconi -- Chief Executive Officer

Yeah. I think we said, I think for the first time now that we're expecting in Q4 now mechanical completion of that first hundred megawatt-hour system. So they really are progressing well even with the Shanghai lockdown that they had. So they, as we mentioned, have over 1200 piles in the ground now in our start in the foundations now next month and are going to be coming up out of the ground.

So, we're really happy with what we see in the progress there, not only on the core project comments, but as we mentioned, and I gave some color, quite a bit of color on the development activities that stretch across some of the state-owned entities there on the utility side, as well as some of the regulatory groups that are supporting the technology development and implementation of new storage technologies there. So it's great to be on the ground floor there as the storage markets are developing, and as China is putting much more emphasis on the shift to renewables. So, anyway, so we see everything moving well there, we are going to be, as I mentioned in my opening remarks, more involved as we get into the commissioning activity. We are opening a wholly owned foreign entity there that just gives us a lot more flexibility, I think, to support the local markets, work with China Tianyang in there, and Atlas renewable and more broadly support other regional markets where we can leverage China where it makes sense.

Thomas Boyes -- Cowen and Company -- Analyst

[Inaudible] maybe just to kind of build off of that since construction is going well over there. But it's happening at a time where there is inflationary pressures and for cost of construction, what learnings have you had at that, that builds that you think that you could translate as far as controlling costs in the U.S. or Australia?

Robert Piconi -- Chief Executive Officer

That is a great question, and really, this has played so well for us in having our first full EVx scale system being developed and built there. We're obviously using a local supply chain there, 100%, 200% local supply chain for all the materials, all the power electronics that we're we're implementing there. And we're learning a few different things you mentioned, there's things on what we're seeing on the cost side, and the core material cost in power electronics. That's been very helpful with the local China supply chain.

But in addition, one of the things we're doing with this system is we're implementing some of the newest cost reduction and new architectures right away, so right out of the gate. So our roadmap of activity that we look at from a design perspective in things like eliminating some of the infrastructure out of the power electronics side, for example, out of our end into our lifting mechanisms for the system, looking at how we are looking at the foundation and the piling activity, and looking at construct ability, looking at optimization around how we construct the system, all of those things we're implementing into this first system, that then we'll be learning. And you rightfully mentioned Australia, so it's a very interesting sequencing here that we're going to be first and have a lot of learnings, I'm sure, as we get into the commissioning of the first EVx system. I think the good news is it's not a small system.

I mean, it is a large 25 megawatt, it's a 4-hour system, a hundred-megawatt hour. So all of those learnings, I think, are going to translate into what we're looking at in a very large and evolving market in Australia, for example, from a local region perspective. But the other learnings are going to come for all of our global deployment and in EVx all over the world, including the U.S.

Thomas Boyes -- Cowen and Company -- Analyst

I appreciate it. If I could sneak one more in the jump back in the queue. Just give us some insight into what kind of opportunities that you're seeing over this next 18-month period as far as it relates to duration. My assumption is that it's still probably mostly in the 2 to 4-hour range.

But I was just wondering if that's true or maybe if there's longer duration systems that are kind of in the pipeline for where you have your guidance that.

Robert Piconi -- Chief Executive Officer

Yeah, it's interesting. We probably can uniquely answer that question given where we're playing across short and longer duration. Right. So this is a really interesting question.

The market continues to be in the bulk of the market. And you can look at all the market data focused in more the 2 to 4-hour range. Now, while saying that what I see about us, in our customer base, remember that the strategic investors we have in BHP, for example, the Korea Zinc Group, which include includes Ark Energy and Sun Metals, that has a stated strategy of being one of the largest green hydrogen producers out of Australia, groups like Saudi Aramco. So when you look at these types of investors that are coincident with customers, the industrial players are making this transition.

And a lot of that's going to require the production of green hydrogen. That's going to mean longer duration storage of at least eight and typically up to 12, I think we announced with DG Fuel's a 16-hour storage, you need that longer duration because you're driving a process of electrolysis with an electrolyzer where you're splitting water and making green hydrogen. So because of that, on the industrial side, you have to have something that's 8 to 12 hours. You better not degrade because it's going to get way too expensive.

And that's where our gravity really comes in, in place strong and really, there's just not a lot of scalable, and low cost, long duration storage technologies. There's a lot of development, there's a lot of new solutions that are in process of getting to a first demonstration. We were ahead of the game, I think in this case with our first five megawatts system in Switzerland that we in 2019 went right. Right to market to prove the technology at scale, and that's what led to all the diligence that we had from some of the largest energy groups in the world that I just mentioned that did the diligence on the tax, all working and working as planned.

I saw the round efficiency we were achieving in Switzerland there, and that led to the progression and getting to their needs for longer duration storage. So it's a little bit of a mixed bag given our specific customer set that we work with. And on the industrial side, I'll say and also with players making, for example, sustainable aviation fuel. So, those type of projects, while they're longer term and a little bit further out, I think, I mean, these are things that are getting developed over multiple years.

They're very large in scale, so we're going to see more and more on that longer duration play in our portfolio in the coming years. And it's going to be a ramp as we get that industrial segment up and going. And the great news for us is we've got with our new software platform the ability to help our customers develop and implement shorter duration solutions with the same type of software platform.

Thomas Boyes -- Cowen and Company -- Analyst

Now perfect. Thank you so much. And jump back in the queue.

Robert Piconi -- Chief Executive Officer

All right. Thank you, Thomas.

Operator

Thank you. Our next question comes from the line of Brian Lee from Goldman Sachs. Please go ahead.

Brian Lee -- Goldman Sachs -- Analyst

Hey, guys. Good morning. Thanks for taking the questions. Appreciate all the high-level color and kind of thoughts around the market,  it's really visionary kind of what you guys are doing and all the momentum you have here.

But I have a couple of sort of more, I guess, nuts and bolts types of questions, just as I think about the model here and all the moving pieces. So maybe first off, on the margins, this battery storage, all these project wins quite impressive in terms of scale and timing. But it's not your technology, it's not the gravity storage, and we see players like [inaudible] and others barely maintaining single-digit gross margins on these types of deployments across the software piece of the business. So I guess the question is, what are you going to make margin lines on being a battery storage deployment company for that kind of $350 million of revenue opportunity versus what you might make on a similar $350 million where you're selling the EVx systems? That's my first question.

And then I have a couple of follow-ups.

Robert Piconi -- Chief Executive Officer

Yeah, well, look, let me also, as I did in gravity, I provided a lot of color and on the types of projects. But let me do the same a little bit on the battery side, because I wouldn't look at us and put us in the bucket of, for example, fluence necessarily. The types of projects that we're looking at, and the problem for solving for customers are pretty complex where they need, for example, they have limitations on space, for example, so they need more creative solutions than exist in the market for energy density. So that puts some of the players that you might expect sort of out of that equation if they can't support certain architectures.

We also in these projects, we've announced are putting in place architectures that in some cases represent hybrid of a combination of technology. And we'll be able to share more details on that. And then, we obviously are doing things with our software. And on the service side, that being at the beginning here, Brian, obviously, it's a little early for me to give you an expectation on that, because we're not a five or ten year player in that space.

Obviously, we're just announcing these new project awards. We're going to be executing on these here in the starting Q4 and through to 2023. And we'll be able to give, I think, a little better indication on that opposed post our Q3 quarter.

Brian Lee -- Goldman Sachs -- Analyst

OK. I mean, maybe a simple question just since you are benchmarking the initial financial model 22 slippages is feeding into a better 23 for the aggregate 22, 23 revenue is in line with what your prior financial model was targeting. Would you say the same about margins given this mix shift, which seems to be playing out as well?

Robert Piconi -- Chief Executive Officer

Sure. Well, what I say is, based on what we're seeing in the ramp-up on both on the gravity side and even within the battery portfolio. That mix now is going to have an impact, I think, on what we had historically in our business plan before, because we have a little different mix of things. We have some things on the positive side, Brian, because I think pointed this out as we talked before, we have the ability to license the technology in particular.

Obviously, that means gravity in some place of the world that we had. We had always assumed we were going to be doing some of that. We obviously got a little bit earlier on as a start, which is always nice to have, is a deal like we had with Atlas in China. So that was obviously a little larger earlier than we had anticipated.

So those types of things will be helpful to our overall margin profile. I think on the new, as we ramp on build out gravity now, and then deal with some of the supply chain areas and just the demand on for example, the EPC companies alone. So I think one of the things I'll give you some color on as we look at early margins, you've got EPC companies that all are very, very busy. Number one, anytime they're going to build something new, and I'm speaking gravity now, so they're building these integrations of lifting systems, and power electronics, and things that have not been built before.

What we saw in the mid-part of the year on some of the quoting we had done was a lot having the EPC companies build in just a lot of contingency, and a lot of things for the unknown on the Labor side, for example. And that shifted a bit. Therefore our strategy on what we were going to start to be involved in meaning, for us to be a little more involved therefore in some of the innovation on the construct ability side. So I'd say from a margin profile perspective, we're going to be taking in factoring this new mix into the rest of this year and into next year.

Now, we provided a little bit of the EBITDA, adjusted EBITDA guidance, I know we didn't give any guidance yet on the specific unit economics, but I am expecting an impact to that gross margin to be slightly lower than what we've had out there relative to this new mix as we look at 2023. But we're going to be getting more information on that here over the next quarter and as we actually start executing projects. I think that's key because we're actually going to be building recognizing revenue against these projects, and we'll be in a better position with every quarter here. And that's part of being a new company that's deploying new solutions as planned for our first deployment year.

And also some of the longer time-frames on the gravity side to have those built out. I mean those projects are 9 12 plus months for the first systems, and can be longer if we get into the 500 MWh plus which some of those projects are. So I know that's not exactly the in-depth clarity, but just to give you some indications, we're going to be absolutely having to update our mix across, I'd say those three areas, licensing, gravity, and our EVS sort of integration platform. And that's not only going to be batteries.

So, we're going to be updating that mix and be able to provide hopefully a little more granular level as we get post Q3.

Brian Lee -- Goldman Sachs -- Analyst

Understood. I appreciate the direction now. And, you know, there's more things to kind of get ironed out here before you reveal the specifics. So that's helpful, though.

Maybe last one just again, kind of logistically, and I'll get back in the queue. Can you talk about for these large project awards you're announcing today the three battery storage, who the battery suppliers are? I mean, the COD and mid-23 is great because it means you have real line of sight to these projects moving forward. But have you secured the supply with sort of your situation on the ground in terms of lithium-ion battery suppliers, pricing those contracts out, getting the delivery schedule? Thank you, guys.

Robert Piconi -- Chief Executive Officer

Sure. Look, we aren't going to provide specific names of the battery players. Just know that we're working with some of the most well-known players in the world there. We've also done a lot of development work on our own there.

I mean, China's a presence for us, as you can imagine, for the last few years of what we're announcing the last year, obviously, as a result of us spending significant time in the region. So, I would say that we are looking there to leverage the market as best we can, as well as do some development between some players there that are doing some unique things. I think on the battery technology and how that integrates with some of the things we're doing in software. For everything we're going to be doing, Brian, I hope you get a sense, we're never going to be need to.

We look at everything is how we innovate and do something to provide value to customers that they aren't potentially finding in the market, and that innovation isn't just there because we want to say we're doing something cool, that is all about unit economics. That is all about unit economics, if you're going to differentiate and do something that others can't, there's a premium you can extract, or you're doing something more cost-effectively at the market price to really focus on that, and drive in that economically, both for our customers and for us, quite frankly.

Brian Lee -- Goldman Sachs -- Analyst

Thanks so much, guys.

Robert Piconi -- Chief Executive Officer

All right. Good to chat, Ryan. Thank.

Operator

Thank you. Our next question comes from the line of Noel Parks from Tuohy Brothers. Please go ahead.

Noel Parks -- Tuohy Brothers -- Analyst

Hi. Good morning.

Robert Piconi -- Chief Executive Officer

Hey. Good morning. How are you?

Noel Parks -- Tuohy Brothers -- Analyst

Real good, thanks. So just thinking about some of the comments you were making about implementing technology improvements as you go, for example, to the project in China. I just wondered, could you maybe just talk a bit about what may be in motion technology-wise, either, whether you're talking about implantation construction or even all the way back to further progress on the material side. So just to give an idea of what's kind of being upgraded as you, or getting more attention of you as you go along with implementation and then design for the next raft of projects.

Robert Piconi -- Chief Executive Officer

Yeah, it's a great question. So let me start with gravity. And if you look at our gravity solution and think about the buckets of where our cost is. It starts with the fixed frame in the foundation.

So if you just think about your building a house, right? That's what we're building as a structure. So that starts with that foundational element where I think I mentioned this before, but we're working with some of the leading research players in civil engineering. So for example, from Caltech, we have the chair of their seismic in civil engineering group, Dr. Jose Andrade, that joined the company a year ago, and is dedicated with us because of the nature of what we're doing as we build these structures and build them across different type of geological profiles.

So that's a chunk of the cost that we really look to get at and innovate, and that includes looking at alternative materials. OK. Then that fixed frame component in particular, there's a lot of different ways you can structure a building. You can use steel, you can use prefabricated concrete, and there's also a lot of different ways you can get at that construct ability costs, which as I mentioned to one of the earlier questions from one of the analysts.

This aspect of the time to construct and how you optimize to shrink that time frame, how do you automate to minimize that labor component? Well, while that labor component is as much lower cost in places like China, and other places like the U.S., it's very, very high, especially in this market, especially in this market. So if we can innovate and provide a way to automate the building of these fixed frames, for example, in components and prefabricated sections and using automated trolleys, for example, that can leverage the infrastructure of the system itself. There's a lot of things that we're looking at there to address that bucket of cost. And of course, with the first system in China, we're going to be looking at how these things play out in ways to optimize it, because we're going to be learning, we're going to be learning on the first build.

There's a second piece around the Power Electronics. It's the other chunk of cost and that's all that the motors, inverters, variable frequency drive. And in our case, in the gravity side, we have these lifting systems, the vertical lifting system. So think vertical freight elevators, right? And the large ones that are lifting essentially 25 metric tonne blocks, which are that sure and posit block.

So that's another area that we look at innovation in there, that gets down to hardware elimination, meaning coming up with architectures where we eliminate gearboxes, or the active front end, or the variable frequency drives in favor of mechanical systems that work differently, for example, in the process of how we're lifting objects. So I think there's a hardware meaning, think about that is CapEx right for customers. So trying to reduce and get a debt that CapEx equation to take hardware cost and coming out, there's obviously a volume component of that. So if we look at multi-megawatt motors and try to look at innovation in that space, that's an area that we'd like to ought to honestly see more innovation, and therefore lower cost, and more efficiency.

We're using motors that are going to be anywhere from 96% to 98% plus in terms of efficiency there for a portion of the architecture. So I think we're balancing innovation there to take material cost out, as well as to improve [inaudible] efficiency. And that improves economics, right? Because what does that mean? That means for every unit that you store, we're able to return more of that unit without loss back to the grid. So a higher [inaudible] efficiency means there's less loss in that process.

So that's what I say around this second part around the power electronics and fixed frame. The third have to do with these mobile masses that get built. So those are these composite, but these, you know, 25 metric ton composite blocks. There are thousands of them per system.

So you can imagine as we eliminate that using concrete, so this is part of our focus on sustainability, but as well as cost, we aren't using concrete in the production of this composite block, we're using as a default solutions soil, so that's available locally. In addition, we can use waste materials and where we can do that, we're going to try to do that. Things like coal ash tailings from the mining process, and as we announced with integrated power, looking at the integration of wind blade, decommissioned wind blades and that fiberglass that otherwise have to be burned or buried. So right, I recycle that.

So those are the areas around cost that we try to get in gravity, and then what I'd say about EVS, as I mentioned this to the last question, also that I think Brian had, but also that Stephen touched on is we're looking at trying to innovate to do things between the battery suppliers and our software in a way, and helping customers solve some of their complex problems that can help us take cost out of the overall solution and provide something very valuable to customers. That includes, by the way, looking at different hybrid architectures to uniquely provide, for example, backup systems with multiple technologies. And we'll be sharing more about that in the future here as we execute.

Noel Parks -- Tuohy Brothers -- Analyst

OK. Great. And you know, one thing as you talk about, and I just trying to picture projects that are in construction all the way out to the various horizons of planning and expecting scaling to find the requirements. So as far as lead time, there must be a point where it's kind of a drop dead with the plan as far as we're not going to try to add anything innovative for the six months or whatever before the trial to start.

Can you give us a sense of how the timing of that happens when you're trying to integrate these advancement into a project?

Robert Piconi -- Chief Executive Officer

Yeah. By the way, it's a great question, and it's also a balance. So as we sign contracts, they have deadlines, they have [inaudible] that we have to respect. And our customers have those.

Obviously, those same constraints relative to hitting number. So what does that mean? For example, for our project that we're implementing in places like the U.S., we have to get started. So that means that we might be a little more conservative with the materials to start, to make sure the technology is proven on first deployments. You can translate that into higher cost, because we may not have tested yet some of the new innovation in cost reduction.

So as I mentioned, we're excited about where China is because we are going to be implementing new testing at commercial scale, large commercial scale. Some of that we're doing testing in Switzerland. We have a test bed for our EVx systems there where we're looking at a few different new cost reduction methodologies there, for example, for the trolleys and even for the lifting systems. So there is a balance and we do have to just essentially go with what we have at a certain point and know that we're going to have a road map to get there.

And that's why we capitalize the company the way we did. David mentioned this, and when someone asked about CapEx in our original plan, we had, I think over the three year period, over $350 million of planned equity investments for projects at that time, thinking that we were going to be participating in projects in a much bigger way with our balance sheet. What what's happened and has things evolved is we aren't needing to do that. So we're actually have very, very minimal.

I mean, as David mentioned, we only have one project right now where we're looking at building that out on our balance sheet, and we'll be sharing more about that over the quarter. So I'd say that the implementation of where we're going of the cost reduction roadmap and the decisions at a certain point, we do have to make decisions and we go that and execute for customers. And, you know, the last thing I'll say on timing is just getting through the contracting process. I mean, as I said, we very just candid and transparent with you.

We were hoping to get some of these project awards 2 to 3 months earlier this year, and that's just a fact. We were hoping to have some of them even before June 30th. And it just some of these contracts have taken a little bit long, we're happy to talk about them now. So we were happy to actually talk about project awards so that we couldn't do that last quarter, because we're just working through that contracting process.

And again, that's not new to any of us around this table. We have a very seasoned management team that's been in a sector in industry. So we get it on what it takes to get customers across the line. I will say that we're solving some pretty complex problems for them that results in a lot of engagement of our technical teams to help do that.

But that's why they choose us, and then we get through the contracting process because they see the value of the innovation, how we're creatively solving this problem.

Noel Parks -- Tuohy Brothers -- Analyst

Got it. So it's still very much a very dynamic process. And it's not as if there is an off-the-shelf installation you can outline to somebody and do a contract and you're done. It sounds like, as you said, a lot of involvement from the technical team just to even get to the contract.

Robert Piconi -- Chief Executive Officer

Yeah, but the way, not unexpected again. So just to be clear that we expect that and we always start fairly standard, and then we get into specifics. But that's part of the value add as well. I mean, for the gravity systems, I'd say that we have a cookie cutter way to just I mean, a modular thing just to go out and build it.

OK. So that's for gravity, it's more of doing geotech insight, a lot of work on the site because we're building a building, right? So that's where some of the work that gets done upfront. So that's a more modular build out. I think as we get into what we're using our EVS software for in solving those problems, we and we get into different technologies that we're integrating.

That's where there's just a little more both creativity and complexity. But that's the value we add, and that's why we're getting chosen and selected here for these larger projects.

Noel Parks -- Tuohy Brothers -- Analyst

Great. Thanks a lot.

Robert Piconi -- Chief Executive Officer

Okay. Thank you, Noel.

Operator

Thank you. Ladies, and gentlemen, at this time, we have reached the end of the question-and-answer session. And now I would like to turn the conference over to Mr. Robert Piconi for closing comments.

Robert Piconi -- Chief Executive Officer

OK. Great. Well, look, I want to thank everybody for joining our call today. We're really excited with what we've discussed today across the gravity front, and the progress we're making in our focused three regions that we outlined at the beginning of the year.

And that's the U.S., China, and Australia. We have a lot of activity going on globally. We're very measured and focused as a company to ensure that we focus on these first deployments of our EVx platform, as well as the new deployments now with our EVS team, that the first ones are very successful. And while I know the numbers are large, as we've discussed some pretty large ramp here, revenue revenues, we look into 2023.

It does reflect a very focused effort on specific regions and specific customers. And if you got a sense of the size of the deals we mentioned, I think that's a real benefit. Meaning we aren't doing 30 deals, or even 20 deals, or even 15 deals. We are focused on large projects with large customers that have a lot of credibility and are making choices, as you heard today, for our technology.

So I think that's definitely a benefit, it's a strength, it allows us as both a commercial and an operational team to keep focused on few but important things. I think less is more in that regard, and that's going to help drive success as we scale and ramp up. And learn, by the way, so these are going to be first deployments that brings with it some level of execution risk. At the same time, if you look at the management team around the table and I always want to end on this now with the people and the team we've assembled, I really believe we have one of the most experienced, dedicated, motivated, and passionate teams focused on decarbonization, but really, really focused on listening to our customers.

And that's why you get the nature of being able to announce project awards of this size and with these type of customers. And we have a lot in the hopper here. And I look forward to share more here as we get back together next quarter. So thank you, everyone, and enjoy the rest of your day.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Laurence Alexander -- Chief Marketing Officer

Robert Piconi -- Chief Executive Officer

David Hitchcock -- Interim Chief Financial Officer

Joseph Osha -- Guggenheim Partners -- Analyst

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Thomas Boyes -- Cowen and Company -- Analyst

Brian Lee -- Goldman Sachs -- Analyst

Noel Parks -- Tuohy Brothers -- Analyst

More NRGV analysis

All earnings call transcripts