Energy Vault Holdings Inc

Previous wording

Backlog is a common measurement used in our industry. Our methodology for determining backlog may not, however, be comparable to the methodologies used by others. The Company’s backlog agrees with the amount of our remaining performance obligations, which are described in Note 3 -Revenue Recognition.

Current wording

Backlog represents contracted but unrecognized revenue from projects and services yet to be completed, unrecognized revenue or other income from IP licensing agreements, and unrecognized revenue from tolling arrangements. Backlog excludes any potential future variable payments or IP royalties. Backlog is a common measurement used in our industry. Our methodology for determining backlog may not, however, be comparable to the methodologies used by others. Effective in the second quarter of 2024, we updated our methodology for computing backlog. Under our previous methodology, our backlog was equivalent to our remaining performance obligations under GAAP. We believe our new methodology for computing backlog allows us to better evaluate the growth of our Company and estimate future revenue.

Previous wording

Consolidated Comparison of Three Months Ended March 31, 2024 to March 31, 2023

Current wording

Consolidated Comparison of Three and Six Months Ended June 30, 2024 to June 30, 2023

Previous wording

The Company recognized revenue for the product and service categories as follows for the three and three months ended March 31, 2024 and 2023.

Current wording

The Company recognized revenue for the product and service categories as follows for the three and six months ended June 30, 2024 and 2023 (amounts in thousands):

Previous wording

Revenue for the three months ended March 31, 2024 decreased by $3.7 million to $7.8 million compared to $11.4 million for the three months ended March 31, 2023. The decrease in revenue was primarily attributable to a $3.9 million decrease in revenue from building and transferring energy storage products due to a reduction in revenue from battery energy storage projects. Revenue from two customers accounted for 80% and 14% of total revenue for the three months ended March 31, 2024 and revenue from three different customers accounted for 43%, 39%, and 16% of total revenue for the three months ended March 31, 2023.

Current wording

Revenue from three customers accounted for 46%, 30%, and 14% of total revenue for the three months ended June 30, 2024 and revenue from two customers accounted for 69% and 19% of total revenue for the six months ended June 30, 2024. Revenue from one customer accounted for 90% of total revenue for the three months ended June 30, 2023 and revenue from two customers accounted for 80% and 14% of total revenue for the six months ended June 30, 2023.

Previous wording

Cost of revenue for the three months ended March 31, 2024 decreased by $3.3 million to $5.7 million compared to $9.0 million for the three months ended March 31, 2023. Cost of revenue decreased as a result of the Company’s BESS projects in progress during the three months ended March 31, 2024 being in their final stages, compared to the projects being in earlier stages during the three months ended March 31, 2023.

Current wording

Cost of revenue decreased due to the Company’s BESS projects in progress during the three and six months ended June 30, 2024 being in their final stages, compared to the projects being in earlier stages during the three and six months ended June 30, 2023.

Previous wording

Gross profit was $2.1 million and $2.4 million, respectively, for the three months ended March 31, 2024 and 2023 and gross profit margin was 26.7% and 21.2%, respectively. Gross profit and gross profit margin for the three months ended March 31, 2024 and 2023 were primarily attributable to the advancement of physical progress on the Company’s BESS projects.

Current wording

Gross profit and gross profit margin for the three and six months ended June 30, 2024 and 2023 were primarily attributable to the advancement of physical progress on the Company’s BESS projects. The decrease in gross profit for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was due to a decrease in revenue due to the Company’s BESS projects being their final stages in 2024. The increase in gross profit margin for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was primarily due to higher margin construction services that were provided in 2024 for the Company’s BESS projects, compared to the transfer of lower margin equipment for the BESS projects in 2023.

Previous wording

S&M expenses decreased by $0.4 million to $4.2 million for the three months ended March 31, 2024, compared to $4.6 million for the three months ended March 31, 2023. The decrease was primarily attributable to a decrease in personnel-related expenses of $0.5 million due to a reduction in headcount.

Current wording

S&M expenses decreased by $0.4 million to $9.0 million for the six months ended June 30, 2024, compared to $9.4 million for the six months ended June 30, 2023. The decrease was attributable to a decrease in personnel-related expenses of $0.4 million, primarily due to a reduction in headcount.

Previous wording

R&D expenses decreased by $4.2 million to $7.0 million for the three months ended March 31, 2024, compared to $11.2 million for the three months ended March 31, 2023. The decrease was primarily attributable to a $2.3 million decrease in engineering costs, a $1.5 million decrease in personnel-related expenses, and a $0.2 million decrease in software expenses. These cost decreases were primarily attributable to a focus on cost controls and a reduction in headcount.

Current wording

R&D expenses decreased by $3.3 million to $7.0 million for the three months ended June 30, 2024, compared to $10.2 million for the three months ended June 30, 2023. The decrease was primarily attributable to a $2.2 million decrease in personnel-related expenses, a $0.8 million decrease in software expenses, a $0.2 million decrease in engineering costs, and a $0.2 million decrease in consulting costs. The cost decreases were primarily attributable to a focus on cost controls and a reduction in headcount.

Previous wording

Interest income decreased by $0.1 million to $1.8 million for the three months ended March 31, 2024 compared to $1.9 million for the three months ended March 31, 2023. The decrease in interest income is primarily due to a decrease in interest income from our money market funds.

Current wording

Interest income decreased by $0.5 million to $1.7 million for the three months ended June 30, 2024 compared to $2.3 million for the three months ended June 30, 2023 and interest income decreased by $0.7 million to $3.6 million compared to $4.2 million for the six months ended June 30, 2024. The decrease in interest income is primarily due to a decrease in interest income from our money market funds.

Previous wording

Other income (expense), net improved by $1.8 million to other income of $1.7 million for the three months ended March 31, 2024 compared to other expense of $0.2 million for the three months ended March 31, 2023. The change in other income (expense), net is primarily due to a $1.5 million gain resulting from the derecognition of a contract liability with a related party during the three months ended March 31, 2024. In 2019, the Company received a $1.5 million deposit for a gravity-based system from a customer that was owned by one of its primary shareholders. During the three months ended March 31, 2024, the Company concluded it was no longer obligated to provide a gravity-based system to the customer and that the deposit was nonrefundable. As a result, the Company derecognized the $1.5 million liability and recognized it as a gain during the three months ended March 31, 2024. There was no such comparable gain during the three months ended March 31, 2023.

Current wording

Other income (expense), net improved by $1.9 million to other income, net of $1.6 million for the six months ended June 30, 2024 compared to other expense, net of $0.3 million for the six months ended June 30, 2023. The change in other income (expense), net is primarily due to a $1.5 million gain resulting from the derecognition of a contract liability with a related party during the six months ended June 30, 2024. In 2019, the Company received a $1.5 million deposit for a gravity-based system from a customer that was owned by one of its primary shareholders. During the six months ended June 30, 2024, the Company concluded it was no longer obligated to provide a gravity-based system to the customer and that the deposit was nonrefundable. As a result, the Company derecognized the $1.5 million liability and recognized it as a gain during the six months ended June 30, 2024. There was no such comparable gain during the six months ended June 30, 2023.

Previous wording

The exercise price for any of our private warrants is $11.50 per warrant, subject to certain specified adjustments. To the extent that the price of our common stock exceeds $11.50 per share, it is more likely that our private warrant holders will exercise their warrants. To the extent that the price of our common stock declines, including a decline below $11.50 per share, it is less likely that our private warrant holders will exercise their warrants.

Current wording

The exercise price for our private warrants is $11.50 per warrant, subject to certain specified adjustments. To the extent that the price of our common stock exceeds $11.50 per share, it is more likely that our private warrant holders will exercise their warrants. To the extent that the price of our common stock declines, including a decline below $11.50 per share, it is less likely that our private warrant holders will exercise their warrants.

Previous wording

Our principal commitments as of March 31, 2024 consisted primarily of obligations under operating leases, finance leases, deferred pensions, warranty obligations, and issued purchase orders. Our non-cancellable purchase obligations as of March 31, 2024 totaled approximately $0.4 million.

Current wording

Our principal commitments as of June 30, 2024 consisted primarily of obligations under operating leases, finance leases, deferred pensions, warranty obligations, and issued purchase orders. Our non-cancellable purchase obligations as of June 30, 2024 totaled approximately $5.0 million.

Previous wording

During the three months ended March 31, 2024 and 2023, cash provided by (used in) operating activities totaled $0.9 million and $(70.8) million, respectively.

Current wording

During the six months ended June 30, 2024 and 2023, used in operating activities totaled $11.8 million and $91.8 million, respectively.

Previous wording

During the three months ended March 31, 2024 operating cash flows were positively impacted by a $59.7 million decrease in operating assets and non-cash charges of $9.6 million. The decrease in operating assets was primarily attributable to a $33.6 million decrease in contract assets, a $25.9 million decrease in accounts receivable, and a $0.8 million decrease in prepaid expenses and other current assets. The non-cash charges were primarily composed of $9.7 million in stock-based compensation expense and $0.3 million in depreciation and amortization, partially offset by $0.4 million in non-cash interest income. Operating cash flows were negatively impacted by a net loss of $21.1 million and a decrease in operating liabilities of $47.2 million. The decrease in operating liabilities was primarily attributable to a $42.1 million decrease in accounts payable and accrued expenses and a $4.8 million decrease in contract liabilities.

Current wording

During the six months ended June 30, 2024, operating cash flows were negatively impacted by a net loss of $47.3 million and a decrease in operating liabilities of $59.7 million. The decrease in operating liabilities was primarily attributable to a $62.7 million decrease in accounts payable and accrued expenses, partially offset by a $3.5 million increase in deferred revenue. Operating cash flows were positively impacted by a $75.2 million decrease in operating assets and non-cash charges of $20.0 million. The decrease in operating assets was primarily attributable to a $51.0 million decrease in contract assets and a $23.8 million decrease in accounts receivable. The non-cash charges were primarily composed of $19.2 million in stock-based compensation expense, $0.6 million in depreciation and amortization, $0.6 million in asset impairments and loss on sale of assets, and a $0.4 million provision for credit losses, partially offset by $0.8 million in non-cash interest income.

Previous wording

During the three months ended March 31, 2023, cash used in operating activities of$70.8 million was negatively impacted by a net loss of$31.2 million, an increase in operating assets of $35.5 million, and a decrease in operating liabilities of $17.8 million. The increase in operating assets was primarily due to a $67.3 million increase in advances to suppliers and a $1.3 million increase in contract assets, partially offset by a $33.4 million decrease in accounts receivable. The decrease in operating liabilities was primarily due to a $54.1 million decrease in accounts payable and accrued expenses, partially offset by a $36.6 million increase in contract liabilities. Operating cash flows were positively impacted by non-cash charges of $13.7 million, which was primarily due to $13.7 million in stock-based compensation expense.

Current wording

During the six months ended June 30, 2023, cash used in operating activities of$91.8 million was negatively impacted by a net loss of$57.3 million, an increase in operating assets of $50.9 million, and a decrease in operating liabilities of $7.7 million. The increase in operating assets was primarily due to a $54.9 million increase in advances to suppliers related to equipment purchases for our BESS projects, and a $34.8 million increase in contract assets primarily due to an increase in unbilled receivables. These increases in operating assets were partially offset by a $32.3 million decrease in accounts receivable, a $4.4 million decrease in inventory, and a $2.1 million decrease in prepaid and other current assets. The decrease in operating liabilities was primarily due to a $46.0 million decrease in accounts payable and accrued expenses, partially offset by a $38.9 million increase in deferred revenue. Operating cash flows were positively impacted by non-cash charges of $24.1 million, which was primarily due to $23.8 million in stock-based compensation expense.

Previous wording

During the three months ended March 31, 2024 and 2023, cash used in investing activities totaled $8.8 million and $17.6 million, respectively.

Current wording

During the six months ended June 30, 2024 and 2023, cash used in investing activities totaled $20.8 million and $24.8 million, respectively.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 consisted of $8.6 million for the purchase of property and equipment, primarily related to the energy storage systems being constructed in Snyder, Texas and Calistoga, California, and $0.2 million for the purchase of property and equipment.

Current wording

Cash used in investing activities for the six months ended June 30, 2024 consisted of $21.1 million for the purchase of property and equipment, primarily related to the construction of the Snyder CDU, Snyder BESS, and the hybrid energy storage system being constructed in Calistoga, California, partially offset by $0.2 million in proceeds from the sale of a cement plant at the Company’s R&D site in Switzerland.

Previous wording

Cash used in investing activities for thethree months ended March 31, 2023 consisted of$11.6 million for thepurchase of property and equipment, primarily related to the energy storage systems being constructed in Snyder, Texas and Calistoga, California, and$6.0 million for the purchase of equity securities in KORE.

Current wording

Cash used in investing activities for the six months ended June 30, 2023 consisted of $18.8 million for the purchase of property and equipment, primarily related to the construction of the Snyder CDU and the hybrid energy storage system being constructed in Calistoga, California. Additionally, the Company purchased$6.0 million of equity securities in KORE.

Previous wording

During the three months ended March 31, 2024, cash used in financing activities totaled $0.7 million, compared to cash used in financing activities of $0.8 million for the three months ended March 31, 2023.

Current wording

During the six months ended June 30, 2024, cash provided by financing activities totaled $0.4 million, compared to cash used in financing activities of $4.5 million for the six months ended June 30, 2023.

Previous wording

For the three months ended March 31, 2024, cash used in financing activities primarily consisted of $0.4 million in repayments on insurance premium financings and $0.3 million in tax payments related to the net settlement of equity awards.

Current wording

For the six months ended June 30, 2024, cash provided by financing activities was attributable to $1.7 million in proceeds from insurance premium financings, partially offset by $0.8 million in insurance premium financing repayments, $0.3 million in tax payments related to the net settlement of equity awards, and $0.2 million in payments for finance lease obligations.

Previous wording

During the three months ended March 31, 2023, cash used in financing activities was primarily attributable to $0.8 million in tax payments related to the net settlement of equity awards.

Current wording

During the six months ended June 30, 2023, cash used in financing activities was primarily attributable to $4.6 million in tax payments related to the net settlement of equity awards, partially offset by $0.1 million in cash proceeds from the exercise of stock options.

Previous wording

To complement our condensed consolidated statements of operations, we use non-GAAP financial measures of adjusted S&M expenses, adjusted R&D expenses, adjusted G&A expenses, and adjusted EBITDA. Management believes that these non-GAAP financial measures complement our GAAP amounts and such measures are useful to securities analysts and investors to evaluate our ongoing results of operations when considered alongside our GAAP measures. The presentation of these non-GAAP measures is not meant to be considered in isolation or as an alternative to net loss as an indicator of our performance.

Current wording

To complement our condensed consolidated statements of operations, we use non-GAAP financial measures of adjusted S&M expenses, adjusted R&D expenses, adjusted G&A expenses, adjusted operating expenses, and adjusted EBITDA. Management believes that these non-GAAP financial measures complement our GAAP amounts and such measures are useful to securities analysts and investors to evaluate our ongoing results of operations when considered alongside our GAAP measures. The presentation of these non-GAAP measures is not meant to be considered in isolation or as an alternative to other measures of financial performance calculated in accordance with GAAP. These non-GAAP measures and their reconciliation to GAAP financial measures are shown below.

Previous wording

We present adjusted EBITDA, which is net loss excluding adjustments that are outlined in the quantitative reconciliation provided above, as a supplemental measure of our performance and because we believe this measure is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. The adjusted EBITDA measure excludes the financial impact of items management does not consider in assessing our ongoing operating performance, and thereby facilitates review of our operating performance on a period-to-period basis.

Current wording

We present adjusted EBITDA, which is net loss attributable to Energy Vault Holdings, Inc. excluding adjustments that are outlined in the quantitative reconciliation provided above, as a supplemental measure of our performance and because we believe this measure is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. The adjusted EBITDA measure excludes the financial impact of items management does not consider in assessing our ongoing operating performance, and thereby facilitates review of our operating performance on a period-to-period basis.

Previous wording

In evaluating adjusted EBITDA, one should be aware that in the future we may incur expenses similar to the adjustments noted above. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these types of adjustments. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net loss, operating loss, or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.

Current wording

In evaluating adjusted EBITDA, one should be aware that in the future we may incur expenses similar to the adjustments noted above. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these types of adjustments. Adjusted EBITDA is not a measurement of our financial performance under

Previous wording

There have not been any changes to our critical accounting policies and estimates as compared to those disclosed under the caption Critical Accounting Policies and Use of Estimatesin Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2023 Annual Report of Form 10-K filed with the SEC on March 13, 2024.

Current wording

There have not been any changes to our critical accounting policies and estimates as compared to those disclosed under the caption Critical Accounting Policies and Use of Estimatesin Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2023 Annual Report on Form 10-K filed with the SEC on March 13, 2024.