ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provide information which Energy Vault’s management believes is relevant to an assessment and understanding of Energy Vault’s consolidated results of operations and financial condition as of December 31, 2024 and for the fiscal year ended December 31, 2024. The discussion and analysis should be read together with our audited consolidated financial statements and related notes that are included elsewhere in this Annual report on Form 10-K. This discussion may contain forward-looking statements based upon Energy Vault’s current expectations that involve risks, uncertainties, and assumptions. Energy Vault’s actual results may differ materially from those anticipated in these forward-looking statements. You should review the section titled “Cautionary Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors,” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Annual Report. Energy Vault’s historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless the context otherwise requires, all references in this Annual Report to “we,” “our,” “us,” “the Company,” or “Energy Vault” refer to Energy Vault Holdings, Inc., a Delaware corporation, and its subsidiaries both prior to the consummation of and following the Merger (as defined below).
Our Business
Energy Vault provides a diverse technology portfolio of turnkey energy storage platforms, including proprietary gravity, battery, and green hydrogen energy storage hardware technologies, supported by our technology-agnostic energy management system software and integration platform. In 2024, we began a multi-year transition from providing this technology portfolio solely to third parties through a build-and-transfer model or licensing model, to also taking an ownership interest in energy storage assets in select attractive markets. We believe that our experience in the build-and-transfer business, combined with our proprietary energy storage technologies and geographical footprint, uniquely positions us to build and operate storage projects with superior efficiency and reliability.
We incorporate a customer-centric, solutions-based approach toward helping utilities, independent power producers (“IPP”), and large industrial energy users reduce their energy costs while maintaining power reliability. As the global demand for electricity increases and the world transitions to an economy powered by increasingly intermittent renewable energy such as solar and wind, the ability to provide clean, reliable, and affordable electricity to a growing global population will depend heavily on the ability to store and distribute energy at appropriate times. We are striving to create a world powered by renewable resources so that everyone will have access to clean, reliable, sustainable, and affordable energy.
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Key Factors and Trends Affecting our Business
We believe that our performance and future success depend upon several factors that present significant opportunities for us, but also pose risks and challenges including those discussed below and in Part I, Item 1A. “Risk Factors.”
Development and Deployment Plan for Third-Party Sales of Energy Storage Products
We primarily rely on two models for project delivery, which are (i) EPC delivery and (ii) EEQ delivery. Under the EPC model, we generally rely on third-party EPC firms to construct our storage systems, under our supervision with dedicated teams tasked with project management. Under the EEQ model, we are responsible for the delivery of the equipment we provide, as well as resolving issues within our scope of supply.
Our cost projections are heavily dependent upon raw materials (such as steel), equipment (such as motors, batteries, inverters, and power electronic devices), and technical and construction service providers (such as engineering, procurement, construction firms).
Energy Storage Industry
The utility-scale energy storage industry is increasing at a rapid pace, driven by increased demand for electricity, global transitions toward renewable energy, and increased focus on grid resilience.
According to a report from the U.S. Department of Energy in December 2024, electricity demand is forecasted to grow substantially in the United States over the next few decades. Electricity demand is expected to be driven primarily by new data centers, artificial intelligence, new manufacturing facilities, electric vehicles, and sector-wide electrification. Electricity demand for data centers alone is expected to grow at a 13% to 27% compound annual growth rate through 2028.
Over the past decade, deployment of renewable energy resources has accelerated and there has been an industry-wide push for decarbonization, which is increasing the demand for grid-scale energy storage. A major obstacle to transitioning to renewable sources of energy such as wind and solar is the intermittent availability of these types of energy sources. Energy storage solutions are needed to balance the production intermittency of variable renewable energy to support a clean-energy future and a balanced electrical grid infrastructure. Both government mandates and companies focused on reducing energy use, cost, and emissions are expected to propel the shift to renewable sources of power.
Additionally, software solutions play a vital role in assisting energy storage owners in managing the growing complexities of renewable energy and energy storage markets. As renewable and energy storage asset portfolios expand globally, these stakeholders will need software solutions that enhance asset performance and boost revenue while reducing total ownership costs.
Our expansion of revenue depends on the ongoing adoption of energy storage solutions by our customers and our ability to source, execute, and operate energy storage projects with attractive economics. The growth of the energy storage market that we address is primarily driven by the decreasing cost of energy storage technologies, government mandates, financial incentives to reduce GHG emissions, and efforts to enhance grid stability and efficiency. These dynamics are driving demand for increased energy storage capacity and duration.
Increasing Deployment of Renewable Energy
Deployment of renewable energy resources has accelerated over the last decade, and solar and wind have become a low cost energy source. Energy storage is critical to reducing the intermittency and volatility of renewable energy generation. However, there is no guarantee that the deployment of renewable energy will occur at the rate that is expected. Inflationary pressures, supply chain disruptions, geopolitical conflicts, government regulations, and other factors could result in fluctuations in demand for and deployment of renewable energy resources, adversely affecting our revenue and ability to generate profits in the future.
Competition
The market for our products is competitive, and we may face increased competition as new and existing competitors introduce energy storage solutions and components. Furthermore, as we expand our services and digital applications in the future, we may face other competitors including software providers and hardware manufacturers that offer software solutions. If our market share declines due to increased competition or if we are not able to compete as we expect, our revenue and ability to generate profits in the future may be adversely affected.
Inflation
In the markets in which we operate, there have been higher rates of inflation in recent years. If inflation continues to increase in our markets, it may increase our expenses that we may not be able to pass through to customers. It may also increase the costs of our products that could negatively impact their competitiveness.
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Government Regulation and Compliance
Federal, state, and local government statutes and regulations concerning electricity heavily influence the market for our product and services. These statutes and regulations directly affect our owned asset business and indirectly affect our third-party sales business. These statutes and regulations often relate to electricity pricing, net metering, incentives, taxation, competition with utilities and the interconnection of customer-owned electricity generation. In the United States, governments continuously modify these statutes and regulations. Governments, often acting through state utility or public service commissions, change and adopt different rates for commercial customers on a regular basis. These changes could affect our ability to deliver cost savings to our current and future customers for the purchase of electricity.
Each of our owned installations or our customer installations must be designed, constructed, and operated in compliance with applicable federal, state and local regulations, codes, standards, guidelines, policies, and laws. To install and operate energy storage systems on its platform, we, our customers or our partners, as applicable, are required to obtain applicable permits and approvals from local authorities having jurisdiction to install energy storage systems and to interconnect the systems with the local electrical utility.
U.S. Energy Storage Regulation and Legislation
The U.S. Congress is continuously reviewing and passing various climate change proposals, incentives, regulations, and legislation that may support the energy storage industry, including in the form of tax credits and incentives. The implementation of these laws can vary greatly across administrations and take long periods of time before the full extent of regulations are adopted. We cannot guarantee we will realize any or all of the anticipated benefits or incentives under any such enacted regulations or legislation, including the IRA. IRS private letter ruling 201809003 clarified that energy storage is eligible for federal tax credits if charged primarily by qualifying renewable resources.
The IRA adopted in August 2022 contains a number of tax incentive provisions that directly support the adoption of energy storage solutions and services. Before the enactment of the IRA, the Section 48 ITC did not apply to standalone energy storage projects. The IRA added Section 48(a)(3)(A)(ix) to allow a taxpayer that placed in service a standalone energy storage technology with a minimum capacity of 5 kWh to claim the ITC, if certain requirements are met. Energy storage technology that is placed in service after December 31, 2022 and started construction for U.S. federal income tax purposes prior to January 1, 2025, may claim the ITC under Section 48(a). To qualify for the full ITC rate of 30%, an energy storage project will need to satisfy certain labor requirements relating to the payment of prevailing wages and use of apprentices, or have started construction for U.S. federal income tax purposes prior to January 29, 2023. If these requirements are not met, the project may be eligible only for a base rate of 6%. The existing energy ITC will be replaced by a CEITC or “tech neutral” regime, which is available for any investment in a qualified storage facility that is placed in service after calendar year 2024 (certain labor requirements will still apply). The IRA also included bonus credits associated with the ITC, which may be relevant to our business. There is a 10% bonus credit for projects located in certain areas designated as energy communities, an additional 10% bonus credit for projects utilizing products which collectively meet certain minimum domestic content requirements, and a 10% or 20% bonus credit for certain projects less than 5 MW located in a low-income community or that serve low-income community members. Finally, the IRA included a manufacturing production tax credit for specific renewable energy and battery storage related products and components manufactured in the U.S.
We believe we may be positioned to benefit from the bonus credits related to the energy storage systems we intend to own and operate and will stimulate demand for our customers to invest in more energy storage systems. To date, the IRA regulations, proposed regulations and/or guidance issued by the U.S. Department of Treasury and Internal Revenue Service associated with these various tax credits, including but not limited to the ITC, domestic content bonus credit, energy community bonus credit, and manufacturing production tax credit have provided some substantive clarity. However, we are continuing to seek additional clarity on certain aspects of IRA guidance and/or regulation via updated guidance and future proposed and/or final regulations. The potential impact from the change in the U.S. presidential administration to any existing regulations, including any potential ramifications for the IRA and the various tax incentive provisions as well as other government and tax incentives for clean energy and energy storage in the United States, is uncertain at this stage. Some of the guidance and rulemaking enacted under the Biden Administration could be changed or modified by the Trump Administration, creating uncertainty with respect to implementation of the IRA. It remains uncertain whether Congress will modify or repeal the IRA in connection with the budget reconciliation process or otherwise. Accordingly, no assurance can be given that our projects will be eligible for tax credits or other benefits under the IRA.
Finally, recent U.S. tariff policy changes may impact our business and results of operations. The Section 301 tariff rate on lithium-ion non-EV batteries imported from China has been amended several times since the beginning of 2025 and may continue to change. These changes specifically target "batteries" as defined by U.S. Customs and Border Protection, encompassing the cubes, modules, and certain types of cells. The tariff rate on battery "parts"–including separators, electrolytes, cans, and electrodes is expected to remain at its current 25% level.
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There is currently much uncertainty relating to potential changes to U.S. tariff policy. In particular, the U.S. government’s recent imposition on tariffs on all imported steel may increase our costs. Changes to U.S. tariff policy may adversely impact our supply chain as well as our supply chain strategies detailed herein, both domestically and internationally, which may then have an adverse impact on our results of operations and business.
Recent Developments
In June 2024, the Company executed an engineer, procure, and construct contract with a customer to build a 200 MW/400 MWh BESS in Australia. Additionally, the Company signed a maintenance agreement with this customer to provide long-term maintenance services on the BESS after construction is completed for a 20-year period.
In June 2024, the Company implemented a series of cost savings measures, expected to result in realized cost savings of $6.0 million to $8.0 million annually. During the year ended December 31, 2024, the Company recognized reorganization costs of $1.6 million, consisting of personnel reduction costs related to these cost saving measures.
On September 13, 2024, the Company was notified by the NYSE that it was not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of the Company’s Common Stock was less than $1.00 over a consecutive 30 trading-day period. The notice did not result in the immediate delisting of the Company’s Common Stock from the NYSE. On November 1, 2024, the Company received written notice from the NYSE informing the Company that it had regained compliance with the bid price rule as of October 31, 2024.
In October 2024 the Company executed a 10-year offtake agreement with a customer for the Cross Trails BESS that is expected to commence in June 2025. The offtake agreement includes both fixed and variable price components. The aggregate expected remaining future revenue from this contract, including variable fees that the Company believes is probable, is $57.0 million. The variable revenues are forecasted by an independent third-party firm using simulation software that factors in current and projected energy market dynamics, historical and forecasted volatility, and location specific data. The Company considers the low-end simulation results to be probable.
Between October 2024 and March 2025, the Company agreed to loan Stoney Creek BESS Pty Ltd (“Stoney Creek”) up to AUD 8.8 million (or $5.5 million) to assist them in paying for BESS project development related costs. The Company also agreed to provide Stoney Creek a bank guarantee of up to AUD 2.5 million (or $1.6 million) as security for a performance bond. On March 17, 2025, the Company entered into a share purchase agreement to acquire Stoney Creek for a nominal purchase price of one hundred Australian dollars. The closing of the acquisition is subject to regulatory review and approval in Australia. Upon closing of the acquisition, the carrying value of the note receivable is expected to be incorporated as part of the total consideration. As of the filing date of this Annual Report, the Company has loaned Stoney Creek AUD 1.4 million (or $0.9 million).
In October, the Company executed a 100 MW/200 MWh EEQ contract to supply B-Vaults to a customer in Texas. The B-Vaults in this contract were delivered to the customer in December 2024. In December 2024, the Company executed an engineer, procure, and construct contract with a customer to build a 100 MW/200 MWh BESS in Australia. Also in December 2024, the Company executed two EEQ contracts for a combined 366.5 MWhs with a large northeastern public utility in the U.S to supply them with B-Vaults.
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Key Operating Metrics
The following tables present our key operating metrics for the periods presented (amounts in thousands unless otherwise noted):
Year Ended December 31,
Cancellations (in MWh) (400) (400)
December 31,
Developed Pipeline (in MWh) (1) 9,194
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(1) Developed pipeline is a new key operating metric that the Company began tracking during the second quarter of 2024, therefore prior period comparable figures have not been included.
(2) The Company changed its definition of backlog during the second quarter of 2024, therefore the Company has presented the comparable amounts as of December 31, 2023 per the new definition.
(3) As of March 17, 2025, the Company maintains a backlog of $660.0 million and a developed pipeline of $2.1 billion associated with additional business booked subsequent to December 31, 2024, net of any adverse impact associated with prevailing equipment costs (namely from lithium-ion battery prices and changes in foreign currency exchange rates for non-U.S. dollar denominated business).
Bookings
Net bookings represent the total aggregate contract value and total MWhs to be delivered from customer contracts signed during the period (i.e., gross bookings), net of the total aggregate value and total MWhs of contracts that were cancelled during the period. The aggregate contract value includes any potential future variable payments from tolling and offtake arrangements that the Company believes are probable of being realized. Probable future variable payments are forecasted by an independent third-party firm using simulation software that factors in current and projected energy market dynamics, historical and forecasted volatility, and location specific data. The Company considers the low-end simulation results to be probable. Potential future IP royalties are not included in bookings. Due to the long-term nature of our contracts, bookings are a key metric that allows us to understand and evaluate the growth of our Company and our estimated future revenue related to our customer contracts.
Developed Pipeline
Developed pipeline represents uncontracted potential revenue from third-party projects where potential prospective customers have either awarded the Company a project or shortlisted the Company for consideration. It also includes potential tolling revenue from projects where the Company is in advanced negotiations to build, own, and operate energy storage systems. Developed pipeline is an internal management metric that we construct using information from our global sales team and is monitored by management to understand the potential anticipated growth of our Company and to estimate potential future revenue. Developed pipeline is influenced by the prevailing foreign exchange rates and equipment prices and may vary from period to period if these inputs change.
Developed pipeline may not generate margins equal to our historical operating results. We have only recently begun to track our developed pipeline on a consistent basis as a performance measure, and as a result, we do not have significant experience in determining the level of realization that we may achieve on these potential contracts. Our customers may experience project delays or cancel orders as a result of external market factors and economic or other factors beyond our control.
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Backlog
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 for projects operated by Energy Vault or affiliates. Backlog includes any potential future variable payments from tolling and offtake arrangements that the Company believes is probable of being realized. Probable future variable payments are forecasted by an independent third-party firm using simulation software that factors in current and projected energy market dynamics, historical and forecasted volatility, and location specific data. The Company considers the low-end simulation results to be probable. Potential future IP royalties are not included in backlog. 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.
We cannot guarantee that our backlog will result in actual revenue in the originally anticipated period, or at all. Our customers may experience project delays or cancel orders as a result of external market factors and economic or other factors beyond our control. If our backlog fails to result in revenue as anticipated or in a timely manner, we could experience a reduction in revenue, profitability, and liquidity.
Key Components of Results of Operations
Revenue
The Company generates revenue from the sale of our energy storage products, the licensing of the Company’s software solutions and IP, and from long-term service agreements to operate and maintain customer owned energy systems. To date, the Company has primarily generated revenue from the sale of our BESSs and from licensing our EVx technology. In addition to these sources of revenue, in the future we expect to generate revenue from tolling arrangements in connection with energy storage systems that we intend to own and operate.
The Company sells its BESSs under (i) an EPC model and (ii) an EEQ model. When the Company sells a BESS under the EPC model, the Company recognizes revenue over time as we transfer control of our product to the customer. Under an EEQ model, the Company recognizes revenue related to equipment sales upon delivery to the customer and service revenue over time as we provide specialized technical services to the customer.
When the Company licenses its IP, revenue is recognized at the point in time at which the customer obtains control of the licensed technology. When the Company licenses its software solutions or provides operation and maintenance services, the transaction price for each contract is recognized as revenue on a straight-line basis over the term of the contract.
Our revenue is affected by changes in the price, volume, and mix of products and services purchased by our customers, which is driven by the demand of our products, geographic mix of our customers, strength of competitor’s product offerings, and the availability of government incentives to the end-users of our products.
Our revenue growth is dependent on continued growth in the number of energy storage systems constructed each year and our ability to increase our share of demand in the geographic regions where we currently compete and plan to compete in the future. Additionally, our revenue growth is dependent on our ability to find attractive projects to build, own, and operate.
Cost of Revenue
Cost of revenue primarily consists of product costs, including purchased equipment, materials and supplies, as well as costs related to subcontractors, direct labor, and product warranties.
Our cost of revenue is affected by underlying costs of equipment and materials such as batteries, inverters, enclosures, transformers, and cables, as well as the cost of subcontractors to provide construction services. We do not currently hedge against changes in the price of raw materials as we do not purchase raw materials. We purchase energy storage system components from our suppliers.
Gross Profit and Gross Profit Margin
Gross profit and gross profit margin may vary from period to period due to the timing of transferring control of significant uninstalled equipment to customers under contracts to sell energy storage systems. When control of significant uninstalled equipment is transferred to customers in a EPC project, the Company recognizes revenue in an amount equal to the cost of that equipment. The profit margin inherent in these materials is deferred until the Company fulfills its obligation to install the materials during construction of the energy storage systems. Generally, margins in an EPC project are lower in the beginning and middle stages as the equipment is delivered, and margins are higher in the later stages as the Company
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performs the construction, installation, and commissioning services. As a result, gross profit and gross profit margin will vary from period to period.
Additionally, gross profit and gross profit margin may vary from period to period due to our sales volume, product prices, product costs, product mix, geographical mix, and change in estimates for warranty liabilities.
Sales and Marketing (“S&M”) Expenses
S&M expenses consist primarily of internal personnel-related costs for marketing, sales, and related support teams, as well as external costs such as professional service fees, trade shows, marketing and sales-related promotional materials, public relations expenses, website operating and maintenance costs. Personnel-related expenses include salaries, benefits, and stock-based compensation expenses.
Research and Development (“R&D”) Expenses
R&D expenses consist primarily of internal and external expenses incurred in connection with our research activities and development programs that include materials costs directly related to product development, testing and evaluation costs, construction costs including labor and transportation of material, overhead related costs and other direct expenses consisting of personnel-related expenses and consulting expenses relating to study of product safety, reliability and development. Personnel-related expenses consist of salaries, benefits, and stock-based compensation expense.
General and Administrative (“G&A”) Expenses
G&A expenses consist of information technology expenses, legal and professional fees, travel costs, and personnel-related expenses for our corporate, executive, finance, and other administrative functions, including expenses for professional and contract services. Personnel-related expenses consist of salaries, benefits, and stock-based compensation expense. To a lesser extent, general and administrative expenses include investor relations costs, insurance costs, rent, office expenses, and maintenance costs.
Provision for Credit Losses
Provision for credit losses represents the expense recognized to account for potential losses on accounts receivable, contract assets, and customer financing receivable due to customer defaults or credit deterioration. This provision reflects management’s estimate of expected credit losses based on historical trends and forward-looking assessments.
Depreciation and Amortization Expense
Depreciation and amortization expense consists of costs associated with property and equipment, and amortization of intangibles. We expect to invest in additional property, equipment, and other assets as we construct and own energy storage systems, which will result in additional depreciation expense in the future.
Loss on Impairment and Sale of Long-Lived Assets
Asset impairment and loss on sale of assets consists of losses associated with the write-down or sale of property and equipment.
Interest Income
Interest income consists of interest income from our money market funds, interest-bearing savings accounts, customer financing receivable, and convertible note receivable.
Impairment of Equity Securities
Impairment of equity securities relates to impairment of the Company’s investment in KORE Power, Inc. (“KORE”).
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Results of Operations
Consolidated Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023
The following table sets forth our results of operations for the periods indicated (amounts in thousands):
Year Ended December 31,
Operating expenses:
Loss on impairment and sale of long-lived assets 336 — 336
Other income (expense):
Impairment of equity securities (11,730) — (11,730)
Revenue
The Company recognized revenue for the product and service categories as follows for the years ended December 31, 2024 and 2023 (amounts in thousands):
Year Ended December 31,
Operation and maintenance services 1,090 —
Software licensing 402 —
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(1) For the year ended December 31, 2023, $0.4 million in revenue from the sale of spare energy system parts has been reclassified from “other” to “sale of energy storage products.”
Revenue for the year ended December 31, 2024 decreased by $295.3 million to $46.2 million compared to $341.5 million for the year ended December 31, 2023.
The decrease in revenue was primarily driven by a decrease in sales of energy storage products, resulting from a reduction in active BESS projects. In 2023, the Company had three active BESS EPC projects that made substantial progress throughout the year. However, in 2024, no BESS EPC projects experienced significant progress. During 2024, the Company completed the delivery of equipment for a single BESS EEQ project.
In 2024, revenue from operation and maintenance services, as well as software licensing, were new revenue streams for the Company. Revenue from two customers accounted for 75% and 19%, respectively, of the Company’s total revenue for the year ended December 31, 2024.
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Cost of Revenue
Cost of revenue for the year ended December 31, 2024 decreased by $284.0 million to $40.0 million compared to $324.0 million for the year ended December 31, 2023.
Cost of revenue decreased due to the reduction in active BESS projects.
Gross Profit and Gross Profit Margin
Gross profit was $6.2 million and gross profit margin was 13.4% for the year ended December 31, 2024, compared to gross profit of $17.5 million and gross profit margin of 5.1% for the year ended December 31, 2023.
Gross profit decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to a decrease in revenue. However, gross profit margin increased over the same period, driven by higher margins on energy storage product sales and the introduction of higher-margin operation and maintenance services and software licensing. The improvements in margins on energy storage product sales was attributable to the Company’s active BESS EPC projects reaching their final stages in 2024, as opposed to earlier stages in 2023, as well as the Company achieving a higher margin on the EEQ contract in 2024 compared to the margins realized on EPC contracts in the prior year.
Selling and Marketing Expenses
S&M expenses decreased by $2.4 million to $15.8 million for the year ended December 31, 2024, compared to $18.2 million for the year ended December 31, 2023. The decrease was primarily attributable to a decrease in personnel-related expenses of $2.1 million and a decrease in marketing and public relation costs of $0.4 million. The decrease in personnel-related expenses was primarily due to a reduction in headcount.
Research and Development Expenses
R&D expenses decreased by $11.1 million to $26.0 million for the year ended December 31, 2024, compared to $37.1 million for the year ended December 31, 2023. The decrease was primarily attributable to a $5.0 million decrease in personnel-related expenses, a $3.9 million decrease in engineering and development costs, and a $2.5 million decrease in software expenses. These decreases in costs were primarily attributable to a decrease in headcount and a focus on cost control measures.
General and Administrative Expenses
G&A expenses decreased by $4.9 million to $63.0 million for the year ended December 31, 2024, compared to $67.9 million for the year ended December 31, 2023. The decrease was primarily attributable to a $4.6 million decrease in personnel-related expenses, a $1.2 million decrease in software expenses, and a $0.7 million decrease in consulting costs. These cost decreases were primarily attributable to a focus on cost control measures and a reduction in headcount. Partially offsetting these cost reductions was a $1.0 million increase in legal and professional fees.
Provision for Credit Losses
Provision for credit losses increased by $29.8 million to $30.0 million for the year ended December 31, 2024, compared to $0.2 million for the year ended December 31, 2023. The increase in provision for credit losses primarily relates the Company’s refundable contribution contract asset and its customer financing receivable. The refundable contribution for $25.0 million was expected to be collected from the customer by the end of 2024, however the customer did not remit the payment. As a result, the Company increased its allowance for credit losses by $24.0 million in 2024 due to the increased risk of non-collection.
The Company also increased its allowance for credit losses by $4.7 million in 2024 related to its customer financing receivable. The customer did not make the first two scheduled installment payments for $1.5 million each that were due in 2024, therefore the Company increased its allowance for credit losses due to the increased risk of non-collection.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $0.2 million to $1.1 million for the year ended December 31, 2024, compared to $0.9 million for the year ended December 31, 2023. The increase is primarily attributable to capitalized software that was placed into service during 2024.
Loss on Impairment and Sale of Long-Lived Assets
For the year ended December 31, 2024, the Company recognized a loss on impairment and sale of long-lived assets of $0.3 million, comprised of $0.4 million in asset impairments and a $0.1 million gain on the sale of operating equipment. The impairment relates to the write-off of leasehold improvements in the Company’s Westlake Village office due to the
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Company relocating its corporate office. The Company did not recognize any gains or losses from impairments or sales of equipment during the year ended December 31, 2023.
Interest Income
Interest income decreased by $2.6 million to $5.5 million for the year ended December 31, 2024, compared to $8.2 million for the year ended December 31, 2023. The decrease in interest income is primarily due to a decrease in interest income from our money market funds.
Impairment of Equity Securities
For the year ended December 31, 2024, the Company recognized $11.7 million in impairment charges on its investment in KORE due to a decline in KORE’s financial performance. There was no such impairment charge in 2023.
Other Income (Expense), Net
Other income (expense), net improved by $0.7 million to other income, net of $0.6 million for the year ended December 31, 2024 compared to other expense, net of $0.2 million for the year ended December 31, 2023. The improvement in other income (expense), net is primarily due to a $1.5 million gain that resulted from the derecognition of a contract liability with a related party. In 2019, the Company received a $1.5 million deposit for a gravity-based energy storage system from a customer that was owned by one of the Company’s primary stockholders. During 2024, the Company concluded it was no longer obligated to provide the customer with the energy system and that the deposit was not refundable. As a result, the Company derecognized the liability and recognized a corresponding gain. There was no such comparable gain in 2023. Partially offsetting this gain was a $1.0 million loss due to the change in the fair value of the Company’s derivative asset - conversion option due to a decrease in the probability of the Company exercising its conversion option in DG Fuels.
Liquidity and Capital Resources
Sources of Liquidity
Since inception, we have financed our net cash used in operating and investing activities primarily through the issuance and sale of equity, and with the proceeds from the reverse recapitalization and private investment in public equity that occurred in 2022.
Furthermore, through Energy Vault’s normal course of business operations, the Company has generated a sales backlog of $660.0 million as of March 17, 2025. We expect our backlog will contribute to the funding of our business in the future, aided by a robust developed pipeline of additional business activity, which we expect to further increase contracted backlog as new agreements are signed. In addition, in order to secure non-cash backed performance bonding and surety as may be required for customers as part of our project EPC agreements, the Company works with Marsh on a global basis to use non-cash backed bonding and surety instruments with top rated insurance firms, with a capability that today stands above $1 billion in capacity toward new projects.
Energy Vault has incurred negative operating cash flows and operating losses in the past and we may incur operating losses in the future. Energy Vault may seek additional capital through combinations of equity and/or debt financings depending on market conditions. If we are required to raise additional funds by issuing equity securities, dilution to stockholders would result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our common stock. The Company has previously announced its intention to raise preferred equity for project-specific financing vehicles that would not be dilutive to common shareholders and is directly tied to the projects themselves.If the Company raises funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing.
Management believes that its cash, cash equivalents, and restricted cash on hand as of the filing date of this Annual Report will be sufficient to fund our operating activities for at least the next twelve months without regard to any cash proceeds we may receive in the future upon the exercise of our private warrants.
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.
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Tax Credit Transfer Commitment
On March 28, 2025, the Company entered into a Tax Credit Transfer Commitment, on behalf of its wholly owned subsidiary companies, with a third-party purchaser pursuant to which the Company agreed to sell certain ITCs generated by the Calistoga Resiliency Center hybrid energy storage system, the BESS in Snyder, Texas (“Cross Trails BESS”), and the microgrid and customer demonstration unit in Snyder, Texas (“Snyder CDU”) that are anticipated to be placed in service in 2025. The Tax Credit Transfer commitment is subject to certain conditions set forth therein, and requires the Company to incur the remaining associated capital expenditures to complete the projects (via internal sources or external sources such as project financing). The third-party purchaser has agreed to purchase on or before December 15, 2025, all the eligible ITCs generated by these projects, in an amount to be finalized subject to final cost segregation reports, which management believes will be approximately $39.9 million, net of fees, across all three projects.
ATM Facility and Equity Purchase Agreement
On November 12, 2024, we entered into a open market sales agreement with Jefferies LLC, as sales agent (the “sales agent”), pursuant to which we may, from time to time, sell shares of our common stock, having an aggregate offering price of up to $50.0 million through the sales agent under an “at-the-market” equity offering program. We may seek, from time to time, to raise additional capital either under the Sales Agreement or otherwise.
On March 31, 2025, we entered into an equity purchase agreement (the “Equity Purchase Agreement”) with an investor (the “Equity Investor”). Pursuant to the Equity Purchase Agreement, the Company has the right at its sole discretion, but not the obligation, to sell to the Equity Investor, and the Equity Investor is obligated to purchase, up to $25.0 million of newly issued shares of the Company’s common stock, from time to time during the term of the Equity Purchase Agreement, subject to certain limitations and conditions. If we don’t terminate the Equity Purchase Agreement on or before May 15, 2025, we will issue the Equity Investor shares of our common stock equivalent to 0.3% of our outstanding common stock as of March 28, 2025 and then have the right to sell shares to the Equity Investor at a market discount. Refer to Note 21 - Subsequent Events for additional details on this agreement.
Short-Term Loan
On March 31, 2025, the Calistoga Resiliency Center, LLC, a wholly-owned indirect subsidiary of the Company (the “Borrower”), entered into a credit agreement with Jefferies Finance LLC, as administrative agent, collateral agent and lender, in an aggregate principal amount of $27.8 million (“Short-Term Loan”), which provides short-term financing while the Borrower pursues a long-term debt financing. The Short-Term Loan matures on April 23, 2025 and bears interest at an annual rate of 9.5% until April 4, 2025 and at an annual rate of 15.5% after April 5, 2025. Interest is payable at maturity. The Borrower has the option to prepay the Short-Term Loan at any time. The Short-Term Loan is secured by an escrow account that will hold the loan proceeds, subject to disbursement upon meeting certain conditions subsequent (the “Escrow Release”). Upon the Escrow Release, the Short-Term Loan would be secured by a pledge of substantially all assets of the Borrower, and an equity pledge in the Borrower. It is currently expected that Eagle Point Credit (the “Investor”) will be funding the final project financing on or about April 4, 2025.
The Short-Term Loan contains affirmative and negative covenants, certain of which become effective upon Escrow Release, including covenants restricting the Borrower’s ability to incur certain liens and indebtedness, enter into certain transactions and merge or consolidate with any other entity or the Company ceasing to own the Borrower, which, in each case, will be subject to certain limitations and exceptions. The Short-Term Loan contains mandatory repayments, representations and warranties and events of default customary for a financing of this nature.
Senior Secured Notes
Subsequent to December 31, 2024, the Calistoga Resiliency Center, LLC, entered into a financing arrangement consisting of the issuance of Senior Secured Notes due April 4, 2032 (the “Senior Notes”). The aggregate principal amount of the Senior Notes to be issued is $27.8 million, with a purchase price of 99.25% of par value. The Senior Notes will be purchased by Eagle Point Credit (the “Investor”), and Jeffries Finance, LLC served as agent for the transaction. The Company expects that the Investor will fund the purchase of the Senior Notes on or about April 4, 2025, by purchasing the Short-Term Loan from Jefferies and converting the Short-Term Loan principal into Senior Notes.
The Senior Notes will bear interest at a rate of 12.5% per annum, until the earlier of (i) the Company’s receipt of any tax credit transfer proceeds and (ii) December 31, 2025, and thereafter at a rate of 9.50% per annum. The Senior Notes will be senior secured obligations of Calistoga Resiliency Center, LLC, and will be secured by a first-priority pledge of all assets and equity interests in the Borrower. The Senior Notes contain affirmative and negative covenants, including minimum cash reserves and a minimum debt service coverage ratio.
The Senior Notes will amortize over their term, with scheduled principal and interest payments occurring on February 28 and August 31 of each year. The amortization schedule includes an initial principal payment of $12.9 million on August
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31, 2025, followed by periodic payments as detailed in the financing agreement. A final balloon payment of $7.0 million is due on April 4, 2032.
The Company may, at its option, redeem the Senior Notes in whole or in part prior to maturity, subject to specified call protection provisions and prepayment premiums as outlined in the agreement. In the event of a change of control, the Company may be required to offer to repurchase the Senior Notes at a specified price.
Cash, Cash Equivalents, and Restricted Cash
The following tables summarizes our cash, cash equivalents, and restricted cash balances as of December 31, 2024 and 2023 (amounts in thousands):
December 31,
Total cash, cash equivalents, and restricted cash $ 30,073 $ 145,555
Contractual Obligations
Our principal commitments as of December 31, 2024 consisted primarily of obligations under operating leases, finance leases, warranty liabilities, a deferred pension, and issued purchase orders. Our non-cancellable purchase obligations as of December 31, 2024 totaled $1.9 million.
Cash Flows
The following table summarizes cash flows from operating, investing, and financing activities for the periods indicated (amounts in thousands):
Year Ended December 31,
Net cash used in operating activities $ (55,860) $ (92,655)
Net cash used in investing activities (58,736) (42,542)
Net cash used in financing activities (252) (5,482)
Effects of exchange rate changes on cash (634) 52
Operating Activities
For the years ended December 31, 2024 and 2023, cash used in operating activities totaled $55.9 million and $92.7 million, respectively.
Cash used in operating activities during 2024 primarily consisted of a $135.8 million net loss, adjusted for non-cash items of $81.7 million. Significant non-cash items include $38.7 million in stock-based compensation expense, $11.7 million in impairment of equity securities, $30.0 million in bad debt expense, $1.4 million in non-cash interest income, $1.1 million in depreciation and amortization expense, and a $1.0 million loss due to the change in fair value of a derivative asset. Net cash used in operating activities declined during 2024 compared to 2023 primarily due to the timing of customer collections and vendor payments.
Investing Activities
For the years ended December 31, 2024 and 2023, cash used in investing activities totaled $58.7 million and $42.5 million, respectively.
Cash used in investing activities for the year ended December 31, 2024 primarily consisted of $58.9 million for the purchase of property and equipment, primarily related to the construction of a hybrid energy storage system in Calistoga, California, Cross Trails BESS, and the Snyder CDU. The increase in cash used in investing activities during 2024 compared to 2023 was due to an increase in the purchase of property and equipment.
Financing Activities
During the years ended December 31, 2024 and 2023, cash used in financing activities totaled $0.3 million and $5.5 million, respectively.
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For the year ended December 31, 2024, cash used in financing activities was primarily attributable to $2.4 million in repayments on insurance premium financings, $0.4 million in tax payments related to the net settlement of equity awards, and $0.2 million in finance lease payments, partially offset by $2.7 million in proceeds from insurance premium financings. The decrease in net cash used in financing activities during 2024 compared to 2022 was primarily due to a decrease in tax payments related to the net settlement of equity awards.
Non-GAAP Financial Measures
To complement our consolidated statements of operations and comprehensive loss, 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.
Beginning September 30, 2024, provision for credit losses has been treated as a non-GAAP adjustment. This change reflects management’s view that this item does not accurately reflect ongoing operational performance. Prior periods have been adjusted to conform to this new presentation.
The following table provides a reconciliation from GAAP S&M expenses to non-GAAP adjusted S&M expenses (amounts in thousands):
Year Ended December 31,
Non-GAAP adjustments:
Stock-based compensation expense 6,162 7,143
Reorganization expenses 288 84
Adjusted S&M expenses (non-GAAP) $ 9,389 $ 10,983
The following table provides a reconciliation from GAAP R&D expenses to non-GAAP adjusted R&D expenses (amounts in thousands):
Year Ended December 31,
Non-GAAP adjustments:
Reorganization expenses 523 182
The following table provides a reconciliation from GAAP G&A expenses to non-GAAP adjusted G&A expenses (amounts in thousands):
Year Ended December 31,
Non-GAAP adjustments:
Reorganization expenses 748 318
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The following table provides a reconciliation from GAAP operating expenses to non-GAAP operating expenses (amounts in thousands):
Year Ended December 31,
Non-GAAP adjustments:
Depreciation and amortization 1,058 893
Loss on impairment and sale of long-lived assets 336 —
Adjusted operating expenses (non-GAAP) $ 64,541 $ 79,543
The following table provides a reconciliation from GAAP net loss to non-GAAP adjusted EBITDA, with net loss being the most directly comparable GAAP measure (amounts in thousands):
Year Ended December 31,
Non-GAAP adjustments:
Provision for income taxes 67 (349)
Depreciation and amortization 1,058 893
Impairment of equity securities 11,730 —
Gain on derecognition of contract liability (1,500) —
Loss on impairment and sale of long-lived assets 336 —
Change in fair value of derivative asset — conversion option 1,025 —
Foreign exchange losses 300 222
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 items excluded from adjusted EBITDA are excluded in order to better reflect our continuing operations.
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.
Our adjusted EBITDA measure has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
•it does not reflect our cash expenditures, future requirements for capital expenditures, or contractual commitments;
•it does not reflect changes in, or cash requirements for, our working capital needs;
•it does not reflect stock-based compensation, which is an ongoing expense;
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•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and our adjusted EBITDA measure does not reflect any cash requirements for such replacements;
•it is not adjusted for all non-cash income or expense items that are reflected in our consolidated statements of cash flows;
•it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;
•it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and
•other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to use to meet our obligations. You should compensate for these limitations by relying primarily on our GAAP results and using adjusted EBITDA only supplementally.
Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity with GAAP. In preparing our financial statements, we make assumptions, judgments, and estimates based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and conditions.
For a summary of significant accounting policies, refer to Note 2 - Summary of Significant Accounting Policies of our audited consolidated financial statements included in this Annual Report on Form 10-K.
Revenue
The Company recognizes revenue over time for EPC contracts and technical services in EEQ contracts as a result of the continuous transfer of control of the products and services to the customer. The Company utilizes the percentage of completion method when recognizing revenue over time and percentage of completion is based on costs incurred as a percentage of total estimated contract costs. Since revenue recognition for these performance obligations depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profits are subject to revisions as the performance obligations progresses to completion. The cumulative effects of revisions of estimated total contract costs and revenues, together with any contract reserves which may be deemed appropriate, are recorded in the period in which the facts and changes in circumstances become known. Due to uncertainties inherent in the estimation process, it is reasonably possible that these estimates will be revised in a different period.
The Company’s contracts generally provide customers with a right to liquidated damages (“LDs”) against Energy Vault in the event specified milestones are not met on time, or certain performance metrics are not met upon or after the substantial completion date. LDs are accounted for as variable consideration, and the contract price is reduced by the expected penalty or LD amount when recognizing revenue. Variable consideration is included in the transaction price only to the extent that it is improbable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty is resolved. Estimating variable consideration requires certain estimates and assumptions, including whether and by how much a project will be delayed and how a project will perform during the performance guarantee period. The existence and measurement of liquidated damages may also be impacted by the Company’s judgment about the probability of favorable outcomes of customer disputes involving whether certain events qualify as force majeure or the reason for the events that caused project delays. Variable consideration for LDs is estimated using the expected value of the consideration to be received.
Allowance for Credit Losses
The Company encounters credit loss risks associated with the collection of accounts receivable, contract assets, and customer financing receivable. The accounting estimates related to the Company’s allowance for credit losses is a critical accounting estimate because the underlying assumptions used for the allowance can change from time to time and credit losses could potentially have a material impact on our results of operations.
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Warranty Liabilities
The accounting for warranty liabilities requires us to make assumptions and judgments, and to the extent actual results differ from original estimates, adjustments to recorded liabilities may be required. The key inputs and assumptions used in calculating estimated warranty liabilities are reviewed by management each reporting period. The Company may make additional adjustments to the estimated warranty liability based on a comparison of actual warranty results to expected results for significant differences or based on performance trends or other qualitative factors. If actual failure rates or replacement costs differ from our estimates in future periods, changes to these estimates may be required, resulting in increases or decreases in the estimated warranty liability, which may be material.
Stock-Based Compensation
Stock-based compensation for RSUs that vest based on market conditions is estimated on the date of the grant using a Monte Carlo simulation model. The Monte Carlo simulation model requires the input of highly subjective assumptions, including the expected term of the award, the expected volatility of the Company’s common stock, risk-free interest rates, and the expected dividend yield of the Company.
Emerging Growth Company Accounting Election
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and have irrevocably elected to take advantage of the benefits of this extended transition period for new or revised standards. We are expected to remain an emerging growth company through the end of 2026 and expect to continue to take advantage of the benefits of the extended transition period. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies because of the potential differences in accounting standards used.
Recently Adopted and Issued Accounting Pronouncements
Recently issued and adopted/unadopted accounting pronouncements are described in Note 2 of the consolidated financial statements included elsewhere in this Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates.
Foreign Currency Risk
The majority of our contracts with customers are denominated in U.S. dollars or the Australian dollar, and certain of our definitive agreements could be denominated in other currencies, including the Euro, the Swiss franc, the South African rand, the Brazilian real, and the Saudi riyal. A strengthening of the U.S. dollar could increase the cost of our solutions to our international customers, which could adversely affect our business and results of operations.
In addition, a portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, such as the euro, the Swiss franc, and the Australian dollar, and are subject to fluctuations due to changes in foreign currency exchange rates. If we increase our exposure to foreign currencies and are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected.
Inflation Risk
Our operations could be adversely impacted by inflation, primarily from higher material, labor, and construction costs. While it is difficult to measure the impact of inflation for such estimates accurately, we believe, if our costs are affected due to significant inflationary pressures, we may not be able to fully offset higher costs through price increases or other corrective measures, which may adversely affect our business, financial condition, and results of operations.
Credit Risk
Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to us. Our customers include the counterparties for the sale of our energy storage products and solutions and the licensees of our IP. A loss of one or more of our significant customers, their inability to perform under their contracts, or their default in payment could harm our business and negatively impact revenue, results of operations, and cash flows. Credit policies have been approved and implemented to assess our existing and potential customers with the objective of mitigating credit losses. These policies establish guidelines, controls, and credit limits to manage credit risk within approved tolerances by mandating an appropriate evaluation of the financial condition of existing and potential customers, monitoring agency
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credit ratings, and by implementing credit practices that limit exposure according to the risk profiles of the counterparties. In addition, customers are required to make milestone payments based on their project’s progress. We may also, at times, require letters of credit, parent guarantees, or cash collateral when deemed necessary.
Our overall exposure may be affected positively or negatively by macroeconomic or regulatory changes that may impact our counterparties. We continuously monitor the creditworthiness of all our customers.
Commodity Price Risk
We are subject to risk from fluctuating market prices of certain commodity raw materials, including cement, steel, aluminum, and lithium, that are used in the components that we purchase from our suppliers and then as inputs to our products. Prices of these raw materials may be affected by supply restrictions or other logistic costs market factors from time to time. We do not enter into hedging arrangements to mitigate commodity risk. Significant price changes for these raw materials could reduce our operating margins if suppliers increase component prices and we are unable to recover such increases from our customers and could harm our business, financial condition, and results of operations.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index of Consolidated Financial Statements for the fiscal years ended December 31, 2024 and 2023.
Contents Page
Consolidated Balance Sheets as of December 31, 2024 and 2023 65
Notes to Consolidated Financial Statements 69
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Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Energy Vault Holdings, Inc.
Westlake Village, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Energy Vault Holdings, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2020.
New York, New York
March 31, 2025
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ENERGY VAULT HOLDINGS, INC.
Consolidated Balance Sheets
(In thousands, except par value)
December 31,
Assets
Current Assets
Restricted cash, current portion 990 35,632
Investments, current portion 2,933 —
Prepaid expenses and other current assets 3,595 4,520
Assets held for sale — 6,111
Operating lease right-of-use assets, net 1,206 1,700
Restricted cash, long-term portion 1,992 —
Liabilities and Stockholders’ Equity
Current Liabilities
Contract liabilities, current portion 8,938 4,923
Lease liabilities, current portion 499 724
Contract liabilities, long-term portion — 1,500
Other long-term liabilities 934 2,115
Commitments and contingencies (Note 20)
Stockholders’ Equity
Preferred stock, $0.0001 par value; 5,000 shares authorized, none issued — —
Accumulated other comprehensive loss (1,896) (1,421)
Non-controlling interest (63) —
Total Liabilities and Stockholders’ Equity $ 183,889 $ 340,753
The accompanying notes are an integral part of these consolidated financial statements.
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ENERGY VAULT HOLDINGS, INC.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share data)
Year Ended December 31,
Operating expenses:
Depreciation and amortization 1,058 893
Loss on impairment and sale of long-lived assets 336 —
Other income (expense):
Interest expense (123) (35)
Impairment of equity securities (11,730) —
Other income (expense), net 566 (173)
Provision (benefit) for income taxes 67 (349)
Net loss attributable to non-controlling interest (63) —
Net loss attributable to Energy Vault Holdings, Inc. $ (135,750) $ (98,443)
Net loss per share — basic and diluted $ (0.91) $ (0.69)
Weighted average shares outstanding — basic and diluted 149,846 142,851
Other comprehensive loss — net of tax
Actuarial loss on pension $ (640) $ (519)
Foreign currency translation gain (loss) 165 (14)
The accompanying notes are an integral part of these consolidated financial statements.
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ENERGY VAULT HOLDINGS, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands)
Shares Amount
Actuarial loss on pension — — — — (519) — (519)
Foreign currency translation loss — — — — (14) — (14)
Exercise of stock options 52 — 42 — — — 42
Vesting of RSUs, net of shares withheld for payroll taxes 6,577 — — — — — —
Actuarial loss on pension — — — — (640) — (640)
Foreign currency translation gain — — — — 165 — 165
The accompanying notes are an integral part of these consolidated financial statements.
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ENERGY VAULT HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
Cash Flows From Operating Activities
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense 1,058 893
Loss on impairment and sale of long-lived assets 336 —
Impairment of equity securities 11,730 —
Change in fair value of derivative asset 1,025 —
Foreign exchange losses 300 222
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 7,953 2,851
Accounts payable and accrued expenses (66,770) 25,508
Other long-term liabilities (1,349) (444)
Net cash used in operating activities (55,860) (92,655)
Cash Flows From Investing Activities
Proceeds from sale of property and equipment 447 —
Purchase of property and equipment (58,853) (30,431)
Purchase of note receivable (330) —
Purchase of property and equipment held for sale — (6,111)
Purchase of equity securities — (6,000)
Net cash used in investing activities (58,736) (42,542)
Cash Flows From Financing Activities
Proceeds from exercise of stock options 42 224
Proceeds from insurance premium financing 2,745 1,250
Payment of taxes related to net settlement of equity awards (408) (6,017)
Repayment of insurance premium financings (2,446) (892)
Payment of finance lease obligations (185) (47)
Net cash used in financing activities (252) (5,482)
Net decrease in cash, cash equivalents, and restricted cash (115,482) (140,627)
Cash, cash equivalents, and restricted cash – end of the period 30,073 145,555
Less: restricted cash at end of period 2,982 35,632
Cash and cash equivalents - end of period $ 27,091 $ 109,923
ENERGY VAULT HOLDINGS, INC.
Consolidated Statements of Cash Flows (Continued)
(In thousands)
Year Ended December 31,
Supplemental Disclosures of Cash Flow Information:
Income taxes paid $ 52 $ 46
Cash paid for interest 123 35
Supplemental Disclosures of Non-Cash Investing and Financing Information:
Actuarial loss on pension (640) (519)
Assets acquired on finance lease 60 108
The accompanying notes are an integral part of these consolidated financial statements.
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ENERGY VAULT HOLDINGS, INC.
Notes to Consolidated Financial Statements
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Energy Vault Holdings, Inc., which together with its subsidiaries is referred to herein as “Energy Vault” or the “Company”, develops and deploys utility-scale energy storage solutions designed to aid in the global transition to a clean energy future. The Company’s mission is to provide energy storage solutions to accelerate the global transition to renewable energy.
The Company primarily relies on two models for project delivery, which are (i) EPC delivery and (ii) EEQ delivery. Under the EPC model, we generally rely on third-party EPC firms to construct our storage systems, under our supervision with dedicated teams tasked with project management. Under the EEQ model, we are responsible for the delivery of the equipment we provide, as well as resolving issues within our scope of supply.
Our current business model options include:
•Selling energy storage products to third-parties, including constructing and delivering fully operational energy storage systems under an EPC model and delivering energy storage equipment under an EEQ model;
•Building, operating, and holding energy storage systems as equity (co-) sponsor that may provide recurring revenue in the future;
•Taking a minority stake in an energy storage project where we provide EPC, EEQ, or long-term services, allowing us to participate in the project’s long-term economics while strengthening alignment with strategic customers;
•Recurring software revenue through licensing software for asset management and use case applications;
•Recurring service revenue through long term service agreements, and;
•IP licenses and royalties associated with our energy storage technologies that may provide recurring revenues in the future.
Energy Vault was originally incorporated under the name Novus Capital Corporation II as a special purpose acquisition company in the state of Delaware in September 2020 with the purpose of effecting a merger with one or more operating businesses. On September 8, 2021, Novus announced that it had entered into a merger agreement with Legacy Energy Vault that would result in a merger (the “Merger”). Upon the closing of the Merger on February 11, 2022, Novus was immediately renamed to “Energy Vault Holdings, Inc.” The Merger between Novus and Legacy Energy Vault was accounted for as a reverse recapitalization.
Throughout the notes to the consolidated financial statements, unless otherwise noted, the “Company,” “we,” “us,” or “our” and similar terms refer to Legacy Energy Vault and its subsidiaries prior to the consummation of the Merger, and Energy Vault and its subsidiaries after the consummation of the Merger.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared on an accrual basis of accounting in accordance with GAAP and applicable rules and regulations of the SEC regarding financial reporting.
Principles of Consolidation
These consolidated financial statements include Energy Vault Holdings, Inc., its wholly owned subsidiaries, and a majority owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or
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ENERGY VAULT HOLDINGS, INC.
Notes to Consolidated Financial Statements
revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s consolidated financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the consolidated financial statements, in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company evaluates its assumptions on an ongoing basis. The Company’s management believes that the estimates, judgment, and assumptions used are reasonable based upon information available at the time they are made. Estimates made by management include, among others, revenue recognition, provision for credit losses, warranty accruals, and stock-based compensation. Due to the inherent uncertainty involved in making assumptions and estimates, changes in circumstances could result in actual results differing from those estimates, and such differences could be material to the Company’s consolidated financial condition and results of operations.
Liquidity
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the normal course of business.
Since our inception in October 2017, we have incurred significant net losses and have used significant cash in our business. As of December 31, 2024 and 2023, we had accumulated deficits of $383.8 million and $248.1 million, respectively, and net losses of $135.8 million and $98.4 million, respectively, for the years ended December 31, 2024 and 2023. We anticipate that we will incur net losses for the foreseeable future and there is no guarantee that we will achieve or maintain profitability.
The assessment of liquidity requires management to make estimates of future activity and judgments about whether the Company can meet its obligations and have adequate liquidity to operate. Subsequent to December 31, 2024, the Company took various actions to enhance its liquidity position, which included:
•Executing Calistoga Resiliency Center hybrid energy storage system financing arrangements for an aggregate principal amount of $27.8 million.
•Executing a Tax Credit Transfer Commitment with a third-party purchaser pursuant to which the Company agreed to sell the ITC generated by the Calistoga Resiliency Center hybrid energy storage system associated with above project financing. The agreement also allows the Company to sell the ITCs for the Cross Trails BESS and Snyder CDU microgrid, pending project financing and completion of the construction capital expenditures.
•Executing an Equity Purchase Agreement with an Equity Investor, in which the Company has the right at its sole discretion, but not the obligation, to sell to the Equity Investor, and the Equity Investor is obligated to purchase, up to $25.0 million of newly issued shares of the Company’s common stock.
Management believes that its cash, cash equivalents, and restricted cash on hand as of the filing date of this Annual Report, along with the actions taken subsequent to December 31, 2024, will be sufficient to fund our operating activities for at least the next twelve months. Refer to Note 21 - Subsequent Events for further details on the transactions executed subsequent to December 31, 2024.
Segment Reporting
The Company reports its operating results and financial information in one operating and reportable segment. Our chief operating decision maker (“CODM”), which is our chief executive officer, reviews our operating results on a consolidated basis and uses that consolidated financial information to make operating decisions, assess financial performance, and allocate resources.
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Notes to Consolidated Financial Statements
Concentration of Credit and Other Risks
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, and customer financings receivable.
Risks associated with cash and cash equivalents and restricted cash are mitigated by banking with creditworthy institutions. Such balances with any one institution may, at times, be in excess of federally insured amounts.
As of December 31, 2024, one customer accounted for 100% of accounts receivable. As of December 31, 2023, one customer accounted for 92% of accounts receivable.
As of December 31, 2024 and 2023, one customer accounted for 100% of the customer financing receivable.
Revenue from two customers accounted for 75% and 19% of total revenue, respectively, for the year ended December 31, 2024 and revenue from three customers accounted for 64%, 22%, and 13% of total revenue, respectively, for the year ended December 31, 2023.
Foreign Currency
Assets and liabilities denominated in a foreign currency are translated into U.S dollars using the exchange rates in effect at the balance sheet date. Revenue and expense accounts are translated at the average exchange rates during the periods. The impact of exchange rate fluctuations from translation of assets and liabilities is included in accumulated other comprehensive loss, a component of stockholders’ equity. As of December 31, 2024, accumulated other comprehensive loss included a $0.1 million loss related to currency translation adjustments. As of December 31, 2023, accumulated other comprehensive loss included a $0.3 million loss related to currency translation adjustments.
Gains and losses resulting from foreign currency transactions are included in other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss.
Fair Value Measurements
ASC 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level I — Inputs which include quoted prices in active markets for identical assets and liabilities.
Level II — Inputs other than Level I that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level III — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Revenue Recognition
The Company recognizes revenue from contracts with customers in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized when, or as, control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for the goods and services transferred. The Company determines revenue recognition through the following steps:
(1)Identification of the contract, or contracts, with a customer.
(2)Identification of the performance obligations in the contract.
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Notes to Consolidated Financial Statements
(3)Determination of the transaction price.
(4)Allocation of the transaction price to the performance obligations in the contract.
(5)Recognition of revenue when, or as, a performance obligation is satisfied.
Once a contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying good or service relative to the option exercise price.
The Company assesses whether each promised good or service is distinct for the purposes of identifying performance obligations in the contract. This assessment involves subjective determination and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered to be distinct provided that: (i) the customer can benefit from the good or service either on its own or together with the other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.
The transaction price is determined and allocated to the identified performance obligations in proportion to their stand-alone selling prices (“SSP”) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs.
In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. When a contract provides the customer with a significant benefit of financing, the Company recognizes a customer financing receivable and recognizes interest income separate from the revenue recognized on the contracts with customers. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment and the transfer of the promised goods or services will be one year or less.
The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time. Over time revenue recognition is based on the use of an output or input method.
Sale of Energy Storage Products: The Company sells its energy storage products to utility companies and independent power producers. The Company enters into (i) engineering, procurement, and construction (“EPC”) contracts to design, construct, install, and transfer fully operational energy storage systems and (ii) engineered equipment (“EEQ”) contracts to design and deliver energy storage equipment. Each storage project is customized depending on the customer’s energy storage needs.
Customer payments are due upon meeting certain milestones that are consistent with contract-specific phases of a project. The Company determines the transaction price based on the consideration expected to be received, which includes estimates of liquidated damages or other variable consideration. Generally, each EPC contract contains one performance obligation to design, construct, install, and deliver a fully operational energy storage system. Generally each EEQ contract contains multiple performance obligations, including separate performance obligations (i) to supply equipment and (ii) to provide specialized technical services. Multiple contracts entered into with the same customer and near the same time are combined in accordance with ASC 606. In these situations, the contract prices are aggregated and then allocated to each performance obligation based upon their relative stand-alone selling price.
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Notes to Consolidated Financial Statements
For EPC contracts, the Company recognizes revenue over time as a result of the continuous transfer of control of its products to the customer. The continuous transfer of control to the customer is supported by clauses in the contracts that provide enforceable rights to payment of the transaction price associated with work performed to date for products that do not have an alternative use to the Company and/or the project is built on the customer’s land that is under the customer’s control. For equipment sales in EEQ contracts, the Company recognizes revenue at a point in time, which corresponds to delivery of the equipment to the customer. For technical services provided in EEQ contracts, the Company recognizes revenue over time as the Company performs the required services.
Revenue for performance obligations satisfied over time is recognized using the percentage of completion method based on cost incurred as a percentage of total estimated contract costs. Contract costs include all direct materials and labor costs related to contract performance. Pre-contract costs with no future benefit are expensed in the period in which they are incurred. Since the revenue recognition of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses to completion. The cumulative effects of revisions of estimated total contract costs and revenues, together with any contract reserves which may be deemed appropriate, are recorded in the period in which the facts and changes in circumstances become known. Due to uncertainties inherent in the estimation process, it is reasonably possible that these estimates will be revised in a different period. When a loss is forecasted for a contract, the full amount of the anticipated loss is recognized in the period in which it is determined that a loss will incur.
The Company’s contracts generally provide customers the right to liquidated damages (“LDs”) against Energy Vault in the event specified milestones are not met on time, or certain performance metrics are not met upon or after the substantial completion date. LDs are accounted for as variable consideration, and the contract price is reduced by the expected penalty or LD amount when recognizing revenue. Variable consideration is included in the transaction price only to the extent that it is improbable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty is resolved. Estimating variable consideration requires certain estimates and assumptions, including whether and by how much a project will be delayed. The existence and measurement of liquidated damages may also be impacted by the Company’s judgment about the probability of favorable outcomes of customer disputes involving whether certain events qualify as force majeure or the reason for the events that caused project delays. Variable consideration for LDs is estimated using the expected value of the consideration to be received. If Energy Vault has a claim against the customer for an amount not specified in the contract, such claim is recognized as an increase to the contract price when it is legally enforceable, which is usually upon signing a respective change order or equivalent document confirming the claim acceptance by the customer.
The Company offers limited warranties on its energy storage products which provide the customer assurance that the products will function as the parties intended because it complies with agreed-upon specifications and are free from defects. These assurance-type warranties are not treated as a separate revenue performance obligation and are accounted for as guarantees under GAAP.
Own and Operate Energy Storage Projects:To date, the Company has not recognized any revenue from its owned energy storage systems. The Company has entered into tolling agreements in which the Company will sell the energy produced by its energy storage systems. These arrangements are expected to be accounted for under ASC 842, Leases, and accounting recognition does not begin until an energy storage system is made available to a customer. This method of revenue recognition will be finalized upon the commencement of one of the Company’s owned energy storage projects.
Software Licensing:The Company licenses its energy management software solutions to customers. Software licensing customers do not receive legal title or ownership of the software. Customers receive access to the software platform and related support services as part of a software licensing contract. We consider these obligations to be a series of distinct services that comprise a single performance obligation because they are substantially the same and have the same pattern of transfer. Revenue is recognized over time on a straight-line basis over the term of the contract.
Long-Term Service Arrangements: The Company enters into long-term service arrangements to provide operation and maintenance services to customer-owned energy storage systems. The Company accounts for this service as a separate performance obligation from the sale of energy storage products. Revenue is recognized over time on a straight-line basis over the term of the contract. The Company believes using a time-based method to measure progress is appropriate as the performance obligation is satisfied evenly over the term of the services.
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Notes to Consolidated Financial Statements
Licensing of IP:The Company enters into licensing agreements of its IP that are within the scope of ASC 606. The terms of such licensing agreements include the license of functional IP, given the functionality of the IP is not expected to change substantially as a result of the licensor’s ongoing activities. The transaction price allocated to the licensing of IP is recognized as revenue at a point in time when the licensed IP is made available for the customer’s use and benefit. Certain licensing agreements contain a significant financing component due to the customer having extended payment terms. The amounts due from customers under extended payment terms are included in the line item, customer financing receivable, on the consolidated balance sheets.
Royalty Revenue:In connection with entering into IP licensing agreements, the Company also enters into royalty agreements whereby the customer agrees to pay the Company a percentage of the customer’s future sales revenue that is generated by using the Company’s IP. The Company has not recognized any royalty revenue to date, but will recognize royalty revenue at the point in time when the customer’s sales occur.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less to be cash equivalents. At December 31, 2024, the Company maintained investments in money market accounts totaling $9.9 million, including $9.5 million in U.S. government money market funds. At December 31, 2023, the Company maintained money market funds totaling $98.4 million, including $98.0 million in U.S. government money market funds.
Restricted cash as of December 31, 2024 and 2023 primarily consisted of cash held by banks as collateral for the Company’s letters of credit.
Accounts Receivable
Accounts receivable represents amounts that have an unconditional right to consideration, have been billed to customers, and do not bear interest. Receivables are carried at the original invoiced amount, less an allowance for any potential uncollectible amounts.
Customer Financing Receivable
Customer financing receivable includes amounts due from a customer related to a licensing agreement under extended payment terms which contains a significant financing component. An interest rate is not stated in this agreement and is imputed using the effective interest method when recognizing interest income. The imputed interest rate on the note is 8.5%. Interest income on the customer financing receivable was $0.8 million and $0.9 million for the years ended December 31, 2024 and 2023, respectively.
Effective December 31, 2024, the Company placed the customer financing receivable on non-accrual status and has discontinued the accrual of future interest income. The Company placed the customer financing receivable in non-accrual status because the customer did not make its first two installment payments in 2024, and both installments are more than 90 days past due as of December 31, 2024.
The amortized cost basis for the Company’s customer financing receivable was $11.5 million and $10.7 million as of December 31, 2024 and 2023, respectively.
Allowance for Credit Losses
The Company estimates expected uncollectible amounts related to its accounts receivable, customer financing receivable, and contract asset balances as of the end of each reporting period, and presents those financial asset balances net of an allowance for expected credit losses in the consolidated balance sheets. Due to the Company’s limited operating history, the Company generally utilizes a probability-of-default (“PD”) and loss-given-default (“LGD”) methodology to calculate the allowance for credit losses for each customer by type of financial asset. The Company derives its PD and LGD rates using historical rates for corporate bonds as published by Moody’s. The Company uses PD and LGD rates that correspond to the customer’s credit rating and period of time in which the financial asset is expected to remain outstanding.
For significantly past due receivables, such as the customer financing receivable and refundable contribution (defined in Note 3), the Company determines specific allowances for each receivable.
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Notes to Consolidated Financial Statements
Inventory
Inventory consists of equipment and spare parts, which are used in ongoing battery storage projects for sale. Inventory is stated at the lower of cost or net realizable value with cost being determined by the specific identification method. Costs include the cost of purchase and other costs incurred in bringing the inventories to their present location and condition. The Company periodically reviews its inventory for potential obsolescence and write down of its inventory, as appropriate, to net realizable value based on its assessment of market conditions.
Assets held for sale
The Company classifies assets to be disposed of as held for sale in the period in which they are available for sale in their present condition and when the sale is probable and expected to be completed within one year. Assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell. Further, the Company does not record depreciation and amortization expense on assets that are classified as held for sale.
Property and Equipment, Net
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to expense as incurred. When assets are retired or sold, the cost and related accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected in operating expenses in the period realized.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, primarily comprised of property and equipment, intangible assets, and operating right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future undiscounted net cash flows which the assets are expected to generate. If the carrying value of the assets exceeds the sum of the estimated future cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceed their fair value.
Intangible Assets
The Company’s intangible assets consist of software development costs related to software to be sold or leased externally. These development costs are capitalized upon the establishment of technological feasibility for a product in accordance with ASC 985-20, Software - Costs of Software to be Sold, Leased, or Marketed. Amortization of capitalized software costs begins at the time that each software product becomes available for general release to customers. Once a software application is available for general release and is placed in service, the Company amortizes the capitalized costs on a product basis by the greater of the straight-line method over the estimated economic life of the product, or the ratio that current gross revenues for a product bear to the total current and anticipated future gross revenues for that product. The useful life of our external-use software development costs is generally expected to be 5 years.
Investment in Equity Securities
During 2022 and 2023, the Company made a strategic investment and purchased equity securities in KORE, a U.S. manufacturer of battery cells and modules. The Company’s ownership in KORE does not provide the Company with the ability to exercise significant influence. These equity securities do not have a readily determinable fair value and are recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings. The carrying value of the Company’s investment in equity securities is included in the line item, investments, long term portion, in the consolidated balance sheets.
Leases
The Company determines if a contract contains a lease at its inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
ROU assets are classified as either operating or finance leases. Upon commencement of the lease, a ROU asset and corresponding lease liability are recognized for all operating and finance leases. The Company has elected the short-term
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Notes to Consolidated Financial Statements
lease exemption, which does not require a ROU asset or lease liability to be recognized when the lease term is 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
Upon commencement of the lease, ROU assets are recognized based on the initial measurement of the lease liability and adjusted for any lease payments made before commencement date of the lease, less any lease incentives and including any initial direct costs incurred. Lease liabilities are initially measured at the present value of future minimum lease payments over the lease term.
The discount rate used to determine the present value is the rate implicit in the lease unless that rate cannot be determined, in which case Company’s incremental borrowing rate is used, which is based on the estimated interest rate for collateralized borrowing over a similar term of the lease at commencement date.
Rights to extend or terminate a lease are included in the lease term when there is reasonable certainty the right will be exercised. Factors used to assess reasonable certainty of rights to extend or terminate a lease include current and forecasted lease improvement plans, anticipated changes in development strategies, historical practice in extending similar contracts and current market conditions.
Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease ROU assets are amortized on a straight-line basis over the lesser of the lease term or the estimated useful life of the leased asset. Amortization of finance lease ROU assets is included in depreciation and amortization.
Operating lease ROU assets are recognized on the consolidated balance sheets in the line item, operating lease right-of-use assets, and finance lease ROU assets are recognized on the consolidated balance sheets within the line item, property and equipment, net.
Defined Benefit Pension Obligation
The Company’s wholly owned subsidiary in Switzerland has a defined benefit pension obligation covering retirement and other long-term benefits of the local employees. Accrued pension costs are developed using actuarial principles and assumptions which consider a number of factors, including estimates for the discount rate, expected long-term rate of return on assets and mortality. Changes in these estimates would impact the amounts that the Company records in the consolidated financial statements.
Warrants
The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the consolidated balance sheets. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in the Company’s consolidated statements of operations and comprehensive loss. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in-capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss.
Earn-Out Shares
In connection with the Merger, eligible Legacy Energy Vault stockholders immediately prior to the Closing, have the contingent right to receive an aggregate of 9.0 million shares of the Company’s common stock (“Earn-Out Shares”) upon the Company achieving each Earn-Out Triggering Event (defined below) during the period beginning on the 90th day following the closing of the Merger and ending on the third anniversary of such date. An “Earn-Out Triggering Event” means the date on which the closing price of the Company’s common stock quoted on the NYSE is greater than or equal to certain specified prices for any 20 trading days within a 30 consecutive day trading period.
The Earn-Out Shares were recognized at fair value upon the closing of the Merger and classified in stockholders’ equity. Because the Merger was accounted for as a reverse recapitalization, the issuance of the Earn-Out Shares was treated as a deemed dividend and since the Company does not have retained earnings, the issuance was recorded within additional-paid-in capital (“APIC”) and had a net nil impact on APIC.
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Notes to Consolidated Financial Statements
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development costs consist of salaries and other personnel related expenses, engineering expenses, product development costs and facility costs.
Advertising Costs
Advertising costs are expensed as incurred and are reflected in the line item, sales and marketing, in the consolidated statements of operations and comprehensive loss. Advertising expenses were $0.2 million and $0.5 million for the years ended December 31, 2024 and 2023, respectively.
Stock-Based Compensation
The Company issues stock-based compensation awards to employees, directors, and non-employees in the form of stock options and restricted stock units (“RSUs”). The Company measures and recognizes compensation expense for stock-based awards based on the award’s fair value on the date of the grant. The Company accounts for forfeitures of stock-based awards when they occur. The fair value of RSUs that vest based on service conditions is measured using the fair value of the Company’s common stock on the date of the grant. The fair value of RSUs that vest based on market conditions is measured using a Monte Carlo simulation model on the date of the grant. The fair value of stock options that vest based on service conditions is measured using the Black-Scholes option pricing model on the date of the grant. The Monte Carlo simulation model and the Black-Scholes option pricing model require the input of highly subjective assumptions, including the fair value of the Company’s common stock, the expected term of the award, the expected volatility of the Company’s common stock, risk-free interest rates, and the expected dividend yield of the Company’s common stock. This assumption used to determine the fair value of the awards represent management’s best estimates. These estimates involve inherit uncertainties and the application of management’s judgment.
The fair value of awards is recognized on a straight-line basis over the requisite service period. The fair value of the market-based RSUs is recognized over the requisite service period regardless of whether or not the RSUs ultimately vest and convert to common stock.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 prescribes the use of the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse.
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent the Company believes they will not be realized.
The Company’s policy is to recognize interest and penalties related to uncertain tax positions, if any, in the income tax provision.
Net Loss Per Share
Basic net loss per share of common stock is calculated by dividing net loss by the weighted average number of common shares outstanding for the applicable period. Diluted net loss is computed based on the weighted average number of common shares outstanding increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued, including any dilutive effect from outstanding warrants, outstanding stock options, or unvested RSUs, and reduced by the number of shares the Company could have repurchased with the proceeds from the issuance of the potentially dilutive shares. Potentially dilutive instruments are excluded from the per share calculation because the Company is in a net loss position and they would therefore be anti-dilutive.
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Notes to Consolidated Financial Statements
Non-controlling interest
In May 2024, the Company’s consolidated subsidiary, Cetus Energy, Inc. (“Cetus”), issued a share-based payment award to an employee of Cetus, representing a non-controlling interest. A non-controlling interest in a subsidiary is considered an ownership interest in a majority-owned subsidiary that is not attributable to the parent. The Company includes non-controlling interest as a component of stockholders’ equity on the Company’s consolidated balance sheets. The Company owns 85% of Cetus.
Recently Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this standard effective for the reporting periods noted above, with retrospective application to all prior periods presented in the financial statements. The adoption of this standard did not have any impact on the Company’s financial condition, results of operations and comprehensive loss, or cash flows, but resulted in enhancements to our segment disclosures, primarily related to our significant segment expenses. See Note 17, Segment Reporting, for further information.
Recent Accounting Standards Issued, But Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures to expand the disclosure requirements for income taxes. Upon adoption we will be required to disclose additional specified categories in the rate reconciliation in both percentage and dollar amounts. We will also be required to disclose the amount of income taxes paid disaggregated by jurisdiction, among other disclosure requirements. The standard can be applied either prospectively or retrospectively. We will adopt the standard in our 2025 annual period and are currently assessing the effect that the updated standard will have on our financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) — Disaggregation of Income Statement Expenses. The ASU requires the disclosure of additional information about specific costs and expense categories in the notes to the consolidated financial statements. The standard is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The standard should be applied on a prospective basis with the option to apply the standard retrospectively. We are currently evaluating the impact of this standard on our disclosures.
NOTE 3. REVENUE RECOGNITION
The Company recognized revenue for the product and service categories as follows for the years ended December 31, 2024 and 2023 (amounts in thousands):
Year Ended December 31,
Operation and maintenance services 1,090 —
Software licensing 402 —
__________________
(1) For the year ended December 31, 2023, $0.4 million in revenue from the sale of spare energy system parts has been reclassified from “other” to “sale of energy storage products.”
For the year ended December 31, 2024, approximately 29% of the Company’s revenue was recognized over time and approximately 71% was recognized at a point in time. For the year ended December 31, 2023, 100% of the Company’s revenue was recognized over time.
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Notes to Consolidated Financial Statements
The following table summarizes the Company’s revenue disaggregated by geographic region, which is determined based on the customer’s location, for the years ended December 31, 2024 and 2023 (amounts in thousands):
Year Ended December 31,
Remaining Performance Obligations
Remaining performance obligations represent the amount of unearned transaction prices under contracts for which work is wholly or partially unperformed. As of December 31, 2024, the amount of the Company’s remaining performance obligations was $42.0 million. The Company generally expects to recognize approximately 90% of the remaining performance obligations as revenue over the next 12 months and the remainder more than 12 months from December 31, 2024.
Contract Balances
The following table provides information about contract assets and contract liabilities from contracts with customers (amounts in thousands):
December 31,