Welcome, everyone, to this session of our August 2026 Micro-Cap Conference. I am Alex Hantman, and I serve as an Equity Research Analyst here at Sidoti & Company. Today, I am pleased to be in conversation with CEO Drew Buckley of ESS Tech, ticker GWH. During this fireside chat, please feel welcome to submit questions using the Zoom Q&A interface at the bottom of your screen. With that, Drew, let's kick it off. Hey, Alex. Absolutely. It has been a very exciting year. A year ago, you guys were only an iron flow battery company. Now you have a sodium ion product, you have a pipeline approaching $1 billion, and you have an exciting business combination on the table. Could you walk us through for folks new to the name, where ESS began and what has changed to get where you are today? Yeah, absolutely. First of all, thanks for hosting me, and thanks to everyone who is on the call or watching for your interest in ESS. I think it is an exciting time, and really glad to be here to share our story with you. I am going to share my slides, Alex. Let me know if this does not work out right. Hopefully you can see that. Is that fair? Yes, they're coming. Okay, great. Perfect. We'll start here with the company timeline for all those who are new to ESS. We really have three phases I would start by talking about. The first one, as you can see at the bottom, is 2011- 2021. Founder-led business. Really intelligent, great founders that we had, a husband and wife. Their thesis, to put it in my own words, was they wanted to take a concept around an iron flow battery and turn it into a product that could be capable commercially. They started there in 2011, and then the next 10 years they spent trying to make an iron flow battery work. At that point, 2021, many of the investors will remember that there was a big SPAC craze, a lot of money coming in for new energy technologies. ESS came public in 2021 via SPAC, and it was a great time for the company because they were able to capitalize themselves quite well. Big valuation, so very exciting. They put out some very high forecasts about what the types of revenues they could do over the next few years on iron flow. That's probably phase II is the IPO via SPAC time, where the company was really focused on fulfilling those projections that they had given during the SPAC and selling a lot of iron flow batteries. What we came to find, or what the company came to find at that time, is that perhaps 2021 wasn't the right time to go public. Hard to decline such a great opportunity to raise capital, and get an opportunity to be a publicly listed company and everything like that. No harm on the reasonings to go public at the time. But because they had put out such high expectations into the market, they really focused on getting sales out there and selling through the pipeline of iron flow. What was behind that, though, is that the product wasn't totally commercially ready. What I would say is the iron flow battery functioned quite well in an R&D setting when you had the people who understood the technology quite well working on it and running it every day. Then from there, when you put it out into the field, it's a totally different problem. You have people who may know the system, may not, running it and doing the maintenance on it. What we found is that the iron flow battery wasn't really commercially scaled yet. During that time, it was really ESS was trying to build the airplane as they were flying it. All of that kind of came to a head at the end of 2024, when a lot of that money, most of the money that had been raised, had been spent over that four years trying to build that airplane up as they were trying to sell. They came to a point where we didn't really have a very commercial viable product, but we were running low on money. That's when the interim CEO, Kelly Goodman, who's still with the company today, she's our Chief Strategy Officer. You can see that third bullet right there, Project New Horizon. What we did in the Project New Horizon timeframe and what we've been on a journey for over the last, call it 12- 15 months, is reassessing where our products fit in the market and what the market needs are. If we take the two things we have, the legacy iron flow business, we really have done a study as to where the best fit for that battery would be in terms of commercial, how much money it's going to take to be able to have commercial scale, and then how much time are we going to need in order to build that product up correctly. What we've seen in those, as we looked at that flux capacitor, if you will, for lack of a better term, is the iron flow battery really needs more time. If we wanted to bring this product to market in a 6- 12 month view, the amount of capital you'd have to spend is exponentially higher than if you give it the time. You can make a more quality product if we step back for a second and we say, "Okay, the energy market has changed so much over the last decade that where is this technology best fit in the market? How do we make sure that it's commercially scaled for that market and leans on the competitive advantages that the technology has?" Everything that comes out of it that says, "Look, we need more time to be able to develop the iron flow battery." We're on that journey there. Some people will ask, "Are we abandoning this? Are we doing something else?" The answer is no. We believe in that technology. It's just there's a different application timeline for it and a different amount of time that it's going to take to build it. In that time, and I'll flip to a different slide now, as I'm sure people have had a chance to look over this one. Here's the way that we think about our platform now is I've talked about on the right side, you've got iron flow for a long duration. Near term is sodium ion. When we decided that iron flow was going to take a lot longer to develop, and that was the best way for us to be able to bring that product to market in the right way, we thought, there's got to be another near-term opportunity for us to take advantage of. One of the things that I wanted to do, since I've joined, as I took over as CEO in January this year, is to think about that. What is the best positioning for our company and our technologies? What we found is that we've got a great opportunity here in sodium ion. Just to give you a very quick idea of sodium ion, sodium ion looks very much like the 3,000 lbs gorilla in the room, which is lithium ion. The box, the battery, looks very much the same. The way you package it up, the way that you deliver it to customers is very similar. The difference here is twofold. Or actually, I would say threefold. One is that sodium ion actually has a, the chemistry is different in that it lets you use a wider operating temperature range. The reason that that is really important is the big problem that we have right now in the power market, and that's with AI data centers. These NVIDIA GPUs, these big 48-chip, 64-chip arrays that are out there, they can draw a lot of power really fast, and that's a lot different than a regular server or a regular rack of servers that we might know in the past. The power draw, the power spike that they can take on as they go to work on these inference workloads, these training workloads, is a totally different style of power demand that sodium ion is set well for. A big part of that is just the base technology and how it works. Sodium ion allows you to work at a wider temperature range. So where if you use a lithium system, it's going to degrade a lot over that time because you're pushing it into these high-power applications, and you're getting a lot of power spikes, and it's heating up that lithium battery, which causes it to degrade. Sodium ion doesn't have that. The part of the market that is the most exciting and growing the fastest right now, as it relates to energy, is one where the sodium ion battery actually works quite well. That's one. The second part about sodium ion is relative to lithium, which lithium is an amazing technology, and we also believe that it's going to grow very well, and there's huge demand for it. But one thing that sodium ion can do that, or has that lithium doesn't, is the abundance of materials, right? Sodium, you can find it very much anywhere in the world. There's a lot actually in Wyoming that you can mine that can go right into a sodium ion battery. But, with lithium, it's slightly the opposite. 98% of lithium battery cells come from China. 98% of the world's lithium is mined by Chinese companies. Sodium actually unlocks the supply chain a lot more, which is in focus not just for the U.S., but many countries to be able to have alternative supply chains, whether it's government-focused or because of COVID and wanting to have access to multiple supply chains. There's a lot of reasons why you might want to do it in many different ways, or have multiple supply chains. Sodium ion gives you that advantage. Then third, I'd say, is the operating cost. There's plenty of good reports out there that will say a sodium ion battery should be less in CapEx and less in operating expense fundamentally at scale. Two reasons for that. If we take the CapEx one first, lithium versus sodium, as I was saying before. The second one on the operating expense side is that because you get that wider temperature range that I was talking about, you don't have to have. There's systems that you can take out of a sodium ion battery solution that you need within a lithium solution. That I'm talking about an HVAC, so cooling, whether it's HVAC or liquid cooling, those are expensive systems that you have to put in as capital expense. Then they're also very expensive to maintain. Everyone's got an air conditioner, you know. You've got to do maintenance. You've got to do repairs. Sometimes you've got to swap it out. Liquid cooling is just an exponential version of that, where there's more that comes in that you have to operate, maintain. You can think if the liquid starts breaking and coming out, that's a big problem. So there's just a bigger CapEx and OpEx burden that's out there. More things can break, right? With sodium ion battery, because you have that temperature range, you can either do it with no cooling at all, so it's really a closed system, or you can do it with minimal fans, which can last 15 years and are much less expensive. So it's cheaper. One of the things that I'm sure a lot of our viewers have read about is how these big data centers make a lot of noise, right? A big part of that comes from the HVAC system on these lithium ion batteries. You take that out, all of a sudden you don't have all this noise and all of this noise pollution that's coming into communities. So we think there's a better community application because it's a much quieter battery. All to say that, just going back to here, we're super excited about the future and what we can bring, and that's that 2026- 2027, scaling the two storage platforms. We've got a really great opportunity on the sodium ion side, over $1 billion in customer interest we've talked about. We're moving through. We've already got an LOI signed with Juniper Energy that's going to be for a major California utility that should deliver in the back end of next year. Yeah, we're really excited about the two-platform opportunity and scaling them both. I will stop there at the company overview, which probably took a little longer. Happy to turn it back over to you, Alex. No, that was great context. I appreciated you sharing more about the power load volatility and how that is uniquely suited to you guys. I think you touched on something I maybe just want to go a little deeper into, which is, there are some powerful forces at play shaping the shift away from foreign lithium into some of the domestic initiatives like yours. Could you talk a little bit about some of those incentives? Absolutely. Look, I think, whatever your political view is, it doesn't really matter. There's two things that are kind of overwhelming what's happening in the energy markets right now. The first one is that energy demand is inflecting, and that's creating a back response from the U.S. government that they really want to build the U.S.-based supply chains to support this critical infrastructure. There's a lot of funding and tax credits that are out there to do that. You kind of have this double whammy that's going on right now, which is if you want to bring in cells or materials from China to do batteries, and recall that 98% of lithium batteries are made in China, you're going to pay a tariff on that. Just to give you a very simple example, if a lithium-ion battery you import from China costs $1, and then you pay the 40% tariff on it's $1.40, right? Whereas if you look at something that could be potentially fully made in the U.S., even if it costs you $1.10, $1.20 because the scale isn't there yet, you can get 40% to 50% at full max in terms of a tax credit back on that. It ends up being, even let's say it costs you $1.30 or $1.40, almost even up to what a lithium-ion battery costs with the tariff, you're talking about $0.70- $0.80 is what that sodium-ion battery could cost, or a battery fully made in the U.S., whether it's iron flow or sodium. That's been a big ethos of ESS over time, is that we always wanted to keep our supply chains focused on the U.S. A big part of what has been instilled in the company in the beginning is keeping the supply chain focused on the U.S. We view energy as critical infrastructure. Look, I think there's a lot, making it from earth-abundant materials, green materials, stuff that can be found anywhere, is really part of what ESS is doing. When we started to look at sodium ion, we really did it with that focus in mind. The nice thing is that helps a company scale over time. So, one of the great things that China does well is they're very good at scaling, and they can put processes in place super fast. The government's very supportive. You can get money, and you can build gigafactories really quickly. In the U.S., some of what that makes it difficult for a company just focused in the U.S. is you're always. Customers are very price sensitive. These utilities, they want to keep their costs low. That's a big focus for them because they want to be able to deliver power to all 330+ million Americans at a cost that's affordable. So they're always thinking about cost, right? The government incentives and the things around that, bringing things back onshore, help companies like us go from a small scale to being much larger because that incentive can help you to scale and can offset some of that price, where it's more expensive to make it in the U.S., especially when you're not at scale. So it's a cool business. I'd say there's incentives on both sides in terms of working on building out new factories on the CapEx side, and then also when you're in production, there's tax credits that you can receive that help to offset some of the costs of production. What we've seen with the OBBBA, that a lot of those battery incentives are still going to exist for some time. So we really do have a Goldilocks opportunity right now within the U.S. to build out this fully U.S. American-made supply chain, take advantage of those tax credits to scale, and then you have a much more robust business at scale that can be truly competitive. Thanks for painting the picture, yeah. Speaking of costs, I think it makes sense to take a question from the audience. Sure. They're asking for context around what's the sort of cost economic break-even point where lithium ion starts becoming basically a worse choice than sodium ion, or the longer duration storage. Could you talk a little bit about that economic point? Yeah. I'll take that question in two ways, maybe against the iron flow battery and then against the sodium-ion battery. First on sodium ion, really, and you can read this, I think it was BYD. BYD or CATL from China, they put out a research paper or something that basically says, at scale, a sodium-ion battery should be cheaper than a lithium-ion battery built. Why is that? Well, the first part is that lithium versus sodium question, right? Lithium is expensive, critical mineral. That's super expensive. Sodium, not the same. If you just compare cell to cell at scale, and we're not there yet, but at scale, a sodium-ion battery should be cheaper than a lithium. What you lose, and what sodium still needs to come up the curve now, is energy density. Lithium has long, long time of putting more energy into a smaller box or more energy into the same size box. That is one big part that sodium-ion loses against lithium. There's ways to make that up, and the gap isn't as wide as some might think, but that is one of the downsides that you have to trade for it. At scale, we should see sodium-ion being cheaper than lithium. I think we're probably a couple years away from that, but that's the idea, on an intrinsic, why do we think this business can actually work well? The cost should be lower. Relative to iron flow is another question, right? That becomes really about duration, and I think that's where the audience question was coming from. If you look at lithium, you really get a four-hour duration out of a system. You can't really push it much further than that. Over time, if you want to get 12 hours of duration, let's say you're pairing it with a solar array, sun shines, let's just pretend it won't be eight hours, but let's just pretend it's eight hours, so you need to get 16 hours out of that battery. You would need to stack four lithium systems, right? The crossover point that we see is actually right in the 12- 16-hour range, and the reason for that is iron flow is a great technology. One of the reasons why it should have a place in the commercial market is that scaling of duration effect, right? If you want an iron flow battery that is 10 hours, it takes, let's call it, 1X of electrolyte. If you want it to be 16 hours, it takes 2X of electrolyte. The system itself can actually stay the same size, and the scaling effect comes in as you build in more electrolyte. What you truly get to do is decouple power from energy. Where at four hours you have one lithium system, eight hours you have two, and we are talking in broad numbers, at 12 hours, you have three. With iron flow, at 12 hours versus 48 hours, all you are changing is the amount of electrolyte you are using. There is a theoretical max. You cannot get 500 hours out of one iron flow system. There is the physics and chemistry limitations that come in with plating and everything like that. To us, we see the crossover at 12 hours, and 12- 48 hours is really the time period where iron flow works well. For us, our strategy is sodium ion is our competitor to lithium in that 2- 8, 10, 12 hour range. Where that crossover is, we will see. Then iron flow is our competitor into the long duration side. A system, and there are many different applications that we can have for energy, but when a customer wants something that is 16, 18, 24 hours, that is where iron flow really does well. I would say the crossover point, just to get specific on it, is somewhere between 12- 16 hours, probably around 14 hours between lithium, where lithium starts to lose economics versus iron flow. Very helpful context. Once a customer has determined, okay, sodium ion makes sense given the duration, the economics, the technological advantages, could you talk a little bit about how the conversations with you have been going? I know you have announced close to $1 billion in pipeline, and how does that basically convert into actual orders, and how are those conversations going? Yeah. Look, it is interesting, right? We thought that this would be a slower burn when we announced our partnership with Alsym earlier in the second quarter of this year. The customer demand just came up really fast, and it goes exactly to that acute pain point that they are having around lithium and around AI and hyperscalers and data centers. Whether they are feeling the pain point now, which some customers are, or they are feeling they see that it is coming for them and they want to get prepared. The response has been really cool and really exciting. What I would say is that, look, we are calling it customer interest over $1 billion, and then we have got one LOI signed. I think the big unlock for us is going to be when we show what the product actually looks like, and we're targeting to do that toward the end of this year. We want to have a product in the market, or a product in our headquarters that functions exactly how the customer would get it. I think, look, with any new battery technology, the customer's going to want to see it, feel it, touch it, and understand how it's going to work. That's the big unlock for us is showing that it actually works, how it plugs in, the charge and discharge of that. I think that's the real point that you're going to start to see everything convert into orders. With iron flow or with other battery technologies, I think what we saw in the history over the last four years with iron flow is that a lot of customers are willing to do pilots. They'll take one system, two systems, five systems, put them next to existing stuff. A lot of what we're seeing with sodium ion is more greenfield, so we're moving past sort of the like, "Yeah, let me test this out and see if this works" to, "I understand it. I see how quickly China is building this stuff. We want to be there, too. If you can deliver us a fully U.S. supply chain, we're all in." I think what you'll see once we show the technology works and it's in our warehouse, all of a sudden you're going to see a huge unlock of those customers because it's not, "Yeah, let me try this new type of technology." They understand that it's basically the same box as lithium ion, some very unique properties, and that it will convert. So look, we think that our expectation is to have a strong 2027 in terms of revenues, as we're able to unlock some of these customers. Again, the CapEx to do that because you're relying on historical, a lot of money that's been spent on lithium ion building systems. We can take advantage of that, and it's not a lot of CapEx to be able to produce 200 GW, 500 GW or 1 GW of sodium ion batteries per year. Makes sense, yeah. I guess, with a lot of exciting LOIs and pipeline, a couple of questions from the audience on funding. Basically, your plans to fund the business from here, and even a specific question. In the last week, there was an announcement of SBA lending for energy loans guaranteed up to 90%. Maybe your eligibility for some of these government programs. Yeah, look, I think it's a great question, right? The funding part out there's no secret we need to continue to fund, and we're looking at all of our options and ways to do that. I think government support is there. I think the investor community is there. I think one of the things that runs difficult for ESS right now is that we have this 15-year history of, and this five-year history as a public company where maybe the story hasn't gone as the way that people want it to, right? We have, since I've joined, we're trying to change that narrative and make people understand that we're focused on execution, we're focused on bringing product to market. My background comes from being an investor myself for two decades, so I understand what I feel like, I hope I understand what the investor is looking for. It's about telling that story, right? I think if we can do that and we can raise the money, there's a huge opportunity out there for us. It's a bit of a leap of faith right now for investors or people who want to put capital into the company. But I can tell you that the trajectory we see ourselves on, we're not going out there, and the idea is not to raise a ton of money, build a huge gigafactory, and then try and fill it with orders. The nice thing about where ESS is as a micro-cap and that people don't have a lot of expectations for us is we want to build intelligently over time, scale up over time. If we can hit some of those milestones, it'll look like an exponential curve where we start slow and then we push up that ramp pretty quickly. I'm super excited about it. We need to keep telling our story and for people to understand that, if we can raise the money, if we can do that, then there's a lot of opportunity ahead of us. So excited to have those conversations directly with anyone who's interested in talking about it. But I think there's a lot to be excited about on the ESS front. Absolutely. As we come up on time, maybe we could just zoom out, for investors who might have AI exposure, might be familiar with AI infrastructure, picks and shovels, but perhaps are less familiar with power and energy management and ESS in particular. What would you tell them about why now might be a great time to invest in ESS? Yeah, look, I love that question. Thanks, Alex. I'm glad you asked it, and it wasn't a plant for anyone out there who thinks that it was. So thanks for asking. Look, I think as an investor myself, I think the big question that we have right now is, are any of these AI models actually going to monetize at the level they need to make a good return for the investor, right? Is OpenAI, is Anthropic, those guys who are going to come public later, are they going to be able to monetize? How much longer can Google, Meta, all these hyperscalers spend at this CapEx level to be able to support NVIDIA and what's going on there? You're seeing new and unique structures that are coming into the market right now, that seem to trying to solve some of that problem, but also may raise some questions. To me, the thing that's not changing with any of this, whether we're building $500 billion worth of data centers or $200, is the power dynamic. There needs to be more power generation and more power storage brought into the market right now. The reason for that is we just haven't had to do that for the last 20 years. So this is the first time in two decades. The second reason why we haven't really seen that trade or the investor flock to that is two parts. One is power moves slower, right? This is regulated stuff. There was ways to get by it, for a while, and now we're really hitting that inflection point. Then two, what I would say, which is really important, is there's not a lot of options for public investors. So, I saw recently there's a lot of private money floating around, whether it's Form. There's a lot of investment in the private markets and the battery space going on right now. To me, I think there's just not a lot of great options to be able to capitalize on the specific power generation needs of AI inside of a public market. So if you're a public investor, I think it's a huge opportunity right now to look for places to spend. I think power is under-invested in by the investment community because, look, it's not as one-to-one direct as a hyperscaler or NVIDIA. I think that whether you think the bubble's going to burst or you think we're going to continue up, the power demand is going to have to be there. Battery companies, I think, are going to play a huge part in that. I hope that the market and the investor understands that sooner rather than later, because obviously we think we have a great opportunity and a right to win in the space, but we need some help, and we need some investment to be able to do that. Great answer. With that, we are at time. I would like to thank you, Drew, for sharing the ESS story with us, and also thank everybody listening for spending time with us today. Yes. Thanks, everyone, and thanks to you, Alex, as well. Good talking again. Yeah, talk soon.