Q1 2026 Earnings Call — May 5, 2026
Justin Clare (Roth Capital Partners): Hi, thanks for taking our question, and congrats on the growth and the backlog here. I wanted to just start out on the AI infrastructure here and the 100 megawatts of powered shell and powered land that you plan to complete over the next 12 to 18 months. But wondering if you could just share more on the status of those projects. For example, you know, how much of the 100 megawatts is contracted and has offtake versus how much is in negotiation? What's the interconnection status? And then where are you in terms of permitting those projects as well?
Management: We have announced 100 megawatts there in powered land and powered shell. As you know, I think at our last earnings we mentioned publicly, the Southwest utility for the 75 megawatt of powered land that also is under a load study for application for 925 additional megawatts for a total of one gigawatt. So that's in the phase right now of the first 75 megawatt is already in construction and committed, and it's gonna be coming online in January.
As far as the powered land goes, from the powered shell perspective, we have our already announced agreement with Crusoe that's under now that development. And we have all the sites and all the load ready for that. And that's going to be constructed. And as we said before, that'll start to come online in Q4 this year. So that's where we are. And as far as the powered land and the powered shell, and I think most of those, and as we look at the opportunities that we're developing, TAB, Mark McIntyre, is where you're going to expect to see some significant growth. If you look at the mix shift, you'll see the mix of power land and powered shell versus our standalone storage increasing significantly there between where we are today in March 2026 up through 2030. So you can see that that's going to move from roughly about 10% of that megawatt funnel to a little over half of it over the next few years. So I would expect that you'll be seeing and you will can expect to be seeing more announcements in that space.
Justin Clare (Roth Capital Partners): Okay. I appreciate the detail there. And then on the $180 million of recurring EBITDA that is anticipated when you build out the backlog here, wondering what the timing of that is and how that ramps over the next two to three years or so. And then wondering on the 180, if you could also break down how much of that may be related to BESS projects versus how much is powered land and powered shell.
Management: Sure. Happy to comment. We previously gave guidance in November of last year around the overall size of the asset vault portfolio. And we had initially talked about that being sort of a target of 150 million of recurring EBITDA. We've since announced our entry into Japan. We believe Japan is a 350 megawatt sort of attractive late stage portfolio. So that would be in addition to that initial guidance.
Now we've given more fidelity around what we believe the contribution would be from powered land and powered shell on the order of about 65 million in recurring EBITDA. So if you were to take the 150, remove the 65 from powered land and powered shell, obviously the increase beyond that is associated with the Japan portfolio. This is sort of envisioned to be in that sort of, let's call it circa 2028, early 2029 type timeframe.
The reason we're seeing this acceleration is, as we met almost a year ago, we looked at a lot of the storage, the standalone storage IPP. As we've evolved the last 12 months and looked at the AI compute infrastructure space, those deals and those megawatts that we're contracting and owning are delivering anywhere from 5 to 10x the EBITDA contribution per megawatt per year. That's why we're providing some of the breakdown around what that mixed shift to these megawatts is going to look like. And as we add more of those, you obviously can expect continual acceleration in terms of hitting and just growing that annualized recurring EBITDA number.
Justin Clare (Roth Capital Partners): Okay. Got it. Thank you. I'll pass it on.
Derek Soderberg (Keenan Fitzgerald): Yeah. Hey, guys. Thanks for taking the questions. First one on gross margins here, guidance looks like 15% to 25% for the year. So just kind of thinking about that range, what are some of the variables? Maybe it's battery cell pricing, maybe some project mix. What sort of variables are going to determine where you guys sort of land in that range? And maybe as of today, where do you think you're sort of tracking towards that range? Maybe the lower end, the higher end. Maybe talk about that. Thanks.
Management: Yeah, you can see quarter to quarter, there can be some different mixed components. Even, you know, a year ago, we had some significant IP-related contributions. So we had a 57% gross margin. This quarter, on an adjusted basis, it's about 28%. On a gap basis, it's about 22%.
Obviously, we're tracking to be better than the midpoint of guidance. You will have a very back-end loaded sort of revenue year associated with project deliveries, right? So we still are in the EPC business, and so the fourth quarter will be heavily influenced with some of those deliveries. Those deliveries can generally balance out the overall shape of the year and the total gross market profile. So we are very confident around the overall range.
We endeavor to do better than the midpoint, just as we had done last year. Derek, the other thing I'll just add to that is our new gross margins now and revenue that's going to include the storage IPP is also, and just from a gap perspective, is going to include the non-cash portions of depreciation. That's why we're referring, and this will make the comparisons good from last year to this year, our adjusted gross margin, which is really getting at that cash gross margin only without the IPP revenue.
Derek Soderberg (Keenan Fitzgerald): Got it that's helpful and then as my follow up sort of related to the first set of questions, so the first 75 megawatts on the powered land piece coming online in January of 27, and then the 25 megawatts coming online in Q4 of this year. I was wondering if you could sort of maybe provide some detail on how that revenue is going to scale, how that EBITDA is going to scale, anything around that, and then also, just on that opportunity to potentially go up to a gig on that sort of higher EBITDA per megawatt opportunity, can you talk about what sort of milestones you need to hit before that larger opportunity starts to materialize? Thanks.
Management: Sure. I'll hit both of those, and Michael can chime in as well. To the first question on both the 75 megawatt and the 25 megawatt, the 75 megawatt is committed to be online in January, as I mentioned, so that's full 75 megawatt will be online.
What you would see on that is an offtake agreement of that 75 megawatt but once that turns on in January, you can expect that to be fully monetized, meaning we will be in a contract and monetizing that. So we should get almost a full year of EBITDA there of that 75 megawatt. And it's estimated at somewhere in and around 35 million. So that's the 75.
On the 25, just to be clear, we're going to be starting those deliveries, meaning we're going to start to receive and have those systems come on within Q4. So not all 25 megawatt will be in Q4, but then we'll, as we've said, we'll come in the next 12 to 18 months. So meaning we'll be beginning to receive and activate the powered shells and then be installing those and then the forward quarters from there.
The good news about that is we're going to, we expect in the next 12 to 18 months to have that roughly 65 million, you know, up and going and on an annualized run rate basis. The second part of your question on the 75 going to a gigawatt. So there is a study that's already underway that we're engaged with the Southwest utility. That study is looking at the addition of 920 megawatt to that 75. So that would be up to a full gigawatt.
We do expect somewhere in and around half a million or so per megawatt on that but that's that's a study that's going to happen. There'll be some decisions, I think, made then this year we expect in the next three to six months. On also some sizing of what the capacity upgrade will be and that's essentially going to be all the transmission and high voltage equipment that will be required to bring that 925 megawatt here to market.
And that will be coming in place over the next 24, 36, 48 months. We are expecting, just to be clear on that, we are expecting to look at doing an interim step with some other generation equipment that we would couple with our storage, for example, to try to bring online something on an interim basis of another 225 megawatt to potentially add to that 75.
So this is within this core powered land segment. So that would be an interim step to get a solution in place. Obviously, as we've said before, with a hyperscaler, it's in a very attractive location that we'll be sharing more of as we do some formal announcements, namely utility, et cetera, and other things this year. But from a timeline perspective, just to summarize, the 75 megawatt in January. Following that, within the next 18 to 24 months, we're looking at another 225 megawatt to bring online on an interim basis until that other 925 megawatt of grid power would come online in the next 36 months plus.
Derek Soderberg (Keenan Fitzgerald): Appreciate the detail on that. Thanks, guys.
Tyler Bissadon (Goldman Sachs): Hey, guys. This is Tyler Bissadon for Brian. Thanks for taking our questions. Just first wanted to touch on the margins in terms of the backlog. So what is the timeline to reach these 60% to 80% IPP margins as you execute on the backlog? And just to confirm, this would be on an adjusted basis?
Management: Yeah, so this is over time. There's obviously two distinct margin profiles for each of the different businesses. The 20 to 25 is akin to the legacy, let's call it EPC-related business. The transition to the IPP business model, those 60 to 80% IPP margins, you can see that all laid out on, I believe it's slide six.
Obviously, there's going to be a mix effect that will take place over time, right, as these projects come online. We're not exiting the EPC business. We'll continue to do that, not only for third-party customers, but we self-perform these projects for ourselves, and there's actually a positive working capital function that that serves. So we'll continue to be in that business, but it'll be a blending over time. It won't just be a flip of a switch.
Tyler Bissadon (Goldman Sachs): And then can you provide an update on just, you know, your revenue trajectory for the balance of the year? Notice accounts receivable step down a quarter. So could you see 2Q revenues decreasing quarter over quarter? And I guess, you know, how are you thinking about the balance of the year from a revenue standpoint?
Management: We generally don't give sort of quarterly guidance in that respect. But as mentioned, it will be a back-end loaded year. I would use a profile akin to what you had seen last year. And as you saw there, just to add to that, we have very strong year-over-year compares just given we are projecting over 30% growth at the midpoint here.
If you look at the trajectory, as Michael said, and look at that framework, we are expecting something similar there. But generally, I think if you look at the year-over-year compares, we're still going to be pretty favorable, I think, as we ramp and scale.
Tyler Bissadon (Goldman Sachs): Understood. And just one more for me. Can you just provide some more details on the progress on the developed pipeline and backlog? It looked like the developed pipeline increased to 3.2 gigawatts from 1.8 gigawatts last quarter, but the value went up to 3.5 billion from three. And then on the backlog, it looked like it remained flat at three gigawatt hours, but the value went up slightly. So can you just discuss some of the moving pieces here?
Management: Yeah, there's always a bunch of ins and outs. FX, there's a host of things that can sort of move these things at the margin. I think within developed pipeline, interestingly, we're starting to see some real benefits of this integrated model and the fact that sort of one hand washes the other.
While we are in both the EPC business and the IPP business, we're now starting to see some opportunities emerge that sort of split the difference or are emerging from both camps. And so the fact that we do have a team focused on both sides of the business is being very additive in that respect. So we're seeing new projects being added all the time.
We also cull our developed pipeline to make sure that if things are stale or if projects have moved on or for whatever reason. So we try to keep this very current and not make sure it's stale. So I think this does represent the current slate of investments that we have here in the U.S. across multiple sort of industry subsegments. And geographically, we're seeing some other things emerge internationally.
Despite the shift we've made from owning and operating assets where we are not recognizing revenue, even though the activity is much more than even our projected revenue is showing because we have activity that we don't recognize. We are building projects. Energy Vault is building projects for Asset Vault that is not showing up in recognized revenue. So we have more activity than we've ever had.
The challenge was how do we keep revenue growth, meaning recognized revenue, going until these new projects come online? And what I feel very good about with the team and the execution is that we were able to still have a year this year in 2026 with strong double-digit revenue growth, despite the fact that as you see in the megawatts that are growing to now over a gigawatt that we have under our control and management and building out, that we are not recognizing revenue on that.
A lot of that's driven, I think, in the U.S. market in particular with what's happening with the AI infrastructure. And in particular, these power packages that are getting put together where we're looking at and we are doing and integrating our energy storage with generation, with gas generation, for example, but also with UPS backups that are a part of those and coupled with that gas generation.
And then we're integrating that solution across a single pane of glass, meaning a single software platform to bring that all together for a customer. So those are solutions that we actually do sell and turn over. So that allows us to do the revenue recognition in parallel. So this, the whole AI compute infrastructure and the, you know, the billions and, you know, arguably you'd say trillions over time that's going to be spent for that, that is enabling us to maintain this revenue growth with that focus on these solutions.
Sid Runchie (Fundamental Research Corp): Hi, congratulations on the strong results. How are Calistoga and CrossTrails operations performing given it's been almost 12 months since both started operating? Are revenue and margins there in line with your expectations?
Management: Yeah, the CrossTrails project continues to perform well. There hasn't been a change and we're expecting on the order of sort of get $10 million in EBITDA on a four-year basis.
Management: Yeah, I'd add to that. Across CRC and then CrossTrails. Yeah, I'd add to that too, as we all know, I think in the market, anyone that's in the IPP market, ERCOT obviously is undergoing and has been really the last 12, 18 months, really almost the last two years, you know, weakness, at least on a cyclical basis versus the prior year.
So I think we're seeing that and, you know, the good news about our system there in ERCOT is it's been running at a 99% availability despite that. And obviously, we'll take advantage of opportunities when they come. But it is that sort of softness in the ERCOT market has made it a buyer's market when we're looking at acquiring megawatts.
So therein lies some opportunity. We've been very, very careful with selecting the best points of interconnect and doing a lot of diligence there to have the points of interconnect, as is the case with McMurtry that we announced, that's just north of Dallas there in Texas, so at points where we do believe we can leverage good economics.
Sid Runchie (Fundamental Research Corp): Great. Thank you for that. And with the ownership structure of the Japanese initiative, will that be similar to your other assets, given your partnering with the local developer there?
Management: Yes, we were expecting, and I think we mentioned this in the, when we made the announcement, the Japanese market is fascinating because if you go back and look at where ERCOT was four to five years ago, we see the Japanese market just evolving now in that same type of economic environment.
An opportunity, therefore, to initially deploy and take advantage of a lot of the frequency and some of the other ancillary services and even the arbitrage opportunity there in Japan. So in terms of structurally that initial team that we're acquiring that was from an existing large company. That team is going to be the one that's going to be continuing developing those near-term projects.
So of the 850 megawatt that are within that portfolio, there's 350 megawatts of near-term projects that, as we said in our announcement, we expect this quarter to close on that 350 megawatt and then get those constructed and get those up and operating.
So I think from an overall structure in terms of how we look at debt and equity and financing these, I would say it wouldn't be unlike as we're looking at projects in the U.S. and Australia. I think one of the differences there, Michael can comment on this too, is you have a very favorable interest rate environment, I think, in Japan that is going to be helpful relative to the financing and their very known project financing models as well.
Michael: Yeah, it's an existing team that we're technically acqui-hiring with a very robust portfolio. As we mentioned in some of the prepared remarks, we are going to be going to market from a financing perspective in support of a host of those projects.
So the fact of the matter is we entered the Australia market just a few short years ago and look at the amount of traction that we've been able to sort of generate there. So we're looking to replicate that in the Japanese market.
Sid Runchie (Fundamental Research Corp): Any comments on the off-take pricing you can get there? Is the ROI, would you say it's comparable to the U.S. or higher?
Management: I don't believe we've given real specifics there. It is an attractive market, but obviously we feel as if we're early to that market. And, you know, obviously we're putting our money where our mouth is. But we haven't given any of those specifics.
We're expecting, I think, yeah. I was just going to add, I wouldn't think that it's going to be far out from what our expectations are on achieving IRRs, sort of low double-digit type of IRRs as we get started there and an opportunity for optimization on that. But hence our investment there.
It is what we believe that is today and will continue to be in the coming years an attractive market.
Noel Parks (Toohey Brothers): Hi, good afternoon. I had a couple, you know, one thing you were mentioning, gas generation a moment ago and sort of in the landscape of potential business out there for your pipeline. I guess I'm wondering maybe what's the main pain point for potential customers I guess I'm thinking about whether there's any difference between those where they're looking, say, for new air-related generation, where gas generation is probably going to be at the core of it, versus situations more where it's a case of playing catch-up with wind and solar for grid integration.
Tom Petrie: Yeah, I'll know it's a good question, the reason you're hearing more and more about gas is just the two things. Obviously, the power demand is largely outstrips the supply or the ability to deliver it. So that's one so any of the any and all solutions, you know solar wind combined with other types of generation and leveraging, we have, you know, obviously abundant natural gas in the US.
So I think gas is going to play an important component in particular over the next three, five years plus. But in addition, remember what's driving this are data centers and the requirements are at five nines reliability, which is, you know, if you're thinking about that and thinking what that requires and you know, it's going to be different regionally, but look at, if you go back to an event, for example, in Texas, we all remember in the cold and the frost and the freeze, and that shut down things for a matter of days.
With the requirements in SLAs at five nines reliability and AI compute infrastructure, these are things that therefore require not only redundancy, but in some case, there's multiple redundancies. So you can think about having a grid connection. Okay, everybody likes that. You can add energy storage to that, which will be good, you know, for if there's an outage, you know, you can name it for some hours, let's say, and even up to the day.
But if you get into a multi-day outage, that's where looking at having some type of reciprocating engines or gas, diesel gen, et cetera, so you can actually have a solution that when you put together, for example, grid power, plus energy storage, plus some gas power backup, you've got something where you can deliver on 5-9. So it's, you know, hence that's the numbers you're seeing, and that was that tremendous amount of CapEx in the data center build outs. A lot of that's, you know, a lot of that CapEx is also essentially guaranteeing that power availability and delivery.
Noel Parks (Toohey Brothers): Yes, absolutely. And you did touch a bit on it already, sort of the comparison of Japan to where ERCOT was a few years ago. But when you announced the Japan acquisition, you sort of stressed the importance of grid stability and load balancing in Japan, that they're at that stage now. I just wonder if you could maybe just dig into that a little bit deeper and whether there are similar analogous regions that might be needing to deal with this sooner rather than later.
Management: Yeah, I'd say that the perspectives we've shared from the announcement and what you've just articulated is what we see. And as I mentioned, you know, we're going to see some of the fast frequency response, that load balancing, and I think opportunities to capture different types of pricings at different times of day.
So I think generally, that dynamic is going to be positive, we believe, for the market. And I think others that have entered there recently are seeing the same thing. As far as other markets that have those same dynamics, there's an important aspect to look at this.
And I think Asia Pac's a great example where there are other markets that may have those same types of, you know, environmental factors. But the other thing we look at is scale and priority in terms of the markets we choose and not spreading ourselves too thin. So there would be, you know, there are, I think, other markets that have those same characteristics and even in some newer European growth markets, for example, that we're seeing.
But we're very focused right now, I think, on some of the largest opportunities and focusing our capital investment, our human resource investment, in the areas where we see the biggest upside. And a lot of that, by the way, is right here at home in the U.S.
Noel Parks (Toohey Brothers): Right, great. And if I could just run more by you. I was thinking about the process of project financing over the last couple years. You've seen this real transition from being able to get it much earlier in a project's life cycle. So I'm just wondering, as you're going through your process of negotiating and arranging it for your upcoming projects. I'm just wondering, is there a considerably less of an education burden that you have to address in terms of, you know, your counterparties and their due diligence? Or is it essentially still just everyone needs to go through a pretty similar higher kicking process?
Management: Yeah. And the market is evolving so quickly. You know, whereas, nobody would have even looked at sort of merchant years ago. You know, now that's being sort of incorporated into models and people are getting very creative in how they structure, you know, bridges or construction financing sort of in and around some of the IPCs.
The market is evolving very, very quickly. Certainly here in the U.S., we're also seeing that bleed over into some of the other markets where we're constructing assets such as Australia and what I suspect is likely Japan, but we need to go through that process.
The fact of the matter is we've now done this a few times and we now know what we're looking for as we're evaluating project attractiveness and what can possibly go wrong, so just mitigating risk where possible, bringing partners into the fold earlier in the conversation.
Robert Picconi (Closing Comments): Great, Alfredo. Thank you. Look, just in closing here, and hopefully you've gone through the numbers and go through the charts, I again encourage everyone to download those.
We are sharing more and more detail and some transparency on things that tie to the future profitability and growth of this business. I think a lot of the key metrics we share, the growth in the megawatts under management that have more than doubled since just going back, getting over that gigawatt.
You know that first gigawatt that's within our control now to go execute those are not small markers, and I think, on top of that, then you look at the backlog, which is a different cut looking at what we've actually contracted.
So just to highlight you know 80% now of that backlog that stands today at the 1.3 billion is contracted at much, much higher IPP type of gross margins. Again, that's something that should give investors a lot of comfort relative to the future profitability as we bring those online.
But also just operationally, and this I think is, as investors look at teams and companies to invest in, the execution that we've had, if you look at just the last six, eight months, last year, one of the most challenging years starting off with the tariffs and uncertainty really through the first half of the year into the mid part of the year.
Yet the team at Energy Vault executed and delivered the only energy storage company to deliver on their original guidance that we set for the year and in a strong way in the quarter delivering a positive adjusted EBITDA even in that last quarter as we delivered work.
We are expecting to do the same this year. And, you know, with strong execution, you...