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NeoVolta (NEOV): Powering Up U.S. Battery Manufacturing · WTR Small-Cap Spotlight

• 0:01
  SPEAKER_01: Welcome to the WTR Small Cap Spotlight Podcast.
• 0:04
  SPEAKER_01: I'm your host, Tim Gerdeman, Vice Chair and Co-Founder, and Chief Marketing Officer of Water Tower Research.
• 0:13
  SPEAKER_01: In today's podcast episode, I am joined by Artis Johnson, CEO of Neovolta NASDAQ Ticker Symbol, N E O V.
• 0:21
  SPEAKER_01: Also joining is my Water Tower Research Equity Research Colleague, Eric Goldstein.
• 0:26
  SPEAKER_01: Neo Volta has been executing on a strategic pivot from a residential battery vendor into an integrated energy storage platform with a transformational U.S.
• 0:36
  SPEAKER_01: utility and CNI scale battery energy storage manufacturing joint venture called Neo Volta Power.
• 0:43
  SPEAKER_01: The joint venture is targeting two gigawatt hours of initial annual capacity, scalable to eight gigawatt hours, with equipment commissioning targeted for completion by the end of August and ramping into 2027.
• 0:57
  SPEAKER_01: Excuse me, gents.
• 0:58
  SPEAKER_01: The company has also secured a non-prohibited foreign entity determination supporting the JV's FEOC compliance.
• 1:06
  SPEAKER_01: It has raised approximately$28 million in gross proceeds in May to fund the buildout.
• 1:11
  SPEAKER_01: And lastly, it describes itself as fully funded through commissioning.
• 1:15
  SPEAKER_01: Welcome to the podcast this morning, gentlemen.
• 1:17
  SPEAKER_01: Good morning.
• 1:19
  SPEAKER_01: So, artists, to kick things off, a year ago Neo Volta was a residential battery company.
• 1:24
  SPEAKER_01: Fast forward to today, and you're standing up an FEOC compliant, two gigawatt hours U.S.
• 1:30
  SPEAKER_01: manufacturing joint venture with a Bloomberg Tier 1 energy storage system integrator and the world's largest solar module and cell manufacturers partners.
• 1:40
  SPEAKER_01: For an investor discovering Neo Volta story for the first time via our podcast, how would you describe what this company has become and why is it an interesting investment entry point?
• 1:51
  SPEAKER_00: Yeah, thanks for this opportunity and thanks for the question.
• 1:55
  SPEAKER_00: I I would say that when I came on board in 2024, the company in and of itself was really focused on the residential space.
• 2:03
  SPEAKER_00: I knew quickly, I have some history in the storage industry, and I knew quickly that I was wanted to look at other verticals to get into.
• 2:09
  SPEAKER_00: So we were looking into the CI space, which is a natural progression for most residential companies to move into.
• 2:16
  SPEAKER_00: During that research and study and looking at companies and talking to potential partners, the new regulations and rules from the reconciliation bill, also known as the One Big Beautiful Bill, came out.
• 2:27
  SPEAKER_00: And it essentially said it was going to prohibit Chinese companies from having ownership and being able to deliver product in order to receive the investment tax credit.
• 2:36
  SPEAKER_00: We took that opportunity and some of the conversations we were having, and ultimately we're having a conversation with the company POTICEDG, as you mentioned before, a historical Tier One Bloomberg uh integrator of energy storage solutions.
• 2:49
  SPEAKER_00: We were talking to them very heavily about an opportunity to work together.
• 2:52
  SPEAKER_00: That ultimately pivoted us into a joint ventured conversation of which we would have ultimate control.
• 2:58
  SPEAKER_00: During that conversation, actually during the negotiations of that joint venture, Long G came in over the top and acquired 60% of POTASEC.
• 3:06
  SPEAKER_00: Long G is, as you said, is arguably the largest solar cell and panel manufacturer in the world.
• 3:12
  SPEAKER_00: And much like other large solar companies, they have a definite interest in getting into the storage game.
• 3:18
  SPEAKER_00: And above and beyond that, they have a big definite interest in being in the United States.
• 3:22
  SPEAKER_00: So that opportunity and that conversations and that timeline really allowed us to get to where we are today.
• 3:28
  SPEAKER_00: And in that, in that development, it went from beyond just the CNI conversation into utility scale in CNI.
• 3:35
  SPEAKER_00: And that's led us to getting from where we were a year ago, a small residential company doing annual revenues in the$8 to$10 million range to where we're going today, which is putting this facility in place and having it come live this year and starting to sell product into a really growing market that's going to accelerate us from that small company into a much larger company in essentially, you know, 18 to 24 months.
• 4:01
  SPEAKER_00: So when someone as an investor comes and looks at us, they may look at the at the past, our history, our public filings.
• 4:08
  SPEAKER_00: But the reality is, as one analyst said to me one day, not too long ago, all of that is yada yada yada, right?
• 4:15
  SPEAKER_00: And the going forward is really what we're looking at and what you're doing.
• 4:18
  SPEAKER_00: It's not that we're moving away from the residential business.
• 4:21
  SPEAKER_00: In fact, we're going to be in Resi, CNI, and utility scale.
• 4:24
  SPEAKER_00: But the key note here is that's the reason why we were able to go from where we were to where we are so quickly.
• 4:31
  unknown: Great.
• 4:31
  SPEAKER_01: Well, thank you.
• 4:32
  SPEAKER_01: That's a really helpful overview.
• 4:33
  SPEAKER_01: And I would be remiss if I didn't mention that I peeked at your uh professional background on LinkedIn, and you have a great background for your role today.
• 4:39
  SPEAKER_01: So with that, I'll turn it over to Eric.
• 4:41
  SPEAKER_01: Okay.
• 4:41
  SPEAKER_02: Thanks, Tim and Artis.
• 4:43
  SPEAKER_02: Thanks for joining us today.
• 4:44
  SPEAKER_02: We really appreciate your time.
• 4:46
  SPEAKER_02: So I know you touched on it a bit, but let's dig into uh the strategic transformation uh maybe a little bit more.
• 4:54
  SPEAKER_02: So you described Neo Volta's evolution from a Southern California residential energy storage pioneer into a multi-vertical platform spanning residential, commercial, industrial, and now utility scale manufacturing.
• 5:09
  SPEAKER_02: So can you walk us through maybe a little bit more through the strategic logic of that build-out?
• 5:14
  SPEAKER_02: Why residential first, CI next through uh Newbow and Lumania, and why utility scale manufacturing was the right next step rather than staying as a pure plate distributor?
• 5:28
  SPEAKER_00: Yeah.
• 5:28
  SPEAKER_00: So if you think about it, the the genesis of our company was created back in 2018, and then really a little bit before that, some of our early investors, or group of people who were uh investing into the company that ultimately invested in the company in the beginning, were solar developers who were trying to get into the residential space, and there wasn't a lot of opportunity.
• 5:50
  SPEAKER_00: At that time, it was primarily Tesla, maybe LG, Solar Edge was dancing around.
• 5:55
  SPEAKER_00: And that's how they got into it.
• 5:56
  SPEAKER_00: This solar developer sent uh our co-founder and original CEO to a solar show and said, Hey, what battery should I use?
• 6:04
  SPEAKER_00: He came back and essentially said, Here's the check boxes for everything, and nothing lined up with all the check boxes.
• 6:09
  SPEAKER_00: And the developer said, I want a battery that does it all.
• 6:13
  SPEAKER_00: That's how Neovolta was formed.
• 6:15
  SPEAKER_00: And that's really how it grew over the coming years.
• 6:18
  SPEAKER_00: However, the company originally was really just focused on that.
• 6:21
  SPEAKER_00: And quite frankly, the original CEO had a mantra that if he couldn't drive to the site, the customer site, he didn't want to sell it.
• 6:29
  SPEAKER_00: So that really locked him into Southern California for the most part.
• 6:32
  SPEAKER_00: And and I think it ultimately, uh, and and he he's still a shareholder today, but I would say ultimately the board was like, we need to go a little bit different direction.
• 6:41
  SPEAKER_00: So when I came on board, the original thought was just to continue to grow the residential business.
• 6:46
  SPEAKER_00: But I have an experience, I you know, I led North America for Tessa in in 20, you know, 15 and 16.
• 6:52
  SPEAKER_00: And I really knew that there was another opportunity, particularly in the CNI space, with the with the evolution of the demand that we have on our grid today and the inability for the grid operators and uh to be able to suffice the the need and the growing demand, storage is going to play a big play, particularly behind the meter in CNI.
• 7:12
  SPEAKER_00: But ultimately, when we got that relationship with POTUSEDGE, they are a large tier one integrator who is really focused on the utility scale space and Long G coming in, that's a$10 billion a year revenue company.
• 7:24
  SPEAKER_00: They definitely want to be in all the verticals themselves.
• 7:27
  SPEAKER_00: We saw that opportunity to get in utility scale space.
• 7:30
  SPEAKER_00: Will we do it necessarily on our own at the beginning?
• 7:33
  SPEAKER_00: Likely not.
• 7:34
  SPEAKER_00: But with those guys together with us, we felt that the timing and the and the opportunity was just right.
• 7:39
  SPEAKER_00: And that's why our facility has the flexibility to do both utility scale and CI.
• 7:44
  SPEAKER_00: And we could talk a little bit about how we're doing that from a go-to-market.
• 7:47
  SPEAKER_00: But that's really what drove us in that direction.
• 7:50
  SPEAKER_00: And we felt with those guys, the technology risk and the pipeline risk were really mitigated in that.
• 7:55
  SPEAKER_00: And for us as Neavolta, as the 80% owner of the joint venture, it was really about the capital risk, and we had to go raise that money, which we did.
• 8:02
  SPEAKER_02: Okay, great.
• 8:03
  SPEAKER_02: Thank you.
• 8:04
  SPEAKER_02: That makes perfect sense.
• 8:04
  SPEAKER_02: So let's dig into um that technology or at least the manufacturing risk a little bit more.
• 8:10
  SPEAKER_02: So a common concern with new US battery manufacturing is technology or manufacturability risk and standing up an unproven line.
• 8:20
  SPEAKER_02: So you've said Pendergrass is essentially replicating an existing POTUSEDE production line that uh you saw and was tested in China.
• 8:31
  SPEAKER_02: So with Langi as the strategic partner that vertically uh integrated into storage through the same relationship.
• 8:39
  SPEAKER_02: So, how does the lineage change the risk profile of standing up a new gigawatt-hour scale uh plant in the US compared with if you were just trying to do it on your own from scratch?
• 8:51
  SPEAKER_00: Yeah, yeah, absolutely.
• 8:53
  SPEAKER_00: And that in quite frankly, if someone gave you a bunch of money today, you could go buy the tools and stand up your own your own factory, right?
• 9:00
  SPEAKER_00: And and and but you you mentioned two things that are really important.
• 9:03
  SPEAKER_00: There's technology risk and there's manufacturing risk, right?
• 9:06
  SPEAKER_00: On the first piece of it, that technology risk, what we wanted to do, and particularly in the market of utility scale, the large developers and the banks and the and the customers, they don't like to have a lot of change very quickly, right?
• 9:18
  SPEAKER_00: And there were a lot of opportunities to look at newer technologies, newer capabilities.
• 9:23
  SPEAKER_00: But what was interesting to us is to be able to come to market with a product that was proven, a product that the customers understood and that they trusted could be done.
• 9:32
  SPEAKER_00: Uh, you know, the POTUSEDGE team, they have product all over the world, including here in the US.
• 9:37
  SPEAKER_00: And what we did when we started talking to them is, guys, we went to their factory in China, we looked at their operations and we said, we want to do something that's very similar.
• 9:46
  SPEAKER_00: We don't want to do new technology.
• 9:47
  SPEAKER_00: Now, don't get me wrong, our tools are brand new.
• 9:49
  SPEAKER_00: We're not, we're not taking existing equipment that was operating per se.
• 9:54
  SPEAKER_00: What we did is we we ordered the new tools, they put the tools together, we went over, they proved to us that they worked.
• 9:59
  SPEAKER_00: We did a factory acceptance test, right?
• 10:02
  SPEAKER_00: And then they tore those down and brought them over.
• 10:04
  SPEAKER_00: But in terms of the technology itself, it's a very understood and tried technology that POTUSEDG and part of our service and partnership agreement, they know how to operate.
• 10:13
  SPEAKER_00: They've operated in the field, you know, they put product in the field, they see product operating today, which starts to mitigate some of that customer risk from a from a technology perspective.
• 10:24
  SPEAKER_00: But another key portion of that is the manufacturing risk.
• 10:27
  SPEAKER_00: Now, I could go buy a line just like I did, and I could buy that same technology, and the technology risk in and of itself is fairly low.
• 10:35
  SPEAKER_00: But the ability to manufacture it is another thing, right?
• 10:38
  SPEAKER_00: And you've got to prove that you've got to have the right quality assurance.
• 10:41
  SPEAKER_00: And POTUSE Edge also brings that very strongly to the table.
• 10:45
  SPEAKER_00: And that's what Long G is leveraging when they did the acquisition, right?
• 10:49
  SPEAKER_00: Long G has a long experience in the solar industry, but relatively new when it comes to storage.
• 10:54
  SPEAKER_00: And they believed in POTUSE Edge, and they're not a small player in this industry.
• 10:58
  SPEAKER_00: So they are a big believer in POTUSEDG's capability.
• 11:01
  SPEAKER_00: They're going to come over, they're going to support us in the manufacturing of the beginning days.
• 11:06
  SPEAKER_00: We have a huge team that's already here, not only from POTUSE Edge, but also from all of our vendors.
• 11:12
  SPEAKER_00: There's a brevy of activity going on, or uh, you know, a ton of activity going on in the factory today.
• 11:17
  SPEAKER_00: And that's starting to not only be the installation and the startup and the operation of the equipment, but also the training of our employees.
• 11:25
  SPEAKER_00: So we felt very comfortable with that.
• 11:27
  SPEAKER_00: And they're not going to just put it in the ground, start it up, hand it over.
• 11:31
  SPEAKER_00: They're going to be with us and support us over the coming months to ensure that we have the right quality assurance that makes our comfortable our customers comfortable.
• 11:40
  SPEAKER_00: And that's really what we're going to be driving at.
• 11:42
  SPEAKER_00: And we'll be doing not only the operations, but third-party auditing, engineers coming in, testing it, making sure that the things are operating, going over our procedures, the typical things that you see from large-scale developers.
• 11:54
  SPEAKER_00: And they'll be supporting us in that.
• 11:56
  SPEAKER_00: And and quite frankly, what they also bring to us is the QAQC on our vendor list, right?
• 12:03
  SPEAKER_00: They're supporting us as we go to qualify vendors.
• 12:05
  SPEAKER_00: And we're utilizing a lot of the processes and procedures that Longi already has in place for their vendors, and we're utilizing their people to do it.
• 12:13
  SPEAKER_00: So that's where we feel very comfortable then versus someone.
• 12:17
  SPEAKER_00: There are people today who are going out investing and putting in pack lines and say, hey, we can manufacture packs.
• 12:22
  SPEAKER_00: There are contract manufacturers that say, Yeah, you bring the tools here, we'll make the pack for you.
• 12:27
  SPEAKER_00: But it's not really the history of the QAQC that we feel comfortable with.
• 12:32
  SPEAKER_00: And that was a strong reason why we decided to partner with POTUSEG.
• 12:36
  SPEAKER_00: We had other opportunities, to be quite frank, but we felt very strongly about partnering with POTUSEG.
• 12:41
  SPEAKER_00: And it only got more strong, if I can say it that way, when Longie came involved.
• 12:46
  SPEAKER_02: Yeah, that sounds great.
• 12:47
  SPEAKER_02: That sounds like a great plan.
• 12:49
  SPEAKER_02: So let's turn to um the fiat compliance, so foreign entity of concern.
• 12:55
  SPEAKER_02: So you've talked about the uh non-prohibited foreign entity determination obtained with a leading law firm as the first stamp that developers and their financing partners look for before they'll even consider a supplier.
• 13:10
  SPEAKER_02: And you're now working through all the uh build material level compliance work with KPMG.
• 13:16
  SPEAKER_02: So for investors who aren't really steeped in the foreign entity of concern and IRA compliance mechanics, can you explain in plain terms what that opinion actually certifies for you and why Neo Volta Power was structured from day one to be compliant rather than retrofitted?
• 13:37
  SPEAKER_02: And what doors does that open for you potentially?
• 13:40
  SPEAKER_00: Yeah, and you know, as as we said at the very beginning, when the new reconciliation bill, the budget bill, as they call it in Congress came out, it created a situation where Chinese ownership in a company, and then ultimately Chinese materials and the balance in the bomb, so to speak, under a material assistance uh uh ruling, uh had a limitation.
• 14:07
  SPEAKER_00: It had a very limitation.
• 14:08
  SPEAKER_00: They did not want to allow a Chinese company's ownership or Chinese materials in order to receive the investment tax credit.
• 14:15
  SPEAKER_00: You can still buy Chinese-made equipment and you can install it here in the US.
• 14:19
  SPEAKER_00: It's not prohibited in that sense, but you can't participate in what they call the 48E under the IRS tax guidelines to receive the investment tax credit.
• 14:27
  SPEAKER_00: We created our business such that we could do that under the rules.
• 14:30
  SPEAKER_00: And what that ultimately means is they have to have a 20% or less ownership.
• 14:34
  SPEAKER_00: That flows down to not only the 48E tax credits, but the 45X advanced manufacturing tax credits as well.
• 14:41
  SPEAKER_00: But we created it from the very beginning.
• 14:43
  SPEAKER_00: What's very interesting of creating it from the beginning, other companies have done this where they've gone, they've taken two operating entities and they've tried to put them together.
• 14:53
  SPEAKER_00: It's much more difficult once you do that because now you have operating companies, whether they're Chinese or non-Chinese in the US, and you're trying to kind of cobble it together.
• 15:01
  SPEAKER_00: It's not impossible, but it's been proven to be very difficult for some of these companies to get to a position.
• 15:07
  SPEAKER_00: We started from ground zero, which was ultimately the smart way to do it.
• 15:11
  SPEAKER_00: And we took advantage, quite frankly, and we were doing this with PoTus Edge as a standalone partner, right?
• 15:17
  SPEAKER_00: But we took a lot of advantage from what Lon G has already done in the United States under the solar side of the business.
• 15:24
  SPEAKER_00: They have a very similar joint venture with a developer called Inventorgy.
• 15:28
  SPEAKER_00: They have a manufacturing facility in Columbus, Ohio that manufactures solar panels.
• 15:32
  SPEAKER_00: Very same similar setup.
• 15:34
  SPEAKER_00: And quite frankly, it was not they had had it set up for the advanced manufacturing tax credit.
• 15:40
  SPEAKER_00: When the Fiat rules came out, it required them to pivot what they already had, and they were able to do that.
• 15:46
  SPEAKER_00: What's critical about that is that's essentially the cornerstone of our agreement.
• 15:51
  SPEAKER_00: Our agreement is not we have 80%, you guys have 20%.
• 15:55
  SPEAKER_00: I mean, that's the result of it.
• 15:57
  SPEAKER_00: Our our is our agreement is we shall be fiat compliant.
• 16:02
  SPEAKER_00: That's the cornerstone.
• 16:03
  SPEAKER_00: So if the government were to come and change the rules, our our structure would need to change.
• 16:08
  SPEAKER_00: If they came back tomorrow and we don't expect this, but if they came back tomorrow and said it needs to be 8515 or it needs to be this or it needs to be this, we as an agreement, we have to make those changes, right?
• 16:20
  SPEAKER_00: And so Long G is very aware of that and and you know and and is willing to move.
• 16:25
  SPEAKER_00: They're a very forward-leaning partner in terms of how they're approaching the U.S.
• 16:29
  SPEAKER_00: market.
• 16:29
  SPEAKER_00: I've been dealing with China for 15 years, right?
• 16:32
  SPEAKER_00: At least.
• 16:33
  SPEAKER_00: And and I've there's a history of next administration, next administration, next administration.
• 16:39
  SPEAKER_00: And I've been doing it since Obama was in.
• 16:41
  SPEAKER_00: We've had vastly different administrations, okay?
• 16:44
  SPEAKER_00: But the the relationship in terms of the engagement in China has really not changed across all of those.
• 16:50
  SPEAKER_00: In fact, the first anti-dumping AD C B D's in the solar industry were put in place when Obama was the president, right?
• 16:57
  SPEAKER_00: So it's not like a Democrat or Republican administration is changing how we deal with China.
• 17:02
  SPEAKER_00: It's very similar.
• 17:03
  SPEAKER_00: So the point of that is that we have a fiat compliant plan.
• 17:07
  SPEAKER_00: It was fiat our pro, you know, we're not a prohibited foreign entity.
• 17:10
  SPEAKER_00: We're finishing up our bomb with KPMG.
• 17:12
  SPEAKER_00: In fact, we have some of it done.
• 17:14
  SPEAKER_00: We're looking at several different bombs because customers may say, I want fiat compliant.
• 17:18
  SPEAKER_00: Customer may say I want domestic content compliant.
• 17:21
  SPEAKER_00: The IRS came out with a subset to the ruling that they had that allows you to mix and match equipment under the maker rule.
• 17:29
  SPEAKER_00: So you could have one fully domestic compliant box and one that's fiat compliant, but you add them together, you can get to 50% domestic content.
• 17:37
  SPEAKER_00: It allows you to do that.
• 17:38
  SPEAKER_00: So we're looking at different bomb combinations based on customers' need.
• 17:42
  SPEAKER_00: I wouldn't say it's dozens, but it's two or three, right?
• 17:44
  SPEAKER_00: So that's kind of what we're doing, and we're working through that today.
• 17:47
  SPEAKER_00: But ultimately, you know, being a prohibitive foreign entity uh limits you and being not one opens up the world, right?
• 17:54
  SPEAKER_00: So that customers are looking at tons of opportunities.
• 17:58
  SPEAKER_00: There's limited competition, more people are coming into the game.
• 18:01
  SPEAKER_00: There's no question about it.
• 18:03
  SPEAKER_00: But it is a very fast growing industry right now, and it's not going to stop over the next five to 10 years.
• 18:09
  SPEAKER_02: Agreed.
• 18:09
  SPEAKER_02: So let's um that's a great answer.
• 18:12
  SPEAKER_02: Let's take a look then at the revenue opportunity for you.
• 18:15
  SPEAKER_02: So with equipment uh roughly 85% on site and um completion of plant commissioning expected in the near term, Pendergrass will move from a construction story to a production story.
• 18:29
  SPEAKER_02: So, can you help investors understand how to translate um the two gigawatts of initial capacity scalable to eight gigawatts into actual revenue terms?
• 18:41
  SPEAKER_02: What should we assume about utilization in year one as you ramp um through 2027?
• 18:49
  SPEAKER_02: What's a reasonable revenue per gigawatt hour framework once the plant is running uh at design capacity?
• 18:57
  SPEAKER_02: And then what would have to happen commercially to justify pulling the trigger on the expansion to uh eight gigawatt hours?
• 19:07
  SPEAKER_00: You got it.
• 19:07
  SPEAKER_00: Let's talk a little bit about the plan itself and that that how you do expand, right?
• 19:12
  SPEAKER_00: And then we'll kind of get into the revenue and in the commercial pool to get us there.
• 19:16
  SPEAKER_00: It's a 210,000 square foot facility.
• 19:19
  SPEAKER_00: It's designed, the layout is designed to have two lines in it.
• 19:22
  SPEAKER_00: Right now we're just dropping in the first line today, right?
• 19:26
  SPEAKER_00: On a single shift operation, which really means about 40 hours a week, right?
• 19:31
  SPEAKER_00: It's not we're not talking seven days a week, we're not talking 10 hours, we're really talking a 40 and 40 hour a week operation.
• 19:37
  SPEAKER_00: We can do up to two gigawatt hours.
• 19:39
  SPEAKER_00: If we go to a second shift, we can go quickly to four gigawatt hours, okay?
• 19:44
  SPEAKER_00: And if what that means in terms of personnel, the plant, when it starts to operate, I'll have about 85 people to make the plant run, operate, not just on the in the on the line, but also from an administration perspective.
• 19:56
  SPEAKER_00: To go to four gigawatt hours, we need to add about 30 people.
• 19:59
  SPEAKER_00: That's what we're doing.
• 20:00
  SPEAKER_00: Okay, so it's not a it's not a big lift to get to that four gigawatt hour.
• 20:04
  SPEAKER_00: And I'll talk a little bit how we're gonna get there in a minute.
• 20:06
  SPEAKER_00: And then to get to the eight gigawatt hours, we ultimately need to drop that second line in.
• 20:11
  SPEAKER_00: You know, from a CapEx perspective, we've been saying somewhere in the$13 to$15 million range for that second line.
• 20:16
  SPEAKER_00: And then we could rinse and repeat in terms of single shift, double shift, and then get up to eight gigawatt hours.
• 20:22
  SPEAKER_00: And I like to say eight gigawatt hours plus because the way that we look at it in the United States versus China, China talks about capacity, but their utilization is generally 30 to 40 percent.
• 20:33
  SPEAKER_00: In the US, in order to compete, you know, your utilization gets up to 90% in terms of how you operate.
• 20:38
  SPEAKER_00: And that could be up to even three shift operation.
• 20:40
  SPEAKER_00: But we're trying to build conservatism into this right now.
• 20:42
  SPEAKER_00: Single shift, double shift, second line, single shift, double shift can go from two to eight gigawatt hours.
• 20:48
  SPEAKER_00: In terms of how we ramp to that, and what the revenue looks like, ramping to that is we start, as you said, right?
• 20:54
  SPEAKER_00: And we're still on pace to do this, to get everything installed.
• 20:57
  SPEAKER_00: And at that 85% number might even be a little bit less now in terms of the percentage or more now in terms of percentage of equipment on site.
• 21:05
  SPEAKER_00: Uh, and quite frankly, uh, I had a report just the other day saying nothing that needs to be delivered could stop us from producing at this moment, right?
• 21:13
  SPEAKER_00: So everything else can do that, just maybe a little bit less efficiently until we get the final pieces in place.
• 21:18
  SPEAKER_00: But everything feels like it's on pace right now to be at the end of August, to be starting to put production and ramping up.
• 21:25
  SPEAKER_00: That ramp up is uh we have some conservatism built into that.
• 21:28
  SPEAKER_00: We actually have conservatism built into the ultimately conservatism was built into the start date or the commissioning and startup date, to be honest with you.
• 21:36
  SPEAKER_00: Early on, I saw numbers that were a few months sooner.
• 21:39
  SPEAKER_00: I didn't feel comfortable with that.
• 21:40
  SPEAKER_00: I've been around several manufacturing facilities and I said there's always things that can happen.
• 21:44
  SPEAKER_00: And some things did happen, you know, generally outside of your control.
• 21:48
  SPEAKER_00: It's city permitting, tenant improvements, things of that nature, not really the line itself, but everything's working, uh everything's going to plan.
• 21:56
  SPEAKER_00: And like I said, there's a host of people and activity going on in the factory right now.
• 22:00
  SPEAKER_00: We feel by the end of August we're going to be up and we're going to start running and producing.
• 22:04
  SPEAKER_00: We have a slow ramp up period, and we think by the time we get to what I'd call middle of next year, we'll be to the 100% two gigawatt hour run rate, right?
• 22:14
  SPEAKER_00: That's kind of what we're looking at.
• 22:16
  SPEAKER_00: We have some analyst reviews out there.
• 22:18
  SPEAKER_00: We have some reports out there that show somewhere between this July and next July, which is our June and June, which is our fiscal year.
• 22:26
  SPEAKER_00: We're actually just started our fiscal year.
• 22:28
  SPEAKER_00: We're looking somewhere in the neighborhood of six to 700 megawatt hours.
• 22:32
  SPEAKER_00: And then by the time we get to that second half of next year, calendar year, we'll be looking at the full two gigawatt hours.
• 22:37
  SPEAKER_00: So that would roughly translate to an additional gigawatt hour in the second half of next year without any kind of ramp up.
• 22:44
  SPEAKER_00: Now, anywhere along that line, anywhere along that timeline, based on the commercial demand and our ability to move, we could start adding people.
• 22:52
  SPEAKER_00: We could start adding a shift.
• 23:00
  SPEAKER_00: So we have that capability along the way.
• 23:02
  SPEAKER_00: But that's how we're looking at it.
• 23:04
  SPEAKER_00: We're looking at it to where we're going to go between now and the middle of next year to get to full ramp.
• 23:09
  SPEAKER_00: And I would tell you there's conservatism built into that, but also ultimately how we're working it.
• 23:14
  SPEAKER_00: And in terms of revenue, how you look at it, right now, you could you could see somewhere in the neighborhood of 170 to 200 per megawatt hour, actually a little bit higher.
• 23:25
  SPEAKER_00: And what I give that range, it kind of depends on the application, the size of the overarching system that you're going to deliver to the customer.
• 23:32
  SPEAKER_00: So the number, you know, there's some economies that they could support maybe that 170 number versus a little higher number, and the mix between C and I and utility scale.
• 23:42
  SPEAKER_00: C and I is a is a is a little bit larger revenue.
• 23:44
  SPEAKER_00: We're seeing in anywhere from the 240 to 350 range of kilo per kilowatt hour.
• 23:49
  SPEAKER_00: Uh, and and so, and that's about 25% of our mix right now, right?
• 23:53
  SPEAKER_00: Is how we look at it.
• 23:54
  SPEAKER_00: Once we scale up from two to four to eight, that percentage will get less because we we believe in the early days that scale, that that ramp up or scale to eight gigawatt hours will be driven by the utility scale market.
• 24:06
  SPEAKER_00: But that being said, we're looking in somewhere in the neighborhood of 170, 200.
• 24:10
  SPEAKER_00: And if you think of that on each gigawatt hour is 170 million to 200 million.
• 24:14
  SPEAKER_00: So if you think about it from that perspective, getting into that one and a half gigawatt hours between now and end of next calendar year, you do the math on that, call it 170 to 200.
• 24:25
  SPEAKER_00: You're you're you're somewhere in the three to four hundred million dollars of revenue.
• 24:28
  SPEAKER_00: And then then you start ramping, you could obviously do the math there.
• 24:32
  SPEAKER_02: Okay, great answer.
• 24:33
  SPEAKER_02: Thank you.
• 24:34
  SPEAKER_02: So let's just take a look at the total addressable market.
• 24:37
  SPEAKER_02: So I think you've pointed to market size potentially around 45 billion.
• 24:43
  SPEAKER_00: Yeah.
• 24:43
  SPEAKER_02: Combined US utility scale, residential, commercial, industrial, and uh financing and services uh TAM by 2030, with utility scale alone potentially being about 20 billion.
• 24:58
  SPEAKER_02: So against a two gigawatt hour initial footprint that's scalable to eight, how do you think about sequencing which of those verticals uh fills the factory first?
• 25:08
  SPEAKER_02: And what has to happen, I guess, and you touched on it a little bit, for you to uh credibly capture a meaningful share of that market size.
• 25:19
  SPEAKER_00: Yeah, I'll kind of start with residential because it's not necessarily the factory and that piece of it, but I think it's important for listeners to understand is we're not necessarily moving away from the residential market.
• 25:29
  SPEAKER_00: The changes in the tax laws have now moved away the individual's ability to capture a tax credit as an individual tax owner, right?
• 25:38
  SPEAKER_00: So before the end of last year, you could file against your own homeowners, your home, your own personal taxes for as a homeowner and take the credits for installing solar and storage.
• 25:50
  SPEAKER_00: That has gone away.
• 25:50
  SPEAKER_00: It's called the 206D under the IRS guidelines.
• 25:53
  SPEAKER_00: That has gone away.
• 25:54
  SPEAKER_00: What's come, what's already been in place and it remains is the financing mechanisms, like the third-party ownership models.
• 26:01
  SPEAKER_00: We also call it TPO, the TPO model, third-party ownership.
• 26:05
  SPEAKER_00: So in that sense, that market remains, but we recognized as a company that as a manufacturer, you're kind of beholden to the tax to those finance platforms.
• 26:16
  SPEAKER_00: And while we love those platforms and continue to want to participate on those platforms, we also wanted to control our own destiny.
• 26:23
  SPEAKER_00: So on the residential market, and ultimately that will translate into the CNI, and I'll talk a little bit about that in a second, is that we are forming our own TPO model.
• 26:32
  SPEAKER_00: So we we have a uh prepaid PPA that we just began to launch.
• 26:36
  SPEAKER_00: It hasn't, we haven't really come out per se, but yet, but we we talked about launching our own model.
• 26:41
  SPEAKER_00: I feel very, very uh secure in the fact that that's gonna get done.
• 26:45
  SPEAKER_00: Uh, but that will, we think, will help multiply a lot what we're doing.
• 26:49
  SPEAKER_00: Many of the analysts aren't giving a lot of uh credit towards the residential play right now.
• 26:54
  SPEAKER_00: So it's not like I can replace residential with utility scale, but at the end of the day, we feel that that market's still gonna continue to be strong.
• 27:01
  SPEAKER_00: That manufacturing is a little bit different.
• 27:03
  SPEAKER_00: Then we go over to the factory.
• 27:04
  SPEAKER_00: The factory's got the CNI and the utility scale, right?
• 27:07
  SPEAKER_00: So those markets we think are going to grow rapidly.
• 27:10
  SPEAKER_00: We talked a little bit about TAM, and TAM is in dollars, right?
• 27:13
  SPEAKER_00: And then we talked a little bit about capacity and capacity being in gigawatt hours.
• 27:18
  SPEAKER_00: The way that I would translate it is we're building a two gigawatt hour to start facility in a market that's 40 to 60 gigawatt hours on utility scale, right?
• 27:26
  SPEAKER_00: And the CNI is somewhat less, but we think it can get up to four to 10 gigawatt hours as well.
• 27:32
  SPEAKER_00: But in that sense, we're trying to capture two to four gigawatt hours with that first line on a 50 to 60 gigawatt hour market.
• 27:40
  SPEAKER_00: Many of those are driven by big hyperscalers, data centers, things of that nature, but a large majority of what we call the tell is coming directly from utilities, solar plus storage developers, and we're really attacking those guys in the in the near term.
• 27:55
  SPEAKER_00: A lot of the hyperscalers, you obviously, the some other players, Tesla Fluence are engaged with those guys.
• 28:00
  SPEAKER_00: And we're talking to data centers as well.
• 28:02
  SPEAKER_00: We're having those conversations today about how we can support those, but at the same time, we're looking at a lot of different opportunities.
• 28:08
  SPEAKER_00: So we feel the lift to get to four gigawatt hours is not very difficult.
• 28:12
  SPEAKER_00: And we think that the demand is going to grow somewhere up to 100 gigawatt hours in terms of energy storage in the coming years, and that kind of reflects in that TAM number that we were talking a little bit about.
• 28:23
  SPEAKER_00: So the TAM growth across all platforms is 45 billion.
• 28:27
  SPEAKER_00: That's you know, put out by other analysts.
• 28:29
  SPEAKER_00: We just, you know, capture that data.
• 28:31
  SPEAKER_00: And you just talked about the financing piece of it.
• 28:33
  SPEAKER_00: We're utilizing that financing piece in the residential, and we're also looking at it in the uh in this in the CNI space with our partnership with Luminia and some of the stuff that we're doing with them.
• 28:44
  SPEAKER_00: But again, for investors to understand, it's not like we're trying to go capture 20% of the market share, right?
• 28:52
  SPEAKER_00: We're really looking at a 50 to 60 gigawatt hour market, and two gigawatt hours gets us from a$10 million company to a$350 million company pretty quick.
• 29:00
  SPEAKER_02: Right.
• 29:01
  SPEAKER_02: A lot of a lot of runway.
• 29:02
  SPEAKER_02: So let's um let's just you mentioned Luminia.
• 29:05
  SPEAKER_02: So let's just take a look at that relationship.
• 29:08
  SPEAKER_02: So they've already produced a uh a$1.9 million uh first purchase order for 40 fiat compliant uh commercial and industrial systems.
• 29:19
  SPEAKER_02: So inside a broader framework that I think you've said could be up to 160 megawatt hours and roughly$39 million of potential equipment revenue.
• 29:30
  SPEAKER_02: So, what gives you confidence that the remaining framework converts into orders?
• 29:35
  SPEAKER_02: And uh why do you see commercial and industrial as particularly attractive uh margin driver alongside the higher volume utility scale business?
• 29:44
  SPEAKER_00: Yeah.
• 29:44
  SPEAKER_00: I'll answer the second question first in terms of how that look.
• 29:48
  SPEAKER_00: You know, if if if someone was looking in this industry and they've looked at solar and they've been involved in in typical renewables, you would know that the three verticals, Resi, C and I, and utility exist.
• 29:59
  SPEAKER_00: And and solar, residential and utility scale were a big player.
• 30:03
  SPEAKER_00: C and I was a lagger, right?
• 30:05
  SPEAKER_00: They didn't really produce as much in solar.
• 30:06
  SPEAKER_00: And it's because most energy consumption doesn't necessarily fit the profile or the fit of putting solar on.
• 30:13
  SPEAKER_00: It's much different when it comes to energy storage.
• 30:15
  SPEAKER_00: Energy storage is definitely something that the customer can utilize.
• 30:19
  SPEAKER_00: And under the right financing platform, they're gonna be saving money day one.
• 30:22
  SPEAKER_00: And it's not a heavy lift relative to putting a solar plant in terms of overarching costs for the benefit of it.
• 30:28
  SPEAKER_00: So we think that there's gonna be a major play for CNI storage.
• 30:32
  SPEAKER_00: And the relationship with the utilities in this case is less antagonistic, right?
• 30:38
  SPEAKER_00: Solar behind the meter, very antagonistic relationship with utilities, whether you like it or not.
• 30:43
  SPEAKER_00: It's been very difficult.
• 30:44
  SPEAKER_00: Storage, it's very, they're very in line with it.
• 30:47
  SPEAKER_00: In fact, many utilities are giving lots of incentives for that, which led us to the conversation with our partnership with Luminia.
• 30:54
  SPEAKER_00: Luminia is a developer of solar and storage uh applications, right?
• 31:01
  SPEAKER_00: But they have a creative way of going to market.
• 31:04
  SPEAKER_00: They don't just go develop deal by deal, they do it more programmatically.
• 31:08
  SPEAKER_00: And the first order that we got was against a program that they got in the in California, we there is a program called um community choice aggregators, right?
• 31:19
  SPEAKER_00: So in where the big IOUs, San Diego Gas and Electric, Southern Caledison, and PG ⁇ E sit, there are other opportunities for consumers to participate so they can have a choice, an option.
• 31:31
  SPEAKER_00: And this is this community choice, these aggregating choices.
• 31:34
  SPEAKER_00: There's, I think, 20 to 25 of those in the state of California.
• 31:38
  SPEAKER_00: We happen to, they happen to get a partnership with one of them in some in San Diego, one of two that are in San Diego, and they they're looking to replicate that.
• 31:47
  SPEAKER_00: But these utilities have a vast need for energy storage to support the ever-growing infrastructure and the aging transmission and distribution that's that's existing.
• 31:59
  SPEAKER_00: They need they need the batteries to level it out.
• 32:02
  SPEAKER_00: So we see a large, large opportunity in the CNI space, and there's a large beginning demand.
• 32:06
  SPEAKER_00: And it's not only driven from the customer being the business, but it's also being driven by the utilities, right?
• 32:13
  SPEAKER_00: So there's a lot of incentive programs that are out there on top of the investment tax credit incentive that comes with it under leasing option, there's a lot of opportunity.
• 32:21
  SPEAKER_00: And what we're bringing to the customer is the equipment and the leasing capability, right?
• 32:25
  SPEAKER_00: So we're bringing the financial platform as well as that.
• 32:27
  SPEAKER_00: So we we're big believers in that.
• 32:32
  SPEAKER_02: So uh, artists uh you've laid out a really compelling story.
• 32:36
  SPEAKER_02: So just as a last question, uh we just have a couple minutes.
• 32:40
  SPEAKER_02: Sure.
• 32:40
  SPEAKER_02: Um, what what what milestones should investors be looking for to see how the story is is playing out?
• 32:47
  SPEAKER_02: What should we look forward to over the next few quarters?
• 32:50
  SPEAKER_00: Yeah, quickly, I think the most important thing that people should know is as we complete the facility, complete the installation, the startup, the commissioning, we'll be talking about that.
• 32:59
  SPEAKER_00: We'll be announcing that.
• 33:01
  SPEAKER_00: So factory going from construction to production, as you said earlier.
• 33:05
  SPEAKER_00: That's a it's a great way to look at it.
• 33:06
  SPEAKER_00: So completion of construction, production, and inside of that window, purchase orders, right?
• 33:12
  SPEAKER_00: Getting our first orders in.
• 33:14
  SPEAKER_00: Those are the key milestones that I think investors want to see.
• 33:16
  SPEAKER_00: We start building up strong backlog, we start producing product, and we start moving that, shipping that to product and generating revenue.
• 33:24
  SPEAKER_00: Those are going to be the big stories over the next coming two to three months.
• 33:30
  SPEAKER_02: That's great.
• 33:30
  SPEAKER_02: Artists, thank you very much for joining us today.
• 33:33
  SPEAKER_02: As Tim said, you have a great background.
• 33:35
  SPEAKER_02: You have a very compelling story.
• 33:37
  SPEAKER_02: It seems like you guys are in a really interesting place, kind of at the right point in time.
• 33:43
  SPEAKER_02: And we look forward, uh, would like to stay in touch and see how the story develops over the next uh coming year.
• 33:49
  SPEAKER_02: And I just want to say thanks again for joining us.
• 33:52
  SPEAKER_02: And with that, Tim, I'll turn it back to you.
• 33:55
  SPEAKER_01: Thank you, Eric.
• 33:56
  SPEAKER_01: And artists, thanks so much for sharing the Neo Volta story with us today.
• 33:59
  SPEAKER_01: I agree with Eric.
• 34:00
  SPEAKER_01: You have some exciting milestones ahead, so feel free to reach out and come back on the podcast when you have more exciting news to talk about.
• 34:06
  SPEAKER_00: Would love to, Tim.
• 34:07
  SPEAKER_00: Eric, thank you guys.
• 34:08
  SPEAKER_00: Have a great day.
• 34:09
  SPEAKER_01: Thank you for listening, and don't forget to subscribe, as well as visiting WW Watertower Research.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules.
• 34:26
  SPEAKER_01: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.
• 34:31
  SPEAKER_01: Finally, a special thanks to the producer and editor of the podcast, Krista Fitzpatrick.