ESS Tech Inc
NYSE:GWH
ESS Tech Inc
NYSE:GWH
Price:
0.7632 USD
3.14%
Updated:
May 14, 2024
Section:
Earnings Call Analysis
Summary
Q3-2023
Q3-2023
Energy Company Completes Accounting Transition
The company has successfully transitioned to standard inventory accounting this quarter but faces a headwind as it works through previously expensed inventory. A key adjustment involves aligning inventory value to the lower of cost or net realizable value, a common procedure during scaling, which impacts companies with high overheads relative to production volumes. With a production capacity of 800 megawatt-hours annually, current operations are much below this threshold. This adjustment is expected until manufacturing scales up to approach full capacity.
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Ladies and gentlemen, thank you for standing by. [Operator Instructions] I would now like to turn the conference over to Erik Bylin. Please go ahead, sir.
Welcome to ESS' 2023 Third Quarter Financial Results Conference Call. Joining me on the call today from ESS are Eric Dresselhuys, CEO; and Tony Rabb, CFO. Following management's prepared remarks, we will hold a Q&A session. Earlier today, ESS released financial results for the third quarter of 2023. The earnings release is available on the Investor Relations section of the company's website. As a reminder, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects, partnerships, financial performance and strategy for the remainder of 2023 and beyond. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call, in particular those described in our risk factors set forth in more detail on our most recent periodic reports filed with the Securities and Exchange Commission as well as the current uncertainty and unpredictability in our business, issues with our partnerships, inflation, the markets, the economy and the current geopolitical situation. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law. During the call, we will also present certain financial information on a non-GAAP basis. Management believes that non-GAAP financial measures, taken in conjunction with U.S. GAAP financial measures, provide useful information for both management and investors by excluding certain items that are not indicative of our core operating results. Management uses non-GAAP measures internally to understand, manage and evaluate our business and make operating decisions. Reconciliations between U.S. GAAP and non-GAAP results are presented within our earnings release. With that, I will turn the call over to ESS' CEO, Eric Dresselhuys.
Thank you, Erik, and thank you all for joining us for our third quarter earnings call. Today, I'll review our financial results, Honeywell partnership, customer success and additions to the leadership team. I am joined by Tony Rabb, our CFO. We continue to make solid progress across the business, driving customer deliveries, signing significant partnership agreements, and efficiently managing our resources as we drive to profitability. While we came in somewhat light on revenue in Q3 due to a timing delay with one project, we remain confident in our ability to deliver on the projections we shared last quarter, namely achieving $9 million in revenue this fiscal year. As a reminder of the progress we've made, our year-to-date revenue of $4.7 million is an increase of about 700% from last year. We have sufficient product and demand to be able to deliver on a material increase in revenue in the fourth quarter and achieve our objectives. We are a burgeoning company with large customers and complex projects. Delays that may seem slight or insignificant at our customers can cause shifts and when we ship product and recognize revenue in the short-term. That's happened in the third quarter, but these should even out over time. In late September, ESS entered a transformational partnership with Honeywell, and industrial powerhouse with strength across technologies and markets that align tightly with those that ESS is pursuing. Recognizing the importance of long-duration storage and ESS' advantages with Iron Flow technology in solving for a clean energy future, Honeywell first engaged with ESS at the beginning of the year. After [exhaustive due] diligence into our operations, customer relationships and intellectual property, Honeywell became convinced that ESS has developed a truly differentiated technology to serve this market, and we are thrilled to enter into this synergistic partnership. The relationship is wide-ranging, but I will provide a brief recap of the highlights. First, Honeywell plans to incorporate our technology into their clean energy go-to-market efforts and have an initial target to purchase up to $300 million of our product in the coming years. They already put down a $15 million prepayment towards those purchases and have made a direct equity investment of $27.5 million at a 24% premium to ESS' then-current stock price, adding $42.5 million to our balance sheet immediately. To warrant, Honeywell can make further investments in ESS at an even more significant premium, which would add almost $40 million more to the balance sheet. ESS will integrate Honeywell's flow battery IP into our own extensive IP portfolio and will collaborate through a joint development agreement to further progress the technology. In total, we believe this to be an industry-defining relationship. Collaboration is already underway, and we can't wait to share our progress.While we are shipping energy warehouses today, over time we see the majority of our revenue shifting to energy centers, or ECs. Our EC solution utilizes the same patent-protected technology and design approach as the EW at a much greater scale. Our EC solution is modular and designed to scale to tens of megawatts per installation with greater flexibility and much lower cost per kilowatt hour to enable the utility scale solutions necessary to achieve a carbon-neutral grid. We've been developing this product for some time, and we're excited that our operations and engineering teams have been hard at work with Portland General Electric building the first energy center right here in Oregon. It's exciting to see this come to life, and we expect to be testing an operational EC this quarter. With full commissioning slated for the first half of '24, we believe we are on track to begin shipping ECs to commercial customers in the second half of 2024. We're excited to be bringing the EC to life, a product that we expect will fuel our long-term growth trajectory. On the customer front, I would like to congratulate our Australian partner, Energy Storage Industries Asia-Pacific, or ESI, on their expanded agreement with Stanwell Corporation, a major electricity generator owned by the Queensland government. Announced by the Queensland Premier during her recent State-Of-The-State address, Stanwell detailed its intent to develop what will be the largest Iron Flow battery energy storage system in the world. After deployment of the previously announced initial project, they plan to expand to a 150-megawatt installation and have already taken an option to buy up to 200 megawatts per year thereafter. This deal comes on the heels of Energy Queensland's announcement in August that it will deploy a 1-megawatt Iron Flow battery from ESI in the Wide Bay region to support the development of lithium-ion alternatives. Stanwell and Energy Queensland are driving forward in the mission to fulfill the Queensland Energy and Jobs plan that will call for 3 to 3.5 gigawatts of storage to achieve the state's target of 80% renewable energy in the grid by 2035.To follow up on our announcement last quarter, we're pleased to share that we finalized the agreement with LEAG for the first phase of our groundbreaking project to bring green baseload energy to Germany. As you'll recall, this project is intended to deliver a 500-megawatt hour Iron Flow battery system at LEAG's Boxberg power plant site. The installation would create a repeatable building block to support LEAG's objective to create up to 20 gigawatt hours of storage to be paired with solar and local hydrogen production, creating the largest green energy hub in Europe.We continue to enjoy great validation from our existing customer base. We successfully commissioned our first deployment of 6 energy warehouses at Sacramento Municipal Utility District. These 6 EWs represents the first phase of an agreement that will deliver up to 200 megawatts of long-duration energy storage to support SMUD's aggressive 2030 clean energy vision. As another sign of the progress our customer success team is making, we recently commissioned an EW for Nevada Energy in just 2.5 weeks among the other projects we delivered this quarter. Four of these customers, Honeywell, ESI, LEAG and SMUD, have signed agreements with ESS that could, if fully realized, result in shipping hundreds of megawatts of storage, which would translate to well north of $1 billion in total revenue. To realize this potential, we need to balance managing our cash position, optimizing our operations and ramping the production of energy centers, which is the best form factor to deliver megawatts of storage most efficiently. To accomplish these objectives together, ESS expects to maintain our relatively modest rate of EW shipments early next year and then to start delivering ECs in the second half of 2024. We have sufficient power module capacity in place today to meet our 2024 demand, and we'll look to add additional capacity late in '24 to enable further ramping into 2025.As you can tell, we're excited about the great progress we're making as we ramp the business, but the progress is not always linear. I want to share that the collaboration we have with San Diego Gas & Electric at the Cameron Corners site has ended. The project was conceived several years ago and, as we built it out, the parties recognized a mismatch related to the specific technical requirements at the site, and we jointly agreed to move on at the end of the quarter. I'll admit this is a disappointing outcome, but a reflection of the transformation of ESS as a company. We are now delivering EWs to customers, largely recognizing revenue upon shipment, and seamlessly commissioning our technology at customer sites. We sincerely appreciate the collaboration with SDG&E and hope to find new opportunities to work with them in the future. We continue to build out and strengthen the ESS team. I am pleased to welcome Harry Quarls to the Board and Jeff Loebbaka as our Chief Commercial Officer. Harry assumed the role of Chairman and brings vast strategic, financial and operational experience to help guide ESS in our continued progress. Jeff will run all of our go-to-market efforts and will leverage his experiences from numerous leadership positions running sales and marketing, including 5 years at Enphase, to drive our revenue growth. And with that, I'll turn it over to Tony to cover our results.
Thank you, Eric. Unless otherwise noted, all numbers we discuss today will be on a non-GAAP basis. You will find the reconciliation of GAAP to the non-GAAP financial measures in our earnings release, which is posted on our Investor Relations website. We recognized $1.5 million in revenue in the third quarter, and we still believe we can deliver on $9 million in revenue for the full year. As noted previously, the timing of activities for our customers can cause delays in the timing of shipments and revenue recognition has happened in Q3, but this is something that we are working to improve. And as we grow, we expect that these variations will smooth over time on a collective basis. Beginning in Q3, we transitioned out of development accounting and into commercial inventory accounting, so we are now reporting our cost of revenue separately from our operating expenses and beginning to record inventory on our balance sheet. Our cost of revenue was $10.2 million in the third quarter. As part of this transition, in Q3 we are required to record a Lower of Cost or Net Realizable Value, or LCNRV, adjustment to write down the value of inventory on hand at the end of the quarter to the amount we anticipate receiving upon customer delivery and after considering all future costs of completion. This is a significant adjustment to our cost of revenue line and has a corresponding decrease to our inventory value. This is very similar to the accounting requirements impacting other energy storage and EV manufacturers. As we have discussed previously, we have moderated our production volumes this year to mitigate our cash usage while we advance our extensive cost reduction initiatives. While this achieves our objective regarding cash conservation, operating our manufacturing lines at a fraction of our 800 megawatt hours of annual capacity creates an impact to our cost of revenue and inventory values. Lower manufacturing throughput and, therefore, lower capacity utilization results in overhead designed to support much higher production volumes being spread over fewer EWs. In the near-term, as we increase our shipments to our customers, scaling the business toward the current full capacity of our factory and personnel, our purchase commitments and inventories on hand will increase as well. Because these factors impact the value that would be subject to the LCNRV inventory adjustment, we expect this LCNRV adjustment will continue to occur in the coming quarters and anticipate that this adjustment will serve as a material headwind to our gross margin in the near-term. However, as we expect to further ramp up our production towards the back half of 2024, increasing the utilization of our fixed manufacturing overhead and eventually achieving scale and continuing to reduce our unit production costs while driving operational efficiencies, we anticipate that the total charge per unit will decline over time. We expect this effect to accelerate once we achieve adjusted gross margin breakeven on our EWs in the second half of 2024. Our non-GAAP operating expenses for Q3 were in line with our expectations at $7.5 million. With that, we reported Q3 adjusted EBITDA of negative $14.2 million, a significant sequential and year-over-year improvement. With the cash infusion of $42.5 million in Q3, we ended the quarter with $124.5 million in cash and short-term investments. We will continue to effectively manage our cash burn rate in the coming quarters, and the cash on hand should last us well into the first half of 2025. While not pressing, we will continue to opportunistically look to strengthen our balance sheet through dilutive and nondilutive means to provide the necessary capital to give us operational flexibility to respond to market demands. The bottom line is that we feel very good about our cash position and liquidity and the extended runway we now have to push towards our longer-term goal of getting to cash flow breakeven. And with that, I'll open it up for questions.
[Operator Instructions] Your first question comes from the line of Corinne Blanchard with Deutsche Bank.
Could you try to talk again about the timing for the revenue recognition and how now is it flowing through? I think you have been improving since the last 2 quarters, but just wanted to get a sense as we go into 2024. And then maybe the second question would be if you can speak high level or how much detail you feel comfortable, but what we should be expecting through 2024?
So it's Tony Rabb. Relative to revenue recognition, things are continuing in the same manner that we described before, where we are able to recognize revenue in a fairly normal manner once the product, the energy warehouses are transferred to control the customer. And that is either happening once it leaves our warehouse here or once it arrives at a customer's location, depending on the contractual terms. But generally speaking, once all the obligations are met, that's how we're recognizing revenue on a fairly regular basis.
Corinne, it's Eric here. I'll take the second one. We've not set a firm goal for 2024 at this point. We do see substantial growth, but we have not locked in on a number. It will be a many multiples growth of where we're going to land in 2023, but we have not set a final target at this point. Corinne, just to add a little color to that, as we said on the call, look, we expect the EW shipments to stay relatively modest in the first half of the year in terms of the rate, kind of at the run rate of plus or minus from where we've been. And then as we hit the second half of the year, as our costs flip over and we start to hit unit profitability, we'll start to ship more EWs plus, as we said on the call in the prepared remarks, we'll start to ship ECs on top of that.
Next question is from the line of Leanne Hayden with Canaccord.
Just to start from me, can you talk about, when you're being approached by a potential customer who is evaluating your solution, which technologies are you primarily up against? Is it lithium ion? Is it hydrogen? Who do you view as the primary technological competitor? And has this changed at all over the past, let's say, 6 or 9 months?
Eric here. I'll take that. It's really primarily lithium-ion today still, and that really hasn't changed much. I think what has changed is that more and more people are coming to us very proactively intentionally seeking a lithium-ion alternative.So a year ago or more, we would have been having a conversation of us trying to convince someone why they needed a non-lithium alternative whereas, today, a lot of the contracts we have are people who have specifically decided to seek a non-lithium alternative and are looking for something particularly around longer duration, which has led them to the conversation with us. Relative to your hydrogen question, we don't see that as really competition at all. I think we've talked this in the past but, as a reminder, our view is that there is a short-duration energy storage market that will probably continue for some time. And there is an ultra-long category within the world of energy storage, which there are different technologies, including hydrogen, that are intended to become the seasonal or multi-multi-day storage. The part that we're absolutely laser-focused on is the intra-[dural], or the [inter-day] kind of 8- to 12-hour range, which we see as the fastest-growing part of the market right now.
Just as a follow-up for me, do you have any updates on the Honeywell transaction? I understand they've had a recent change in corporate structure. What does this mean for you? How do you expect to fit into their solutions? Any color you could provide on that would be great.
As we said in the prepared remarks, we remain very, very excited about the potential of this relationship. We just had a whole group of people from Honeywell out starting to kick off planning and targeting specific customer projects and development projects just last week. You're right, they did a reorganization that is actually, I think, fantastic for us. Joking aside, the new group that we work with is called ESS, which is kind of funny, but it's Environmental and Sustainability Solutions within the Honeywell world, and that's what we are, we're ESS. So I think Honeywell made some really smart moves to help align their business to really maximizing the energy transition, and I really hope we're going to be the beneficiaries of that.
Next question is from the line of Brian Dobson with Chardan Capital Markets.
Just a follow-up on Honeywell as well. So it's been a few weeks since you inked that agreement, and it may be too soon to comment on early results of the deal, but what have you heard from other potential partners and clients as far as (indiscernible) such a marquee client?
No, that's a great question. I'd say we've heard a couple of things. The first is I think people have appreciated that a group like Honeywell, maybe they don't move that fast. It's a big corporate organization with a lot of people and a lot of different groups, but that that has really helped validate the diligence and the work that they did. We tried to work it into the prepared remarks because some people asked us after we announced the deal, did this come up in a hurry, did this come up in the last 30 or 60 days.And of course, as you would expect with somebody like Honeywell, this is a process that kicked off in late January of this year and has gone through an extensive amount of diligence on the customer front and the technology front and operationally. And so the probably single biggest thing we've heard is that the validation that it's given to ESS has really been the right technology in the right market space is the #1 thing we've heard. From specific customers, of course, there's definitely a feeling that says, wow, if Honeywell did diligence on this and they've given it the stamp of approval, that puts you in a different category than all of the other non-lithium alternatives that are coming to market today. And then the third thing that I think is interesting is, and we've talked about this on previous calls, at a project level, the projects that people are undertaking are increasingly complex. They might be putting in renewables plus storage plus green hydrogen production. And our business at ESS is just to provide the technology for long-duration storage. So having a partner that's got the kind of scale and breadth that Honeywell has I think is going to open up market segments that go beyond just stand-alone storage or storage plus solar into these more complex use cases that we see great opportunity for in long-duration storage.
[Operator Instructions] Next question is from the line of Colin Rusch with Oppenheimer.
As you start to ramp here and start to approach pretty significant volumes by the second half of next year, can you talk a little bit about your working capital needs and how your supply chain is starting to mature to support that?
It's Tony Rabb. I think that we've made quite a bit of progress in terms of enhancing and improving our supply chain, both the process and in terms of the vendors that we're working with. That being said, we're still working through a number of different changes with a number of our vendors as we continue to scale and grow the product and as we work through the energy center development.But in terms of working capital needs, I anticipate that, obviously with volume, the overall dollar of working capital is going to go up, but the amount of actual working capital in terms of from an efficiency standpoint, I see that the weeks of inventory or weeks of working capital and the percent relative to sales, that's something that we believe we'll be able to improve over time. Today, we're carrying quite a bit of inventory and working capital relative to our sales, but we expect to get more efficient with that as time goes on next year.
And then Eric, if you look at the potential with a lot of these customers, obviously you're going to get through kind of the first hurdle with some of these customers from a diligence perspective because of the Honeywell relationship. But then what's your expectation around your ability to move those folks through the funnel to contract and the delta in terms of the pace of how that can happen here over the next several quarters?
That's a great question, Colin. It's something we spend a lot of time talking about. I'd put it into 2 different categories. I think that for commercial and industrial applications, so behind-the-meter type applications that are the typically smaller projects and maybe a little bit more one-off, I think those have moved relatively quickly. We've had sales cycles as low as a couple of quarters, and the transaction from the buy decision to implementation can go more quickly. That's, I think, in part driven by things that are connected to the low-voltage network tend to have a little less challenge on permitting and grid access and things like that, whereas I think the large utility scale projects are going to continue to be a little bit more plodding in terms of their total process to go from contact to implementation.Some of the big projects we've announced and why we had like some of the projects, like SMUD is a good example, is that it lays out a roadmap that goes over multiple years, and I think it will help accelerate the time to convert from implementation to operations. With Honeywell on board, I think that takes out a big chunk of kind of the bankability and are you going to be around kind of questions that always come up when you're a new company in a space. Having the endorsement, the ability to buy the product through Honeywell I think will accelerate that for some number of the customers.
The next question comes from the line of Chris Kapsch with Loop Capital.
A couple of follow-ups. Just on the Honeywell relationship also, while you said which makes sense that diligence process on their behalf sort of validated your technology, I'm curious if also that diligence process sort of validated your commercial strategy to transition to EWs and if there's specific examples of that in terms of Honeywell's commercial strategies.And then also just sort of following up on the transition to EWs. Tony, you mentioned some efficiencies with respect to working capital as you scale that transition from ECs to EWs. Just wondering if there's also an opportunity to, once you cross that Rubicon, to maybe steepen the sense in terms of gross margins? And is there also some capital efficiencies that come with that transition?
I'll take the first part of that, Chris, and then Tony can chime in as need be. And don't take this the wrong way. It's we're EWs today. We're transitioning more to ECs, so the reverse of what you said. But that's on us for the naming (indiscernible) we've come up with. Don't feel bad about it.Yes, we talked a lot about EWs and ECs with Honeywell. I won't try to preempt anything that they're thinking about in terms of their strategy, but there was a great meeting of the minds between us and them on the need to get to greater scale and to lower costs on a per-kilowatt hour basis. And the EC really drives our ability to do those 2 things. The thing that's really valuable for as it gets into some of these capital questions is that the core technology, the way we build a stack and the proton pump, the electrolyte we use, those are the same across any form factor. So you're really just looking at the balance of the system and trying to constantly find better and more efficient ways to build the balance of system to lower total cost and to improve performance. But the core technology underneath it, if we make an improvement to a stack, it affects the EW. It affects the EC. It affects any place that we deploy product.
This is Tony. So essentially, we're producing these on the same manufacturing lines, ECs and EWs, from a battery cell and battery stack standpoint, and the materials are the same. So as I transition to producing ECs and scaling those up, the vendors that I'm using and the amount of material that I'm buying for the battery cells and the stacks, it's all the same. And so it just helps in terms of efficiency from an inventory standpoint, from a volume standpoint and the leverage that we have with those vendors.So all of that I think is a positive as we scale the business up. And the key for us is going to be make sure that we're qualifying the best vendors and we have the ability to work down the lead times that we have with our vendors today.
And apologies for my (indiscernible). I'll blame that on the earnings season [slog]. But the follow-up was you mentioned sort of the collaboration in and around your IP and their IP. I'm just wondering if there's some opportunity when collaborating that will lead to a more discernible competitive advantage when addressing the long-duration energy storage market. And is it right to assume that the most attractive piece of your IP portfolio still is the proton pump technology? And if you could provide any color on what they're bringing to the table from an IP standpoint, that would be interesting.
Yes, sure. Well, certainly, I think that the proton pump is a very appealing part of our overall portfolio. I think the other thing that I'd say, not to put words in their mouth, but they were incredibly complimentary of our stack, the stack design and our manufacturability of the stack, and to do that with quality. And it's something that I think people take for granted, but building a really high-quality stack is not a small thing, and we got a lot of really positive marks from them on that.In terms of the collaboration, I think you hit it on the head. The goal here is to always find ways to move things forward. So I don't think it's going to result in any radical changes to our approach. They came to us in part because they liked Iron Flow. They absolutely appreciated the inherent advantages of Iron Flow Technology in terms of performance, safety hitting cost points. But they've got a ton of expertise around advanced materials. So whether that's separator materials or different power electronics or anything that we can do to improve the cost and the performance of the system I think are all things that are on the table. I would tell you that, after the first meeting, there was no shortage of ideas of things to go collaborate on together. And they've done a lot in their IP portfolio around things like separator materials and things like that. As you would probably appreciate, they've been a major player in that space across everything from petrochemicals to plastics to fuel cells to you name it. So they bring a wealth of experience on how to maximize those kinds of products, and we're really looking forward to tapping into that.
Next question is from the line of Thomas Boyes with TD Cowen.
I joined the call a little bit late, so I apologize in advance if some of these were already asked. But I just wanted to get a better sense of maybe where we are in the continuum of transferring to regulated accounting this quarter. I know that some inventory items, based on the timing when they were purchased, kind of present themselves differently as they flow through the P&L. Can you maybe just talk about that mechanism broadly? And then should we expect this to kind of be free and clear in 4Q? Or is there any lingering effects into 2024?
So we are fully transitioned into a standard inventory accounting this quarter, so that's good news, and we're extremely happy to have transitioned out. And as part of that transition, we're going to have to deal with a couple of components of transitioning into it. Number one is that we do have inventory that was previously expensed, obviously, and some of that inventory will take a little bit of time to work through. It doesn't all get worked through in one quarter.But more importantly, I think the thing to recognize is that we have to make an adjustment to our inventory, where we're basically adjusting it down to lower of cost or net realizable value, which is the same accounting that all companies in standard inventory accounting have to deal with. But companies that are scaling up like ours and other energy storage companies and other EV companies are all dealing with this as they're scaling up, and their manufacturing volumes are low relative to the amount of overhead that they have. And so we've got a lot of capacity in the facility today. We've got 800 megawatts hours of annual production capacity. We're operating well below that. So the fixed overheads that we have that you have to apply into inventory against the low number of units that we're producing, that's going to continue to be a headwind. And we'll be making this LCNRV adjustment until we start to get up closer to our full manufacturing capacity. The other component that we've described previously is that we anticipate on energy warehouses getting to what we call adjusted gross margin or non-GAAP gross margin breakeven, but not until the second half of 2024. And at that point is when we'll actually start scaling up because that's when your selling price is above your direct cost, and that's when you want to start ramping up your volumes to start covering all of those overheads. So both of those components are going to impact this LCNRV valuation, and we anticipate that, on a per unit basis, it will start coming down over time. However, as we start producing more units as we scale up, the absolute dollar value will be increasing until we get to the point where we can really start scaling the business up. So it is going to be a material hedge for us, going forward.
And then maybe just obviously great to see the progress on the energy center front. Can you just remind me kind of what the timeframe is in general terms to deliver on a project of that scale, if, say production starts in 4Q of this year? Is that a late 2024 event? Is that more early 2025?
Yes. I'll take that, Thomas. Eric here. So the first units that are being built are being built here, being built for our project with Portland General, which are here in Oregon. So those are actually coming right off of the manufacturing floor and onto the job site. We kind of view that as the pre-commercial units that we've done in collaboration with Portland General. And then we'll start shipping true commercial units in the second half of '24. So we'll have a '24 impact and then ramp up further as we get into '25.
This concludes today's conference call. You may now disconnect your lines.