Eos Energy Enterprises Inc. Q1 2023 Earnings Call
Good morning.
And welcome to Eos Energy Enterprises first quarter 2023 conference call.
As a reminder, today's call is being recorded and your participation implies consent to such recording at this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
With that I would like to turn the call over to Laura Ellis Vice President of Investor Relations. Thank you you may begin.
Yeah.
Thank you good morning, everyone and thank you for joining us for <unk> financial results conference call for the first quarter of 2023 on the call today, we have CEO , Joe Mr. Angelo and CFO Nathan Crazy.
Before we begin allow me to provide a disclaimer regarding forward looking statements this call, including the Q&A portion of the call may include forward looking statements, including but not limited to current expectations with respect to future results of our company, which are subject to certain risks uncertainties and assumptions.
Should any of these risks materialize or should our assumptions prove to be incorrect. Our actual results may differ materially from our expectation or those implied by these forward looking statements the.
The risks and uncertainties that forward looking statements are subject to are described in our SEC filings.
Looking statements represent our beliefs and assumptions only as of the date such statements are made we undertake no obligation to update any forward looking statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law.
Today's remarks May also include references to non-GAAP financial measures.
All information, including reconciliation between non-GAAP financial information to U S. GAAP financial information is provided in the press release non.
non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.
In addition, our non-GAAP financial measures may not be the same as or comparable to a similar non-GAAP measures presented by other companies.
The conference call will be available for replay via webcast through yes, as Investor Relations website at investors that E O S E Dot com Joanne.
Joe and Nathan will walk you through the company highlights financial results and business priorities before we proceed to Q&A with that I'll now turn the call over to E. S. CEO Joe Mr. Angelo.
Thanks, Laura let's move quickly to page three I mean this is.
Really a capstone page of the progress of the company's maintenance 15 year history, and really when I sit back and think about my five years in the company and just being able to sit here and talk about discharging a gigawatt hour of energy out in the field is very exciting when you think about that gigawatt of energy out in the field 700 megawatt hours of that team.
In 2023, and when you put that in perspective, that's the equivalent of powering 140000 homes for up to four hours. I think this is just a lot of work here done by the entire team throughout the history of the company to get to this moment and it's just one of those months, where you're going to get.
Get the get the news from the teams sit back and reflect how far the company has come but then also realize how much more work we have to do to move forward around the potential of this product. That's delivered this gigawatt of LNG could be.
Moving on to page four on the operating highlights you'll continue to see good progress commercially I'll go through some more details on the pipeline in.
In a future slide, but we continue to see the opportunity pipeline increase we booked a large order for $87 million nearly $87 million and that brought our backlog up to $535 million with representing $2. Two gigawatt hours of power talked about the discharge energy I think another piece of this and Nathan will get into some more details later.
Revenue delivering $8 8 million of revenue of 168% increase over first quarter of 2022, along with seeing the progress of our cost out and the product where you can see in the numbers revenue coming up the gross margin the loss of gross margin coming down and closing the gap on our <unk>.
Losses of operating profit cash on hand, yes, we closed the quarter with $60 million that doesn't include the funds that we raised <unk> hundred $55 million of Nathan will walk through later on our financing strategy, which I think we've put in place that financing strategy over a year ago, we've been very consistent about how we talked about using the different tools.
And we continue to use those tools to allow us to position the company for growth and deliver the results that youre seeing and the progress that youre seeing I guess, the overall strategy of becoming a.
Profitable operating company.
Now, let's move forward and talk about the commercial pipeline and orders backlog go to page six when we go to our classic our classic page of how we look at pipeline, we keep the page in the same format. So you don't have to figure out the format. When you look at it and you can focus on the numbers so focusing on the numbers Youll lead generation. Once again these are people coming to us customers come.
To us with ideas of projects that stands at nine over $9 5 billion 57 gigawatt hours. There is a lot of churn in that and that $1 billion increase yes things that drop out things that move in the current pipeline and things that come in team is doing a great job building relationships with potential new customers and really working through and showing the power.
The Eos.
<unk> and how it can help deliver a longer duration energy storage, which is critical for the energy transition. When you look at our current pipeline current pipeline is up in Q2, and we said every time, we signed over $500 million of LOI. Thank again about how we think about the movement through.
Our pipeline.
We don't call. It current pipeline unless we have a technical use case, where we can provide a technical proposal to the customer, which then leads us to giving them a nonbinding financial quote which that stands at $6 billion.
Itself our goal with that combined 7 billion is to then get customers to sign an LOI with us. So we get on the same side of the table with them and close the project out to allow them to generate revenue and allow us to put product out in the field that stands now at 1 billion and a half with seven gigawatt hours of.
We worked through those and when you think about the timing of LOI to firm commitment youre working through various different aspects on commercial terms permitting.
Land rights and interconnections to be able to get to a firm commitment that then goes into our backlog, which as I stated earlier stands at $535 million up $71 million versus.
Fourth quarter, so starting to see some traction on the team closing orders starting to see opportunities move into LOI and I think as we get more clarity around the IRR a legislation in the United States, we're going to see more and more orders to work through the pipeline opportunities worked through this pipeline while at the same time you are starting to see.
Europe looking at their what they're calling their green new deal, which is going to drive more activity over in Europe , and we're starting to see pipeline grow there as well and our focus on that on that on the European continent, as far as where we can deliver product as they look to diversify their energy mix moving on to page seven this is a page where.
I wanted to take a look back to our original customers. When we first went public.
Nearly two year over two years ago.
We had three what I would call emerging customers in IEP enter smart and Carson energy I mean, when you look at when you look at what those customers and what we've done here. This is really building a relationship back in 2020, creating letter of intent booked orders delivering.
On some of those booked orders, but also working with the customer from letter of intent into a booked order into delivery I think this just shows that process that I just talked about in real life with real orders that are going to be shipping here in 2023 and four in early 2024. We're excited about these relationships and these are the types of customer.
Is that when you look at the space, you've got to go out and grow with them and find ways for them to grow and find ways for us to deliver profitable solutions for that the bottom of the page talks about some more established customers Youll Panga Pine gate East over that's the project that I showed on the first page. This was a booked order back in 2021, we started delivering.
In 2022 that was the focus of ramping up the factory.
See that project running cycles around 50 megawatt hours per day is very exciting for the team and that also will lead us to additional add on projects under our MSA with <unk> as we look to move forward in the future The California Energy Commission or the SEC. This is something that started back in late <unk>.
17, 2018 running pilot projects for CEC relationship started with running individual cells than doing individual pilot projects in California, which then led to a commercial order in 2022, which was the bulk of the revenue that we delivered in the first quarter of 2023 with.
Additional shipments to come.
In the second half of 2023, but an exciting development for us as you think about developing that relationship and proving out your ability for your technologies that deliver the operating needs of customers, which then is going to create additional additional pipeline for us in California remains an important market for us as we look to the future.
I talked earlier about Europe at <unk> and other is another another repower is another customer that we've been building a relationship with over time.
Back again to pre public company days to come up with a booked order in 2021 to work through with them to get all the siting and shipping and logistics around getting that project install in in Europe and operating in 2024 with delivery in late 2023, it's exciting for us.
If you look at what's going to come in Europe , and working with a partner like annual adds credibility to what our technology can and will do out in the marketplace.
We shift now from the commercial side and go into operating excellence, what I want to leave the commercial section on is the concept of you're planting seeds to eventually grow trees to eventually create an installed base to eventually create a service a service annuity for our for our company.
That takes time to do that in an industry. That's very thoughtful because all of US are users of our product in that when we flip the light switch in our home we expect the likes to come on so you've got a high hurdle to prove out your technology and that's with the team here at <unk> has been working on everyday in the five years that I've been.
Here and that really takes us to slide nine so when you look at slide nine. This is the proof point of us being able to rapidly scale production in a very cost effective manner. When you look back at March of 2022, we had an empty building and turtle Creek with to infer.
While others in there when you think about where we were in April of 2023, you wind up with that.
That is a picture of the production line as we delivered the last new units to the field for Gen. Two three.
This facility not only ramp up but it also achieved cost out, which which Nathan will talk about we shipped 208 energy blocks, we produced over 34000 batteries and as I talked about we've run what we believe is one of the largest cycle.
<unk> ever done by another lithium ion technology in the World and when you think about documented cycles as far as we can tell this might be the largest one but we've got some more work to make sure that that's true, but we're proud of the fact that this 47 megawatt hour cycle proves out that the technology can scale, what we did in.
The factory over the last 12 months proves out our ability to scale, our technology and our ability to.
Produce product quality product out to the field now that foundation takes us to page 10, which is the <unk> III. The next generation of our technology same proven electrolyte inside of a new mechanical design inside of a new <unk>.
Your Asian that not only allows us to take cost out but also improves performance. So where are we in the journey. When you think about what we did in <unk> deliver those last.
Units for Gen. Two three inside of that that was part and parcel if you will with our strategy and the <unk> of delivering the product in 2023 to generate the investment tax credits for our customers and the production tax credits for ourselves, but where we have been also working on at that same time.
<unk> is getting the discrete manufacturing operations up and running for the <unk> III battery.
We're very excited about what we've done here, we've invested $1 billion.
Aligned today could do a 110 megawatt hours of annualized capacity, but more importantly, what you do with that $1 billion investment as you learn how to make your product. There is a list of little things that we learned that if you would have gone out and put a massive factory in place you would have tripled the company with the law.
<unk> that you had in each individual discrete manufacturing steps. So when you think about what we do.
First figure out how to get your manufacturing steps correct. Then go to a semi automated manufacturing sites and Thats, where we are and what we're doing in Q2. So Q2 is now investing in additional incremental $5 million to $7 million to expand the capacity of that line and get more throughput take the.
Lessons learned and codify them into our manufacturing processes could start delivering commercial product into the field second quarter is a transition quarter from us from the from the Gen. Two three into this E. Three now while we're doing that when you think about this from physical location the pictures I.
Could you on the prior page Thats the downstairs for them what is called building 700, and Turtle Creek the <unk>.
As you see here are the upstairs floor, where we're doing the modeling of steps one and two for the Z three manufacturing lines at the same time, we're doing that we're taking that downstairs floor that was an empty building in March of last year and emptying it out again to set up a spare part Manny.
Factoring line to manufacturers batteries for services and start to lay the groundwork for phase three of our scale up which is a fully automated manufacturing line, which we're forecasting to bring online by the end of this year. We're very excited we've got our we've picked our automation partner a proven.
Partner in both the battery space and with a lot of experience in automation and you've got to remember and I've said this before page eight page nine excuse me, where we talk about Gen. Two three that's a 90 minute cycle time from components to a finished battery.
<unk> III here on page 10 is about 90 seconds. So the throughput that will get on an asset base is.
<unk> is really significantly higher than what we're doing as we go through generations. That's why we've made the transition to the <unk>, what I would tell you before turning to turn it over to Nathan to walk through the financial results and how we're performing against our goals objectives is we're really proud of what gets me excited every.
They come in to work is the fact that this is a company where the technology was invented by American mines, It's built with American hands using predominantly American raw materials on American need manufacturing equipment. This proves that in the United States, we can still manufactured product.
We can still innovate and we could still lead the next generation of energy technologies. So it's an exciting time with a lot of work to do still and you have a team that's committed to delivering that and I'll turn it over to Nathan now to walk us through the financials. Thanks.
Thanks, Joe Good morning, everyone I want to begin by walking you through the first quarter financial performance discuss our liquidity position and capital structure, and then provide progress against our 2023 company objectives.
Overall, a strong performance by the team as we finished the last production of the Gen. Two three energy blocks that were shipped in the quarter and now we're beginning to transition the factory to Z three production.
Revenue for the quarter was $8 8 million almost three times, our revenue from one year ago, driven by increased production and deliveries over last year.
Cost of goods sold for the quarter was $26 9 million a decrease of $8 6 million compared to the first quarter of 2022, primarily driven by a 25% reduction in unit product costs and all of this in a world that is characterized by supply chain disruption and high inflation.
As we've said previously we have a number of clearly defined product cost out initiatives that fall into three primary categories better pricing and quality from our supply chain increased energy density and improved manufacture ability of our battery systems. While we have made very good progress on our cost out initiatives to date despite deferring.
Some of our Q4 shipments into 2023 in order to take advantage of the IRI credits, we expect unit cost to continue to trend down going forward as we implement incremental changes and realize further savings.
R&D investment was $5 4 million a.
A slight increase compared to the first quarter last year as we've made product and process design improvements and anticipation of manufacturing the Z three battery. It is important to note that $400000 was noncash related items.
SG&A for the quarter was 14.0 million, including $3 1 million of noncash items, which is $300000.
Lower than the first quarter of the prior year, driven primarily by reduced third party spend as we brought much of our initial startup overheads in house at a lower cost we continue to focus on managing our corporate overhead expenses is 85% of our 300 plus employees are directly involved in <unk>.
Designing building selling or commissioning our battery systems.
Interest expense was $18 6 million for the quarter of which $4 8 million was driven by the senior secured term loan with Atlas and the equipment financing facility with Trinity capital. The other $13 8 million was related to the interest expense and amortization from our convertible notes.
The resulting operating loss was $38 $3 million with a net loss of $71 6 million. This translates to $38 $6 million and net loss when you exclude $33 million in noncash items. The primary noncash items are the interest that we pick on.
Our convertible notes the change in fair value of our derivatives stock compensation and depreciation.
This compares to $48 5 million in net loss adjusted for noncash items and <unk> of 2022, which represents a 20% improvement year over year.
Now turning to slide 13, I want to provide some insight into how we're positioning ourselves to fund the future growth of our manufacturing capabilities in order to meet our increasing backlog of demand while capital markets have been challenging in general we've been working hard to provide funding optionality to best position us for further growth and caps.
The opportunity that sits in front of us as the market is accelerating and overall demand for long duration energy storage continues to increase.
Year to date, we've raised $90 million utilizing a variety of different financing instruments in the first quarter, we raised $35 million, which is $13 $75 million raised through convertible notes with existing investors $21 million to $5 million under our standby equity purchase agreement that we have in place with York.
And then most recently in April we announced a $40 million registered direct offering and private placement. These funds will support our ongoing operations as well as enable us to begin constructing the automated line for <unk> III.
I will take this opportunity to reiterate that if these investors exercised their warrants after after they become exercisable in October we could receive up to $50 million in additional proceeds.
Yes.
You can see from the middle column on this slide that we have capital flexibility and we will continue to use our financing facilities on an as needed basis to capture market share and deliver on customer commitments.
As a reminder, <unk> has an effective S. Three shelf registration filed with the SEC for up to $300 million of common stock preferred stock <unk> debt securities of $100 million of this is allocated to our ATM $75 million to Vascepa and $40 million for the registered direct offering that we just announced.
Ernst in April I.
I do want to clarify how these tools work. The ATM is one of our most cost effective ways to raise equity capital. However, it is subject to blackout periods market demand and daily trading volumes the issuance of convertible notes under supplements to the SIPA is similar to the ATM, but also provides us with the key.
Benefit of certainty and the amount raised with each issuance.
While our most recent capital raise was equity we continue to see significant interest from debt investors and we will continue to evaluate these options for future capital needs.
In addition to debt and equity markets, we continue to pursue other opportunities for funding and leveraging the incentives for U S. Clean energy companies. So that we can continue to accelerate our competitiveness in the marketplace, we expect to secure state and local incentives alongside federal support.
You may have noticed that we recorded an $800000 benefit in our Q1 financials related to the IRS tax credits and while the industry continues to wait an additional clarity on how and when these can be monetized. We expect this number to grow as we scale up production.
We have substantially completed the due diligence for our department of energy loan and are actively negotiating the final provisions of a term sheet with the loan program office.
The combined federal state and local industrial policy tools that have come together in recent years is allowing the U S to be competitive in the Cleantech space and we believe this will help accelerate our own competitiveness.
In addition, we are forming a consortium of community leaders universities and supply chain partners in anticipation of pursuing grants issued under the bipartisan infrastructure law.
The application process for these grants is currently expected to open in early summer with the awards being announced early next year.
In summary, we believe we have significant capital flexibility and we will continue to use these financing facilities on an as needed basis to capture the market and deliver on customer commitments. We believe we are well positioned to capture a once in a generation opportunity.
Now turning to slide 14, we want to provide an update on our progress against the full year 2023 company objectives.
The first quarter reflects a strong performance by the team as we're shifting the manufacturing process from Gen. Two three to <unk> III.
While we are off to a good start there is still a lot of work for us to do in order to reach these full year goals.
In the first quarter, we increased our opportunity pipeline by $1 billion, and we booked over $86 million with two new orders. The first is with one of the largest operators of energy storage in the U S and the second is an additional project with one of our existing customers.
We also signed three new letters of intent for a total of 850 megawatt hours, we continue to see market demand surging and we expect to convert these letters of intent into booked orders in the coming quarters.
Next we are on track for our $30 million to $50 million revenue target in the first quarter, we had revenue of $8 $8 million and as we think about 2023, we expect the revenue to be back end weighted as Q2 is very much a transitional quarter for us as we make the shift from manufacturing Jen.
Two three batteries to the Z three cubes.
Securing adequate funding will allow us to rapidly scale capacity in the next 12 months and we expect our first fully automated line in the fourth quarter of this year.
Lastly, while all of this is occurring one of our main priorities continues to be to take cost out of the product. We have identified seven key projects to increase energy density and improve our supply chain and streamline the manufacture ability of our product and we believe we should realize a 15%.
Product cost reduction from the current expected launch cost of the <unk> product as a reminder, with the delivery of a couple of recent cost out projects. The <unk> battery is expected to launch at half the launch cost of the Gen. Two three product back in 2020.
We have seen clear advantages with the three over the Gen. Two three product and efficiency energy density material quality and overall manufacturer ability and we're excited to scale this product and deliver it to the market with that I want to thank everybody for their time today and listening into our call I would now like to turn it.
Over to the operator for questions operator, please open the line for questions.
Thank you.
To ask a question. Please press star one one Orient Hudson telephone and wait for your name to be announced.
To withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Okay.
Our first question comes from the line of Christopher Souther with B Riley. Your line is now open.
Hey, guys. Thanks.
Thanks for taking my questions here, maybe just starting off.
The Doe loan process any.
<unk> color you can share around timing and the term sheet negotiation process.
I think it would be would be pretty helpful.
Sure Chris It's Nathan it's good to hear your voice.
I will tell you I mean, we can't say a lot more than what we've already said publicly I'll. Just let you know that I've spent time in D. C. Several times over the last couple of weeks.
I would reiterate we are making good progress we feel positive about where we're at unfortunately the.
The size of the organization, we are dealing with this process is taking longer than we would like.
The overall size of the loan Hasnt changed from what we've said previously to 50, plus and we're optimistic that we'll have something to announce.
The near future.
Got it Okay. That's helpful and then.
Maybe just.
The cost of goods sold decline.
Could you give us a walk through the first quarter, it's nice to see the reduction along with the big uptick in revenue, but it seem like.
A good chunk of deployments may have been in inventory at year end. So I just wanted to get a sense of what to.
The fixed portion of let's call it looks like in the quarter and the cadence.
As we transition into <unk>, and then ramp up in the second half.
I think you called out launch costs being half of what they were for Q3, but maybe you can just provide a little bit more.
Over there.
Yes, I don't know that I can give you the walk quarter to quarter, but ill just let you know 40% of Cogs is materials and freight related directly related to manufacturing.
15%, 16% as the labor costs associated with building and installing and commissioning batteries.
15% of it is depreciation.
And then the other 30% is all the other little stuff and Chris the only thing.
I'd add on your question here is is this is flowing through the cost out work that we did all of last year into the income statement, we didn't ship out of inventory and <unk>. We built we built the product and that was the strategy that we laid out last year and <unk> to manufacture.
Product and <unk> to take advantage of DRA incentives and you'll see those incentives, which reported that that manufacturing manufacturing generated $780000 in initial production tax credits under the area.
Got it Okay. That's helpful I'll hop in the queue. Thanks, guys. Thank you thanks, Chris.
Thank you.
Our next question comes from the line of Martin Malloy with Johnson Rice. Your line is now open.
Good morning, congratulations on the transition to hear that G. III.
Backlog build.
Wanted to.
Just to ask about the <unk>.
Procurement.
Raw materials components as you ramp up.
Are there any.
Raw materials are.
<unk>.
It might be more of a concern as you ramp up and maybe you could talk about the availability of zinc.
Mine.
I think you are purchasing a lot of it from tetra are they able to.
Fly what you need or are there other suppliers available.
So.
Good morning.
Yes, they can supply to our demand and.
They have capacity greater than what we're planning on manufacturing.
<unk>.
In 2023.
From the standpoint of the Bill of materials. When you look out at the ramp that we're going to go through.
We're ramping into a new production processes I talked about on the <unk> three what I would say is.
Like everyone and we've talked about this every quarter there are the normal supply chain blips in risks that you have to mitigate against that are consistent with <unk>.
There are manufacturers that you see and that's around.
Your power electronics equipment your chips for our BMS.
We feel like we've secured that supplier, we just have to manage through that the core raw materials to build batteries and enclosures. We've got partners that are able to deliver to the demand and we just got to work through that demand curve, where the focus for us is getting the timing right.
Of receiving the material as we ramp production.
Okay and.
My second question just wanted to.
Your customer conversations.
Our customers waiting for clarification on some of the provisions of the higher rate before they are placing orders.
With you all is there some pent up demand do you think it's related to waiting for the clarification of some of the key domestic content et cetera provisions in the IRI.
Yes, Marty I think hunter.
100% agree with your your question.
I think Thats why you see the buildup in loi's with customers, where customers are saying I've got a project.
Doses might technology I want to lock in the technology and my delivery, but I want to work through and see where the guidance comes out on.
What I'm, what I'm hopeful for.
On this on the on the on the domestic content part, which I think is one of the more important provisions that we all need to understand.
Everybody gets 30, a 30% investment tax credit for installing storage then there is a 10% if you install it in an energy transition zone, so going to places where there were former coal plants that are now being transitioned into renewable energy you another 10% for that.
And we're seeing a lot of we're seeing a lot of projects that tie into that 10%. Then there is a 10% of made in America.
What we have been pushing for where we continue to say is made in America needs to be manufactured in America not assembled in America using batteries manufactured overseas. So we're hopeful that that will come through and that will be a big differentiator, what I would say, though is around those tax credits.
It's going to be a significant uptick in demand, but we don't plan the business around having the habit is something that will help us and incentivize customers to buy from us, but the underlying fundamentals outside of the IRR for demand are still there that fit in with the product. So.
The made in America, not only is it a tax incentive but it's a security of supply chain. When you think about what's happened over the last two years.
Shifting to longer duration energy storage, and our product being able to deliver that that variation of flexibility of operation and then the long life of the product we've got fundamentals underneath that need a market demand thats only going to be accelerated with the IRI, but I do agree with you that there is a little bit of pent up demand as people are.
Waiting for guidance.
Great. Thank you I'll get back in queue. Thanks.
Thanks Martin.
Thank you.
As a reminder to ask a question at this time. Please press star one one you touched on telephone.
Our next question comes from the line of Joseph Osha with Guggenheim. Your line is now open.
Oh, Hey, good morning, My compliments on the progress a couple of questions. First you you were talking about before.
Five ex manufacturing credits.
Is there a <unk>.
To monetize those.
Other than from just.
Waiting on the IRS and I'm curious what your plan is for those and then I have a follow up.
Yes, we're looking at options.
Joe on how we can monetize those and when we can monetize those were still working through the details and nothing more definitive that we want to share at this point in time.
Okay, and I assume you are taking direct right.
Yes, yes, okay.
The second question just wondering if you can update us a little bit on what you see.
You undertake the transition to Gen three what some of the key.
Manufacturing challenges are key attributes of that new assembly process that we are analysts should be should be focused on.
Yes.
Joe Good morning, yes.
Yes, so inside inside that that slide that we showed on page 10 that phase one of developing discreet manufacturing we've worked through a lot of the details and bugs that come up when you're starting a manufacturing process.
As we move forward Youre basically.
This is going from like the minor leagues into the big leagues into the all star game as to how I think about it and the pace of how you are trying to do it.
Accelerates on every step so we have a process that allows us to build a quality battery that performs today. The next phase of this as we as we transition into phase II in semi automated manufacturing is stepping up the speed at which we do that you've got to make sure that that speed still delivers the quality that <unk> got under.
Phase one so that that is a P.
So we look at and then the third one is how you pull that together as we get into as we get into the second half of the year fourth quarter with the automated line of again, taking that down to that 92nd target cycle time to be able to deliver product off the line. So to me when I look at this I think we have figured out the equipment that we're going to use.
Discrete manufacturing process already is the next phase of this is how do you want to lay out your line. How do you want to staff. Your line how do you want to increase the throughput and then getting the automation now the reality is on the automation side. This is our first automated. This is our first automated manufacturing line that we've had in years, we believe we've got a great partner.
Thats done this before in the industry and also has done a lot of work in the automotive industry that will help us, but what I've learned in my five years. Here is you don't know until you actually know as crazy as that statement zones. So we just have to manage them. One by one I think what we've what we've done is we've set up a process where.
We go through this on a working level every day and then three times a week entire leadership team going through what are the lessons learned and challenges we have with just knock them off one by one.
Okay. Thank you and just on the back of that what can you say about how you see your path to positive gross margin at this point.
Yes, I think Joe we're confident that we will see positive gross margin as soon as we get this fully automated line implemented and running.
The exact timing of that we're not you're not communicating because it is dependent on the Doe funding and additional capital raising but but I am very confident that we'll be gross margin positive when we get this fully automated line.
Right.
Very helpful.
That toggle to positive gross margin does depend on getting those fully automated facility up and running.
Yep Yep alright.
Okay. Thank you very much thanks, Joe.
Thank you and I'm currently showing no further questions at this time I would like to hand, the call back over to Joe Mr. Angelo for closing remarks.
Thanks.
Okay.
Look I think the team we continue to make progress here and it's.
Its progress that you can see and measure in the numbers and I think one thing that we that I'd like to hit on this I would like to take we talked about revenue growth can you talk about gross margin growth cost out of the products, but what I'd like to take a moment I was just kind of flip this and look at this.
I think about the performance as it is also an investor in Es our earnings per share. If you look at the EPS numbers year over year.
We're at $85 85 loss last year and were at an <unk> loss. This year, but I think we've got to Peel back the onion and think about how we run the company. We really run this company on a cat on a cash basis. So if you take those same numbers and strip out the noncash numbers in that EPS loss.
You would have been at 90 cent loss in <unk> last year, if you take out the noncash items, which are which were principally driven by the increase in our stock price as it is tied to our convertible our convertible notes that we had for capital raise our loss on earnings.
On an earnings per share basis goes down to <unk> 44.
So it's half of what it was a year ago that shows the journey of where we want to get to it gives me the confidence that we have the team the plan and we've got a lot of risk and opportunity that we've got to manage to get there, but youre starting to see in <unk>.
In our third year here of being public the roadmap of how we're going to get to profitability with a lot of risk inside of it and a lot of things, we still have to do but you're starting to see that those numbers tying back to the vision that we laid out three years ago. That's also why I really wanted to include in there our commercial page to talk about.
This is not a sell it ship it market, where its very easy it's a widening road, where you've got to develop long term relationships in an industry, where the customers want to make sure. They get it right. The first time, so you've got a high bar to prove yourself and we're challenging ourselves every day to meet that high bar.
Both on how we went out in the marketplace and how we deliver the product and drive this company to become profitable over time, and we're continuing to be committed on that I want to thank everybody for their time. This morning, and look forward to keeping you updated on the journey as we move forward from here.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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