Q1 2024 Eos Energy Enterprises Inc Earnings Call

Good day and thank you for standing by welcome to <unk> Energy's first quarter 2024 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need a press star one on your telephone.

Unknown Executive: Good day, and thank you for standing by. Welcome to Eos Energy's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode.

Unknown Executive: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

You will then hear an automated message if I didn't hear you.

Speaker Change: Your hand is raised to withdraw your question. Please press star one again. Please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today Ms.

Unknown Executive: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Liz Higley, Director of Investor Relations.

Haley <unk>: Haley <unk> Treasurer and Investor Relations. Please go ahead.

Good morning, everyone and thank you for joining us for <unk> financial results and conference call for the first quarter 2024 on the call today, we have CEO, Joe Mr. Angelo and CFO Nathan Gregor before we begin allow me to provide a disclaimer regarding forward looking statements this call, including the Q&A portion of the call may.

Liz Higley: Good morning, everyone, and thank you for joining us for EOS's financial results and conference call for the first quarter of 2024. On the call today, we have EOS CEO Joe Mastrangelo and CFO Nathan Kroeker. 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 and outlook for our company and statements regarding our ability to secure final approval of a loan from the Department of Energy LPO or our anticipated use of proceeds from any loan facility provided by the U.S. Department of Energy, which are subject Should any of these risks materialize or should our assumptions prove to be incorrect, our actual results may differ materially from our expectations of those implied by these forward-looking statements.

Liz Higley: The risks and uncertainties that forward-looking statements are subject to are described in our SEC filings. Forward-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. The conference call will be available for replay via webcast through EOS's investor relations website at investors.eose.com.

Haley <unk>: Include forward looking statements, including but not limited to current expectation with respect to future results and outlook for our company and statements regarding our ability to secure final approval of the loan from the department of Energy L. P O or our anticipated use of proceeds from any loan facility provided by the U S Department of energy, which are subject to certain <unk>.

Haley <unk>: Risks uncertainties and assumptions should any of these risks materialize or should our assumptions prove to be incorrect. Our actual results may differ materially or materially from our expectation of those implied by these forward looking statements the risks and uncertainties that forward looking statements are subject to are described in our SEC filings.

Haley <unk>: Forward looking statements represent our beliefs and assumptions only as 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. The conference call will be available for <unk>.

Speaker Change: Replay via webcast or <unk> Investor Relations website at investors that USA Dot Com, 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 <unk> CEO Joe Mr. Angelo.

Joseph R. Mastrangelo: 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 EOS CEO Joe Mastrangelo. Thanks, Liz.

Speaker Change: Thanks, Liz welcome everyone. Thanks for taking the time here. This morning, let's jump right into what I think is the biggest news of the.

Joseph R. Mastrangelo: Welcome, everyone. Thanks for taking the time to be here this morning. Let's jump right into what I think is the biggest news of the session here today. Last week, we successfully completed the factory acceptance test for the state-of-the-art Line 1 with our automation partner, Acro Automation, in Wisconsin. It was really a tremendous achievement by the combined team of the two companies to get the FAT completed and the way that we got it completed. We got through final system debugging and integration in six weeks. The total cycle time on the line is a battery moving through stations for around 12 seconds. We really have a couple of stations that we need to tune in to.

Speaker Change: The session here today last week, we successfully completed the factory acceptance test for the state of the Art mine, one with our automation partner Acro automation, and Wisconsin really a tremendous achievement by the combined team of the two companies to get the FHA completed and the way that we got are completed.

Speaker Change: We got through final system debugging and integration.

Speaker Change: Six weeks the total cycle time on the line as a battery moving through stations around 12 seconds. We really have a couple of stations that we need to tune in the majority of the patients are running at the 10 second target. We've got a clear line of sight to get to that 10 second cycle time, it's very impressive to watch the batteries go through the bill to go through the manufacturing.

Speaker Change: Factoring process and see how far we've come and see the quality thats able to come off of the <unk>.

Joseph R. Mastrangelo: The majority of the stations are running at the 10-second target. We've got a clear line of sight to get to that 10-second cycle time. It's very impressive to watch the batteries go through the manufacturing process and see how far we've come and see the quality that's able to come off of the line. Now, when you take a look at that and think about what's next, what's next? First equipment arrived today in Turtle Creek to then start being installed in our factory here in Building 700, where we've been manufacturing on the semi-automated line. Pretty exciting time here.

Speaker Change: Now when you take a look at that and I'll think about what's next what's next first equipment, arriving today in turtle Creek to them to start being installed in our in our factory here.

Speaker Change: In building 700.

Speaker Change: Here, we're we've been manufacturing on the semi automated line pretty exciting time here. The operators have been trained on the on the state of the art line.

Joseph R. Mastrangelo: The operators have been trained on the state-of-the-art line during FAT. For us as a company, there are a couple of areas. One, we continue to execute on the plan that we laid out at our strategic outlook session in December. The second piece is getting through the FAT is a critical step as we think about customers wanting to see our ability to execute on large projects. And three, as we've talked about, this is also SAT, a critical milestone as we continue to work with the Department of Energy on our loan program office conditional commitment. So really, a great job by the team to achieve the schedule.

Speaker Change: Yes.

Speaker Change: And then our installation and commissioning is on plan for our scheduled now I think this is very important.

Speaker Change: For us as a company and a couple of areas. One we continue to execute to the plan that we laid out at our strategic outlook session. In December the second piece is getting through the FHA is a critical step as we think about customers wanted to see our ability to execute on large projects and three as we've talked about this.

Speaker Change: Also as.

Speaker Change: As a critical milestone as we as we continue to work with the department of energy on our loan program office conditional commitments, so really great job by the team to achieve the schedule great job to really start positioning now for SAP and truly ramp up ramp up production here as we go forward if we switch.

Joseph R. Mastrangelo: Great job to really start positioning now for SAT and truly ramp up production here as we go forward. If we switch to the next page and just talk about where we are running the business operationally versus the targets that we laid out in December. You know, we talked about continuing to improve the performance of the Z3 module. Nathan will talk through in his section some of the cost outs and work that we've done that we talked about in December. You know, we cut in a new EOS Z3 inline cube, which improves the overall power density of the product out in the field. We also transitioned over to a lower cost, higher energy density Z3 battery module.

Speaker Change: <unk> to the next page and just talk about where we are running the business operationally versus the targets that we laid out in December we talked about continuing to improve the performance of the <unk> III module Nathan will talk through in his section some of the cost out and work that we've done that we've talked about in December.

Speaker Change: We cut in a new iOS Z three inline cube, which improves the overall power density of the product out in the field. We also transitioned over to lower cost higher energy density Z. Three battery module. This will allow us to reduce overall product costs and manufacturing costs to bring them.

Joseph R. Mastrangelo: You know, this will allow us to reduce overall product costs and manufacturing costs to bring the product to market. On our path to profitability, which is our overriding goal as you think about where we are in 2024, you know, we've secured 55% of our direct material cost out target. A phenomenal job by the team to be able to do this.

Speaker Change: Products to market on our path to profitability, which is which is our overriding goal as you think about where we are in 2024, we've secured 55% of our direct material cost out target.

Speaker Change: A phenomenal job by the team to be able to do this more importantly, I think when you think about this in the context of the overall market. We believe that we are above 90% of U S content, while achieving that cost out. So once again like one of our core tenants is to allow our customers to maximize their benefits under the investment tax credit.

Joseph R. Mastrangelo: More importantly, I think when you think about this in the context of the overall market, we believe that we're above 90% of US content while achieving that cost out. So once again, one of our core tenets is to allow our customers to maximize their benefits under the investment tax credit of the IRA. Continuing to do that while driving down the cost of our product is a testament to our belief that we can still build competitive products here in the U.S. You know, field data, you know, field operating data is the next critical component. We've shifted over 110 Z3 tubes to five different customers.

Speaker Change: The IRI continue.

Speaker Change: To do that while driving down cost of our product is a testament to our belief that we can still build competitive products here in the United States.

Speaker Change: Field data field operating data is the next critical component we've shipped over $110 three cubes to five different customers. We're beginning commissioning on three of those projects I'll talk about them on a subsequent page, but thats going to be the critical next milestone when you think about.

Joseph R. Mastrangelo: We're beginning commissioning on three of those projects. I'll talk about them on a subsequent page, but that's going to be the critical next milestone when you think about where the Z3 evolves to, getting those assets up and running for customers out in the field. We have one of the three that are getting very close to start operating, with the other two starting operations in early third quarter. Commercial momentum, you know, the big announcement of extending our MSA with Pinegate Renewables, you know, very big, recurring customer, our largest installation is with Pinegate, so a testament to our ability to execute out in the field.

Speaker Change: We're the E three evolves to us getting those assets up and running for customers out in the field. We have one of the three that are getting very close to start operating with the other two starting operations in early third quarter.

Speaker Change: Commercial momentum the big announcement of extending our MF.

Speaker Change: <unk> with Pine Gate renewables very big recurring customer our largest installation is with pine gates. So a testament to our ability to execute out in the field.

Joseph R. Mastrangelo: You know, we are working out 1.2 gigawatt hours of late stage opportunities to continue to convert into orders. I think, again, going back to the previous page, that conversion into orders is really going to start to see momentum as people can come and see the line and be able to look at a battery coming off the line every 10 seconds and be able to say that EOS is capable of delivering at scale. I think that's critical as we start to see projects getting bigger in size.

Speaker Change: We are working on one two gigawatt hours of late stage opportunities to continue to convert into orders I think again going back to the previous page that conversion in the orders. It really is going to start to see momentum as people can come and see the line and be able to look at our battery coming off the line every 10 seconds and be able to say that.

Speaker Change: IOS is capable to deliver at scale I think that's critical as we start to see projects getting bigger in size people want to be able to see that you can deliver not just the small bespoke prove out a technical concept would be a true scaled operating company and that's the path that we're on as a team we continue to improve our overall digital capability we've.

Joseph R. Mastrangelo: People want to be able to see that you can deliver not just the small bespoke, prove out a technical concept, but be a true scaled operating company, and that's the path that we're on as a team. We continue to improve our overall digital capability. You know, we've taken a lot of the lessons learned from the Gen 2.3 product out in the field and rolled that into the logic around our BMS. If you go back and look at what we said in December around state of health, state of charge, overall operating and optimizing performance for customers, using that data and applying it to the Z3 is just going to make those purchases that customers are making of the Z3 more valuable as they get out in the field and installed.

Speaker Change: Taken a lot of the lessons learned from the from the Gen. Two three product down the field and roll that into the logic around our BMS. If you go back and look at what we said in December around state of health state of charge overall operating and optimizing performance for customers using that data and applying it to the G. III is just going to make those those parts.

Speaker Change: Is that customers are making up the <unk> III more valuable as they get out in the field and installed on the liquidity front Nathan will walk through where we are on monetizing our production tax credits and bringing that bringing in that.

Joseph R. Mastrangelo: On the liquidity front, Nathan will walk through where we are on monetizing our production tax credits and bringing in that capital to the company to allow us to keep operating. We continue to work to achieve our DOE loan requirements and continue to work with the LPO to get to loan closing, and we feel really good about also the operational aspects of the business and being able to bring cash into the business through delivering on project milestones and being able to invoice and collect cash as we execute on those projects for those 110 cubes that we've already put out. We go to the next page, just our normal operating highlight page.

Speaker Change: That capital to the company to allow us to keep operating and we continue to work to achieve our Doe loan requirements. We continue to work with the LPL to get to loan closing and feel really good about also the operational aspects of the business and being able to bring capital being able to bring cash into the business through delivering on project milestones and being able to invoice and collect cash as we are.

Speaker Change: Execute on those projects for those 110 cubes that we've already put out in the field to go to the next page just our normal operating highlight page.

Joseph R. Mastrangelo: The commercial pipeline stands at above 13 billion, 49 gigawatt hours of opportunities. Booked orders, $125 million last quarter, which is the Pinegate MSA extension. Our order backlog now stands above 600 million; that's 2.4 gigawatt hours of backlog. If you think about where we are on the initial introduction of the state-of-the-art line, that's two years of capacity for the state-of-the-art line. When you really think about some of the things Nathan will talk about when he gets in there, we've already started thinking about how we take that state-of-the-art line, get it up and running at the 1.25 gigawatt hours that we've talked about, but then increase that to allow us to continue to grow the business as we see our pipeline accelerate.

Speaker Change: Commercial pipeline standing at above 13 billion 49 gigawatt hours of opportunities booked orders of $125 million last quarter, which is the pie the pie gate.

Nathan: MSA extension, our orders backlog now stands above $600 million. That's two four gigawatt hours of backlog. If you think about where we are on the on the initial introduction of the state of the art line. That's two years of capacity of the state of the airline when you really think about some of the things Nathan will talk about when he gets in there we've already.

Nathan: Starting to thinking about how do we take that state of the art line get it up and running at the one five gigawatt hours that we've talked about but then increased that to allow us to continue to grow the business as we see our pipeline accelerating discharge energy. This is probably one of the other biggest milestones that we have in the presentation. We're above three gigawatt hours of discharge energy with $2 six giga.

Joseph R. Mastrangelo: Discharge energy, this is probably one of the other biggest milestones that we have in the presentation. We're above three gigawatt hours of discharge energy, with 2.6 gigawatt hours of that coming from customer sites out in the field.

Nathan: What hours of that coming in customer sites out in the field, our revenue of $6 6 million, 100% of that coming from the <unk> three production I think what we see and when you really look at this and look at it on the basis of quarter over quarter performance, you're really starting to see the aspect of being able to manufacture the product at scale and being able to see the cost work that we have.

Joseph R. Mastrangelo: Our revenue is $6.6 million, 100% of that coming from Z3 production. I think what we see, and when you really look at this and look at it on the basis of quarter over quarter performance, you're really starting to see the aspect of being able to manufacture the product at scale and being able to see the cost work that we've been doing come through when you look at our cost of goods sold. Lastly, cash on hand was around $32 million at the end of the quarter. It doesn't include restricted cash that we hold for our Atlas debt that we have on the balance sheet.

Nathan: Been doing come through and when you look at our cost of goods sold and lastly, cash on hand was around $32 million at the end at the end of the quarter. It doesn't include restricted cash that we hold for <unk>.

Nathan: Outlets that we have on the balance sheet.

Nathan: Shifting as we move into commercial the commercial opportunity pipeline and the orders backlog. If we go to page seven first I want to start off with what I think is a really valuable page from the value that the team is creating around Eos in the energy storage field left hand side of the page shows the disc.

Joseph R. Mastrangelo: Moving as we move into the Commercial Opportunity Pipeline and the Orders Backlog, if we go to page 7, I first want to start off with what I think is a really valuable page showing the value that the team is creating around EOS in the energy storage field. The left-hand side of the page shows the discharged energy coming off of our systems; that dark green line is energy discharges out in the field.

Nathan: Charged energy coming off of our systems that dark Green line, our energy discharged out in the field. When you just think about what we've done we've discharged one four gigawatt hours of energy in the first four months of 2024, and we discharged 400 megawatt hours in the last two.

Joseph R. Mastrangelo: When you just think about what we've done, we've discharged 1.4 gigawatt hours of energy in the first four months of 2024, and we've discharged 400 megawatt hours in the last three weeks. So when you really think about the assets being able to operate, the technology being able to work out in the field, we're learning every day, we're improving the performance every day, but you can see the durability and the flexibility of the product as customers use it out in the field. That's mostly energy being generated off of Gen 2.3. I just want to be clear on when you look up at the top, you know, 2.6 coming from the field. 2.2 gigawatt hours. It says "fat."

Nathan: Three weeks. So when you really think about the assets being able to operate the technology being able to work out in the field. We're learning every day, we are improving the performance every day, but you can see the durability of the flexibility of the product as customers use that out in the field that's mostly.

Nathan: Energy being generated off of Gen. Two three I just wanted to be clear on when we when you look up on the top two six coming from the field.

Joseph R. Mastrangelo: I just want to be clear that that's factory acceptance testing of the cubes and containers prior to being shipped from the factory, not associated with the factory acceptance testing that has been done on state-of-the-art line one for the Z3. And then there's around 0.2 gigawatt hours out in the lab that totals up to three gigawatt hours. Now, on the right-hand side of the page, another important proof point when you think about proof points in the market and showing Eos' ability to grow into the demand that we see in the field.

Nathan: Two two gigawatt hours, which is F.

Nathan: I just wanted to be clear that Thats factory acceptance testing of.

Nathan: Cubes and containers prior to being shipped from the factory not associated with the factory acceptance testing that has been done on state of the art line one for the <unk> III and then there's around two gigawatt hours on the lab that totals up to three gigawatt hours now on the right hand side of the page you know another important proof point when you think about proof points in the <unk>.

Nathan: <unk> and showing <unk> ability to grow into the demand that we see out in the field first proof point, we talked about today is the ability to be able to manufacture at scale big milestone and being able to deliver the factory acceptance testing on state of the art line one.

Joseph R. Mastrangelo: The first proof point we talked about today is the ability to manufacture at scale, a big milestone in being able to deliver the factory acceptance testing on state-of-the-art line one. The second proof point is the left-hand side of this page, which talks about assets operating, discharging energy out in the field, and showing that the technology works. The right-hand side of the page, I think, is the third important proof point, which is Z3 operating out in the field.

Nathan: Second proof point is the left hand side of this page, which talks about assets operating discharging energy out in the field and showing that the technology works. The right hand side of the page I think it's the third important proof point, which is Z three operating out in the field and you could see three projects that are currently.

Joseph R. Mastrangelo: You can see three projects that are currently installed out in the field, one of which is completing its commissioning, and the other two scheduled to complete their commissioning here at the beginning of the third quarter. That will then start generating and adding to that line on the left-hand side of the page, which will no longer just be Gen 2.3, but Gen 2.3 plus Z3 operating out in the field, which is another critical proof point of how we grow the company for the future. Which takes me to page 8, which is our current pipeline, our traditional pipeline page that we talk about. Now, you'll see there's been a lot of flow in the pipeline during the quarter. You know, lead generation continues to grow. There's, you know, you have to realize, like, we're showing net numbers.

Nathan: Installed out in the field, one of which completing its commissioning the other two scheduled to complete their commissioning here in the beginning of the third quarter that will then start generating and adding to that line on the left hand side of the page, which will no longer just be jumped to three will become gen. Two three plus <unk>.

Speaker Change: Operating out in the field, which is another critical proof point in how we grow the company for the future, which takes me to page eight which is our current pipeline our traditional pipeline page that we talk about youll see theres been a lot of slow.

Speaker Change: And the pipeline during the quarter lead generation continues to grow there. So you have to realize we're showing net numbers, there's always ins and outs in every bucket, but we continue to add really strong core lead generation, which will then go into this commercial opportunity pipeline, which is technical proposals nonbinding.

Joseph R. Mastrangelo: There are always ins and outs in every bucket, but we continue to add really strong core lead generation, which will then go into this commercial opportunity pipeline, which is, you know, technical proposals, non-binding quotes, and LOI firm commitments. You see LOI firm commitments being down from the prior quarter. A lot of that has to do with the signing of the Pine Gate order.

It's an LOI firm commitments, you see LOI firm commitments being down from prior quarter, that's largely a lot of that has to do with the signing of the pine grade order.

Joseph R. Mastrangelo: There are also some changes in projects that we have as far as the sizing of projects and projects that didn't materialize even though we had a binding or an LOI and a firm commitment from our customers. Now, inside of that, we talked about late-stage opportunities last quarter. That stands at 1.2 gigawatt hours.

Speaker Change: There's also some changes in projects that we have as far as sizing of projects and projects that didn't materialize, even though we had a.

Speaker Change: A binding.

Speaker Change: Or in LOI and a firm commitment from our customers now inside of that we talked about late stage opportunities last quarter that stands at one two gigawatt hours. The change in that number is again <unk> moving over into the book the order side and then one project where the sizing of the project got smaller as the customer looked at their ability to generate profit.

Joseph R. Mastrangelo: The change in that number is, again, Pine Gate moving over to the booked order side, and then one project where the size of the project got smaller as the customer looked at their ability to generate profit off of a project and balancing the land available, the financing available, and the need for the power. So that takes that to 1.2 gigawatt hours. We continue to work across that portfolio to be able to continue to grow the right-hand side of the page, which is that backlog, which stands at $602 million today with 2.4 gigawatt hours, up 13% from where we were last quarter.

Speaker Change: It off of a project in balancing the land available the financing available and the need for the power. So that takes that to one two gigawatt hours. We continue to work across that portfolio to be able to continue to grow the ram side of the page, which is that backlog, which stands at $602 million today with two four gigawatt hours up 13%.

Speaker Change: <unk> from where we were.

Speaker Change: Last quarter so.

Joseph R. Mastrangelo: So I will continue to make progress here. I continue to have to work through putting the proof points on the board, the three important proof points that I think about operationally that lead to taking this pipeline page to booked orders, which eventually translates into revenue, having the line up and running, showing that the product works out in the field, and then, ultimately, for shareholders, working through the cost-out equation to get the company to profitability. With that, I'll turn over to Nathan, who'll walk you through the progress that the team has made here since we last spoke about year-end earnings. Thanks. Thanks, Joe.

Speaker Change: Continue to make progress here continue to have to work through through putting the proof points on the board. The three important proof points that I think about operationally that lead to taking this pipeline page to booked orders, which eventually translates into revenue, having a line up and running showing that the product works out in the field and then ultimately for shareholders is working through.

Speaker Change: Through the cost out equation to get the company to profitability and with that I'll turn it over to Nathan who walk you through the progress that the team has made here since we last spoke.

Speaker Change: For our year end earnings thanks.

Nathan G. Kroeker: Thanks, everybody, for joining us this morning. I will spend the rest of the time walking through where we are on our cost out roadmap, along with our first quarter performance and an outlook for the rest of 2024. Moving to slide 10, I just want to spend some time on two programs that are critical to our cost-out program and part of the manufacturing cutover that we undertook last month and as we discussed back in December.

Nathan: Thanks, Joe Thanks, everybody for joining us this morning, I will spend the rest of the time walking through where we are on our cost out roadmap along with our first quarter performance and an outlook for the rest of 2024.

Nathan: Moving to slide 10, I just want to spend some time on two programs that are critical to our cost out program and part of the manufacturing cutover that we undertook last month and as we discussed back in December if you look on the left what you see here is the new lower cost higher energy density module that was designed for further cost out as well as <unk>.

Nathan G. Kroeker: If you look on the left, what you see here is the new lower-cost, higher-energy density module that was designed for further cost-out as well as being uniquely designed in anticipation of our automated line. If you remember from our last call, Joe talked about increasing the surface area of the felt on the bipolars and replacing the terminal electrodes with conductive plastic. Having more felt surface area means you have the ability to retain more energy, which has resulted in 15 percent more energy per module. Furthermore, you can see the differences in the lids on these two images.

Speaker Change: Being uniquely designed in anticipation of our automated line.

Speaker Change: If you remember from our last call Joe talked about increasing the surface area of the felt on the bipolar and replacing the terminal electrodes with conductive plastic having more felt surface area. I mean do you have the ability to retain more energy, which has resulted in 15% more energy per module.

Speaker Change: Further you can see the differences in the lids on these two images. The design has evolved as we replace the titanium stood in the old design with a tab that is yield in place with <unk> compound to improve manufacture ability and reduce cost in the automated line.

Nathan G. Kroeker: The design has evolved as we replaced the titanium stud in the old design with a tab that is sealed in place with potting compound to improve manufacturability and reduce cost in the automated line. All of these enhancements take cost out of the product and improve performance, both of which were key components of our cost-out roadmap that we laid out in December. Now, switching to the inline cube, we are very proud of the team that has taken a concept and brought it to reality in just four months.

Speaker Change: All of these enhancements to take cost out of the product and improve the performance both of which were key components of our cost out roadmap that we laid out in December now switching to the inline cube, we're very proud of the team that has taken a concept and brought it to reality in just four months. This design was created with the intent of capitals.

Nathan G. Kroeker: This design was created with the intent of capitalizing on the value propositions of our Z3 battery technology and by working with customers and incorporating their suggested enhancements that they value as our projects get larger in scale.

Speaker Change: Rising on the value propositions of our Z three battery technology and by working with customers and incorporating their suggested enhancements that they value as our projects get larger in scale.

Nathan G. Kroeker: The new inline cube has benefits in terms of the speed of loading batteries into the cube at our facility in Turtle Creek, but perhaps more importantly, it also has benefits for our customers as it simplifies site setup and site energy density as the new inline cubes can be placed directly next to each other rather than leaving spaces between each cube. The design enhancements seen in both of these programs testament to the hard work and dedication of our talented team, particularly in our research and development departments, and they have been instrumental to our cost-out program. Our cube now has an energy density of up to 695 kWh for longer duration applications, and we have scheduled to further increase energy density in Q4 with the projects that Francis laid out back in December.

New inline cube has benefits in terms of the speed of loading batteries into the cube and our facility in Turtle Creek, but perhaps more importantly, it also has benefits for our customers as it simplifies despite setup and site energy density as the new inline cubes can be placed directly next to each other rather than leaving spaces between HQ.

Speaker Change: <unk>.

Speaker Change: The design enhancements were seen in both of these programs is testament to the hard work and dedication of our talented team, particularly in our research and development departments and they have been instrumental to our cost out program.

Speaker Change: Our cube now has an energy density of up to 695 kilowatt hours for longer duration applications and we are scheduled to further increase energy density in Q4 with the projects that France is laid out back in December.

Nathan G. Kroeker: Now, flipping to the next page, we continue to see progress on our cost roadmap that we have been talking about for the last couple of quarters. When you look at the left-hand side, you see we started off at 100% when we first launched the product, and we're now down to 59%, and we continue on our way to 20%, which would represent 80% cost out from product launch to manufacturing at scale. A lot of this has to do with ramping up the line but also acceleration of our direct material reductions as we transition to the lower-cost design and continue to negotiate strategic supply agreements with larger U.S. suppliers, as Joe discussed earlier.

Speaker Change: Now flipping to the next page we continue to see progress on our cost roadmap that we have been talking about for the last couple of quarters. When you look at the left hand side you see we started off as a 100% when we first launched the product and we're now down to 59% and we continue on our way to 20%, which would represent 80%.

Speaker Change: Cost out from product launch to manufacturing at scale.

Speaker Change: A lot of this has to do with ramping up the line, but also acceleration of our direct material reductions as we transition to the lower cost design and continue to negotiate strategic supply agreements with larger U S suppliers as Joe discussed earlier.

Speaker Change: As of March 31, we have locked in 55% of our direct material cost out target and we expect to see these benefits flow through our financials in the second half of the year.

Nathan G. Kroeker: As of March 31st, we have locked in 55% of our direct material cost-out target, and we expect to see these benefits flow through our financials in the second half of the year. You can also see on the page that we had lower overhead absorption from the prior quarter, which we discussed on the Q4 call. You will recall this was expected as we cut in some design enhancements into our semi-automated manufacturing line at the end of Q1 and into Q2 as part of the implementation of our newly designed product, as we talked about earlier. We expect to continue to have lower overhead absorption in the second quarter as we've scaled back production volumes in anticipation of the transition to the new state-of-the-art line.

Speaker Change: Can also see on the page that we had lower overhead absorption from the prior quarter, which we discussed on the Q4 call. You will recall this was expected as we cut in some design enhancements into our semi automated manufacturing line at the end of Q1 and into Q2 as part of the implementation of our newly designed product as we talked about earlier.

Speaker Change: We expect to continue to have lower overhead absorption in the second quarter as we have scaled back production volumes in anticipation of the transition to the new state of the art line, we feel really good about where we're at and as we begin to ramp up in the back half of the year. We believe we will continue to see benefits through scaled production improving both our overhead.

Nathan G. Kroeker: We feel really good about where we are at, and as we begin to ramp up in the back half of the year, we believe we will continue to see benefits through scaled production, improving both our overhead and direct labor efficiency. Now, moving to slide 13, before getting into the first quarter financial results, I will start with an update on our cash position as we continue to make progress on securing our long-term finances. We ended the quarter with $31.8 million in cash on the balance sheet, not including $14.5 million of restricted cash, which is primarily related to our senior secured loans.

Speaker Change: And direct labor efficiencies.

Speaker Change: Now moving to slide 13, before getting into the first quarter financial results I will start with an update on our cash position as we continue to make progress on securing our long term financing.

Speaker Change: We ended the quarter with $31 $8 million in cash on the balance sheet, not including $14 5 million of restricted cash, which is primarily related to our senior secured loan.

Nathan G. Kroeker: We are very focused on minimizing cash burn and optimizing working capital to support our ongoing operations and strategic objectives. As a proactive measure to conserve capital, we made the strategic decision to scale back production volumes in the second quarter and prioritize shipping new product from our automated line. While the unit economics of the new line are better as a result of better labor and overhead absorption, we still expect to be at negative contribution margins in the short term, but we do have a clear path to positive unit margins as we ramp up over the next few months.

Speaker Change: We are very focused on minimizing cash burn and optimizing working capital to support our ongoing operations and strategic objectives as a proactive measure to conserve capital. We made the strategic decision to scale back production volumes in the second quarter and prioritize shipping new product from our automated line, while the unit economics of the.

Speaker Change: New line are better as a result of better labor and overhead absorption, we still expect to be at negative contribution margins in the short term, but we do have a clear path to positive unit margins as we ramp up over the next few months.

Nathan G. Kroeker: We have also been taking measures to increase cash flow and enhance our liquidity as we monetize our tax credits and collect on customer milestone payments. On April 22, we finalized our first transaction to monetize our production tax credit in an agreement with Banyan Software. The sale was executed at a 10% discount to the face value of the credits, which was in line with our expectations and resulted in a cash infusion of $2.3 million.

Speaker Change: We have also been taking measures to increase cash flow.

Speaker Change: And enhance our liquidity as we monetize our tax credits and collect on customer milestone payments.

Speaker Change: On April 20, we finalized our first transaction to monetize our production tax credits and an agreement with Banyan software sale was executed at a 10% discount to the face value of the credits which was in line with our expectations and resulted in a cash infusion of $2 3 million going forward, we expect to take.

Nathan G. Kroeker: Going forward, we expect to take a more accelerated approach to monetizing these tax credits on a regular basis in an effort to offset our cash usage from operations and strengthen our balance sheet. With that said, let's get into our financial results. In the first quarter, revenue was $6.6 million, flat to the last quarter and down roughly 25% from the prior year on 18% lower unit volumes as we transitioned to Z3, combined with a slightly lower average selling price.

Speaker Change: A more accelerated approach to monetizing these tax credits on a regular basis in an effort to offset our cash usage from operations and strengthen our balance sheet with that let's get into our financial results.

Nathan G. Kroeker: In the quarter, we delivered the three systems to two customers and completed our final shipment to a key customer owned by a large North American infrastructure fund in Orchard, Texas, just outside of Houston. Cost of goods sold was $28.2 million, a 5% increase versus the prior year despite having 28% higher manufacturing volumes. Even though we saw a slight increase in COGS, we are beginning to see the benefits of this E3 product as we had higher manufacturing volumes this quarter compared to Q1 of 2023 when we were producing the Gen 2.3 product.

Speaker Change: In the first quarter revenue was $6 6 million flat to last quarter and down roughly 25% from the prior year, an 18% lower unit volumes as we transition to the three combined with a slightly lower average selling price.

Nathan G. Kroeker: The decrease in gross margins was driven by specific project revenue recognition timing combined with the switch to Z3 cube manufacturing. Looking at quarter-over-quarter results, we saw a 9% improvement in gross margins as we continue to see the benefits of recent cost-outs, and improved manufacturability, and we expect to see continued improvements once we transition to our new line. Operating expenses for the quarter were $19.5 million, a 3% decrease from the prior year, resulting from slightly higher payroll expenses offset by slightly lower R&D spend.

Speaker Change: In the quarter, we delivered three systems to two customers and completed our final shipments to a key customer owned by a large north American infrastructure Fund and Orchard, Texas just outside of Houston.

Speaker Change: Cost of goods sold was $28 2, million% to 5% increase versus prior year, despite having 28% higher manufacturing volumes, even though we saw a slight increase in Cogs. We are beginning to see the benefits of the <unk> three product as we had higher manufacturing volumes this quarter compared to Q1 of 2023 when we.

Speaker Change: We're producing the gen two three product.

Speaker Change: The decrease in gross margins was driven by a specific project revenue recognition timing combined with the switch to <unk> III cube manufacturing.

Speaker Change: Looking at quarter over quarter results, we saw a 9% improvement in gross margins as we continue to see the benefits of recent cost outs improved manufacture ability and we expect to see continued improvements once we transition to our new line of.

Speaker Change: Operating expenses for the quarter were $19 5, million% to 3% decrease from prior year, resulting from slightly higher payroll expenses offset by slightly lower R&D spend total operating expenses included $3 1 million or 16% and noncash items, including stock based.

Speaker Change: <unk> depreciation and amortization.

Nathan G. Kroeker: Total operating expenses included $3.1 million, or 16%, in non-cash items including stock-based compensation, depreciation, and amortization. Our operating loss was $41.1 million for the quarter, compared to $38.3 million in the prior year, driven primarily by the decrease in revenue that we discussed earlier.

Speaker Change: Our operating loss was $41 1 million for the quarter compared to $38 3 million in the prior year driven primarily by the decrease in revenue that we discussed earlier, excluding noncash items, such as stock based compensation depreciation and amortization and PP&E write offs operating loss was.

Nathan G. Kroeker: Excluding non-cash items, such as stock-based compensation, depreciation, and amortization, and PP&E write-offs, operating loss was $36.6 million. Net loss for the quarter was $46.7 million, a 35% improvement versus the prior year. Now, let's turn to page 14 and look at how we're planning to grow the business as we scale capacity. We continue to believe this to be a very capital efficient business, as we are forecasting approximately $50 million in CapEx for over two gigawatt hours of production capacity, which is less than $25 million per gigawatt hour.

Speaker Change: 36 6 million.

Speaker Change: Net loss for the quarter was $46 7, million% to 35% improvement versus the prior year.

Speaker Change: Now, let's turn to page 14, and look at how we're planning to grow the business as we scale capacity. We continue to believe this to be a very capital efficient business. As we are forecasting approximately $50 million in capex for over two gigawatt hours of production capacity, which is less than $25 million per gigawatt hour.

Speaker Change: Yeah.

Nathan G. Kroeker: As we've discussed previously, and in line with our original expectations, it requires approximately $30 million in CapEx to get to 1.25 gigawatt hours of annualized capacity. This includes CapEx related to the Acro automation line and the related investment for injection molding tooling. As of March 31st, we have spent a little over $21 million and have roughly $8 million to go for the remainder of 2024.

Speaker Change: As we've discussed previously and in line with our original expectations. It requires approximately $30 million in capex to get to 125 gigawatt hours of annualized capacity. This includes capex related to the acro automation line and the related investment for injection molding tooling as.

Speaker Change: As of March 31, we have spent a little over $21 million and have roughly $8 million to go for the remainder of 2024.

Nathan G. Kroeker: These dollars are expected to be spent over the next three quarters with payment terms driven by progress milestones. Furthermore, we are carefully evaluating our investment priorities to ensure that every dollar spent on capital expenditures has a direct impact on streamlining operations and improving productivity. Looking at the bottom left-hand side of the page, we are forecasting an additional $20 million in spend, which is in line with our original estimates, to further expand capacity and increase the throughput of our first line to reach over 2 gigawatt hours of annualized capacity.

These dollars are expected to be spent over the next three quarters with payment terms driven by progress milestones.

Speaker Change: Further we are carefully evaluating our investment priorities to ensure that every dollar spent on capital expenditures has a direct impact on streamlining operations and improving productivity.

Speaker Change: Looking at the bottom left hand side of the page we are forecasting an additional $20 million in spend which is in line with our original estimates to further expand capacity and increase the throughput of our first line to reach over two gigawatt hours of annualized capacity.

Nathan G. Kroeker: We expect the majority of this spend to be in the back half of this year and into the first part of 2025. This investment would include automating the subassembly processes on the front and back ends of the automated battery line, as well as increasing the injection molding tooling capacity to keep up with the increase in production volume. Automating the subassembly process is aimed to enhance operational efficiency, reduce labor costs, and minimize scrap.

Speaker Change: We expect the majority of this spend to be in the back half of this year and into the first part of 2025.

Speaker Change: This investment would include automating the sub assembly processes on the front and back end of the automated battery line as well as increasing the injection molding tooling capacity to keep up with the increase in production volumes.

Speaker Change: Automating the sub assembly process is aimed to enhance operational efficiency reduced labor costs and minimized scrap today. The bipolar sub assembly is one of the more labor intensive areas of our semi automated manufacturing process. As we have teams of people manually cutting impressing felt into the plastic bipolar.

Nathan G. Kroeker: Today, the bipolar subassembly is one of the more labor-intensive areas of our semi-automated manufacturing process, as we have teams of people manually cutting and pressing felt into the plastic bipolar using a manually operated heat press. Automating this portion of the process is expected to increase our labor efficiency by approximately 87%, significantly reducing our direct labor costs. While we look to increase capacity and automate certain processes, we may adjust investment timing as it will be tied to securing long-term funding.

Speaker Change: With a manually operated heat press art.

Speaker Change: This portion of the process is expected to increase our labor efficiency by approximately 87% significantly reducing our direct labor costs.

Speaker Change: While we look to increase capacity and automate certain processes, we may adjust investment timing as it will be tied to securing long term funding.

Speaker Change: And finally, let's shift our focus to our 2020 for outlook on the next slide regarding our revenue estimates for 2024, we continue to expect to realize between 60 and $90 million based.

Nathan G. Kroeker: And finally, let's shift our focus to our 2024 outlook on the next slide. Regarding our revenue estimates for 2024, we continue to expect to realize between $60 and $90 million based on our current production plan and anticipated customer delivery schedules, which assumes that we will be running the semi-automated manufacturing line through the second quarter and then transitioning to production of battery modules on the new state-of-the-art manufacturing line. As previously mentioned, we do expect our second quarter revenue to be lower than initial expectations as we transition to the new lower-cost battery module and scale back production volumes to better optimize our cost roadmap and conserve precious capital.

Speaker Change: Based on our current production plan and anticipated customer delivery schedules, which assumes that we will be running a semi automated manufacturing line through the second quarter, and then transitioning to production of battery modules on the new state of the art manufacturing line.

Speaker Change: As previously mentioned, we do expect our second quarter revenue to be lower than initial expectations as we transition to the new lower cost battery module and scaled back production volumes to better optimize our cost roadmap and conserve precious capital.

Speaker Change: Aligning our cost out roadmap with production volumes and critical customer commitments continues to be a key priority. This decrease is not indicative of a decline in overall performance, but rather a strategic shift from one period to another as a way to realize better unit economics, as we transition to our automated line.

Nathan G. Kroeker: Aligning our cost out roadmap with production volumes and critical customer commitments continues to be a key priority. This decrease is not indicative of a decline in overall performance but rather a strategic shift from one period to another as a way to realize better unit economics as we transition to our automated line. We also continue to expect to achieve positive contribution margin in the fourth quarter of this year, which is defined as revenue less direct labor and direct materials, including the benefit of the production tax credit.

We also continue to expect to achieve positive contribution margin in the fourth quarter of this year, which is defined as revenue less direct labor and direct materials, including the benefit of the production tax credits.

Nathan G. Kroeker: The entire team is laser-focused on executing the cost-out program that we detailed in December through a combination of increased production and improved operating leverage, as well as direct material cost-outs that simultaneously improve battery performance and energy density. We continue to expect to reduce our total unit production costs in 2024 by approximately 76 percent from the initial commercial launch, with further cost-out to be achieved when we continue to increase our capacity in the beginning of 2025.

Speaker Change: The entire team is laser focused on executing the cost out program that we detailed in December through a combination of increased production and improving operating leverage as well as direct material cost outs that simultaneously improve battery performance and energy density we continue to expect to reduce our total unit production costs in 2020.

Speaker Change: For by approximately 76% from initial commercial launch with further cost out to be achieved when we continue to increase our capacity in the beginning of 2025.

Nathan G. Kroeker: Once we achieve positive contribution margin in Q4, we intend to increase our production significantly, with every incremental unit that we produce helping to cover our fixed costs. We believe this disciplined manufacturing approach will allow us to conserve capital as we work on securing long-term funding and then lead to positive contribution margins in Q4 of this year.

Speaker Change: Once we achieve positive contribution margin in Q4, we intend to increase our production significantly with every incremental unit that we produce helping to cover our fixed costs.

Speaker Change: We believe this disciplined manufacturing approach will allow us to conserve capital because we work on securing long term funding and then lead to positive contribution margins in Q4 of this year.

Nathan G. Kroeker: To conclude, we are incredibly confident in the roadmap that we've outlined, and the entire team is committed to meeting these benchmarks as we deliver both for our customers and the broader stakeholder community. With that, I want to thank everybody for their time and listening today. I would now like to turn it over to the operator for questions. Operator?

Speaker Change: To conclude we are incredibly confident in the roadmap that we've outlined and the entire team is committed to meeting these benchmarks as we deliver both for our customers and the broader stakeholder community.

Speaker Change: With that I want to thank everybody for their time and listening today I would now like to turn it over to the operator for questions operator.

Unknown Executive: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: While we compile our Q&A roster.

Speaker Change: Yes.

Speaker Change: Yeah.

Unknown Executive: One moment while we compile our Q&A roster. Our first question is going to come from the line of Chris Souther with B Reilly. Your line is open. Please go ahead.

Speaker Change: Our first question is going to come from the line of Chris <unk> with B Riley. Your line is open. Please go ahead.

Speaker Change: Okay.

Joseph R. Mastrangelo: Hey guys, thanks for taking my question and congrats on the progress here with the factory acceptance testing. I just wanted to get a sense of what are the areas we're still working on to hit 10-second cycle times. If you could kind of walk through some of those areas that are a little bit slow in the line today, and then maybe walk through the steps needed from operational and or financial we need with site acceptance testing in order to close the DOE facility as you see it today.

Speaker Change: Taking my question congrats on the progress here with the factory acceptance testing.

Speaker Change: I just wanted to get a sense of what are the areas. We're still working on to hit 10 second cycle.

Speaker Change: Thank you.

Speaker Change: Kind of walk through some of those areas that are a little bit slow in line today and then.

Speaker Change: Maybe walk through the steps needed from operational or financial we need with site acceptance testing in order to close the facility.

Speaker Change: As you see it today.

Chris: Hey, Chris Good morning.

Joseph R. Mastrangelo: Hey Chris, morning. So, on the line cycle time, look, there are two stations on what I would call the back end of the line that we need to work on speeding up the production of those individual stations. I would call them from a level of complexity, not highly complex, just a matter of working through the control logic and how you pulse the batteries through the different stations.

Chris: So on the.

Chris: On the line cycle time look there is two stations on what I would call. The back end of the line that we need to work on speeding up the production of those individual stations.

Chris: Not I would call from a level of complexity not highly complex just a matter of working through the control logic and how your pulse to batteries through the different stations I think the team has a path on that.

Joseph R. Mastrangelo: I think the team has a path to that. So, we'll just continue pushing this forward. I mean, again, like with any production line, you know, we're never going to stop making this thing better and improving upon it. And 10 is not the end. 10 is the starting line to then find productivity year over year as we go through this. So, this is just a natural evolution.

Chris: So, we'll just continue pushing as Florida again like with any production line.

Chris: We're never going to stop making this thing better and improving upon this intense not tends not the end 10 is the starting line to then find productivity year over year as we go through this so this is just a natural evolution.

Joseph R. Mastrangelo: What I'm particularly proud of is the front end of the line, you know, running at 10 seconds on every station. I mean, that's been an amazing amount of work being done really by three companies, you know, Eos, Acro, and Rockwell Automation, just really pulling this together. And when you stand there and watch it, it's pretty impressive.

Speaker Change: Im, particularly proud of is the front end of the line running at 10 seconds on every station I mean, that's been an amazing amount of work being done really by three companies.

Speaker Change: S Acro and Rockwell automation, just really pulling this together and when you stand there and watch it it's pretty impressive.

Joseph R. Mastrangelo: From an SAT standpoint, you know, look, we're sitting off the shop floor here in Building 700, and the first truck is here, and they're unloading the first piece of equipment onto the line as we speak. It's going to be rebuilding that line here on the factory floor and then running SAT to get through a successful test, which we're confident on given where we are from a schedule. And, you know, we've put a lot of planning into disassembly and the logistics around how things are arriving and how we're going to build out the line on the floor. The team has spent the past month or so just getting the floor ready, wiring, and prepared for electrolyte tanks to be installed to be able to get through on the throughput.

Speaker Change: From an FCC standpoint look.

Chuck: Sitting off the shop floor here in building 700 in the first Chuck is here and there on loading the first piece of equipment onto the line as we speak is going to be rebuilding that rebuilding that line here on the factory floor and then running.

Chuck: To get through a successful SaaS, which we are confident on given where we are from a schedule and we've put a lot of planning into disassembly and the logistics around how things are arriving in how we're going to build out the line on the floor of the team has spent.

Chuck: The past month, or so just getting the floor ready.

Chuck: <unk> and <unk>.

Chuck: <unk> four electrolyte tanks to be installed to be able to get through on the throughput. So we're pretty excited about getting through that.

Joseph R. Mastrangelo: So we're pretty excited about getting through that per the plan by the end of Q2. On other things, again, we haven't talked about the other CPs that we have around closing the loan, but we're confident that we're dialing in with those and working with the LPO to. That's great. And then on the incremental 20 million capex to expand the line one capacity to two gigawatt hours, would that be funded potentially up front by the DOE, like I think you've talked about for future lines, or would that be back end, like we've seen on the first 1.2 gigawatt hours?

Chuck: Per the plan by the end of Q2.

Chuck: On other things like again like we Havent talked about.

Chuck: The other piece that we have around around closing the loan, but we're confident that we're dialing in with those and working with the <unk> to get to a successful close here after after FCT.

Speaker Change: That's great and then.

Speaker Change: And the incremental 20 million capex to expand the line one two.

Speaker Change: Two gigawatt hours would that be funded.

Speaker Change: Upfront by the Doe.

Speaker Change: You've talked about for future lines or would that be.

Speaker Change: Back then.

Speaker Change: We've seen on the first one two gigawatt hours.

Joseph R. Mastrangelo: And I'm curious, do we need that subassembly automation to hit positive contribution margins later this year or not? Chris, just to clarify, you know, that's not one of the positive contribution margins, our goal for the year as a company, it's not tied to the funding of the loan. I mean, when you think about the purpose of the LPO, it's a bridge to bankability. So that's not one of the conditions that we have.

Speaker Change: Do we need that sub assembly automation to hit positive contribution margins later this year or not.

Chris: Chris just to clarify.

Nathan G. Kroeker: But every LPO loan has the same mechanism in that it's a reimbursement of costs. So you would invest; you would invest that cost, and then that cost would be reimbursed. If you remember, when we talked about the loan closing, we got the maximum amount of reimbursement at 80%. So you would spend that capital and then be reimbursed 80% of the capital spent to be able to do that work. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Chip Moore with Roth. Your line is open. Please go ahead. This morning,

Speaker Change: That's not one of the positive contribution margins our goal for the year as a company, it's not tied to the funding of the loan I mean, when you think about the purpose of <unk>. It's a bridge to bank ability. So that's not one of the conditions that we have but every LPL alone has the same mechanism and that it's a reimbursement of costs.

Speaker Change: So you would invest you would invest that cost and that cost will be reimbursed. If you remember when we talked about the loan closing we got the maximum amount of reimbursement at 80%. So you would view it spend that you would spend that capital and then be reimbursed 80% of the capital spent to be able to do that work.

Speaker Change: Okay.

Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line more with Ross. Your line is open. Please go ahead.

Joseph R. Mastrangelo: Thanks for taking the question. I guess, congrats on factory acceptance as well. I think, Joe, you did a good job on the last question there. Maybe you can expand on sort of what you learned during that process.

Speaker Change: Good morning, Thanks for taking the question.

Speaker Change: I guess congrats on factory acceptance as well I think Joe you did a good job on the last question. There maybe you can expand on.

Joseph R. Mastrangelo: And I guess, would you say that site acceptance is fairly de-risked here, just given some of those things you talked about in terms of planning for installation here? Yeah, so thanks, Chip. Morning.

Ross: Sort of what you learned during that process and I guess would you say that site acceptance is fairly derisked here just given some of those things you talked about in terms of planning.

Ross: For installation here.

Joseph R. Mastrangelo: Look, we learned a lot through this process, right? So, going through it and really when, you know, like, I can't say enough about the ACRO team and the way that we pulled together to get through this. I mean, you know, like, this was literally, you know, run the run in the morning, sit down, do an after action report, come back in the afternoon, run again, see where we improved and just continuously dialing in how material moved and how the individual stations worked. You know, really, like, what we've learned as we've gone through this is just the consistency that you get from an automated line of how you produce. And just watching that time come down.

Speaker Change: Yes. Thanks.

Speaker Change: Chip morning.

Speaker Change: Look we learned a lot through this process right. So.

Speaker Change: Going through and really win.

Speaker Change: I can't say enough about the acro, the acro team and the way that we pulled together to get through this I mean this was literally.

Speaker Change: Running the run in the morning sit down do like an after action report out come back in the afternoon, Ron again C, where we improved in just continuously dialing in how material moves and how the individual stations worked.

Joseph R. Mastrangelo: You know, when we started off on this, you know, individual cycle times were above 20 seconds when we started. And you're basically, I mean, this is like running a marathon, right? You start your training, and you're not running as fast as you want, but the more you run, the more you run, and the better you get.

Speaker Change: We really like what we've learned as we've gone through this is just the consistency that you get from an automated line of how you produce and just watching that time come down.

Speaker Change: We started off on this.

Speaker Change: Individual cycle times were above 20, <unk>, when we started and Youre basically I mean this is like running a marathon right. You started off your training and Youre not running as fast as you as you want but the more you run the more you run in the better yet and I think we learned that we learned a lot about component quality, how we feed the lines.

Joseph R. Mastrangelo: And I think we learned a lot about component quality, how we fed the lines, how the individual stations worked. And I think it's just pretty exciting to really think about, you know, executing this next phase of the installation. You know, like, we had a plan that said, get through, get through successfully, start taking apart this part of these individual portions of the line, get it on trucks, and get trucks to Turtle Creek.

Speaker Change: Individual stations worked and I think it's pretty exciting to really think about executing this next phase of the installation like we had a plan.

Speaker Change: That said get through effete get through FHA successfully.

Speaker Change: Start taking apart this part at least individual portions of the line get it on trucks and get trucks, a turtle Creek.

Joseph R. Mastrangelo: And, you know, first, as I said earlier, the first ones here next to arriving, we'll have three trucks worth of equipment arriving. There's a team from ACRO on site. You know, if you go and look at the parking lot, there are Wisconsin license plates out in the parking lot because they're here with us helping us put the line back together. One of the things that we did, you know, was. We had our line operators in Acro last week for the FATs. They've run the line.

Speaker Change: First as I said earlier first ones here next to arrive and we will have three trucks worth of equipment, arriving there is a team from macro on site.

Speaker Change: If you come and look at the parking lot Theres, Wisconsin license plates out in the parking lot because they are here with us helping us put the buying back together one of the things that we did do.

Speaker Change: It was.

Speaker Change: We had our line operators in Acro last week for the FAA.

Speaker Change: They've run the line when we were building the line, we had our maintenance team, they're helping to build the line that's alerting curve that as things arrive here will know how to put the equipment back together again, because we've done it once before so I feel good about where we are and again like we've got a fairly detailed daily plan of how we have to.

Joseph R. Mastrangelo: When we were building the line, we had our maintenance team there helping to build the line. That's a learning curve that as things arrive here, we'll know how to put the equipment back together again because we've done it once before. So, you know, I feel good about where we are. And again, like we've got a fairly detailed daily plan of how we have to work through this. We'll just continue to work through this and let everyone know when we get through SAT where we are. I mean, I feel confident, but never feel like you've won the game until you cross the finish line.

Speaker Change: Worked through this and we'll just continue to work through this and let everyone know when we get through.

Speaker Change: Where we are I mean, I feel feel confident but never never never never feel like you've won the game and so you across the finish line and I think thats what were focused on getting across the finish line.

Joseph R. Mastrangelo: And I think that's what we're focused on, getting across the finish line. That's great. That's helpful, Collar.

Speaker Change: That's great that's helpful color.

Nathan G. Kroeker: And if I could ask about liquidity, I think you talked about PTC monetization. I think maybe being able to accelerate efforts there and then anything you can give us on line of sight on milestone cash payments or anything else on liquidity. Yeah, so on the PTC, it was a significant amount of work to get the first deal done. As you know, the marketplace is still fairly new, but we do have a counterparty that has an appetite for more tax credits, and we've already worked through all the legal documentation to get one done.

Speaker Change: If I could ask about liquidity I think.

Speaker Change: You talked about PTC monetization, I think maybe being able to accelerate that.

Speaker Change: Hurts there and then anything you can give us on line of sight on milestone cash payments or anything else on liquidity.

Speaker Change: Yes, so on the on their PTC, we it was a significant amount of work to get the first deal done as you know the marketplace is still fairly new but we do have a counterparty that has an appetite for more tax credits.

Speaker Change: And we've already worked through all the legal documentation to get one done so I do feel like we can monetize every quarter much quicker going forward and that's our plan in order to do that.

Nathan G. Kroeker: So I do feel like we could monetize every quarter much quicker going forward, and that's our plan in order to do that. From a liquidity standpoint, look, I mean, it's consistent with what we've talked about previously, which is, you know, focus on getting the SAT completed here at the end of the quarter, meeting the final conditions for long-term financing, and in the short term, continue to manage cash outflows as efficiently as possible while still hitting critical customer delivery dates, and then try to pull in customer milestone payments and deposits. So, you know, kind of balancing that in the short term as we focus on getting the line implemented for long-term funding security. Thanks, Nathan.

Speaker Change: From a liquidity standpoint look I mean, it's consistent with what we've talked about previously which is focused on getting the.

Speaker Change: Completed here at the end of the quarter meeting the final conditions for long term financing.

Speaker Change: In the short term continue to manage.

Speaker Change: Cash outflows.

Speaker Change: As efficiently as possible.

Speaker Change: While still hitting critical customer delivery dates and then trying to pull in customer milestone payments and deposits. So.

Speaker Change: We're kind of balancing that in the short term as we focus on getting the line implemented and long term funding secured.

Thanks Nathan.

Nathan G. Kroeker: Maybe just one last one on that incremental $20 million to get to 2 gigawatts and the automated bipolar subassembly process. I think you mentioned sort of timing on that tied to securing longer-term funding. Does that imply that the DOE loan is not contingent upon that? Thank you.

Speaker Change: Just one last one.

Nathan: On that that incremental $20 million to get to two gigawatts.

Speaker Change: Automated bipolar.

Speaker Change: Sub assembly process, I think you mentioned sort of timing on that tied to securing longer term funding does that imply that thats not.

Speaker Change: <unk> loan is not contingent upon that thank you.

Speaker Change: CRE loan is not contingent on that that would be a future.

Nathan G. Kroeker: That would be a future event, just like Line 2 or Line 3, in that we would spend the money, apply for reimbursement, and get reimbursed. Joe touched on the mechanics of the loan a little bit earlier. I mean, once you get through the first reimbursement, that money goes into an account and kind of recycles inside the mechanism to where we can use that to pay for the next round of costs and then submit for reimbursement again.

Speaker Change: Event, just like lying to relying three and that we would spend the money and apply for reimbursement and get reimbursed jumped.

Speaker Change: Joe touched on the mechanics of the loan a little bit earlier.

Once you get through the first reimbursement that money goes into an account and kind of re cycles inside the mechanism to where we can use that to pay for.

Speaker Change: The next round of cost and then submit for reimbursement again. So once you get through the first closing and funding that money kind of re circulate within the within the cap stack if you will.

Unknown Executive: So once you get through the first closing and funding, that money kind of recirculates within the capital stack, if you will. Perfect. Thank you for the clarification.

Speaker Change: Perfect. Thank you for the clarification.

Speaker Change: Thank you and one moment as we move on to our next question.

Unknown Executive: Thanks. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of James West with Evercore. Your line is open. Please go ahead. Hey, good morning, guys. Hey, James. Good morning.

And our next question is going to come from the line of James West with Evercore. Your line is open. Please go ahead.

Hey, good morning, guys.

James: Hey, James Good morning.

Speaker Change: Okay.

Joseph R. Mastrangelo: So congratulations on getting the line up and running. As you guys... You'll get more experience and progress further here. Any changes to the strategy for line 234 and expanding capacity further? And then, did I hear correctly that what you have in the backlog should take up most of the capacity, if not all, of line one for the next one to two years? Yeah, if we just stay on line one, yes, James, I think I think, you know, underlying your question, if you look at what's happening in the marketplace, the market continues to accelerate to bigger projects with longer duration energy storage and a demand for domestic or U.S. produced technology for energy security. All three of those things, I think EOS meets all three of those criteria.

Speaker Change: So congratulations on getting the line up and running.

Speaker Change: As you guys.

We're experiencing ramp further here.

Any changes to the strategy for 1234 and expanding capacity further and then did I hear correctly that.

Speaker Change: What you have in the backlog should take up most of the capacity if not all of one one for the next one to two years.

Speaker Change: Yes.

James: We just stay Pat online one, yes, James I think I think.

Speaker Change: Underlying your question if you look at what's happening in the marketplace. The market continues to accelerate too big.

Speaker Change: Bigger projects with longer duration energy storage and <unk>.

Speaker Change: Somewhat demand of domestic or U S produced technology for energy security.

Speaker Change: All three of those things I think iOS meets all three of those criteria. So as you look at the strategy for expansion and the strategy for extension is going to continue to be expanding as we get backlog I think what we've learned going through the line width with acro online. One is we can convert these lines and relative.

Joseph R. Mastrangelo: So as you look at the strategy for expansion, the strategy for expansion is going to continue to be expanding as we get backlog. I think what we've learned going through the line with ACRO on line one is we can convert these lines relatively quickly, and we're only going to add that capacity as we see the backlog firming up and the pipeline firming up to be able to be able to produce what we don't want to have is, you know, like really want to avoid, you know, capacity chasing orders versus orders wanting to get in front of capacity and us investing our capital when we have the orders to be able to deliver and that will continue to be the strategy.

Speaker Change: <unk> relatively quickly.

Speaker Change: And we're only going to add that capacity as we see the backlog firming up in the.

Speaker Change: Pipeline firming up to be able to be able to reduce what we don't want to have us.

Speaker Change: Yes.

Speaker Change: Wanted to avoid.

Speaker Change: Capacity chasing orders versus orders wanting to get in front of capacity in us investing our capital when we have the orders to be able to deliver and that will continue to be the strategy now what I think we're seeing is a building storm. If you will inside of inside of what we're trying to do in the country and also starting to see.

Joseph R. Mastrangelo: Now, what I think we're seeing is a building storm, if you will, inside of what we're trying to do in the country and also, you know, starting to see Europe and India and other parts of Australia and other places go through the same acceleration that we're seeing in the U.S.

Speaker Change: Europe, and India and other than that in Australia, and other places go through the same acceleration that we're seeing in the U S. So I think demand signals will continue to strengthen the entire philosophy of how we came up with our manufacturing capacity strategy was built it in lines make the lines Incrementals spank capacity as you need it and if you have demand cigna.

Joseph R. Mastrangelo: So I think demand signals will continue to strengthen. The entire philosophy of how we came up with our manufacturing capacity strategy was to build it in lines, make the lines incremental, and spend capacity as you need it. And if you have demand signals that come from other places, you would then expand into other buildings. So this isn't this isn't like, you know, I don't think our strategy has ever been a 10 gigawatt hour factory in Pennsylvania.

Speaker Change: Does that come from other places you would then expand into other into other buildings. So this isn't this isn't like I don't think our strategy has never been a 10 gigawatt hour factor in Pennsylvania, It's build out project amazed in Pennsylvania, and then look where you can reduce logistics cost by Colo co locating a factory near demand and that will.

Joseph R. Mastrangelo: It's building out Project Amaze in Pennsylvania, then looking where you can reduce logistics costs by co-locating a factory near demand. And that will be the next phase of growth as we get through this first part here of getting the line up and running and delivering. Okay, okay, makes sense. And so to push on kind of a line like that, would you need to have it totally sold out, half sold out? What's the kind of gating factor or the data point you need to see before you commit to it?

Speaker Change: The next phase of the growth as we get through this first part here of getting a line up and running and delivering.

Speaker Change: Okay. Okay. It makes sense and so for push go on kind of a line.

Speaker Change: Who would.

Speaker Change: Would you need to have it totally sold out half fold out what's kind of the the.

Speaker Change: The gating factor or the data point, you need to see before you commit to it.

Joseph R. Mastrangelo: So look, I think we look forward on a rolling basis, six, 12, 18 months. You're going to be looking out on the 12 to 18 month demand signal and want to have and want to have, you know, in my view, you're going to want to be close to that 50% mark because you can absorb that and continue to and can make profit off the line. Like when you look at it, you know, and this, you know, just if I take back your question, James, and kind of link it back to our second quarter numbers.

Speaker Change: So look I think I think we look forward on a rolling basis 12 to 18 months youre going to be looking out you're going to be looking out on the on the 12 months to 18 months demand signal and want to have and want to have.

Speaker Change: In my in my view, you're going to want to be close to that 50% Mark.

Speaker Change: Because you can absorb that and continue to.

And make profit off the line like when you look at.

James: Just if I take back your question James again, a link it back into like our second quarter numbers.

Joseph R. Mastrangelo: You know, if you look at what happened in the quarter to us on the page where Nathan walked through cost out, we don't want to have capacity sitting there underabsorbed that drags down the performance of the company. So, like when you look out and you say, if I get to 50% online, I can absorb that capacity and still get to break even positive on a contribution margin basis.

Speaker Change: If you look at what happened quarter to us on the page, where Nathan walked through cost out we don't want to have capacity sitting there under absorbed that drags down the performance of the company. So like when you look out you said, if I get to 50% on Hawaiian eye can absorb that capacity and still get to breakeven positive on a contribution margin basis and that's how we'll make.

Joseph R. Mastrangelo: And that's how we'll make the investment decisions. But at the same time, you're going to be weighing the opportunity pipeline and what's out there for conversion and orders over that 12 month time period to take that 50% that you're locked in on and increase that as you go. And I think that's going to be the best way for us to continue effective utilization of capital and deliver a company that has profitable growth. Okay, I got it.

Speaker Change: The investment decisions, but at the same time youre going to be weighing the opportunity pipeline and what's out there for conversion and orders over that 12 month time period to take that 50% that you're locked in on an increased debt. As you go as you move forward and I think thats going to be the best way for us to continue.

Joseph R. Mastrangelo: Thanks, Joe. Thanks, James. Thank you, and one moment as we move on to our next question. And our next question comes from the line of Joseph: Yosha with Guggenheim.

Speaker Change: Active utilization of capital and deliver a company that has profitable growth.

Speaker Change: Okay got it thanks, Jeff.

Dan: Thanks, Dan.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: And our next question comes from the line of Joseph Osha.

Speaker Change: Sure.

Guggenheim: Guggenheim. Your line is open. Please go ahead.

Unknown Executive: Your line is open. Please go ahead. Thanks. Good morning, everybody.

Joseph Amil Osha: Thanks, Good morning, everybody I did want to return quickly to this issue on the deal side.

Joseph Amil Osha: I guess I had gotten the impression that site acceptance was.

Joseph Amil Osha: Really the major thing that we had to deal with prior to the initial draw.

Joseph Amil Osha: And that might be reasonable to expect that to conclude by the end of Q2, So I guess I'm asking a or any of these other cps really material hurdles in your view would be are you still comfortable telling us that we could get there by the end of Q2 in terms of the initial draw.

Unknown Executive: I did want to return quickly to this issue on the DOE side. I guess I had gotten the impression that site acceptance was really the major thing that we had to deal with prior to the initial draw and that it might be reasonable to expect that to conclude by the end of Q2. So I guess I'm asking, A, are any of these other CPs really material hurdles in your view?

Joseph R. Mastrangelo: And B, are you still comfortable telling us that we should get there by the end of Q2 in terms of the initial draw? Then, I think this, um, so you asked a couple of questions there. One, we're on schedule to get SAT done by the end of the second quarter. That is a significant CP in terms of the DOE.

Speaker Change: I think this.

Speaker Change: So you asked a couple of questions in there one way or on schedule to get it done by the end of the second quarter that is a significant CP in terms of the Doe Theres obviously.

Nathan G. Kroeker: There's obviously, you know, we've got to submit our eligible expenses, they've got to review, they've got to process, they've got to reimburse. We've been led to believe that's probably a 30 day turnaround time. And so, and that is, there are other smaller CPs, but we've always been focused on the SAT.

Speaker Change: Got a submit our eligible expenses they've got to review they've got a process. They have got to reimburse we've been led to believe Thats, probably a 30 day <unk>.

Speaker Change: Turnaround time.

Speaker Change: So and that is there is other smaller cps, but we've always been focused on the <unk> I think that is the that's the big one we've got to focus on.

Nathan G. Kroeker: I think that is the, that's the big one we've got to focus on. And so I would anticipate, you know, closing funding several weeks after that. So I guess, let me try it a different way.

Speaker Change: And so I would anticipate closing funding several weeks after that.

Speaker Change: But as yet.

Joseph R. Mastrangelo: Do you believe that you're going to be in a position then to give the LPO the relevant documentation by the end of the quarter? So Joe, they'll be part of the SAT process. I'm not going to make a commitment on the cycle time and the processing time of an external entity, but we feel like we'll be able to show them that the line is running to the performance that we signed up for in the loan, and then from there, as Nathan said, we have to go through the process of reimbursement of the cost and review of the cost.

Speaker Change: Let me try it a different way.

Speaker Change: <unk> that youre going to be in a position then.

Speaker Change: Give the LBO that relevant documentation by the end of the quarter.

Speaker Change: So Joe there'll be part of the process.

Speaker Change: Okay.

Speaker Change: They have been all the way through this I am not going to I'm not going to make a commitment on the on the cycle time and the processing time of an external entity, but we feel like we'll be able to show them that the line is running to the performance that we signed up to in the loan and then from there as Nathan said, we have to go through the process of reimbursement of the cost review of the costs.

Joseph R. Mastrangelo: Okay. All right. Thanks. That's helpful. I have some more, but I'll take it offline for later.

Speaker Change: Okay Alright.

Speaker Change: Alright. Thanks.

Speaker Change: We'll have some more but I'll take it up one provider.

Unknown Executive: All right. Thanks, Joe. Thank you. One moment as we move on to our next question. Our next question comes from the line of Martin Mallory with Johnson Rice and Company. Your line is open. Please go ahead.

Joe: Alright, Thanks, Joe.

Speaker Change: Thank you one moment as we move on to our next question.

Speaker Change: Our next question comes from the line of Martin Malloy with Johnson Rice <unk> Company. Your line is open. Please go ahead.

Unknown Executive: So good morning and congratulations on all the progress you've made, including the cost out initiative. My, my first question is about customer conversations over the last couple months and if they've changed. You know, we're hearing in the press a lot more about utility companies increasing their expectations for demand and data center power needs and them wanting power as quickly as possible and reliability. Can you maybe talk about anything you're seeing with respect?

Martin Malloy: Good morning, and congratulations on all the progress you've made including the cost out initiatives.

Joseph R. Mastrangelo: to that maybe has changed with customer conversations or new customers in the last couple months. Well, I think you see it in the growth of the opportunity pipeline, you know, on a quarter-over-quarter and year-over-year basis. You know, yes, I mean, there's a lot there.

Martin Malloy: My first question I, just wanted to ask about.

Martin Malloy: Customer conversations over the last couple of months.

Changed.

Martin Malloy: Yeah.

Martin Malloy: Hearing in the press a lot more about.

Martin Malloy: Utility companies, increasing their expectations for demand in data center.

Speaker Change: Power needs increasing in them wanting power as quickly as possible and reliability could you maybe talk about anything you're seeing with respect.

Speaker Change: Did that maybe has changed with customer conversations or new customers in the last couple of months.

Speaker Change: Well, Marty I think you see it in the in the growth of the opportunity pipeline.

Speaker Change: <unk>.

On a quarter over quarter and year over year basis.

Joseph R. Mastrangelo: There are conversations we're having on the data center side. We feel like we've got a really good solution for data centers. And we always have to remember, you know, data centers need two types of energy they're looking for. There's the emergency response, which we are not.

Speaker Change: Yes, I mean theres a lot there are conversations we're having on the data center side, we feel like we've got a really good solution for data centers and we always have to remember.

Speaker Change: Data centers, there's two types of energy. They are looking for there is the emergency response, which we are not and then there is the operating in providing the energy for the data Center, which I think we are a good fit for we continue to work through with multiple customers multiple opportunities and just see that this is an emerge.

Joseph R. Mastrangelo: And then there is the operation and providing the energy for the data center, which I think we have a good fit for. You know, we continue to work with multiple customers, multiple opportunities, and just see that this is an emerging realization that there is a lot more power demand out there, and long-duration energy storage can help fit and deliver that demand requirement.

Speaker Change: <unk> realization of Theres, a lot more power demand out there and long duration energy storage can help fit.

Speaker Change: Deliver that demand requirement and we have a solution that fits that really well.

Joseph R. Mastrangelo: And we have a solution that, you know, fits that really well. Great. And for my follow-up question, just wanted to ask about maybe initial thoughts on the impact of the tariffs that were announced yesterday and how that might benefit EOS in your domestic content that you have.

Speaker Change: Yes.

Speaker Change: Great.

Speaker Change #100: My follow up question I, just wanted to ask about.

Speaker Change #101: Maybe initial thoughts on the impact on yields from.

Speaker Change #102: The tariffs.

Speaker Change #102: Were announced yesterday and how that might.

Speaker Change #102: Benefit.

Speaker Change #102: Domestic content that you have.

Speaker Change #102: Okay.

Joseph R. Mastrangelo: Okay, I mean, Marty, I think from the standpoint of, Wanting to bring manufacturing back to the United States and wanting to invest in manufacturing and wanting to not just bring it back but also incentivize the growth of companies like Eos, I think it's a great piece of legislation, not just for energy storage but also for EVs. I think the timing of when it comes in for energy storage times well to when we'll be up at scale and running as it gets into 2026, I think when you take the combination of the tariff, the fact that we're above 90% on U.S. content, so the investment tax credit that the customers get and the energy security piece of this, let's not downplay that, I think you now have really good conditions for companies like Eos to grow in the future.

Speaker Change #102: Marty.

Speaker Change #103: From the standpoint of.

Speaker Change #104: Wanting to wanting to bring manufacturing back to the United States and wanting to invest in manufacturing and wanting to not just bring it back but also incentivize the growth of companies like <unk> I think I think it's a great.

Speaker Change #104: It's a great piece of legislation both not just for energy storage, but also for Evs.

Speaker Change #104: I think the timing of when it comes in for energy storage times, well to when we will be up at scale.

Speaker Change #105: Running as it gets into 2026 I think when you take the combination of.

Speaker Change #105: The tariff the fact that we're above 90% on U S content. So the investment tax credit that the customers get in.

Speaker Change #105: The energy security piece of this that's not downplay that.

Speaker Change #106: I think you now have.

Speaker Change #106: Really good conditions for companies like <unk> to grow in the future and I've said many times.

Joseph R. Mastrangelo: As I've said many times, we're going to need more than one Eos to be able to meet this demand. We've been positioning the company very purposefully for the time frame that we're talking about as growth hits. I think, Marty, the other piece that I'd like to talk about is going back, linking your two questions together, you know, nearly six years here at the company, the overall industry has changed dramatically. You know, and I think, you know, when you look at, when I first came here, we were talking about energy storage for minutes, maybe if we get two hours, four hours being the goal, to now talking about plus six hours, large scale, you know, like when you look at what the team has been able to do here in transitioning from Gen 2.3, which, you know, six years ago would have been a product that could have met that market that was much smaller with a much more bounded use case to coming out with the Z3 and the work that the team continues to do.

Speaker Change #107: We're going to need more than one <unk> to be able to to be able to meet this demand we're going to we've been positioning the company very purposefully.

Speaker Change #108: For the timeframe that we're that we're talking about growth rates and I think Marty the other piece that I'd like to talk about is going.

Speaker Change #108: Going back linking your two questions together.

Speaker Change #108: Nearly six years here with the company.

Speaker Change #108: The overall industry has changed dramatically.

Marty: And I think when you look at when I first came here, we were talking about energy storage for minutes, maybe if we get two hours four hours being the goal to now talking about plus hours large scale like when you look at what the team has been able to do here and transitioning from Gen. Two three which six years ago would have been it would have been a product that could have met that market that was.

Marty: As much smaller with a much more bounded use case to coming out with a Z three and the work that the team continues to do it positions you perfectly for.

Joseph R. Mastrangelo: It positions you perfectly for the market, for the future of the market, for where the market is going to be in the future, not where it is today. And I think we're just gonna keep working on that and keep improving what we have and keep driving costs down and keep getting a US supply chain to deliver energy security and a competitive product that meets the future demand that we have for energy. Great, thank you. I'll turn it back.

Marty: For the market for the future of the market, where the market is going to be in the future not where it is today and I think and I think we're just going to keep working on that and keep improving what we have and keep driving cost down and keep getting a U S supply chain to deliver the energy security and a competitive product that meet the future demand that we have for energy.

Speaker Change #110: Great. Thank you I'll turn it back.

Unknown Executive: Thanks, Morris. Thank you, and one moment as we move on to our next question. And our next question comes from the line of Thomas Boyes with TD Cal.

Mark: Thanks Mark.

Speaker Change #112: Thank you and one moment as we move on to our next question.

Speaker Change #113: And our next question comes from the line of Thomas Boyes with TD Cowen. Your line is open. Please go ahead.

Unknown Executive: When your line is open, please go ahead. I appreciate you taking the questions. Maybe just two quick ones.

Thomas Gordon Boyes: I appreciate you taking the questions maybe just two quick ones.

Joseph R. Mastrangelo: You know, great to hear that you're at 90% for, you know, domestic content. Can you get to 100% at some point? Is that the ultimate goal? Or there may be some things that just can't be insourced fully, even over the longer term? So, yes, you can't get to 100%.

Speaker Change #115: To hear that you are at 90% for principal.

Speaker Change #116: The domestic content as.

Can you get to a 100% at some point is that the ultimate goal.

Speaker Change #117: Maybe something that just can't ultimately be in source fully even over the longer term.

Speaker Change #118: So yes, you can get to a 100%.

Joseph R. Mastrangelo: You know, it's a goal we put out there for ourselves. I think when you look at, like, the core portion of what we do, you know, the components and the battery, the software, and the BMS, yes, 100%. That's the goal. Other ancillary things are maybe some hardware and fans and other things that might not come from the U.S., but what we're marching to as a team is, you know, how close can we get to 100%?

Speaker Change #119: It's a goal we've put out there for ourselves.

Speaker Change #120: I think when you look at like the core portion of what we do the components in the battery the software in the BMS, yes, 100%.

Speaker Change #120: That's the goal other ancillary things or maybe some hardware and fans and other things that might not come from the U S. But we're marching to as a team is how close can we get to a 100% and again like part of that also is.

Joseph R. Mastrangelo: And, again, part of that is, you know, making our supply chain simple and making it easy to work and control and get quality from our suppliers versus adding the complexity of trying to do this globally when you're a small company. I mean, I think the fact that we went with the strategy of, you know, really, when we started out, it was North America and then honed down into the US, it's made our ability to grow the company and switch over to the Z3, it's enabled us to be able to do that because everybody's close by. You can actually talk to people face to face and go to their facilities, and they can come to our facility.

Speaker Change #120: Making making are making our supply chain simple, making it easy to work in control and get quality from our suppliers versus adding the complexity of trying to do this globally when you're a small company I mean, I think the fact that.

Joseph R. Mastrangelo: And it just allows you, you know, innovation requires getting in a room together and working through the challenges to get to an innovative product, and having it local makes it simpler and faster. I appreciate the insight there. And maybe just the last question. When, you know, you're expanding capacity for Line 1, do you need to kind of pause production at some point so that work can be done? Or can it occur concurrently with, you know, operations? It sounds like it can, based on kind of what you had laid out on the call, but I wasn't sure.

Speaker Change #120: We went with the strategy.

Speaker Change #120: Let's look at you know really when we started it was North America, and then hone down into the U S. It's made our ability to grow the company and switch over to the <unk> three it's enabled us to be able to do that because everybody is close by you can actually talk to people face to face and go to their facilities and they can come to our facility and it just allows you.

Speaker Change #120: Innovation requires getting in a room together and working through the challenges to get to an innovative product and having it local makes it simpler and faster.

Speaker Change #121: Excellent I appreciate the insight there and maybe just.

Last question.

When you're expanding capacity for line one do you need to kind of pause production at some points that where it can be done or can it occur concurrently with operations. It sounds like you can based on kind of what you had you.

Speaker Change #121: Later on the call, but I wasn't sure.

Joseph R. Mastrangelo: It's concurrent. So it's not feeding, it's feeding, it's feeding parts into the main line. You know, and, and, and, you know, we've been working on this. As far as getting a conceptual design done and doing some pilot testing, and then we'll launch the full automation of the bipolar production. But that happens, that happens as an input into the line, not on the line itself.

Speaker Change #122: Concurrent so it's not it's feeding it's feeding feeding parts into the mainline.

Speaker Change #123: And we've been working on this as far as getting a getting a conceptual design done and doing some pilot testing and then we'll launch the full.

Speaker Change #123: Automation of the bipolar production.

But that happens that happens as an input into the line.

Speaker Change #123: Not on the line itself.

Speaker Change #124: I appreciate it I'll hop back in queue.

Speaker Change #124: Thanks.

Speaker Change #125: Thank you and one moment for our next question.

Joseph R. Mastrangelo: I appreciate it. A heart to you. Thank you, and one moment for our next question. And our next question comes from the line of Vincent Anderson with Stiefel. Your line is open. Please go ahead.

Speaker Change #126: And our next question comes from the line of Vincent Anderson with Stifel. Your line is open. Please go ahead.

Unknown Executive: Yeah, good morning. It's been said a few times already, but I think it was barely a year ago when I was out in Turtle Creek watching Terry Rigg T-Shirt Press for prototype. Cell.

Yes, good morning.

Vincent Alwardt Anderson: It has been said already a few times, but I think it was barely a year ago. When I was out in Turtle Creek watching your user Jerry rig teacher press for prototyping disease <unk> cel. So to go from that to an automated production line and barely a year is really honestly impressive. So I wanted to echo the congratulations just one more time.

Joseph R. Mastrangelo: So to go from that to an automated production line and barely, really honestly impressive, so I wanted to actually ask you. Ah, thanks. Sold on ramping up the line 1 to 2 gigawatt hours. Can you just maybe talk me through what led you to that decision versus building out a second line first? And then you touched on this already, but maybe just initial feedback from your automation partners on the subassembly step. So let me start at the end there, and I'll work my way back, Vincent.

Vincent Alwardt Anderson: Thanks Vincent.

Speaker Change #128: You settled on ramping line one two gigawatt hours can you just maybe talk me through what led you to that decision versus building out a second line first.

Speaker Change #129: Then you touched on this already but maybe just the initial feedback from your automation partners on the sub assembly step.

Speaker Change #130: So on the so let me start at the end there and I'll work My way back then and so on.

Joseph R. Mastrangelo: So on the subassembly work, we feel confident that we'll be able to do this. Like I said, there's been some pilot work done. Part of we've already automated, I'd say, on our terminal manufacturing. We've already automated that process. So that is a very similar manufacturing process. We feel like automating the other subassemblies is going to give us better, obviously, consistency of parts coming off the line. We feel confident that we have a layout and solution that we can execute on, and we've done some testing on individual processes, so we followed the same playbook that got us where we are, which is... get your discrete processes within manufacturing, get them working in an automated fashion, and figure out how to move things between their individual stations.

Speaker Change #130: On the sub assembly work.

Speaker Change #131: We feel we feel confident that we'll be able to do this.

Speaker Change #131: Said theres been some pilot work done.

Speaker Change #131: Part of <unk>.

Speaker Change #131: Part of it we've already we've already.

Speaker Change #131: Automated I'd say on our terminal manufacturing, we've already automated that process. So that is a very similar manufacturing process, we feel like automating. The other sub assembly is going to give us better obviously consistency.

Speaker Change #131: Parts coming off of the line.

Speaker Change #131: <unk>.

Speaker Change #131: We feel confident that we have a layout and solution that we can execute on and we've done some testing on individual property. So we followed the same playbook that got us where we are which is get your discrete processes within the manufacturing and get them working in an automated fashion and figure out how to move things between their individual stations and Thats really what we are.

Joseph R. Mastrangelo: And that's really what we're working on now with Acro for the subassembly piece of it. You know, that's going to help us. I think, like, you know, on your question of why not go for a second line, you need the subassembly, you know, to feed two lines; you need the subassemblies up and operating at that line rate.

Speaker Change #131: We're working on now with Acro four four for the sub assembly piece of it.

Speaker Change #131: That's going to that's going to help us I think on your question of why not go for a second line you.

Speaker Change #131: You need the sub assembly to feed two lines you need the sub assemblies up and operating at that line right and we've always known we've always planned that.

Joseph R. Mastrangelo: We've always known, we've always planned that. And I think that would be a fast follow, depending on where we are with the backlog, to launching the second line and getting the profitability where it needs to be. And I think, you know, the main goal, if you go back to what we said in December, Vincent, is like.., continue to drive the cost out program, you know, we're making good progress on bill of material cost, you know, as Nathan laid out on his page, it's now about utilizing your labor and your capacity to its fullest, to get to position the company to become contribution margin positive, and then, and then go into cash flow positive as we get into 2025.

Speaker Change #131: And I think that would be a fast follow depending on where we are with the backlog to launching the second line and getting that getting that profitability, where it needs to be.

Vincent Alwardt Anderson: The main goal if you go back to what we said in December Vincent is like.

Vincent Alwardt Anderson: We need to drive the cost out program, we're making good progress on bill of material cost is Nathan laid out on this page. It's now about utilizing your labor and your capacity to its fullest to get to position the company to become contribution margin positive and then and then go into cash flow positive as we get into 2025.

Joseph R. Mastrangelo: The line to launch comes down to allocation of capital us getting the company to where we're generating the cash to be able to do that tied in with the funding from the DOE loan. The only thing I would add, Vincent, is just efficient use of capital, right? The first one and a quarter gigawatt hours cost 30 million bucks. For an incremental 20, we can effectively double that within our existing footprint, within our existing square footage. So from a capital efficiency point of view, it is more efficient to just increase the capacity of the first line than to go and build the second line.

Speaker Change #132: The line two launch comes down to allocation of capital in us getting the company to where we're generating the cash to be able to do that tied in with the funding from the deal.

Speaker Change #132: The only thing I would add Vincent is just efficient use of capital right. The first one in a quarter gigawatt hours was 30 million Bucks for an incremental 20, we can effectively double that.

Speaker Change #132: Within our existing footprint within our existing square footage so from a capital efficiencies more efficient to just increase the capacity of the first line than to go and build the second line.

Vincent Alwardt Anderson: Okay. That's perfect I appreciate it and I know, we're coming up on on time here, but I had a few questions all kind of related to the commercial side of things. So I'm, just going to try to speed run them.

Nathan G. Kroeker: Okay, that's perfect. I appreciate it. And I know we're coming up on on time here, but I had a few questions all kind of related to the commercial side of, you know when I think about the the cubes that are being installed or they are installed hopefully they'll start up, When I think about the marketing value of the data they're going to spit out, are we thinking about this as, those customers that have received those cubes are going to.., turn around with that data and hopefully put in more orders or is this more about Eos collecting that data and having something to point to other [inaudible] Vincent, both. Yes, yes, yes, yes. All right, beautiful. That's exactly how that's going to work.

Vincent Alwardt Anderson: When I think about the cubes that are being installed or they are installed hopefully they'll startup soon when I think about the marketing value of the data, they're going to they're going to spit out are we thinking about this is.

Vincent Alwardt Anderson: Those customers that have received those cubes are going to turnaround with that data and hopefully put in more orders or is this more about.

Vincent Alwardt Anderson: Collecting that data and having something to point to two other customers in the pipeline.

Vincent Alwardt Anderson: Order to generate additional orders.

Vincent Alwardt Anderson: Yes.

Speaker Change #133: Both yes, yes, yes, and yes alright.

Speaker Change #134: That's exactly that's exactly how thats going to work.

Joseph R. Mastrangelo: Okay, and then Joe, maybe I'm maybe I'm misinterpreting or overinterpreting this, but you specifically pointed to FAT rather than then site acceptance testing as being the stage that was really important to your potential. Curious, did you have potential customers come in and view the line while it was at ACRO as part of their diligence to help accelerate the pipeline conversion? We've had customers go visit Acro. I think my point, my point, Vincent, is like, you know, when you, you know, part of the challenge of this, you know, road that we're on is there have been people before us that have tried and haven't gotten there.

Speaker Change #135: Okay, and then Joe maybe I'm, maybe I'm misinterpreting or over interpreting this but you specifically pointed to fat rather than than site acceptance testing is being the stage that was really important to your potential customers. I'm curious did you have potential customers come in and view. The line wallet was that acro as part of their diligence to help accelerate the pipe.

Line conversion.

Vincent Alwardt Anderson: We've had customers we've had customers go visit Acro I think I think my point My point Vincent is like.

Vincent Alwardt Anderson: When you part of the part of the challenge of this.

Vincent Alwardt Anderson: Road.

Vincent Alwardt Anderson: Road that we're on as there has been people before us that have tried and haven't gotten there. So when you talk about being able to automate production a lot of people question can you do it because we've seen a lot of other companies try and not get there.

Joseph R. Mastrangelo: So when you talk about being able to automate production, a lot of people ask, can you do it? Because we've seen a lot of other companies try and not get there. Being able to say, "Come out and let's watch it." I stand there with a stopwatch and time the individual stations. And when people start timing it, you know, and maybe they use a stopwatch, or maybe it's kind of like, you know, flag football where they're counting 10 Mississippis and saying, "All right, that's 10 seconds."

Vincent Alwardt Anderson: Being able to come out and let's watch it.

Vincent Alwardt Anderson: Stand there with a stopwatch in time, the individuals stations and when people start timing it.

Vincent Alwardt Anderson: And maybe they use a stopwatch or maybe it's kind of like.

Vincent Alwardt Anderson: Football, where theyre count 10, Mississippis, and saying right that's 10 seconds.

Joseph R. Mastrangelo: I mean, it proves to people like this can really happen; it's not just a concept. And there are a lot of people, Vincent, that have, you know, kind of where you started on the call, which is, I came to Turtle Creek, and I could see the potential of where you could game. I've said this many times, like, you know, we've got to show people and earn the right to grow this company and show people, you know, FAT and, and, and, when I talk to customers about this, it' Do you think we can't take it apart and put it back together again?

Vincent Alwardt Anderson: It proves out it proves out the people like this can really happen. It's not just the concept and theres a lot of people Vincent that have kind of where you started on the call which is I came to Turtle Creek I could see the potential of where you can take this to why youre doing it and this is great and I think that's just.

It's a show me game I've said this many times like we've got to show people and earn the right to grow this company and showing people.

Vincent Alwardt Anderson: And when I talk to customers about this.

Bill: It's bill.

Bill: Along the lines of.

Bill: We've created a line do you think we can't take it apart and put it back together again.

Bill: And Thats, where we are when I think about.

Joseph R. Mastrangelo: And that's where we are when I think about SAT. Perfect. And then I'll just have one last one here for you, Joe. Your alma mater there over at GE, Vernova, it's now kind of through the distraction of, you know, becoming an independent entity.

Bill: Hey.

Speaker Change #137: Perfect and then just one one last one here for you Joe your alma mater, there at over at GE for Nova It's now kind of through the distraction of becoming an independent entity, just curious where you view them in kind of your value chain.

Joseph R. Mastrangelo: Just curious where you view them in kind of your value chain, particularly given their position in wind energy and if that's a, you know, a pretty actionable partnership. Yeah, I mean, look, I mean, congratulations to Scott Strezic and the team there, having done it on a much smaller scale. I can only imagine how excited they are to be able to be focused on the energy industry.

Speaker Change #137: Particularly given their position in wind energy and.

Joe: Yes, pretty actionable partnership opportunity going forward.

Joe: Yes, we looked at it.

Speaker Change #138: Congratulations to Scott <unk> and the team there.

Speaker Change #139: Having done it on a much smaller scale I can only imagine.

Speaker Change #139: How excited they are to be able to be focused on the energy industry. There is always opportunities to partner with anybody that has that has.

Joseph R. Mastrangelo: There's always opportunities to partner with anybody that has, that has, you know, production, you know, whether it be wind turbines, whether it be solar modules, whether it be, you know, gas turbines, you know, there's a ton of opportunity to be able to do that.

Speaker Change #139: Production.

Speaker Change #139: Whether it be wind turbines, whether it be solar modules, whether it be gas turbines.

Speaker Change #139: Ton of opportunity to be able to do that.

Joseph R. Mastrangelo: I won't comment on any specific conversations with any players, but, you know, there's a lot of opportunity here as the market starts to evolve and we continue to put the proof points out on the product. All right. Excellent. Thanks again. All from me. Thank you.

Speaker Change #139: Wont comment on any specific conversations with any with any players, but there's a lot of opportunity here as we as the market starts to evolve and we continue to put the proof points out on the product.

Speaker Change #140: Alright excellent. Thanks again, all from me thanks.

Speaker Change #141: Thank you and I'd now like to hand, the conference back to Joe Mr. Andrew Lu for closing remarks.

Joseph R. Mastrangelo: And I'd now like to hand the conference back to Joe Mastrangelo for closing remarks. Hey, thanks everyone for being on the call today. I really, really appreciate the time.

Andrew Lu: Thanks, everyone for being on the call today I really really appreciate the time.

Joseph R. Mastrangelo: You know, again, I'm proud of the team and the work that they've done. Really, we've got to continue executing, and the challenge now is taking what has been a very detailed logistical plan and turning that into a line on the factory floor that's pushing batteries off that line every 10 seconds and, you know, continuing to get the product out in the field commissioned and up and running and just continue to show the value that the Z3 brings to the market and the need that it fulfills in the future energy demands of the world.

Speaker Change #141: Again.

Andrew Lu: Proud of that proud of the team and the work that they've done.

Speaker Change #143: Really we've got to continue executing in the challenge now is taking what has been a very detailed logistical plan and turn that into a lineup on the factory floor. That's pushing batteries off that line every 10 seconds and continuing to get the product out in the field commissioned and up and running and just continue to show the VAT.

Speaker Change #144: <unk> three.

Speaker Change #144: <unk> brings to it brings to the market and the needs that are fulfilled in the future energy demands for the world and we're just going to keep working on that every day. There is a lot of work left to do and Thats, what makes the job both challenging and fun at the same time and there is a group of people here that I couldnt be prouder of calling my colleagues because of the energy and enthusiasm.

Joseph R. Mastrangelo: And we're just going to keep working on that every day. There's a lot of work left to do, and that's what makes the job both challenging and fun at the same time. And there's a group of people here that I couldn't be prouder of calling my colleagues because of the energy, enthusiasm, and dedication they put into building a successful company. This concludes today's conference call. Thank you for participating, and you may now disconnect. Thomas Boyes, Joseph Souther, Nathan Kroeker, Joseph Souther, Nathan Kroeker,??

Speaker Change #144: <unk> and dedication they put into building a successful company.

Speaker Change #145: This concludes today's conference call. Thank you for participating and you may now disconnect.

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