Q3 2025 Eos Energy Enterprises Inc Earnings Call
Hello and welcome to the US Energy, third quarter 2025 earnings conference. Call please note that this call is being recorded. You will have the opportunity to ask questions to our speakers later on during the Q&A session. If you'd like to ask a question by that time, please press star 1 on your telephone keypad, thank you. Now, I would like to turn the call over to Liz Higley vice president of investor relations, you may begin.
Good morning everyone and welcome to eos's third quarter 2025 conference call today, I'm joined by EO CEO, Joe Mr. Angelo Co John may have and CEO and interim CFO Nathan Cregger. This call, including Q&A may include forward-looking statements, including, but not limited to current expectations with respect to Future results and outlook for our company.
Should any of these risk materialized or should our assumptions proved to be incorrect? Our actual results May differ materially from our expectation or those implied by these 4, we're looking statements, the risks and uncertainties that forward-looking statements are subject to are described in our SCC filings. For we're looking statements, represent our beliefs and assumptions. Only, as the day such statements are made. We undertake no obligation to update these statements made during this call to reflect events or circumstances after today, or to reflect new information or the occurrence of unanticipated events, except as required. By law, today's remarks will also include references to non-gaap financial measures additional information, including reconciliation between non-gaap financial information to us. Gaap financial information is provided in the press release.
Mental and is not meant to be considered an isolation or is a substitute for the related financial information prepared in accordance with gaap. In addition, our non-gaap financial measures may not be the same as or comparable to similar non-gaap measures presented by other companies. This conference call will be available for replay via webcast, through eos's investor relations website and investors that e.com. Joe, John and Nathan will walk you through our business Outlook and financial results before we proceed to Q&A with that. I'll now turn the call over to EO CEO. Joe Mr. Angelo.
Thanks Liz. Welcome everyone, to our third quarter earnings meeting. I'd like to start off on our classic page uh, our operating highlights. I really want to talk about, you know, Nathan and John will dive into the numbers here a little bit, but I want to spend a moment on the commercial Pipeline and the orders booking and the recent announcement that we made to just talk about the team that's been worked at work here, you know, Nathan moved over to be our chief commercial officer, back in the spring, and you're starting to see the results of both him and Justin vazi who's been here for almost 2 years. You're seeing the pipeline going up, you're seeing mous and getting on the same side of the table. With the customer, transferring, his orders. And you're seeing those orders, go into backlog and then ultimately out the door of shipping the same time that we've won a couple orders here after the quarter closed. We signed a very important strategic agreement with Talent energy that I'll talk about a little bit further. How we're thinking about this on a subsequent page in the deck around Revenue look. John's been here um with us for for 60 days and he's
Going to go through the details of what he found and what he's done in those first 60 days. But we've had a team on the field here for the last year. Jason's Greg's, Josh Payne. Um, Jessica Tryon, I've been doing a fantastic job, helping us position the supply chain, help us position cost to get the profitability and really position us to scale this business. You've seen our best quarter to date on Revenue in the history of the company. It's a phenomenal performance by the team in the third quarter. And more John will talk about how we started off fourth quarter, which really leads us to reiterate guidance, which I'll talk about at the end of the presentation on the cash side. You saw that we hit our last cash Milestone around customer cash. And again, this is attributable to the 2 hat that Nathan wears, meaning that she's commercial officer, you know, working on both the order side of the project side, the loan being the CFO. You know, we brought in 43 billion dollars of customer cash here, already in the fourth quarter, the business is becoming more stable and being positioned to scale as we move forward. It's an exciting time to think about what the future holds and I want to move to the next bill.
To talk about some of the announcements that we made a few weeks ago. Look, I know when we talk about our new building, people are going to ask why. Now, why do you need to do this to begin with? And I just want to take a moment to talk about where we were, and how we wound up where we are. We started off in Turtle Creek, in 2019, we took a building that was very low cost, and we expanded into a footprint with our landlord that footprint, as we expanded is not optimized. This new building gives us an optimized footprint, to build a world-class Factory to take cycle times down to drive, costs down and to get
This product where it should be as a market leader, both on performance and cost. I'm excited about what we're going to be doing in our new Factory as we get into next year and how John's positioning us to expand capacity to meet Demand, on our new software Hub in downtown Pittsburgh. It's an honor for us to be part of the revitalization of downtown Pittsburgh. It's an honor for us to be sitting here and thinking about coming to Pittsburgh because we knew we could build things and now tapping into the brain power and the ecosystem to make how we're building things even smarter being able to recruit. You know, when you look at the work we've done and Michelle boczkowski coming in as our chief people officer last year. You know, when you look at our company our turnover rates are in line with high growth startup companies and we've brought in a lot of talent to make this company better over the last 24 months and it's particularly in the last 12 months. I'm excited to be moving into the new building. You can see a rendering of what the building will look like. We're not taking the whole building, we're taking 3 floors but it will be branded as NEOS building. And we look forward to the day where all of our shareholders will be able to
Able to watch a pirate game or a sealer game and see that EOS logo in the skyline. It's a very very humbling to think about where we've come from, but it's also very exciting to think about where we're going. So if we go to the next page, I want to talk about the market itself. So I wanted to take a second here to talk about what we're trying to do as a country and as an industry and ultimately globally to truly scale into the power requirements that we need to Future growth and future economic growth around the world.
Or green electron in from Renewables. They take electrons and store them when they're needed. So how do what does that mean? Well, let me just talk about. Put for seconds. Go back to my old life before EOS and talk about traditional power generation, traditional power generation. It's installed for Peaks. You build capacity for a peek once a year that may happen, the capacity factors of how that Capac of how that generation works are in the 33 to 65% range. That means the assets are sitting idle more than they're probably actually running. So, what is energy storage do for every 5% that you can increase the capacity factor of a, gas turbine of steam, fired coal, plant of a nuclear facility or pumped Hydro storage. Every 5% increase in capacity, factor is like powering 50 million homes. What does that mean? Let me put that in context. That's powering for 1 year, California.
Texas, New York, Pennsylvania and Illinois. We need power. We need energy storage, and we need energy storage now and that's what we're positioning this company to deliver the same time. If you look at Renewables and let's say you say oh Renewables inefficient, they have intermittency but just take the installed base of the Renewables. We have now don't add anything to it. Let's imagine that we don't add any more wind or solar to the power infrastructure. Just putting
Energy storage systems on that existing installed base. So what's curtailment mean? Curtailment means that the wind is blowing or the sun is shining and there's no demand. For those electrons, adding energy storage at those points in time, you can add 10 gigawatt hours of Best and power 750,000 homes for a year. That would be like, powering Philadelphia for the year. Don't add, any additional capacity. Put energy storage alongside of it, make our energy infrastructure, more efficient and make it available to Consumers and industries when it's required. When you think about what all that.
Trials and tribulations and variance and how things work on The Upfront generation side. That is an impact on how we deliver the electrons to the end user. We have a lot of congestion on our grid. Congestion think of it as a traffic jam, energy storage on both ends of that traffic jam on the source. And the use allows you to decongest and reduce costs in the overall system, take what we have, make it more efficient, make it lower costs, deliver the electrons when they're needed and to and, and generate those electrons as efficiently as efficiently as they possibly can. Now, we're talking about
This super cycle being driven by Ai and to build out a hyperscalers and yes, they're creating new demand in the system, but at the same time, we have to deliver that demand at a cost-effective way so that consumers don't see their energy prices. Go up. The way you do that is with energy storage and what's our value proposition as EOS. So I'm going to talk about EOS we need all
Types of energy storage but let me specifically talk about what we bring as EOS. If you go with a traditional Cube solution that we've been putting out in the market with 1 acre, you can deliver a 100 megawatt hours of Cubes. If you take that Team, 1 acre and do an in-building solution because of the way our architecture of our product and how it operates you can deliver a gigawatt hour in 1 acre that's 4 times. What is out in the market today? That's being able to take bulk storage available today bring it to the market. Get that running and get what we have operating more efficiently and deliver more electrons when they're needed. So we can win the race of AI at the same time, our round trip efficiency. I'm going to show you data on the next page. Our round trip efficiency is in the mid 80s to the low 90s but that's across a very wide operating range. There's no other technology that can deliver that type of performance. Over that wide of an operating range. Not only do you have to sit there and say do a 12 hour, continuous cycle or 16 hour, continuous cycle, you want to do a 4 hour cycle and a 5 hour.
Cycle later in the day, our technology will do that and deliver that same round-trip efficiency independent of what the ambient temperature is. So we have a wide operating range ability to go across multiple temperatures and we can respond to fluctuations in demand. So think about this 5 milliseconds, I can't even that that's faster than snapping your fingers so demand changes are excess capacity, comes on our system responds 5 times faster than what the grid requires, its leading in the industry in that area at the same time.
That number that goes to the to to, to onto the grid and they're non-flammable and we'll we'll and I've talked about this before and talked about this again. Yes, if you overcharge our battery more than 200%, you run the risk of the electrolyte heating up and having steam come out of the battery that steam is non-toxic, we've tested it, as this has happened. It happens, it's happened. It's a safety feature of our battery. It's what makes it non-flammable and we've been able to operate through those incidents basically. Replace batteries, keep the system in place and start operating again. Now, let's go to the next page and talk about operations, Z3 field performance as of the end of October.
This is really, really encouraging what Francis, Richie and the team in Edison. These guys have been with, with EOS for nearly 10 years, they've developed the product, that is a killer product out. In the marketplace, I'm proud to see these initial results of how we're operating. If you look at the bottom left hand side, you can see the average performance of the 4 sites that are operating. And if you look at the right hand side, you can see the top performance of how they're operating. But what I'd like to point out to you, is, look at that wide temperature range normally, like if you're an engineer and you're a technologist listening to this, you know, thermal dynamics, you get to extreme temperatures, performance usually drops off. But look at our performance, against those fluctuations in temperature, it's relatively flat more to come on. The performance of this product. We are very encouraged about what we're seeing and feel like this product meets. All of the
As I talked about on the prior page. Now let's go to my last page here before I turn over to John our improved operating performance. Look, you see the performance in the increase in in Revenue quarter over quarter over quarter. This is all about taking production bottlenecks out eliminating single points of failure and Manufacturing bringing someone in with John's experience is only going to make this better with time. We were able to double our Revenue number from from second quarter in the third quarter and going into fourth quarter. We feel really confident on what we're seeing in the first 40 days of the quarter as far as how we're going to be able to execute for the rest of this year and going forward. But on the right hand side, what's most important for everyone here on the phone is our ability to generate Returns on that volume. And if you look at those lines, those lines are rapidly approaching break even and ultimately Pro ultimately profitability. And what's most important is you see the gap between our gross margin and our adjusted ebiz and margin closing. That's because we've always talked about the ability to scale this business on a low-cost based
and deliver profitability. I'm excited about where we are. We still have a lot of work left to do. We have a great product, there's going to be more to come, we're really excited, John and Nathan to walk through both operations, commercial and financial. But this was a really good quarter delivered by a team that's wired to win and wants to be the best in the industry. And with that I'll turn it over to John to walk through operations.
Thanks for calling. Good morning. Everyone really excited to be here today to talk to you about EOS. It's been just over 60 days since I joined EOS and as an operations leader there's truly no better time to join a company than when it is set up for large-scale growth before diving into what the team is accomplished, and what we're focused on going forward. I just want to briefly introduce myself. I bring more than 35 years of experience leading large scale, high-quality efficient and cost-effective operations around the world. I've worked for organizations that are recognized for world class execution and I not only know what world class looks like. I have also built and led teams to deliver it. My experience has taught me how to drive operational excellence, Building Systems that are efficient repeatable and cost-effective at scale. Those lessons translate directly into what we're doing here at EOS. What's impressed me most about EOS is the Simplicity and scalability of the product. A single product SKU and a highly automated manufacturing process, tailored around it. The team has done the hard work proving the
Process tightening the supply chain and hitting cycle time Milestones, that demonstrate this technology and scale.
As we move in the next phase of growth, my focus is on driving consistency and repeatability, creating a global Playbook that allows us to repay this model wherever our customers need long duration, energy storage, we see meaningful opportunities to take costs out of every aspect of the product, not just materials, but labor efficiency and overhead as Joe's discussed many times on prior calls through product.
This optimization automation layout design and lean principles will be able to increase Revenue per head square foot and cap apps.
Closely with the operations to enhance, quality, efficiency, and cost.
So let's take a look at what the teams accomplished in the 2 months. I have been here focusing on 5 key areas safety, quality cost output and capacity expansion. Safety is our top priority. We reduce safety and spends by 84% in Q2 to Q3 and user today at our 41% better than the industry. Average in September, we did 4 times, the production volumes that we did in August with zero loss time. Safety incidents. My goal is clear. I mean, trusted to keep our people safe and send them home to their families, each and every day.
quality we've made significant progress in decreased battery defects by 45% from 22 to Q3
Bipolars account for about 70% of, the total battery defects and with a complete cut over from manual to 100% automated. Bipolar production at the beginning of 24, we expect to drive that down by another 63% with costs we have a single product to focus on. What does that mean? I'll give you a couple of examples. 1, we have 5 buyers, the activity level and cost is not changed. Whether we buy for 1 line, 10 lines or 50 lines. The organization is already scaled in all key areas for growth.
2. Our supply base consists of 9 key. Suppliers making up 80% of our bill of material to date. We have never done a large buy and buy with our suppliers because of uncertainty around capacity, installation and production ramp. We are now in the position to do. So, we hosted these suppliers and Turtle Creek, a few weeks ago, where we reviewed our capacity forecast, and the opportunity pipeline as they ramp their production, they would have the ability to get more efficient and realize cost absorption. With that, as the backdrop, we expect to achieve further cost out in sync with the volume increases with this and other costs initiatives. We expect to exit, q1, gross margin positive.
Moving to production output. We're now positioned to deliver a significant step change in Q4 in Q3 our automated battery line operated at 15% capacity, utilization of its full 2. Gigawatt potential, limited by self-assembly bipolar equipment availability.
In Q4, we expect to ship three times the volume we did in Q3. We'll accomplish this by increasing capacity utilization by 167%, ramping additional shifts, along with having all eight bipolar cells in full production. My team is laser-focused on hitting the output to achieve our revenue guidance, and we're set up to do just that in October alone. We've already shipped 179% more cubes than we did in the first month of Q3. And in just the first four days of November,
The team has already shipped 83% of August total volume.
Let me say that again. It took us a month to accomplish just 3 months ago. We'll now take this only 6 days
Now, looking ahead, our next big step comes with the new building and the installation of line 2 expected in Spring of 2026. What excites me here is how we'll be able to utilize the layout and the opportunities. We have to be even more efficient. The space is designed for single piece flow, enabling lower cost and higher throughput. Let me give you an example of what I mean by this. Today, we're moving products. Across 3, floors and 2 buildings and from start to finish, which translate to materials, traveling 2.1 miles, their significant Material, Handling costs, associated with this in the new building we expect this cost to decrease by 86%. As we will have a 1/4 single piece flow in our end to end operation. This not only improves cost but gives us the ability to increase throughput. You've heard us talk about having a battery. Come off the line. Every 10 seconds, what we're focusing on now is reducing that time even further with changes to line 2, to 9. We should be able to further reduce cycle time. Once validated, we will then go back and
Retrofit Line 1, we will continue to implement enhancements to the automation equipment to reduce cycle time.
Finally, we're preparing to scale by diversifying our operation Supply base with multiple partners in place. We're positioned to have our suppliers build the line every 90 days if needed.
That flexibility gives us the ability to stay ahead of demand and deliver for our customers. When I get the green light from Nathan with that, I want to thank everyone for their time, and I'll let Nathan talk through the commercial highlights.
New volumes from pipeline into backlog. This PO is very strategic and it is for deployments ahead of Frontiers, UK cap, and floor projects.
That means we're getting systems in the ground early and showing the market what our technology can do, ahead of the cap and for projects, as we continue to support Frontier on their submissions.
To put the cap and floor program in perspective. There were a total of 177 projects submitted by various developers, but only 77 Advanced to round 2 and every single 1 of the 16 projects that Frontier submitted using our technology moved forward. That means EOS is represented in over 20% of the projects that made it to round 2.
We have nearly 11 gigawatts in the second phase. More than double what was anticipated when we signed the mou with Frontier earlier this year. That's a powerful endorsement of our technology and our ability to deliver at scale and just to remind everyone under cap and floor rules. Projects must deliver at least 8 hours of discharge which plays directly to our strengths in long, duration storage.
We recently announced the 750 megawatt hour Supply contract or MSA with mn8 energy 1 of the largest independent renewable energy. Operators in the US. We began our relationship with mn8 in 2023 earlier. This year we announced an mou where our 2 companies were working together to develop an opportunity pipeline that mou has now transitioned from pipeline into tobacco.
As an order for 750 megawatt hours, this illustrates how our commercial process works.
The first couple of 10-hour projects are expected to Total, 200 megawatt hours, and uniquely pair solar with long duration. Storage in support of hyperscaler, offtake, requirements. This is a strong signal that the market is Shifting. And that customers want, not just long duration storage, but an American-made solution, to power data centers, and Industrial operations.
Zooming out for a moment, our commercial pipeline continues to grow. As we ended the quarter at 22.6 billion, a net increase of 21% quarter over quarter, representing about 91 gigawatt hours of potential projects and no surprise here. Data centers are the fastest growing part of the pipeline now, making up 22% of the volume and perhaps, even more encouraging, 64% of our pipeline volume is now at 6 hours or more in duration, validating what we've been saying the world needs longer duration Solutions,
Geographically. We're beginning to see a significant increase in activity, in pjm and New York, ISO, along with the existing growth. We've previously highlighted in spp and myso. For example, the nicer of bulk storage RFP which is similar to the UK cap and for mechanism requires that 20% of the procurement, the 8-hour systems and 20% be in zone. J, which includes Manhattan. This is exciting for us as this aligns. Exceptionally well with our technology.
And our ability to be deployed in populated areas with the rising demand from data centers and electrification. Customers are focused on speed to power, high density, energy delivery, and de-risking supply chains with U.S.-made technology. All areas where Eos is uniquely positioned to deliver.
Finally, on backlog, we ended the quarter at 644 million with 2.5 gigawatt hours of storage, not including nearly 1 gigawatt hour in new orders that we've booked. Since the end of the quarter, this is down slightly quarter over quarter as we continue converting backlog, into revenue on shipments.
During the quarter, we delivered over $30 million in Revenue, while adding an initial order for behind-the-meter storage for a large client in Germany, while Q3 may appear slower on paper Q4, is already off to a strong start with more than 220 million. In new orders, booked and significant forward momentum on several large pipeline opportunities. We've built strong Partnerships with leaders like Frontier and emanate. And we continue working on additional opportunities to support the large and growing hyperscaler demand for Reliable power.
Moving to our financials. We again delivered record quarterly Revenue as production volumes continued to ramp with gross margins. Improving sequentially for the past 4 quarters. We're really encouraged by our progress and remain confident in our ability to scale. Now that sub assembly automation is nearing completion and delivering increased manufacturing capacity and quality as John highlight earlier.
Revenue for the quarter was 30.5 Million. Double what we reported in Q2 supported by shipments to 5 different customers.
Take hold.
Average selling price was also higher and More in line with our expectations going forward.
You'll recall that in Q2 50% of our production volume was delivered to a single strategic customer at a lower ASP, which was a drag on revenue for that quarter. I'd like to highlight that is Joe mentioned earlier. This system has begun cycling and running in the field at some of the highest RTE we've ever seen.
Gross loss for the quarter was 33.9 Million, Just slightly more than last quarter as Revenue, doubled on increased volume. Driving, a 92 Point Improvement in gross, margin and demonstrating the scalability of our operations, as we ran.
We're continuing to see steady quarter over quarter margin improvements and remain on track to reach, positive contribution margin in the fourth quarter, and positive gross margin as we exit the first quarter of 2026 as John previously said.
Building on the improvements in gross margin operating expenses for the quarter totaled. 27.3 million and Improvement of 5.6 million from Q2 and 4% better than prior year.
20% of this quarter's Opex reflects non-cash items such as stock-based compensation.
We ended the quarter with a net loss of 641.1 million, which was primarily driven by non-cash fair value. Adjustments of approximately 569 million related to warrants and derivatives on our balance sheet. And to be clear, this is not an operating loss. The adjustments are largely driven by a 122% increase in our stock price, quarter over quarter and the corresponding Mark to Market revaluation. These stock price fluctuations can, and will continue to drive volatility below the line, but they have no impact on our operating results or our cash position.
Adjusted even though loss was 52.7 Million compared to 51.6% improved by 166 basis points. Reinforcing that the efficiency gains were achieving in production, our scaling across the business, the continued increase in production volumes that both John, and Joe talked about should be moving us to positive contribution, margins in the fourth quarter, after that important Milestone. We'll start closing the gap on ebita margins and continue moving toward profitability.
Turning to the balance sheet. We ended the third quarter with 126.8 million in total cash.
couple things on cash post quarter close first, you heard Joe talk about the customer receipts, we received in October,
Second, we just completed another sale of our production tax credits, monetizing 11.8 million of 45x credits that were generated in the first few quarters of this year.
Consistent with prior transactions, we realized 90 cents on the Dollar on this sale.
And lastly, we've seen an increase in number of exercises in both our public and private warrants as all warrants are now in the money. The last day to trade these public warrants is November 17th.
Just as importantly, we've completed the final Cerberus Milestone tied to customer cash receipts under our Term Loan. This means that we've achieved all 16, Milestones with no additional Equity, preferred stock, or warrants being issued to Cerberus. And I want to thank all of the EOS employees for making this happen.
With that, I want to thank everyone for joining us this morning, and I'll now turn it over to Joe before heading into Q&A.
Thanks Nathan before we move into Q&A, I'd like to reiterate guidance to the low end of our range. These are the commercial team have positioned us with the backlog that allows us to deliver, and you've heard from John, and the impact he's making on, improving our operations performance that are keeping us on track to earn between 150160 million in revenue for the total year. I also feel compelled to make a few comments about the short report that was issued about.
EOS. Last week when the report surfaced. Last Thursday, I was in a meeting in New York with the CEO of a large independent. Power producer, the North American CEO of a large energy storage operator and the CEO of 1 of 1 of the largest financial investors. We were discussing a strategy to meet America's accelerating power demands with a mix of generating Technologies combined with esg3 systems. While I was finishing up the meeting, our team quickly, mobilized to review. What's being said about our company, we take these issues very seriously and immediately engage our outside SEC Council and our external Auditors, in this review, we are certain that the allegations in the short report are without any Merit
Company and collectively we own 11% of the company's Equity. When I got back to Turtle Creek I found a galvanized team with a singular Focus to finish. What we started improved that great and Innovative products can still be designed and manufactured in the United States. We are a team that is wired to win with that. Let's start by taking a few questions submitted online. I'll turn it over to Liz. Thanks.
Thanks, Joe. So moving to a few of the questions we've received online with the first question. Being can you provide an update on the timeline around Factory 2 outside PA in a project amazed will need to be completed before a factory 2 Go lines. Go live.
Thanks for the question as we discussed earlier in my opening remarks. We now have building partners and automation partners that can deliver a line every 90 days. This work can all be done, simultaneously going forward.
Thanks John. Next question as the company navigates, the capital intensive scale up phase. How are you balancing the need for fresh funding? With imperative to avoid excessive shareholders resolution and what Milestones might unlock access to lower cost capital.
Thanks Liz. As you just heard John say we're positioned to add manufacturing capacity to meet this growing demand. We're in an energy super cycle, and it's my job to deliver the orders and the capital to support this growth. And I'm committed to doing this in the most cost-effective way possible for the company.
All right. Thanks, Nathan. I think the next 1 here is for Joe. What is the long-term vision? And how do you plan to surpass or match the competition?
Thanks Liz. So, look, I mean, you heard John talked about positioning us to be able to add capacity in a 90-day Rhythm. That's great. When you talk about being an energy, super cycle, Nathan's out there with his 2, Hats winning the orders to fill the factory and securing the capital to drive growth. You know, I'm just excited about the product that the team is delivered. I mean, we've got some things that we're working on that we're really excited about that. Will position this to be the energy storage product to help meet the needs of this energy super cycle. We've got some work to do to continue to close the gap on profitability and I feel really good about the Playbook. The team has to be able to do that, but the same time, we've got to make this the easiest technology to work with out in the field and that's why we're investing in a software Hub here in Pittsburgh. And I think, when you think about what we want to do is take a great technology, build it quickly and operate it easily out in the field. That's the simple strategy of this company and what everybody is executing on with that, we'll turn it back over to the operator and see if there's any questions from our sales side on
Thanks.
Thank you. We will now begin the question and answer session at this time, I would like to remind everyone that in order to ask a question press star, then the number 1 on your telephone keypad,
And your first question comes from the line of Julian de Molen Smith with Jeffrey, please go ahead.
Hey, good morning, team. Thank you guys very much for the time. Nicely done, I got to say, um, let me just kick. Absolutely nice job with you guys. Um, maybe just to kick things off here. Uh, you know, I know you tweaked the 25 guide here, but if you think about like the quarter or quarter run rate and and trajectory, I know you articulated this more in operational terms and you're prepared remarks. But how would you think about, you know, as you exit 25 with that 4 year 25, how do you think about that ramping into 26 here and what that trajectory suggests if you just look at, you know, the 2q 3Q 4q trajectory on Topline? I'm just really curious how, what, how you think about that Revenue trajectory going into 26?
And and and the ability for your commercial. Yeah, go for it.
No, thanks for the question. So in my prepared remarks, I talked about. So Q3 we were at 15% capacity utilization. If we look at going forward, we'll execute 4 running our complete asset base 24/7. So you're looking at going from a 15% capacity utilization to 90 plus from a capacity, utilization standpoint. So a lot of work was done in Q3 installing capacity training. Um our Work Force training the additional shifts and all the costs associated with it. So as you fast forward, all the ramping will be done. So as we enter q1 at the the very start, we'll we'll be at oese higher than 90% will be fully realizing and utilizing the capacity.
Thank you.
Activity in our pipeline write pipelines up, 21%, 22% of that now is data center activity. Um, we talked about kind of the sales cycle and how these things, mature, over a period of months, even quarters. And we continue to see very strong activity, uh, in the pipeline as we move forward. Good news is John's capacity expansion. Now, can be moved, um, you know, in 3 month increments as the orders come in, and I think we're going to see new orders come in, we're going to add capacity to line up with those orders and I see consistent Revenue growth over time. Yeah. Julie in the only, the thing I would add on, on the, on the pipeline and Order side. We've always been very conservative about what we do with our backlog and our orders pipeline Nathan's. Got some things going on that are use that we haven't been able to announce that we haven't been able to announce names yet and he continues to work with Justin in the entire team to get some of these hyperscalers to go from an mou to firm projects. And we really only want to talk about them when we close them and there's project names.
That we can talk about like we did with Frontier.
And I'll make 1 nicely done.
Right, Julian. Sorry.
No, no, no please.
And I'll make 1 more point. So you think about the the, um, all the assets were installing, so we're learning as we go. Alright, so first, bipolar line comes in took us several weeks to get it up and running.
6 and 7 that we just got up. Now we're talking days, the same thing will fast forward to when we launched line 2 um in the spring all those learning. So we're able to shrink the ramp shrink the time to get up to full capacity. So everything we're doing now, we're learning because it it's so with the data uh we're going to be able to, to aggressively move forward, much quicker than we are right now.
Awesome. And and guys, if I can take sort of the natural extension of that last question, how are you thinking about the ramp here, right? I mean, it, it's, it's pretty phenomenal. What? You just achieved in the last 6 months here, as you just described. How do you think about the Cadence of ramping further lines and then also related to that? How do you think about the financing side of that, right? So you've got the, the 43 million. Um, from Cerberus, you got the 24 million award. You've got unrestricted, balance of 60. You've got an ability to tap doe. How do you think about financing that against potentially? What seems like an accelerated ramp on capex? I don't want to put words in your mouth when I say accelerated, but I'm curious on how you you think about. Just seeing this all up and setting expectations.
I think Julian I I look kind of put the puzzle together there that you're laying out. You know, we have a we have a loan from the LPL, from the Department of energy that finances 4 lines, right, and we're going to line 2. Um, with John's trying to do is like what we. And what we have to do is reduce the cycle between starting and getting a line up and running. So we start producing Revenue off of that. So that the capital requirements in effect become operational versus versus Financial
That being said, we're in a, we're in a moment of time here where, where the industry and the world needs our product and we've got to be able to ramp into that as quickly as possible. I've said, many times like we don't want underutilized capacity sitting around, but we're looking at all this. And what John's put together from the different automation, suppliers that he now has and breaking this up into pieces and getting everybody focused on delivering to that goal. We'll be able to get that capacity online in 90 days, which is well within the cycle time of how Nathan's selling the product. So part of it will be what we already have in place. Other things will be come from operations and deposits from from customers as we close orders. And then we'll look to be opportunistic if need be for growth Capital, if we have to
Awesome. Excellent. Sorry. And 1 last tweak here and you talk a lot about operational metric, but it seems like the latest quarter. ASP is went up materially again. You, you tell me if we're reading that right? And, and you also flag, I think in the queue here, concentration with, like, 80% tied to a single customer, this is not the same customers. You guys have been concentrated to in the past. I I presume. Can you talk to that just a little bit about the ASP Dynamics and and the customer maybe of late
Yeah, we talked about this a little bit last quarter as well. So, Q2 I think was the anomaly because we had one strategic customer. That was a drag on revenue in Q2. What we're seeing in Q3 was revenue rates reverting back to what we view as a more normal run rate.
And then and then, uh, deliveries in the quarter, I mean, it was 5 individual customers. You know, they're not all equally weighted, but I would say the customer base that we delivered to in Q3 was representative of what customer base would look like going forward and and Julie and I I just want to add 2 2 points on top of what Nathan just said, you know, ASP. Like you could like
Lows, but you got to get your average where it makes sense, and the average of the portfolio is up.
And it's up because people are seeing the value of the technology now on this strategic customer that we talked about last quarter. Look, we're getting data from that from that system out in the field and it's on that page that we talked about and the data is phenomenal. So I look at that as kind of an investment in our future where we needed to get Z3 out in the field at scale and see it operate and it's delivering on those results. So it's a mix of all things but the overall portfolio of the order book. ASP is higher than what it was.
Yeah, absolutely. I'm very curious to see some of these strategic Partners in there in those days and coming weeks. All right guys. Um thank you very much. All the best. I'll leave it, I'll pass it over.
All right. Thank you.
Your next question comes from the line.
With default, please go ahead.
Uh, thank you. Good morning everybody.
Hey, Stephen. How are you? I'm good, thanks. Uh, so I think, 2 things for me 1 is just to follow up on the last question and I'm not sure how much your you want to say. But you talked about sort of the average.
Selling price kind of across the portfolio.
Is that how is that look in the backlog and the and the recent awards that you're booking? Well, just to kind of what you're realizing now.
I mean.
You can do the math on the backlog page, right? I mean we, you can see
Total dollars and total gigawatt hours and how that's trended over time and it's, it's stayed pretty consistent over time. I mean, we're not seeing long-term long-term, I think the revenue rates that we've realized and expect to realize going forward are going to be pretty consistent.
When you get larger orders, um, you know, we're working with customers and say, okay, what, what is our cost curve doing?
What can we do from a large volume by perspective? You saw the chart we showed on page,
8. I think it was where you see margins improving over time. You see net margins improving over time. Um you know as we continue to scale the business but we think we're going to turn the corner here and get to positive contribution margin into this quarter positive, gross margin exiting q1 on a path to profitable uh positive ebita after that and and see what I would add on top of that, you know, look you know, part of my job is handing out the targets to people and the orders that were recently closed are well within the the, the the, the the ASP portfolio Target that Nathan has a CCO.
That that that's helpful because I I couldn't do the math on the on the post quarter announcement but that's that's fine. Thank you. And remember the stuff that we're talking about Stephen you know that's post post quarter closed that happened that happened after the quarter after 3 Q. So that'll come out in 42. Yeah yeah. The the other 1 I had
Is.
uh, it's around the margins but it's around the cost side when we think about
the progression of margin and some of your bigger costs that go into making the product.
Like what are the necessary levers that get you to gross margin positive. It is is it a supply chain improving? Is it the cogs coming down per unit? Is it just scale? Like are there are there is there a color? You can give us around how to think about the cost structure? That's the biggest as you've been successful with the ramp and the backlog growth. That's the biggest question we get from investors. Pretty consistently is you know what is what does this look like at scale? From a profitability perspective. So I'm curious if you could give some incremental color,
Yeah. So from a cost perspective, I already talked about the asset utilization. The same thing is true here is with our suppliers so so they've had to put a lot of Assets in place to be able to support this ramp so as we ramp their rapping ramping, so they're seeing cost optimization, they're seeing cost absorption which will translate
Then it's about taking cycle times out. So if I can, we've got a heavy um, automated process. So if I can take, take 10 seconds down to 9.8 seconds down to 9.6 seconds, and that work is absolutely doable. Again, you keep you, you keep moving it forward. The 1 thing, I like about being here is, where I came from. I had thousands of different products. So the focus would shift every day. Now to come in every day and focus on the 1 products, they're they're, we will continue to look at all of our cost buckets and continue to put projects together. Um that'll close those out. We right now just to take a material cost out, forget cost savings and, and what we're asking from the vendor, we've got 61 different projects that we're doing right now to take the amount of parts that we have out to take the cost out, 61 projects, and all of those projects will be closed, um, before we execute too. So, that's the way I kind of think about it.
Okay, great. No. Thank you for all the color.
Thanks Stephen. And there are no further questions at this time. I will now turn the call back over to Joe my strong yellow CEO for closing remarks.
Thank you. Thanks, everyone for listening, look 1, 1 thing. Um, I want to talk about here in the closing is like the, the, the project that Nathan and Justin closed with Frontier power, because this kind of lays out another, another strategic puzzle piece for us, as we as we grow the company. We met Frontier back in, January Nathan and Justin met them at a trade show. In the UK, we developed the relationships signed an mou got a project Pipeline and and every week we meet with cerus and we go through, where we are in cash, where we are financially, how we are doing performance, and we look at Frontier, not as a transaction. But as a platform, you know, Cerberus Finance Frontier, because we view this as experienced operational leadership in the industry that can help us build the platform and expand out in Europe. We're excited about how that's going to how that's going to look as we move forward and really look forward to to partnering with the team at Frontier. At the same time, we're looking at what John's doing operationally and you heard a really you know, it's it's fun working with them, it's great.
Great. Having him on the team and seeing what he's been able to deliver and the whole team underneath him. Uh, we just have to keep growing and keep focused and knowing that the industry needs our product. We got to continue executing, and we got to keep making this simpler and easier to do business with. We look forward to keeping everyone updated on the progress and want to thank everyone for listening today. Thanks a lot talk to you soon.
Ladies and gentlemen, that concludes today's call, thank you all for joining. You may now disconnect
Please.