Q2 2026 Eos Energy Enterprises Inc Earnings Call

August 5, 2026

Speaker #1: Good morning, and welcome to Eos Energy Enterprises' Q2 2026 conference call. As a reminder, today's call is being recorded. And your participation implies consent to such recording.

Operator: Good morning, welcome to Eos Energy Enterprises' Q2 2026 conference call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. With that, I would like to turn the call over to Liz Higley, Head of Investor Relations. Thank you. You may begin.

Speaker #1: At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. With that, I would like to turn the call over to Liz Higley, Head of Investor Relations.

Speaker #1: Thank you. You may begin.

Speaker #2: Good morning, and welcome to Eos Q2 2026 conference call. Today I'm joined by Eos CEO Joe Mastrangelo, COO John Mahaz, and CFO Alessandro Laghi.

Liz Higley: Good morning, welcome to Eos' Q2 2026 conference call. Today, I'm joined by Eos CEO, Joseph Mastrangelo, COO John Mahaz, and CFO Alessandro Laghi. Today's call may include forward-looking statements, including our expectations regarding future results and the outlook for our company. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. For more information on these risks and uncertainties, please refer to our SEC filings. These forward-looking statements speak only as of today, and we undertake no obligation to update them except as required by law. Today's remarks will also include references to non-GAAP financial measures. A reconciliation of these measures to the most directly comparable US GAAP measure is included in our earnings release.

Liz Higley: Good morning, welcome to Eos' Q2 2026 conference call. Today, I'm joined by Eos CEO, Joe Mastrangelo, COO John Mahaz, and CFO Alessandro Laghi. Today's call may include forward-looking statements, including our expectations regarding future results and the outlook for our company. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. For more information on these risks and uncertainties, please refer to our SEC filings. These forward-looking statements speak only as of today, and we undertake no obligation to update them except as required by law. Today's remarks will also include references to non-GAAP financial measures. A reconciliation of these measures to the most directly comparable US GAAP measure is included in our earnings release.

Speaker #2: Today's call may include forward-looking statements, including our expectations regarding future results and the outlook for our company. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker #2: For more information on these risks and uncertainties, please refer to our SEC filings. These forward-looking statements speak only as of today, and we undertake no obligation to update them except as required by law.

Speaker #2: Today's remarks will also include references to non-GAAP financial measures. A reconciliation of these measures to the most directly comparable U.S. GAAP measure is included in our earnings release.

Speaker #2: Non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. In addition, these measures may not be comparable to similarly titled measures used by other companies.

Liz Higley: Non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. In addition, these measures may not be comparable to similarly titled measures used by other companies. This conference call will be available for replay via webcast through Eos's investor relations website at investors.eose.com. Joseph, John, and Alessandro 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 Eos CEO, Joseph Mastrangelo.

Liz Higley: Non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. In addition, these measures may not be comparable to similarly titled measures used by other companies. This conference call will be available for replay via webcast through Eos's investor relations website at investors.eose.com. Joe, John, and Alessandro 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 Eos CEO, Joe Mastrangelo.

Speaker #2: This conference call will be available for replay via webcast through Eos's Investor Relations website at investors.eose.com. Joe, John, and Alessandro will walk you through our business outlook and financial results before we proceed to Q&A.

Speaker #2: With that, I'll now turn the call over to Eos CEO Joe Mastrangelo.

Speaker #3: Thanks, Liz. Good morning. Thanks, everyone, for joining us. This quarter comes down to three simple things. We ship more product than we have in any prior quarter.

Joe Mastrangelo: Thanks, Liz. Good morning, thanks everyone for joining us. This quarter comes down to three simple things. We shipped more product than we have in any prior quarter. We grew our backlog, and we committed to consolidating our manufacturing footprint, a strategic decision that trades near-term revenue to lower our cost base as we exit 2026. Let me walk through all three of these. We're tightening our 2026 revenue outlook range to $300 to 350 million. This is a business decision, not an operating surprise. Let me address this change directly. We are accelerating the consolidation of operations into our modern Thornhill facility because of what it has begun to deliver. Line one will be down during the move and upgraded to the operational improvements we've implemented on line two. The volume it would have produced is the difference in the upper end of our guidance range.

Speaker #3: We grew our backlog, and we committed to consolidating our manufacturing footprint—a strategic decision that trades near-term revenue to lower our cost base as we exit 2026.

Speaker #3: Now let me walk you through all three of these. We're tightening our 2026 revenue outlook range to $300 to $350 million. And this is a business decision, not an operating surprise.

Speaker #3: Let me are accelerating the consolidation of operations into our modern Thornhill facility because what it has begun to deliver. Line one will be down during the move and upgraded to the operational improvements we've implemented on line two.

Speaker #3: The volume that would have produced is the difference in the upper end of our guidance range. We are doing this so that 2027 is not only a volume growth year, but also a margin expansion year.

Joe Mastrangelo: We're doing this so that 2027 is not only a volume growth year, but also a margin expansion year. John and Alessandro will take you through the operational and financial expression of decision in a few moments. The low end of this range is roughly 2.5x our 2025 revenue and more than 19x to 2024. We delivered just under $126 million in H1, which already exceeds all of last year's revenue. Let's frame the range itself. While we are still finalizing a detailed schedule, the shape is very clear. The H2 exceeds the H1, the Q4 is higher than the Q3. The bottom of the range takes roughly $50 million of H2 growth over the H1. That is just maintaining the run rate that we exited June with on revenue already secured through backlog and Frontier Power USA.

Speaker #3: John and Alessandro will take you through the operational and financial expression of the decision in a few moments. The low end of this range is roughly 2.5 times our 2025 revenue.

Speaker #3: And more than 19 times 2024. We delivered just under $126 million in the first half, which already exceeds all of last year's revenue. Let's frame the range itself.

Speaker #3: Why we are still finalizing the detailed schedule, the shape is very clear. The second half exceeds the first half. The fourth quarter is higher than the third.

Speaker #3: The bottom of the range takes roughly $50 million of second half growth over the first half. That is just maintaining the run rate that we exited June with on revenue already secured through backlog and Frontier Power USA.

Speaker #3: The top end of the range is achievable, and it comes down to how quickly we scale Thornhill operations into a 24/7 production facility like we have today in Turtle Creek.

Joe Mastrangelo: The top end of the range is achievable. It comes down to how quickly we scale Thornhill operations in a 24/7 production facility, like we have today in Turtle Creek. We're planning for that. We'll report against it every quarter. Moving to slide five, our Q2 operating highlights. We achieved record backlog, record revenue, record cube shipments, and a significant improvement in adjusted EBITDA margin. We're starting to see the operating leverage we've been talking about. As volume increases, fixed costs are spread across more cubes. That's what drives margin improvement and closes the profitability gap. John and Alessandro will take you through the details behind those numbers and our path forward. Before they do, I'd like to spend a moment on fleet performance and cash. First, discharge energy.

Speaker #3: We're planning for that, and we'll report against it every quarter. Moving to slide five, our second quarter operating highlights. We achieved record backlog, record revenue, record cubed shipments, and a significant improvement in adjusted EBITDA margin.

Speaker #3: We're starting to see the operating leverage we've been talking about. As volume increases, fixed costs are spread across more cubes, and that's what drives margin improvement and closes the profitability gap.

Speaker #3: John and Alessandro will take you through the details behind those numbers and our path forward. But before they do, I'd like to spend a moment on fleet performance and cash.

Speaker #3: First, discharge energy. The number we're looking at at the page is up nearly a half a gigawatt-hour since our last call. The fleet now cumulatively has discharged 6.5 gigawatt-hours of energy.

Joe Mastrangelo: The number we're looking at at the page is up nearly a half a gigawatt hour since our last call. The fleet now cumulatively has discharged 6.5 gigawatt hours of energy. The Z3 fleet continues to perform, operating at an average round trip efficiency of 78%. Let me be precise about that number, because precision is what matters here. 78% is the average across a 2,120 state of charge window. It includes units running on DawnOS and the units that have not yet been upgraded to DawnOS. The performance of what we've developed. We're continuing to count that performance of where we still have to improve to show the true number of what customers are experiencing out in the field. It's a fleet average under real duty cycles, not a laboratory result on a single unit.

Speaker #3: And the Z3 fleet continues to perform, operating at an average round-trip efficiency of 78%. Let me be precise about that number, because precision is what matters here.

Speaker #3: 78% is the average across a 20, 100, 20 state of charge window. It includes units running on Dawn OS and the units that have not yet been upgraded to Dawn OS.

Speaker #3: So the performance of what we've developed, but we're continuing to count that performance of where we still have to improve, to show the true number of what customers are experiencing out in the field.

Speaker #3: It's a fleet average under real-duty cycles, not a laboratory result on a single unit. We're starting to scale here. We have clear path to continue to improve performance.

Joe Mastrangelo: We're starting to scale here. We have more work to do. There is a clear path to continue to improve performance. Turning to cash. We ended the quarter with $364 million in total cash. What's important is what sits behind that number. Our operational cash use this quarter closely matched our adjusted EBITDA loss. Cash on cash, there is very little gap between the P&L and cash flow. That burn rate needs to continue to come down and turn positive. The initiatives that John and Alessandro will walk you through are designed to drive that improvement. Let's move on to slide six. Let's focus on what wins our next order, reference hours.

Speaker #3: Turning to cash, we ended the quarter with $364 million in total cash. What's important is what sits behind that number. Our operational cash use this quarter closely matched our adjusted EBITDA loss.

Speaker #3: Cash on cash, there is very little gap between the P&L and cash flow. That burn rate needs to continue to come down and turn positive.

Speaker #3: And the initiatives that John and Alessandro will walk you through are designed to drive that improvement. Now let's move on to slide six. Let's focus on what wins our next quarter.

Speaker #3: Reference hours. This page shows the hours the fleet has already delivered and the continued growth ahead, with more than 200 additional megawatt-hours expected to come online over the next six months, based on current customer project schedules.

Joe Mastrangelo: This page shows the hours the fleet has already delivered and the continued growth ahead, with more than 200 additional MWh expected to come online over the next six months based on current customer project schedules. Let's start on the top left of the page. The fleet has now run over 3.9 million cycles and discharged 6.5 GWh I talked about earlier. On Z3 specifically, over 1.1 million cycles, and we're moving towards 1 GWh of discharge energy. Every hour of cycling makes the next project easier to finance, because customers can now evaluate a track record, not a promise. Round trip efficiency tells a more interesting story. Note how the performance range is narrowing. The bottom is rising towards the fleet average. That is variation coming out of the system, and reducing variation is what makes performance bankable.

Speaker #3: Let's start on the top left of the page. The fleet has now run over 3.9 million cycles and discharged 6.5 gigawatt-hours I talked about earlier.

Speaker #3: On Z3 specifically, over 1.1 million cycles, we're moving towards 1 gigawatt-hour of discharge energy. Every hour of cycling makes the next project easier to finance because customers can now evaluate a track record, not a promise.

Speaker #3: Round-trip efficiency tells a more interesting story. Note how the performance range is narrowing. The bottom is rising towards the fleet average. That is variation coming out of the system, and reducing variation is what makes performance bankable.

Speaker #3: At the same time, the top of the range has crossed above 90%. In manufacturing terms, that is entitlement. It is what this technology delivers when everything runs designed.

Joe Mastrangelo: At the same time, the top of the range has crossed above 90%. In manufacturing terms, that is entitlement. It is what this technology delivers when everything runs designed. It is not a ceiling we hope to reach. It is a level the fleet has already demonstrated, and now our work is to deliver it consistently across every cycle, every cube in the field runs. The duration tile shows the range our systems are operating in the field. From two and a half hours to 14. One product, one SKU dispatched however the market needs it. The photo on the right is a project that was added into our backlog in November 2024. I want to use it to show you how a pipeline opportunity becomes an asset operating in the field. The units were built and shipped by November 2025.

Speaker #3: It is not a ceiling we hope to reach. It is a level the fleet has already demonstrated. And now our work is to deliver it consistently, across every cycle, every cube in the field runs.

Speaker #3: The duration tile shows the range our systems are operating in the field—from 2.5 hours to 14. One product, one SKU, dispatched to whoever the market needs it.

Speaker #3: The photo on the right is a project that was added into our backlog in November of 2024. I want to use it to show you how a pipeline opportunity becomes an asset operating in the field.

Speaker #3: The units are built and shipped by November 2025. They went on foundations in May of June of this year. And the project is expected to come online by year-end.

Joe Mastrangelo: They went on foundations in May or June of this year, and the project is expected to come online by year-end. Order to operations, roughly 2 years, and notice where the time went. The product was ready in 12 months. The second year was everything else, from site readiness to third-party equipment delivery outside of our scope and the site construction schedule. That is one of the industry's key bottlenecks, and it's exactly why Frontier Power USA was built, to simplify the process and streamline the customer experience. The next page highlights how that strategy is translating into results. On page seven, the US storage market is changing in ways that favors our technology. Load growth from data centers and electrification is pulling capacity needs forward faster than new generation can interconnect.

Joe Mastrangelo: They went on foundations in May or June of this year, and the project is expected to come online by year-end. Order to operations, roughly two years, and notice where the time went. The product was ready in 12 months. The second year was everything else, from site readiness to third-party equipment delivery outside of our scope and the site construction schedule. That is one of the industry's key bottlenecks, and it's exactly why Frontier Power USA was built, to simplify the process and streamline the customer experience. The next page highlights how that strategy is translating into results. On page seven, the US storage market is changing in ways that favors our technology. Load growth from data centers and electrification is pulling capacity needs forward faster than new generation can interconnect.

Speaker #3: Order to operations. Roughly two years. And notice where the time went. The product was ready in 12 months. The second year was everything else, from site readiness to third-party equipment delivery outside of our scope and the site construction schedule.

Speaker #3: That is one of the industry's key bottlenecks, and it's exactly why frontier power USA was built. To simplify the process and streamline the customer experience.

Speaker #3: The next page highlights how that strategy is translating into results. On page seven, the US storage market is changing in ways that favor our technology.

Speaker #3: Load growth from data centers and electrification is pulling capacity needs forward faster than new generation can interconnect. In PJM, the grid operator for 65 million people and the largest power market in the country, prices have hit the ceiling in three consecutive capacity auctions.

Joe Mastrangelo: In PJM, the grid operator for 65 million people and the largest power market in the country, prices have hit the ceiling in three consecutive capacity auctions, and the way the market now counts a resource towards capacity favors those that hold output through the system, full system need rather than the first two hours of it. Virginia's written the same logic into law this spring. The statute carves out 4.5 GW for resources that run 10 hours or more inside its total state storage target above 20 GW. At the minimum duration, that carve-out alone is 45 GWh of energy. Buyers are no longer procuring just a storage system, they're procuring hours. Inside of this, we see 4 customer types. Energy providers and regulated utilities who generate revenue from assets. Energy consumers and assurance buyers who carry them as a cost of operations.

Joe Mastrangelo: In PJM, the grid operator for 65 million people and the largest power market in the country, prices have hit the ceiling in three consecutive capacity auctions, and the way the market now counts a resource towards capacity favors those that hold output through the system, full system need rather than the first two hours of it. Virginia's written the same logic into law this spring. The statute carves out 4.5 GW for resources that run 10 hours or more inside its total state storage target above 20 GW. At the minimum duration, that carve-out alone is 45 GWh of energy. Buyers are no longer procuring just a storage system, they're procuring hours. Inside of this, we see four customer types. Energy providers and regulated utilities who generate revenue from assets. Energy consumers and assurance buyers who carry them as a cost of operations.

Speaker #3: And the way the market now counts a resource towards capacity favors those that hold output through the system full system need rather than the first two hours of it.

Speaker #3: Virginia's written this same logic into law this spring. The statute carves out 4.5 gigawatts for resources that run 10 hours or more, inside its total state storage target above 20 gigawatts.

Speaker #3: At the minimum duration, that carve-out alone is 45 gigawatt-hours of energy. Buyers are no longer procuring just a storage system. They're procuring hours. Inside of this, we see four customer types.

Speaker #3: Energy providers are regulated utilities who generate revenue from assets. Energy consumers and assurance buyers who carry them as a cost of operations. The largest energy providers are independent power producers who need to deliver multi-hour and multi-cycles day after day because those capacity payments reward duration and energy margin rewards throughput.

Joe Mastrangelo: The largest energy providers are independent power producers who need to deliver multi-hour and multi-cycles day after day because those capacity payments reward duration and energy margin rewards throughput. Utilities need assets that regulators will allow them to earn a return on over a 20-year life. Think about that for a moment. An energy provider, an IPP, uses that discharge window I talked about earlier, and when we've always talked about the degradation of our product over time and having a 25-year life helps a utility with its regulator and its rate base. If you move over to the largest energy consumer, that's high-speed computing, where power is just a cost of goods sold. Think of a data center as a factory and think of energy storage or energy coming in as an input for them to produce.

Speaker #3: Utilities need assets that regulators will allow them to earn a return on over a 20-year life. Think about that for a moment. An energy provider and IPP uses that discharge window I talked about earlier and what we've always talked about the degradation of our product over time and having a 25-year life, helps utility with its regulator and its rate base.

Speaker #3: And if you move over to the largest energy consumer, that's high-speed computing where power is just the cost of goods sold. Think of a data center as a factory and think of energy storage or energy coming in as an input for them to produce.

Speaker #3: So storage is judged on delivered costs, how fast the site can energize, and how reliably it will operate. The assurance segment is made up of defense or critical infrastructure customers.

Joe Mastrangelo: Storage is judged on delivered costs, how fast the site can energize, and how reliably it will operate. The assurance segment is made up of defense or critical infrastructure customers, where storage is priced against the cost of failure and the rapidness of being able to perform. Two book it as revenue, one books it as cost of goods sold, and one books it as insurance. All four buy hours and all four screen for supply chain origin. We manufacture in Pennsylvania with a domestic supply chain. That is a commercial advantage today, not a future one that we're planning on. The pipeline on this slide is built from all four of these customer types, and the composition is where we are focused. I talked about backlog earlier, but what's important to note is that six customers placed orders this quarter, four new and two repeat.

Speaker #3: We're storage is priced against the cost of failure and the rapidness of being able to perform. Two booking is revenue. One books it as cost of goods sold.

Speaker #3: And one books it as insurance. All four by hours and all four screen for supply chain origin. We manufacture in Pennsylvania with a domestic supply chain.

Speaker #3: That is a commercial advantage today, not a future one that we're planning on. The pipeline on this slide is built from all four of these customer types.

Speaker #3: And the composition is where we are focused. I talked about backlog earlier, but what's important to note is that six customers place orders this quarter.

Speaker #3: Four new and two repeat. Our pipeline of $24.6 billion, nearly 112 gigawatt-hours, is up 31% year-over-year. Fifty-one percent of the pipeline is 8 hours or longer.

Joe Mastrangelo: Our pipeline of $24.6 billion, nearly 112 gigawatt-hours, is up 31% year-over-year. 51% of the pipeline is 8 hours or longer. That is the duration band where our economics separate from incumbent technologies. 32% is data center related, which 2 years ago was a de minimis amount. Three commercial developments frame the H2. After the quarter close, we were awarded a strategic partnership agreement under Golden Dome for the Golden Dome America program with the Department of War. During the quarter, we signed a 750-megawatt-hour master supply agreement with CAPAC covering Germany, Austria, and Switzerland. Frontier Power USA holds a 2-gigawatt-hour capacity reservation agreement.

Joe Mastrangelo: Our pipeline of $24.6 billion, nearly 112 gigawatt-hours, is up 31% year-over-year. 51% of the pipeline is eight hours or longer. That is the duration band where our economics separate from incumbent technologies. 32% is data center related, which two years ago was a de minimis amount. Three commercial developments frame the H2. After the quarter close, we were awarded a strategic partnership agreement under Golden Dome for the Golden Dome America program with the Department of War. During the quarter, we signed a 750-megawatt-hour master supply agreement with CAPAC covering Germany, Austria, and Switzerland. Frontier Power USA holds a 2-gigawatt-hour capacity reservation agreement.

Speaker #3: That is the duration band where our economic separate from incumbent technologies. 32% is data center related, which two years ago was a de minimis amount.

Speaker #3: Three commercial developments frame the second half. After the quarter close, we were awarded a strategic partnership agreement under Golden Dome for America for the Golden Dome America program with the US Department of War.

Speaker #3: During the quarter, we signed a 750-megawatt-hour master supply agreement with KPAC covering Germany, Austria, and Switzerland. And Frontier Power USA holds a 2-gigawatt-hour capacity reservation agreement.

Speaker #3: Under that agreement, we are now seeing purchase orders convert into projects. Beginning with the Biomergen project and most recently with the $100 million purchase order we announced this morning for phase one of the Blanquilla project in Ercot, originally developed by Stella Energy.

Joe Mastrangelo: Under that agreement, we are now seeing purchase orders convert into projects, beginning with the Bimergen project and most recently with the $100 million purchase order we announced this morning for phase one of the Blankila project in ERCOT, originally developed by Stella Energy. I'll highlight the obvious. With nearly $25 billion of pipeline against an $807 million backlog, our job is conversion, not origination. Capital availability is one of the critical opportunity conversion factors. Two slides ago, I mentioned we built something to improve it. That now brings me to Frontier Power on the next slide. Frontier Power USA, it's working as we intended.

Speaker #3: I'll highlight the obvious. With nearly 25 billion of pipeline against an 807 million dollar backlog, our job is conversion, not origination. Capital availability is one of the critical slides ago, I mentioned we built something to improve it, and that now brings me to frontier power on the next slide.

Speaker #3: Frontier Power USA—it's working as we intended. We have started execution on our first project, because our priority is to get more projects into the field, begin generating returns, and begin the operating references that help turn the investment flywheel of Frontier Power and deliver that pipeline conversion I was talking about a moment ago.

Joe Mastrangelo: We have started execution on our first project because our priority is to get more projects into the field, begin generating returns, and begin the operating references that help turn the investment flywheel of Frontier Power and deliver that pipeline conversion I was talking about a moment ago. We saw that strategy begin to play out in Q2. A pre-existing project that will ultimately be part of Frontier Power USA was executed prior to the closing of the joint venture using financing provided by a service affiliate. That project accounted for roughly 80% of Q2 revenue and demonstrates how this structure can help us get projects into the field sooner and build the reference hours that support future growth. Adding this project is an asset that we believe will deliver mid-teen returns and accrete the value of the joint venture in which we hold a minority interest.

Speaker #3: We saw that strategy begin to play out in the second quarter. A pre-existing project that will ultimately be part of frontier power USA was executed prior to the closing of the joint venture using financing provided by a service affiliate.

Speaker #3: That project accounted for roughly 80% of second quarter revenue, demonstrates how this structure can help us get projects into the field sooner and build the reference hours that support future growth.

Speaker #3: Adding this project as an asset that we believe will deliver mid-teen returns and accrete the value of the joint venture in which we hold the minority interest.

Speaker #3: I'm putting that on the table first because I want you to understand it is a strategy rather than just a footnote. Our pipeline has historically experienced delays closing project financing, not technology acceptance.

Joe Mastrangelo: I'm putting that on the table first because I want you to understand it is a strategy rather than just a footnote. Our pipeline has historically experienced delays closing project financing, not technology acceptance. We saw qualified projects with real offtake sitting unbuilt because developers could not close their capital stack. We built the vehicle. Frontier Power USA supplies the capital, Eos supplies the technology, and we hold a minority interest in the entity. Walk the left side of the page. $263 million of gross proceeds initially raised, supporting an estimate $1 billion project deployment. The funnel behind it, 16 GWh of opportunity pipeline, 5 GWh acquired, selected, or under active due diligence, and 1.8 GWh under construction are approaching full notice to proceed. First projects under this vehicle are expected to be online by Q3 2027.

Speaker #3: We saw qualified projects with real offtakes sitting unbuilt because developers could not close their capital stack. So we built the vehicle, frontier power USA supplies the capital, EO supplies the technology, and we hold the minority interest in the entity.

Speaker #3: Walk the left side of the page. 263 million of gross proceeds initially raised supporting an estimate $1 billion in project deployment. The funnel behind it, 16 gigawatt-hours of opportunity pipeline, 5 gigawatt-hours acquired, selected, or under active due diligence, and 1.8 gigawatt-hours under construction or approaching full notice to proceed.

Speaker #3: The first projects under this vehicle are expected to be online by the third quarter of 2027. That is the project journey I showed you two slides ago.

Joe Mastrangelo: That is the project journey I showed you 2 slides ago. Running at platform scale with capital waiting for projects instead of projects searching for capital. Now in the middle of the page, because this is a long-term operating asset and it creates value in three ways. Frontier Power USA operates projects for recurring revenue. It can sell projects and recycle the capital into new ones. At scale, the platform itself becomes highly valuable. Eos participates in all three. We are the long-term service agreement counterparty across the installed fleet with up to 25% to 30% of total CapEx over a 20-year life. We hold economic ownership in the platform, so we share in the recurring cash flows, the project sale proceeds, and any future monetization of the platform.

Joe Mastrangelo: That is the project journey I showed you two slides ago. Running at platform scale with capital waiting for projects instead of projects searching for capital. Now in the middle of the page, because this is a long-term operating asset and it creates value in three ways. Frontier Power USA operates projects for recurring revenue. It can sell projects and recycle the capital into new ones. At scale, the platform itself becomes highly valuable. Eos participates in all three. We are the long-term service agreement counterparty across the installed fleet with up to 25% to 30% of total CapEx over a 20-year life. We hold economic ownership in the platform, so we share in the recurring cash flows, the project sale proceeds, and any future monetization of the platform.

Speaker #3: Running at platform scale with capital waiting for projects instead of projects searching for capital. Now in the middle of the page because this is a long-term operating asset and it creates value in three ways.

Speaker #3: Frontier power USA operates projects for recurring revenue, it can sell projects and recycle the capital to new ones, and at scale, the platform itself becomes highly valuable.

Speaker #3: Eos participates in all three. We are the long-term service agreement counterparty across the installed fleet, with up to 25 to 30 percent of total capex over a 20-year life.

Speaker #3: We hold economic ownership in the platform, so we share in the recurring cash flows, the project sale proceeds, and any future monetization of the platform.

Speaker #3: And every project frontier power USA puts into operations adds reference hours to the install base and to that chart I showed earlier, which will accelerate the next order and backlog growth and conversion of pipeline into orders into assets operating in the field.

Joe Mastrangelo: Every project Frontier Power USA puts into operations adds reference hours to the installed base and to that chart I showed earlier, which will accelerate the next order and backlog growth and conversion of pipeline into orders into assets operating in the field. CAPAC, the Department of War, and the customers that place orders this quarter growing. Both engines are running and they compound as we execute our strategy and projects become operational.

Speaker #3: KPAC, the US Department of War, and the customers that place orders this quarter growing. Both engines are running and they compound as we execute our strategy and projects become operational.

Speaker #3: So we have a strong demand signal. We're building install base operating hours. So the capital partner that unlocks accelerated growth. Strong execution delivers profitable growth.

Joe Mastrangelo: We have a strong demand signal. We are building installed base operating hours, the capital partner then unlocks accelerated growth. Strong execution delivers profitable growth. Let me turn it over to the man responsible for all that, John, for an operations update.

Speaker #3: And let me turn it over to the man responsible for all that, John, for an operations update.

Speaker #1: Thanks, Joe. And good morning, everyone. Q2 was about focus, disciplined operation, and increased efficiency. Turtle Creek delivered on all three. Q output increased 20% sequentially, reaching an annualized production rate of approximately 1.5 gigawatt-hours in June.

John Mahaz: Thanks, Joseph. Good morning, everyone. Q2 was about focus, disciplined operation, and increased efficiency. Turtle Creek delivered on all three. Cube output increased 20% sequentially, reaching an annualized production rate of approximately 1.5 gigawatt an hour in June. More importantly, we achieved that while keeping labor costs essentially flat. On materials, we are beginning to see the work we have been doing translate into lower costs. Material costs improved by 10% sequentially with the benefit of tariff rebates paid in prior periods on an imported component. Excluding that, material cost per cube improved 1% sequentially. We expect further improvement in Q3 as inventory balances our work through production and we realize the benefits of our cost reduction initiatives. More broadly, there is a continuous learning cycle in our business where we take feedback from the field and incorporate those learnings into the design.

John Mahaz: Thanks, Joe. Good morning, everyone. Q2 was about focus, disciplined operation, and increased efficiency. Turtle Creek delivered on all three. Cube output increased 20% sequentially, reaching an annualized production rate of approximately 1.5 gigawatt an hour in June. More importantly, we achieved that while keeping labor costs essentially flat. On materials, we are beginning to see the work we have been doing translate into lower costs. Material costs improved by 10% sequentially with the benefit of tariff rebates paid in prior periods on an imported component. Excluding that, material cost per cube improved 1% sequentially. We expect further improvement in Q3 as inventory balances our work through production and we realize the benefits of our cost reduction initiatives. More broadly, there is a continuous learning cycle in our business where we take feedback from the field and incorporate those learnings into the design.

Speaker #1: More importantly, we achieved that while keeping labor costs essentially flat. On materials, we're beginning to see the work we've been doing translate into lower cost.

Speaker #1: Material costs improved by 10% sequentially with the benefit of tariff-free base paid in prior periods on an imported component. Excluding that, material costs per cube improved 1% sequentially.

Speaker #1: We expect further improvement in the third quarter as inventory balances are worked through production and we realize the benefits of our cost reduction initiatives.

Speaker #1: More broadly, there is a continuous learning cycle in our business where we take feedback from the field and incorporate those learnings into the design.

Speaker #1: While that can add costs in the short term, it ultimately drives meaningful cost reductions over time. When we launched on OS in the third quarter of 2025, material costs increased, as we noted on our last earnings call.

John Mahaz: While that can add costs in the short term, it ultimately drives meaningful cost reductions over time. When we launched NLS in Q3 2025, material costs increased, as we noted on our last earnings call. Since then, we have reduced material costs by 12.5% in less than a year. At the same time, we invested in product enhancements throughout 2026 based on the field learning. Had those enhancements not been incorporated, material costs would have been down 14.5%. We achieved this despite elevated inflation, a volatile geopolitical environment, and a continually evolving product design, which reflects the strength of our continuous improvement process. Labor productivity also improved during the quarter. Direct labor cost per cube declined 20% sequentially while production increased, reflecting better execution and increasing efficiency across the factory. Manufacturing overhead per cube improved 4% sequentially.

Speaker #1: Since then, we have reduced material costs by 12.5% in less than a year. At the same time, we invested in product enhancements throughout 2026 based on field learning.

Speaker #1: Had those enhancements not been incorporated, material costs would have been down 14.5%. We achieved this despite elevated inflation, a volatile geopolitical environment, and a continually evolving product design, which reflects the strength of our continuous improvement process.

Speaker #1: Labor productivity also improved during the quarter. Direct labor costs per cube declined 20% sequentially while production increased, reflecting better execution and increasing efficiency across the factory.

Speaker #1: Manufacturing overhead per cube improved 4% sequentially. However, if you look at Turtle Creek on a standalone basis, overhead per cube improved approximately 16%, reflecting the productivity gains delivered by the team at the Turtle Creek plant.

John Mahaz: However, if you look at Turtle Creek on a standalone basis, overhead per cube improved approximately 16%, reflecting the productivity gains delivered by the team at the Turtle Creek plant. The consolidated result was temporarily impacted by the underutilization of Thornhill as we brought line 2 into commercial production. That is exactly what we would expect at this stage of the ramp. As planned, we have been operating on one partial shift while we validate the line's performance. Over the next several months, we will continue to add shifts and increase utilization. As volumes ramp, we expect utilization to improve, fixed costs to be absorbed across greater production, and the operating leverage built into Thornhill to become increasingly evident in our results.

John Mahaz: However, if you look at Turtle Creek on a standalone basis, overhead per cube improved approximately 16%, reflecting the productivity gains delivered by the team at the Turtle Creek plant. The consolidated result was temporarily impacted by the underutilization of Thornhill as we brought line two into commercial production. That is exactly what we would expect at this stage of the ramp. As planned, we have been operating on one partial shift while we validate the line's performance. Over the next several months, we will continue to add shifts and increase utilization. As volumes ramp, we expect utilization to improve, fixed costs to be absorbed across greater production, and the operating leverage built into Thornhill to become increasingly evident in our results.

Speaker #1: The consolidated result was temporarily impacted by the underutilization of Thornhill as we brought line two into commercial production. That's exactly what we would expect at this stage of the ramp.

Speaker #1: As planned, we have been operating on one partial shift while we validate the line's performance. This phased approach allowed us to add labor incrementally as we ramp up that line.

Speaker #1: Over the next several months, we'll continue to add shifts and increase utilization. As volumes ramp, we expect utilization to improve fixed costs to be absorbed across greater production and the operating leverage built into Thornhill to become increasingly edible in our results.

Speaker #1: While we're pleased with the progress at Turtle Creek, our focus is not simply on incremental improvements. Our focus is on achieving the cost structure we've always envisioned for the business.

John Mahaz: While we're pleased with the progress at Turtle Creek, our focus is not simply on incremental improvements. Our focus is on achieving the cost structure we've always envisioned for the business. That's where Thornhill comes in. The biggest opportunity ahead of us is not just a continuation of what we've already accomplished. It's the earnings power we unlock as we fully utilize a purpose-built, highly automated manufacturing platform. During H1 2026, we produced 17% more cubes than we did in all of 2025, and we've matched last year's total production volume in just 164 days. What's most important is that scrap dollars on that same volume were down 63%, validating that our manufacturing platform is scaling as planned. With line 2 contributing only 1% of Q2 production, we have yet to realize the full benefit of Thornhill, leaving significant operational upside ahead.

John Mahaz: While we're pleased with the progress at Turtle Creek, our focus is not simply on incremental improvements. Our focus is on achieving the cost structure we've always envisioned for the business. That's where Thornhill comes in. The biggest opportunity ahead of us is not just a continuation of what we've already accomplished. It's the earnings power we unlock as we fully utilize a purpose-built, highly automated manufacturing platform. During H1 2026, we produced 17% more cubes than we did in all of 2025, and we've matched last year's total production volume in just 164 days. What's most important is that scrap dollars on that same volume were down 63%, validating that our manufacturing platform is scaling as planned. With line two contributing only 1% of Q2 production, we have yet to realize the full benefit of Thornhill, leaving significant operational upside ahead.

Speaker #1: That's where Thornhill comes in. The biggest opportunity ahead of us is not just to continuation of what we've already accomplished. It's the earnings power we unlock as we fully utilize a purpose-built, highly automated manufacturing platform.

Speaker #1: During the first half of 2026, we produced 17% more cubes than we did in all of 2025, and we've matched last year's total production volume in just 164 days.

Speaker #1: What's most important is that scrap dollars on that same volume were down 63%, validating that our manufacturing platform is scaling as planned. With line two contributing only 1% of second quarter production, we have yet to realize the full benefit of Thornhill, leaving significant operational upside ahead.

Speaker #1: Thornhill is already delivering the performance we intended. Initial line two battery cycle times are 10% faster, and bipolar cycle times are 11% faster than line one.

John Mahaz: Thornhill is already delivering the performance we intended. Initial line 2 battery cycle times are 10% faster, and bipolar cycle times are 11% faster than line 1, with additional redundancies built in to improve line availability. That drives a near-term increase in overhead per cube, and it improves as we scale production, and we will continue to improve performance from here. As we move through Q3, we're evaluating the timing of consolidating line 1 into Thornhill. There is never a perfect time to make a move like this. You have to balance execution, customer commitments, and operational continuity. That said, after years of operating manufacturing facilities, I've learned that the sooner you pick a path, the sooner you begin realizing the benefits. Waiting rarely creates value.

John Mahaz: Thornhill is already delivering the performance we intended. Initial line two battery cycle times are 10% faster, and bipolar cycle times are 11% faster than line one, with additional redundancies built in to improve line availability. That drives a near-term increase in overhead per cube, and it improves as we scale production, and we will continue to improve performance from here. As we move through Q3, we're evaluating the timing of consolidating line one into Thornhill. There is never a perfect time to make a move like this. You have to balance execution, customer commitments, and operational continuity. That said, after years of operating manufacturing facilities, I've learned that the sooner you pick a path, the sooner you begin realizing the benefits. Waiting rarely creates value.

Speaker #1: With additional redundancies built in to improve line availability. That drives a near-term increase in overhead per cube, and it improves as we scale production and we will continue to improve performance from here.

Speaker #1: As we move through the third quarter, we're evaluating the timing of consolidating line one into Thornhill. There is never a perfect time to make a move like this.

Speaker #1: You have to balance execution, customer commitments, and operational continuity. That said, after years of operating manufacturing facilities, I've learned that the sooner you pick a path, the sooner you begin realizing the benefits.

Speaker #1: Waiting rarely creates value. Consolidating the footprint will allow us to upgrade Line 1 to the same single-piece flow design, while at the same time implementing redundancies to remove single points of failure.

John Mahaz: Consolidating the footprint will allow us to upgrade line 1 to the same single-piece flow design, while at the same time implementing redundancies to remove single points of failure. The focus becomes much clearer. One building, multiple production lines, one overhead structure, and more volume flowing through the same footprint. Based on our current analysis, we believe this initiative alone could deliver an additional 10% to 15% reduction in conversion costs on top of the improvements already embedded in our current operating plan. Achieving those savings would require a modest investment to relocate and integrate line 1 in Thornhill. Even after accounting for that investment, we currently estimate a payback period of approximately 9 months. This is what positions us to 2027. It is the foundation for the margin improvement Alessandro Lagi will walk you through on the next page. Thanks, everyone. With that, I'll turn it over to Alessandro Lagi.

John Mahaz: Consolidating the footprint will allow us to upgrade line 1 to the same single-piece flow design, while at the same time implementing redundancies to remove single points of failure. The focus becomes much clearer. One building, multiple production lines, one overhead structure, and more volume flowing through the same footprint. Based on our current analysis, we believe this initiative alone could deliver an additional 10% to 15% reduction in conversion costs on top of the improvements already embedded in our current operating plan. Achieving those savings would require a modest investment to relocate and integrate line 1 in Thornhill. Even after accounting for that investment, we currently estimate a payback period of approximately nine months. This is what positions us to 2027. It is the foundation for the margin improvement Alessandro Lagi will walk you through on the next page. Thanks, everyone. With that, I'll turn it over to Alessandro Lagi.

Speaker #1: The focus becomes much clearer. One building, multiple production lines, one overhead structure, and more volume flowing through the same footprint. Based on our current analysis, we believe this initiative alone could deliver an additional 10 to 15 percent reduction in conversion costs.

Speaker #1: On top of the improvements already embedded in our current operating plan. Achieving those savings would require a modest investment to relocate and integrate line one into Thornhill, but even after accounting for that investment, we currently estimate a payback period of approximately nine months.

Speaker #1: This is what positions us for 2027. It is the foundation for the margin improvement Alexandra will walk you through on the next page. Thanks, everyone.

Speaker #1: With that, I'll turn it over to Alexandra.

Speaker #2: Thank you, John, and good morning, everyone. Before I start to discuss the quarter, let me say that it's a privilege to be here and I want to thank the entire Eos team for the company that they have built and the progress that they've made over the last few years.

Alessandro Lagi: Thank you, John Mahaz, and good morning, everyone. Before I start to discuss the quarter, let me say that it is a privilege to be here, and I want to thank the entire Eos team for the company that they have built and the progress that they've made over the last few years. I followed Eos for several years, first as a shareholder, and now for the past 2 months as a CFO. Over the last 25 years, I've led finance organizations across global energy and industrial businesses. What brought me here was the combination of a unique vision, a differentiated technology, an expanding market, and a business at an operational inflection point. Before I joined, I visited our manufacturing facilities. Having spent most of my career around industrial operations, the level of automation stood out.

Alessandro Lagi: Thank you, John Mahaz, and good morning, everyone. Before I start to discuss the quarter, let me say that it is a privilege to be here, and I want to thank the entire Eos team for the company that they have built and the progress that they've made over the last few years. I followed Eos for several years, first as a shareholder, and now for the past two months as a CFO. Over the last 25 years, I've led finance organizations across global energy and industrial businesses. What brought me here was the combination of a unique vision, a differentiated technology, an expanding market, and a business at an operational inflection point. Before I joined, I visited our manufacturing facilities. Having spent most of my career around industrial operations, the level of automation stood out.

Speaker #2: I followed Eos for several years, first as a shareholder and now for the past two months as a CFO. Over the last 25 years, I've led financial organization across global energy and industrial businesses.

Speaker #2: What brought me here was the combination of a unique vision, a differentiated technology, and expanding market, and a business at an operational inflection point.

Speaker #2: Before I joined, I visited our manufacturing facilities. Having spent most of my career around industrial operations, the level of automation stood out. Eos designed this platform for the volume the business is growing into rather than the volume it had, and that decision is now paying off.

Alessandro Lagi: Eos designed this platform for the volume the business is growing into, rather than the volume it had, and that decision is now paying off. I strongly believe that Eos is at a real tipping point. Looking at what the team has built gives me tremendous confidence in the opportunities ahead. I believe I bring an operational mindset that complements the team with a particular focus on execution and margin expansion. I'm excited to be part of the next phase of growth and to help translate the scale we've built into stronger profitability and long-term shareholder value. I want to finally thank Nathan for this partnership through the transition and for the financial foundation he has established. With that, let me turn now to the Q2.

Speaker #2: A strong belief that Eos is at a real keeping point. Looking at what the team has built, gives me tremendous confidence in the opportunities ahead.

Speaker #2: I believe I bring an operational mindset that complements the team, with a particular focus on execution and margin expansion. I'm excited to be part of the next phase of growth and to help translate the scale we've built into stronger profitability and long-term shareholder value.

Speaker #2: I want to finally thank Nathan for this partnership through the transition and for the financial foundation he has established. With that, let me turn now to the second quarter.

Alessandro Lagi: Revenue increased to its highest of $68.8 million, which is up 351% year-over-year and 21% sequentially, with cube deliveries increasing 207% year-over-year and 20% sequentially. Turning to margins. Gross loss totaled $48.8 million. Margin improved 132 points year-over-year and 7 points sequentially. Excluding stock-based compensation and depreciation and amortization, adjusted gross loss was $42.9 million and an adjusted gross margin of -62%. This marks our seventh consecutive Q of gross margin improvement and reflects the operational progress we're making across the business. The Q2 results also reflect the continued scaling of our manufacturing operations, with some expected cost pressure as we invest in supporting that growth. In these regards, two items impacted the Q. First, Thornhill. As you heard from John, a newly commissioned line operates below its long-term utilization targets, which weigh on fixed asset absorption.

Alessandro Lagi: Revenue increased to its highest of $68.8 million, which is up 351% year-over-year and 21% sequentially, with cube deliveries increasing 207% year-over-year and 20% sequentially. Turning to margins. Gross loss totaled $48.8 million. Margin improved 132 points year-over-year and 7 points sequentially. Excluding stock-based compensation and depreciation and amortization, adjusted gross loss was $42.9 million and an adjusted gross margin of -62%. This marks our seventh consecutive Q of gross margin improvement and reflects the operational progress we're making across the business. The Q2 results also reflect the continued scaling of our manufacturing operations, with some expected ost pressure as we invest in supporting that growth. In these regards, two items impacted the Q. First, Thornhill. As you heard from John, a newly commissioned line operates below its long-term utilization targets, which weigh on fixed asset absorption.

Speaker #2: Revenue increased to his highest of 68.8 million dollars. Which is up 351% year over year and 21% sequentially. With cube deliveries increasing 207% year over year and 20% sequentially.

Speaker #2: Now, turning to margins. Gross loss totaled $48.8 million. Margin improved 132 points year over year and 7 points sequentially. Excluding stock-based compensation and depreciation and amortization, adjusted gross loss was $42.9 million.

Speaker #2: And an adjusted gross margin of negative 62%. This marks a seven consecutive quarter of gross margin improvement and reflects the operational progress we're making across the business.

Speaker #2: The second quarter results also reflect the continued scaling of our manufacturing operations, with some expected cost pressure as we invest in supporting that growth.

Speaker #2: In this regards, two items impacted the quarter. First, Thornhill. As you heard from John, a newly commissioned line operates below its long-term utilization targets, which weigh on fixed asset absorption.

Speaker #2: As throughput increases and the line matures, absorption improves. Second is still cost. As installed base expanded, which drove higher deployment and commissioning activity, and we accelerated the down OS upgrades across a portion of the legacy fleet.

Alessandro Lagi: As throughput increases and the line matures, absorption improves. Second is field cost. Our installed base expanded, which drove higher deployment and commissioning activity, and we accelerated the DawnOS upgrades across portion of the legacy fleet. The improved field data that Joe discussed earlier is directly related to this work. Both reflect investment in supporting a growing asset base rather than a structural increase in our cost profile. We flagged these pressures last Q, and we continue to expect them to diminish significantly by the Q4. Operating expenses totaled $35 million, increasing 6% year-over-year while remaining essentially flat compared to the Q1. While revenue increased 351%, we reduced the SG&A by 4% and increased R&D by 46% to invest strategically in the future software capabilities and product development. This clearly demonstrates the diligence around cost and cash management from the team.

Speaker #2: The improved field data that Joe discussed earlier is directly related to this work. Both reflect investment in supporting a growing asset base rather than a structural increase in our cost profile.

Speaker #2: We flagged this pressures last quarter and we continue to expect them to diminish significantly by the fourth quarter. Operating expenses total 35 million dollars.

Speaker #2: Increasing 6% year over year while remaining essentially flat compared to the first quarter. While revenue increased 351%, we reduced the SG&A by 4% and increased R&D by 46% to invest strategically in the future software capabilities and product development.

Speaker #2: This clearly demonstrates the diligence around cost and cash management from the team. Net loss for the quarter was $276 million, with an adjusted EBITDA loss of $71.4 million.

Alessandro Lagi: Net loss for the Q was $276 million, with an adjusted EBITDA loss of $71.4 million, a margin of -104%, which is improving 235 points year-over-year and 16 points sequentially. Reported net loss continues to be driven primarily by non-cash fair value adjustments related to our capital structure. Specifically, changes in our share price result in mark-to-market revaluation of warrants and derivative liabilities. As an example, when our share price increases, the value of certain warrants also increases, which can result in a higher account liability and a corresponding non-cash expense. Those adjustments create volatility in reported earnings and do not reflect an operating performance. Turning to the balance sheet and cash flow, we are encouraged by the continued improvement in how operating cash flow tracked adjusted EBITDA during the Q, with almost 100% free cash flow conversion from operations.

Speaker #2: A margin of negative 104%, which is improving 235 points year over year and 16 points sequentially. Reported net loss continues to be driven primarily by known cash fair value adjustments related to our capital structure.

Speaker #2: Specifically, changes in our share price result in mark to market revaluation of warrants and derivative liabilities. As an example, when our share price increases, the value of certain warrants also increases, which can result in a higher account liability and a corresponding known cash expense.

Speaker #2: Those adjustments create volatility in reported earnings and do not reflect an operating performance. Now, turning to the balance sheet and cash flow, we are encouraged by the continued improvement in how operating cash flow tracked adjusted EBITDA during the quarter.

Speaker #2: With almost 100% free cash flow conversion from operations. Working capital did not consume incremental cash, even as revenue grew 21% sequentially and we continue to invest in the line to build out at Thornhill.

Alessandro Lagi: Working capital did not consume incremental cash, even as revenue grew 21% sequentially, and we continue to invest in the line 2 build-out at Thornhill. As a result, we ended up the quarter with $364 million in cash. We remain focused on disciplined cash management. We believe we are well-positioned as we continue to improve margin. We are preparing the advance request for the second DOE tranche and expect to close it by quarter-end, subject to the conditions outlined in the loan agreement. Now, let me close today's prepared remarks with the critical drivers to deliver positive adjusted gross margin. When you look at our history, product adjusted gross margin moved from approximately -983% in Q2 2024 to -40% this quarter. That is more than 940 points of improvement in 2 years.

Speaker #2: As a result, we ended the quarter with $364 million in cash. We remain focused on disciplined cash management, and we believe we are well positioned as we continue to improve margin.

Speaker #2: We are preparing the advanced request for the second DOE tranche and expect to close it by quarter end, subject to the conditions outlined in the loan agreement.

Speaker #2: Now, let me close today's prepared remarks with the critical drivers to deliver positive adjusted gross margin. When you look at our history, product adjusted gross margin moved from approximately negative 983% in the second quarter of 2024 to negative 40% this quarter.

Speaker #2: That is more than 940 points of improvement in two years. Two years ago, we carried the cost of building and manufacturing platform well ahead of volume.

Alessandro Lagi: 2 years ago, we carried the cost of building a manufacturing platform well ahead of volume. We invested in automation, expanded the footprint, qualified suppliers, and built an organization for the business we believed we could become. Over the last year, those investments began translating into performance. We increased production, improved yields, reduced manufacturing costs, and benefited from the supply economics as volume grew. This quarter continued that progress. Some of the manufacturing gains were offset by the project execution investments I described earlier. Those were deliberate. We chose to strengthen our ability to execute as deployment scaled. That choice creates near-term margin pressure. The heavy lifting of building the platform is largely complete. Now the work is leveraging it. That is what the right side of this page shows.

Speaker #2: We invested in automation, expanded the footprint, qualified suppliers, and built an organization for the business we believed we could become. Over the last year, those investments began translating into performance.

Speaker #2: We increased production, improved yields, reduced manufacturing costs, and benefited from supply economics as volume grew. This quarter continued that progress. Some of the manufacturing gains were offset by the project execution investments I described earlier.

Speaker #2: Those were deliberate. We chose to strengthen our ability to execute as deployment scaled, and that choice creates near-term margin pressure. The heavy lifting of building the platform is largely complete, and now the work is leveraging it.

Speaker #2: That is what the right side of this page shows. There are four drivers of cost-out that we're pushing, with detailed plans in place that John just walked us through.

Alessandro Lagi: There are 4 drivers of cost out that we're pushing with detailed plans in place that John just walked us through. First, we anticipated a roughly 25% point reduction in material cost as a percentage of revenue. As backlog conversion becomes more predictable, we move from transactional purchasing to longer-term supply agreements. Additionally, the team is executing against more than 90 active cost reduction initiatives focused on simplifying design, reducing material content, and improving manufacturability. Second is conversion cost. Approximately 20 points of reduction from the framework that John just walked us through. The step change comes from running under one cost structure. Supervision, planning, quality, maintenance, and production support stay relatively constant whether we run 1 line or 4. Materials management is one of our largest labor costs today. We move product between floors, buildings, and warehouses with labor-intensive processes using temporary labor.

Speaker #2: First, we anticipate a roughly 25% point reduction in material cost as a percentage of revenue. As backlog conversion becomes more predictable, we move from transactional purchasing to longer-term supply agreements.

Speaker #2: Additionally, the team is executing against more than 90 active cost reduction initiatives focused on simplifying design, reducing material content, and improving manufacturability. Second is conversion cost.

Speaker #2: Approximately 20 points of reduction from the framework that John just walked us through. The step change comes from running under one cost structure. Supervision, planning, quality, maintenance, and production support stay relatively constant whether we run one line or four.

Speaker #2: Materials management is one of our largest labor costs today. And we move product between floors, buildings, and warehouses with labor-intensive processes using temporary labor.

Alessandro Lagi: At Thornhill, the majority of that movement is automated with conveyance and automated mobile robots. Third is project and field services, contributing another 20 points or so. As we said, we invested in the field this year through DawnOS upgrades while leveraging third-party resources. As that work is completed and we bring execution activities back to internal teams, project productivity improves and our reliance on external support declines. We are applying the same operational discipline we have established inside our manufacturing facilities. We actually view the field as a factory without walls. Lean principles apply. As more projects become operational, we expect this cost to increase. However, we view this as an attractive opportunity over time. We believe it can become a profitable area of the business as we continue to build and scale our internal capabilities.

Speaker #2: At Thornhill, the majority of that movement is automated with conveyance and automated mobile robots. Third is project and field services. Contributing another 20 points or so.

Speaker #2: As we said, we invested in the field this year through Downo S upgrades while leveraging third-party resources. As that work is completed and we bring execution activities back to internal teams, project productivity improves and our reliance on external support declines.

Speaker #2: We are applying the same operational discipline we have established inside our manufacturing facilities. We actually view the field as a factory without walls and lead principle apply.

Speaker #2: As more projects become operational, we expect these costs to increase. However, we view these as an attractive opportunity over time and believe it can become a profitable area of the business as you continue to build and scale our internal capabilities.

Speaker #2: Finally, we expect approximately eight points from continued yield improvements in our subassembly processes. We have already made solid progress here and assuming an equipment upgrades are completed and tighter component tolerance are implemented, we expect to further reduce scrap and improve first-pass yield.

Alessandro Lagi: Finally, we expect approximately eight points from continued yield improvements in our sub-assembly processes. We have already made solid progress here, and as tooling and equipment upgrades are completed and tighter component tolerance are implemented, we expect to further reduce scrap and improve first-pass yield. Combined, these initiatives provide what we believe is a clear path to over 72 points of adjusted gross margin improvement over the next 12 months, assuming we execute our plan and achieve expected production volumes. We have demonstrated that we can build the capability. The next chapter is converting that capability into earnings, and I believe we have a clear plan to get there. As we continue the base cost control, we expect adjusted EBITDA to improve with increasing operating leverage, with execution and volume growth determining the pace of our improvement.

Speaker #2: So combine these initiatives provide what we believe is a clear path to over 72 points of adjusted gross margin improvement over the next 12 months.

Speaker #2: Assuming we execute our plan and achieve expected production volumes. We have demonstrated that we can build the capability. The next chapter is converting that capability into earnings and I believe we have a clear plan to get there.

Speaker #2: As we continue the base cost control, we expect adjusted EBITDA to improve with increasing operating leverage. With execution and volume growth determining the pace of our improvement.

Speaker #2: While there is still work ahead, I'm confident in this team, I'm confident in the roadmap, and excited about the opportunity to drive margin expansion.

Alessandro Lagi: While there is still work ahead, I'm confident in this team, I'm confident in the roadmap, and excited about the opportunity to drive margin expansion. With that, I'll turn it back to the operator for questions.

Speaker #2: With that, I'll turn it back to the operator for questions.

Speaker #1: If you'd like to ask a question at this time, please press star 11 on your telephone. And wait for your name to be announced.

Operator: If you'd like to ask a question at this time, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from Christopher Souther with Truist.

Speaker #1: To withdraw your question, please press star 11 again. Our first question comes from Christopher Souther with Truist.

Speaker #3: Hey guys, thanks for taking my questions here. So just to kind of unpack the updated revenue guidance, and the path here, the low end is essentially one and a half gigawatt hours for the rest of the year.

Christopher Souther: Hey, guys. Thanks for taking my questions here. Just to kind of unpack the updated revenue guidance, and the path here, the low end is essentially one and a half gigawatt hours for the rest of the year at just Thornhill. In the high end, are we assuming that line 1 comes back online at Thornhill and is producing as well?

Speaker #3: Just Thornhill and the high end, are we assuming that line one comes back online at Thornhill and is producing as well?

Speaker #4: Hey Chris, so lower end is basically continuing the run rate of June throughout the rest of the year. To get to the 300, the higher end of that is to not so much get line one up and running in Thornhill, but to get Thornhill the full 24/7 operation by the time we get into the at the end of the fourth quarter.

Joe Mastrangelo: Hey, Chris. Lower end is basically continue the run rate of June throughout the rest of the year to get to the 300. The higher end of that is to not so much get line one up and running in Thornhill, but to get Thornhill the full 24/7 operation by the time we get into the end of Q4.

Speaker #3: Got it. Okay. So if Thornhill is just 1% of 2Q production, what kind of throughput are we seeing today and how close are we to kind of ramping that up towards the one and a half gigawatt hour rate we need for the low end there?

Christopher Souther: Got it. Okay. If Thornhill is just 1% of 2Q production, what kind of throughput are we seeing today, and how close are we to kind of ramping that up towards the 1.5 GWh rate we need for the low end there?

Speaker #4: So we'll continue to run, we'll continue to run line one, and line one is running really well, and John's actually got line one to its nameplate performance.

Joe Mastrangelo: We'll continue to run line one, line one is running really well, and John's actually got line one to its nameplate performance. The team continues to bring Thornhill up into operations. The Thornhill up in operations right now is more the training and staffing of the people to run the line. The way we've learned when we did Turtle Creek is get one turn up and running, add a second shift, get that up and running, and go from there, versus trying to do it all at once. What John and the team has done with the second line is nothing short of phenomenal when you look at the results he talked about on how the line's been performing initially.

Speaker #4: And the team continues to bring Thornhill up operations right now is more the training and staffing of the people to run the line. So we'll go one the way what we've learned and we did Turtle Creek is get one turn up and running at a second shift, get that up and running and go from there versus trying to do it all at once.

Speaker #4: But with the second line is nothing short of phenomenal when you look at the results he talked about on how the line's been performing initially.

Speaker #3: Got it. Okay. And then I appreciate all the gross margin walk drivers to get to the 10% gross margins by 2Q of next year.

Christopher Souther: Got it. Okay. I appreciate all the gross margin walk drivers to get to the 10% gross margins by Q2 of next year. Can you provide a bit more detail on some of the material cost and project drivers? I think the conversion and scrap are pretty clear, but would love to get a better sense on what the cost out initiatives are and the DawnOS and third-party labor, what those kind of drivers look like and how those progress over the next year.

Speaker #3: Can you provide a bit more detail on some of the material cost and project drivers? I think the conversion and scrap are pretty clear, but would love to get a better sense on what the cost out initiatives are and the Downo S and third-party labor, like what those kind of drivers look like and how those progress over the next year.

Speaker #4: So Chris, I think John and Alexandra can jump in. I think when you look at what the team is doing, having a clear revenue conversion plan now allows us to go out to suppliers and drive down costs and we're seeing the cost like I think we talked about this in the presentation itself where 2Q there was a little bit of timing, 3Q we're seeing costs come down as we get into July.

Joe Mastrangelo: Chris, I think, and then John and Alessandro can jump in. I think, when you look at what the team is doing, having a clear revenue conversion plan now allows us to go out to suppliers and drive down costs. We're seeing the costs, I think we talked about this in the presentation itself, where Q2, there was a little bit of timing. Q3, we're seeing costs come down as we get into July. John will keep driving that with the team on supplier costs out. I think the second piece of this that you laid out is just part simplification as you move through. It's taking DawnOS, making the way the firmware and how we run the hardware, how we run DawnOS simpler, taking costs out on that, scaling up with suppliers.

Speaker #4: John will keep driving that with the team. On supplier costs out, then I think the second piece of this that you laid out is just part simplification as you move through.

Speaker #4: It's taking Downo S, making the way the firmware and how we run the hardware that how we run Downo S simpler. Taking costs out on that, scaling up with suppliers.

Speaker #4: So going more from as we do this, we start off with the supplier that can move quickly to get us through prototype, to initial production, and then John with his relationships and background with Jable and other contract manufacturers allows us to scale into a lower cost solution to continue to drive that down.

Joe Mastrangelo: Going more from, as we do this, we start off with a supplier that can move quickly to get us through prototype to initial production. Then John, with his relationships and background with Jabil and other contract manufacturers, allows us to scale into a lower cost solution to continue to drive that down. Then the third piece of it, which you talked about, is as we've gone through and started ramping up and installing more MW out in the field, we started off just like we did when we did this in Turtle Creek, if you remember. We were talking about bringing in temp labor as we brought up Eos capability, and then eventually phasing out that temporary labor and having it be all Eos. You see that in the seven quarters of improved margin that we've delivered.

Speaker #4: And then the third piece of it, which you talked about, is as we've gone through and started ramping up and installing more megawatts out in the field, we started off just like we did when we did this in Turtle Creek, if you remember. Like we were talking about, we were bringing in temp labor as we brought up Eos, as we brought up Eos capability, and then eventually phasing out that temporary labor and having it be all Eos.

Speaker #4: And you see that in the seven quarters of improved margin that we've delivered. We're doing the same thing out in the field. You start off with people that worked out in the field, you build up your capabilities, you start off with supervision, now we'll get into labor and we'll selectively use third-party.

Joe Mastrangelo: We're doing the same thing out in the field. You start off with people that work out in the field, you build up your capabilities. You start off with supervision. Now we'll get into labor and we'll selectively use third party, but drive down to a lower cost point on a labor input basis by using Eos employees to do installation and commissioning.

Speaker #4: But drive down to a lower cost point on a labor input basis by using EOS employees to do installation and commissioning.

Speaker #3: Okay. Thanks for all the color there. I'll hop in again.

Christopher Souther: Okay. Thanks for all the color there. I'll hop in the queue.

Speaker #4: No problem. All right. Thanks, Chris.

Joe Mastrangelo: No problem. All right. Thanks, Chris.

Speaker #1: Our next question comes from Stephen Gangaro with Stiefel.

Operator: Our next question comes from Stephen Gengaro with Stifel.

Stephen Gengaro: Thank you. Good morning, everybody.

Speaker #3: Thank you. Good morning, everybody.

Speaker #4: Hey Stephen, how are you?

Joe Mastrangelo: Hey, Stephen. How are you?

Speaker #3: Two good, thank you. Two for me. The first one is can you talk about the customer concentration that we see in the 2Q rev in the backlog that you mentioned in the press release?

Stephen Gengaro: Good, thank you. Two for me. The first one is, can you talk about the customer concentration that we see in the Q2 rev in the backlog that you mentioned in the press release, and how we should expect and what you expect to see from sort of a diversification of the customer base going forward?

Speaker #3: And how we should expect and what you expect to see from sort of a diversification of the customer base going forward?

Speaker #4: Yeah. I mean, look, Stephen, I think when you look at Q2, we had an opportunity to take a project that had a strong return profile, add it as an initial asset into Frontier Power, and we capitalized on that, working with Cerberus.

Joe Mastrangelo: Yeah. Look, Stephen, I think when you look at Q2, we had an opportunity to take a project that had a strong return profile added as an initial asset into Frontier Power, and we capitalized on that working with Cerberus, and it was, I think, a great move for us. When I think about what we're trying to drive with Frontier Power is we're trying to drive returns on the basis of individual project returns, which this does with the project that we're delivering right now. The same time, we create a pool of assets that can be monetized later on to spin the flywheel. I think owning 36% of an entity, and when you look at comps of other developers like Frontier Power, it gives us the opportunity to be able to build a company and build valuation around that.

Speaker #4: And it was, I think, a great move for us. When I think about what we're trying to drive with frontier power, is we're trying to drive returns on the basis of individual project returns, which this does with the project that we're delivering right now.

Speaker #4: The same time, we create a pool of assets that can be monetized later on. This has been the flywheel and then also I think owning 36% of an entity.

Speaker #4: And when you look at when you look at comps of other developers like Frontier Power, it gives us the opportunity to be able to build a company and build valuation around that.

Speaker #4: I think inside of this, like over time, there's going to be a blend of bringing in both frontier power as we execute and then also projects that are closing out in the market out in the market with third parties.

Joe Mastrangelo: I think inside of this, over time, there's going to be a blend of bringing in both Frontier Power as we execute and then also projects that are closing out in the market with third parties, and there'll be a blend of that as we move forward. I think the important thing for us is having surety of a baseline of backlog conversion that allows us to load the factory, that allows us to sign longer-term supply agreements because we know what we're going to need to deliver. It just gives also the commercial team the ability to go out and sell slots in the factory to be able to deliver revenue and accrete margin.

Speaker #4: And there'll be a blend of that as we move forward. I think the important thing for us is having surety of a baseline of backlog conversion that allows us to load the factory that allows us to sign longer-term supply agreements because we know what we're going to need to deliver.

Speaker #4: And it also gives the commercial team the ability to go out and sell slots in the factory to be able to deliver revenue and accrete margin.

Speaker #1: As a reminder, if you'd like to ask a question at this time, please press star 11 on your touchstone phone. We have another question from the line of Stephen Gangaro.

Operator: As a reminder, if you'd like to ask a question at this time, please press *11 on your touchtone phone. We have another question from the line of Stephen Gengaro. Your line is open.

Speaker #1: Your line is open.

Speaker #3: Sorry, Joe, I was muted, but just a follow-up to that and another question. But the follow-up was I understand the FPUSA side, but in your pipeline of opportunities and the customers you're talking to, how should we expect that the right now 50% of your backlog is from that single entity?

Stephen Gengaro: Sorry, Joseph, I was muted, just a follow-up to that and another question. The follow-up was, I understand the FP USA side-

Stephen Gengaro: Sorry, Joe, I was muted, just a follow-up to that and another question. The follow-up was, I understand the FP USA side-

Joe Mastrangelo: Yeah

Stephen Gengaro: In your pipeline of opportunities and the customers you're talking to, how should we expect that right now 50% of your backlog is from that single entity. How should we think about that customer diversification evolving? Because that's something that we get a lot of questions on from investors. I'm just curious the conversations you're having, if we're sitting here 12 months from now, how should we think about that from a non-affiliated entity in the backlog?

Speaker #3: How should we think about that customer diversification evolving? Because that's something that we get a lot of questions on from investors and just curious the conversations you're having like if we're sitting here 12 months from now, like how should we think about that from a non-affiliated entity in the backlog?

Speaker #4: Yeah. I mean, Stephen, if we're adding assets that deliver returns in the frontier power USA, I think it's great. What I'd like to see is less percentages change and more of the size of the pie grow.

Joe Mastrangelo: Stephen, if we're adding assets that deliver returns in the Frontier Power USA, I think it's great. What I'd like to see is less percentages change and more the size of the pie grow. I think that's what we're focused on, I think getting Frontier Power and being able to execute quickly, getting projects referenced out in the field lead to the other half of that pie continuing to grow. We continue to work through that, and we're very selective. We do all the Frontier Power transactions arm's length. We're looking at projects that deliver returns and support long-term asset growth into Frontier Power. At the same time, there's a large pipeline there that needs to convert and convert faster. I feel really good when you look at things like what we announced in Germany.

Speaker #4: think getting frontier power and being able to execute quickly, getting projects referenced out in the field lead to the other half of that pie continuing to grow.

Speaker #4: We continue to work we continue to work through that and we're very selective. We do all the frontier power transactions, arm's length. So we're looking at projects that deliver returns and support long-term asset growth into frontier power.

Speaker #4: But at the same time, there's a large pipeline there that needs to convert and convert faster. And I feel really good when you look at things like what we announced in Germany, Germany, Austria, and Switzerland that's now landing real volume into Europe and allows us to expand in Europe.

Joe Mastrangelo: Germany, Austria, and Switzerland, that's now landing real volume into Europe and allows us to expand in Europe. We feel also good about the recent announcement that we had with the Department of War, because I think we talked about the specific program where we're in a strategic partnership. Microgrids, and when you look at energy consumption, the government is one of the largest energy consumers in the United States. Being able to come in and show them that we have a solution that is American-made, FAIR compliant, all the things that we've always talked about and can deliver the diversity of cycling and applications, is another area that we're going to be able to grow. None of this moves as fast as you would like it to, as we've been experiencing here over the last couple of months.

Speaker #4: We feel also good about the recent announcement that we had with the Department of War because I think we talked about the specific program where we're in a strategic partnership.

Speaker #4: But microgrids and when you look at and when you look at energy consumption, the government is one of the largest energy consumers in the United States.

Speaker #4: So being able to come in and show them that we have a solution that is American made, FAA compliant, all the things that we've always talked about and can deliver the diversity of cycling and applications is another area that we're going to be able to grow.

Speaker #4: None of this moves as fast as you would like it to as we've been experiencing here over the last couple of months. But like when you look at where we are and where we want to go and the performance we're seeing out in the field, it gets stronger and stronger and stronger.

Joe Mastrangelo: When you look at where we are and where we want to go and the performance we're seeing out in the field, it gets stronger and stronger. Look, having a 50/50 split, I think that would mean that Frontier Power is doing its job and we're growing a company like you see other project developers doing out in the marketplace. Having a partner where we can execute through would be great. Keeping that 50% split on the other side and making the pie bigger from the 800 is the goal that the team has.

Speaker #4: So look, having a 50/50 split, I think that would mean that frontier power is doing its job and we're growing a company. Like you see other project developers doing out in the markets out in the marketplace and having a partner where you can execute through would be great.

Speaker #4: And keeping that 50% split on the other side and making the pie bigger from the 800 is the goal that the team has.

Speaker #3: Great. Thanks. And when you think about the mobilization of line one over time, and consolidating to Thornhill, and there's sort of two questions behind that.

Stephen Gengaro: Great. Thanks. When you think about the mobilization of line 1 over time and consolidating to Thornhill, there's sort of two questions behind that. One is, are you doing it now versus waiting because of just the timing of backlog delivery, your ability to meet delivery obligations and mobile line? Or is it because you've seen such higher efficiency out of Thornhill and it's critical to driving margin expansion?

Speaker #3: One is, are you doing it now versus waiting, just because of the timing of backlog delivery and your ability to meet delivery obligations and move online?

Speaker #3: Or is it because you’ve seen such higher efficiency out of Thornhill, and it’s critical to driving margin expansion?

Speaker #4: Yeah, Stephen, look, I think there were a couple of factors that came into this. It's just as you look at how the backlog conversion was laying out, and we want to hit January running.

Joe Mastrangelo: Yeah. Steven, look, I think there was a couple factors that came into this is just as you look at how the backlog conversion was laying out, we want to hit January running. When you look at this, we've seen the growth of the company, and I want to emphasize to everybody that Turtle Creek is operating to the nameplate. Just between the nameplate, just between all the movements and things you have to do, it just becomes complicated. This just simplifies. It's a simplification effort to get to scale next year. I think doing it this year when we know we can execute both of them together, it just also takes the noise out of 2027 for us. It really focuses us on executing around the 2 lines.

Speaker #4: Like when you look at this like we've seen the growth of the company and I want to emphasize to everybody that Turtle Creek is and could is operating to the nameplate.

Speaker #4: Just between the nameplate, just between all the movements and things you have to do, it just becomes complicated. And this just simplifies it. It's just a simplification effort to get the scale next year.

Speaker #4: And I think doing it this year, when we know we can execute both of them together, just also takes the noise out of 2027 for us.

Speaker #4: And really focuses us on executing around the two lines. The other piece of this is John and the team with what they've done on line two and the redundancies that they've built in from the lessons learned in 4Q and other things that we've been able to do.

Joe Mastrangelo: The other piece of this is John and the team with what they've done on line 2 and the redundancies that they built in from the lessons learned in 4.2 and other things that we've been able to do, and you see it in the results you put on this page. You see it in how it's performing versus line 1. This is not about, oh, Turtle Creek doesn't work. It's a story of Thornhill works better. Why did we wind up where we wound up? Steven, you and I have talked about this before. We moved into Turtle Creek because at the time we were setting up manufacturing, it's what we could afford. We expanded into areas of what we can afford. The line is laid out the way it's laid out in Turtle Creek because we had to fit it into the building that we could afford.

Speaker #4: And you see it in the results you put on his page. You see it in how it's performing versus line one. This is not about, oh, Turtle Creek doesn't work.

Speaker #4: It's a story of Thornhill works better. And why do we wind up where we wound up? Stephen, you and I have talked about this before.

Speaker #4: We moved into Turtle Creek because at the time we were setting up manufacturing, it's what we could afford. We expanded into areas of what we can afford.

Speaker #4: The line is laid out the way it's laid out in Turtle Creek is we had to fit it into the building that we can afford.

Speaker #4: Thornhill gives you now the straight shot to be able to do this without forklifts, without pallet movers. It just simplifies the entire operation. Which five years ago, we couldn't afford to do it.

Joe Mastrangelo: Thornhill gives you now the straight shot to be able to do this without forklifts, without pallet movers. It just simplifies the entire operation, which five years ago, we couldn't afford to do it. We got Turtle Creek running the best that it could run. We knew we would come to this point. It's why we went out and negotiated to move into Thornhill and come up with a flagship factory. When you go see it, you sit there and you say, I see the difference. When you look at it and you think about it, you've been in the factory, Stephen. When you think about the second floor of the building where we're manufacturing bipolars and you walk that floor and then go to Thornhill, you see and feel the difference of the efficiencies that we gain, the material movements, and how fast things can flow.

Speaker #4: So, we got Turtle Creek running the best that it could run. We knew we would come to this point. It's why we went out and negotiated to move into Thornhill and come up with a flagship factory.

Speaker #4: But when you go see it, you sit there and you say, I see the difference. When you look at it and you think about it, you've been in the factory, Stephen.

Speaker #4: When you think about the second floor of the building where we're manufacturing bipolars and you walk that floor and then go to Thornhill, you see and feel the difference of the efficiencies that we gained, the material movements and how fast things can flow.

Speaker #4: And the fact that John's got it running at nine seconds is a testament to all the hard work that the team has done and the fact that, yeah, we may have problems and everybody that scales in manufacturing operations, we'll stub their toe here or there, but we don't stub our toe on the same thing twice.

Joe Mastrangelo: The fact that John's got it running at nine seconds is a testament to all the hard work that the team has done and the fact that, yeah, we may have problems and everybody that scales a manufacturing operations will stub their toe here or there, we don't stub our toe on the same thing twice. That's what the results are showing, and that's why we're doing what we're doing.

Speaker #4: And that's what the results are showing and that's why we're doing what we're doing.

Speaker #3: Great. Thank you. And then maybe one quick one and I don't know if you're going to be able to address this yet, but when we think about FPUSA and your ownership position in that business, how do we think about the profitability of FPSUSA?

Stephen Gengaro: Great. Thank you. Maybe one quick one, and I don't know if you're going to be able to address this yet, when we think about FP USA and your ownership position in that business, how do we think about the profitability of FP USA? When does that business become profitable and then those profits, you then obtain a third of those profits?

Speaker #3: When does that business become profitable and then those profits kind of you then obtain the third of those profits?

Speaker #4: Yeah. So Stephen, remember, this will be below the line profitability. It's not going to be operating profit. But like when you're talking about like initial projects coming online in second half of next year, once those start operating, then you should start seeing the profitability come through and the return on investment occurring as other income.

Joe Mastrangelo: Yeah. Stephen, remember, this will be below-the-line profitability. It's not going to be.

Stephen Gengaro: Yes

Joe Mastrangelo: operating profit. When you're talking about initial projects coming online in H2 of next year, once those start operating, you should start seeing the profitability come through and the return on investment occurring as other income.

Speaker #3: Great. Thank you for all the detail.

Stephen Gengaro: Great. Thank you for all the detail.

Speaker #4: All right, Stephen. Thank you.

Joe Mastrangelo: All right, Stephen. Thank you.

Speaker #1: Our next question comes from Joseph Osha. With Guggenheim.

Operator: Our next question comes from Joseph Osha with Guggenheim.

Joseph Osha: Hi. Thanks. Good morning. One of the things you talked about last year we haven't heard as much about recently is the data center opportunity, and in particular, some of the advantages that you felt like you have in terms of the ability to cycle, the ability to locate close to the building, and so forth. I'm just wondering if we might be able to get an update there, and I'm curious to the extent you are doing anything, what kind of durations you're seeing your customers ask for? Thank you.

Speaker #4: Hi. Thanks. Good morning.

Speaker #3: One of the things you talked about last year, we haven't heard as much about recently is the data center opportunity and in particular some of the advantages that you felt like you have in terms of the ability to cycle, the ability to locate close to the building, and so forth.

Speaker #3: I'm just wondering if we might be able to get an update there and I'm curious to the extent you are doing anything, what kind of durations you're seeing your customers ask for.

Speaker #3: Thank you.

Speaker #4: Hey, Joe. So we did talk about data centers on the if you go back to the page on the pipeline, 32% of what's in the pipeline is data center related.

Joe Mastrangelo: Yeah, Joseph. We did talk about data centers, if you go back to the page on the pipeline, 32% of what's in the pipeline is data center related.

Speaker #4: And we've always talked about and you and I have talked about this in the past. There's two things. There's two segments within data centers.

Joseph Osha: Yep.

Joe Mastrangelo: We've always talked about, and you and I have talked about this in the past, there's two things. There's 2 segments within data center. Segment 1 is co-locating with a data center. Segment 2 is having a storage asset in a generating area where data centers are going to be installed. We feel really good, I think, on the second part. That's really what the Talen relationship is all about, is getting those projects with Talen that'll be in PJM and in Pennsylvania, and having them-

Speaker #4: Segment one is co-locating with a data center. Segment two is having a storage asset in having a storage asset in a generating area where data centers are going to be installed.

Speaker #4: We feel really good. I think on the second part, that's really what the talent relationship is all about, is getting those projects with talent that'll be in PJM and in Pennsylvania and having them supporting the demand load from data centers.

Joseph Osha: Okay

Joe Mastrangelo: supporting the demand load from data center. A lot happening there. Obviously, we're at the timelines of how the PJM auction and backstop auction are going to work. We're working through all those things, but feel really good about the work that we're doing with Mac and his team. On the locating directly on the site, continue to work through that. There's qualification work that you need to do. As I talked about, the more and more that I work with high-speed computing, you realize we like to talk about and think about energy storage as this great technological marvel and things that it can do and everything else. From a data center, it's a cost of goods sold in a factory, and their factory is high-speed computing. They want to make sure that they have the reliability and performance that they need.

Speaker #4: So a lot happening there, but obviously we're at the timelines of how the PJM auction and backstop auction are going to work. So we're working through all those things, but feel really good about the work that we're doing with Mac and his team.

Speaker #4: On the locating directly on the site, continue to work through that. There's qualification work that you need to do. I mean, like as I talked about, like the more and more that I work with high-speed computing, you realize like we like to talk about and think about energy storage as this great technological marvel and things that it can do and everything else.

Speaker #4: But from a data center, it's a cost of goods sold in a factory and their factory is high-speed computing. So they want to make sure that they have the reliability and performance that they need.

Speaker #4: We can perform on inference and do millisecond response times. We can do as we've said many times, we do all the things that we talked about before that none of that has changed.

Joe Mastrangelo: We can perform on inference and do millisecond response times. We can do, as we've said many times, we can do all the things that we talked about before. None of that has changed. It's a matter of working through with the suppliers to get to the point where we're going to be able to announce firm contracts with people with siting energy storage alongside a data center.

Speaker #4: It's a matter of working through with the suppliers to get to the point where we're going to be able to announce firm contracts with people with building with putting siting energy storage alongside a data center.

Speaker #3: Okay. Thanks. So it sounds like at this point, it's sort of more the grid-level resilience for the near term, at least than it is necessarily the on-site power quality, although that's evolving.

Joseph Osha: Okay, thanks. It sounds like at this point, it's sort of more the grid-level resilience for the near term at least, than it is necessarily the on-site power quality, although that's evolving. Is that a correct way to think about it?

Speaker #3: Is that a correct way to think about it?

Speaker #4: I don't know that I would term it that way, Joe, and I'm not going to handicap where we are in either one of those things.

Joe Mastrangelo: I don't know that I would term it that way, Joseph, I'm not going to handicap where we are in either one of those things. We'll announce as we come, but they're both moving, and I think they're both moving really well, and I'm proud of the work that the team's doing and the customers that are talking to us about that. That's not how I would characterize it, though.

Speaker #4: We'll announce as we come, but they're both moving. And I think they're both moving they're both moving really well and I'm proud of the work that the team's doing and the customers that are talking to us about that.

Speaker #4: That's not how I would characterize it, though.

Speaker #3: Okay. And just on that other point, I made about duration. One of the things we hear a lot is that the data center operators, hyperscalers, colos, whatever, are going to suppliers and saying, "Hey, we want rapid response time and all that." But we want pretty short duration of an hour or two out of someone else told me yesterday they're shipping mostly two hours.

Joseph Osha: Okay. Just on that other point I made about duration, one of the things we hear a lot is that the data center operators, hyperscalers, colos, whatever, are going to suppliers and saying, Hey, we want rapid response time and all that, but we want pretty short duration of an hour or 2. Someone else told me yesterday they're shipping mostly 2 hours. Are you seeing requests in that part of the market for shorter duration devices?

Speaker #3: So, are you seeing requests in that part of the market for shorter-duration devices?

Joe Mastrangelo: The way I would term it, Joseph, is you see multiple cycles in shorter durations that add up to longer duration discharge. I think the reality of that is that plays into a strength of Eos of being able to cycle the battery multiple times in a day and have it be able to perform. Yeah, I don't know that the total amount is 2 hours, because if you're running inference sessions and you have to cycle, with our battery, you don't run the risk of the thermal runaway that you see with other technologies. We feel really good about where that is. I've said this many times before, this is no different than any other segment in the energy industry.

Speaker #4: The way I would term it, Joe, is you see multiple cycles in shorter durations that add up to longer duration discharge. And I think the reality of that is that plays into a strength of EOS of being able to cycle the battery multiple times in a day and have it be able to perform.

Speaker #4: So yeah, like I don't know that the total amount is two hours because if you're running inference sessions and you have to cycle, with our battery, you don't run the risk of the thermal runaway that you see with other technologies.

Speaker #4: So we feel really good about where that is. And I think, and I've said this many times before, this is no different than any other segment in the energy industry.

Speaker #4: There's going to be a diversity of technologies required for use cases. And we have a big segment where our technology can serve a use case.

Joe Mastrangelo: There's going to be a diversity of technologies required for use cases, we have a big segment where our technology can serve a use case.

Speaker #3: Okay. All right. Thanks for the detail. I appreciate it.

Joseph Osha: Okay. All right. Thanks for the detail. I appreciate it.

Speaker #4: All right. Thanks, Joe.

Joe Mastrangelo: All right. Thanks, Joseph.

Speaker #1: That concludes today's question and answer session. I'd like to turn the call back to Joe Mastrangelo for closing remarks.

Operator: That concludes today's question and answer session. I'd like to turn the call back to Joseph Mastrangelo for closing remarks.

Operator: That concludes today's question and answer session. I'd like to turn the call back to Joe Mastrangelo for closing remarks.

Speaker #4: Thanks everyone for listening today. Look, we continue to make progress. I think one comment that came out, we're very clear on the goal of the company is to become profitable and become EBITDA profitable, gross margin is a signpost in a journey to becoming profitable and generating free cash flow.

Joe Mastrangelo: Thanks, everyone, for listening today. Look, we continue to make progress. I think one comment that came out. We're very clear on the goal of the company is to become profitable and become EBITDA profitable. Gross margin is a signpost in a journey to becoming profitable and generating free cash flow. That's what we'll keep everybody updated on as we move forward. It's the focus of John, Alessandro, and the team.

Speaker #4: And that's what we'll keep everybody updated on as we move forward. It's the focus of John and Alessandro on the team. We continue to see strength on the commercial side and we'll have to keep working through the opportunities in the pipeline, but are really excited about the ability to create and accrete value for our shareholders through frontier power USA.

Joe Mastrangelo: We continue to see strength on the commercial side. We'll have to keep working through the opportunities in the pipeline, but are really excited about the ability to create and accrete value for our shareholders through Frontier Power USA, through multiple avenues of just building up the potential returns of Frontier Power itself, but also Frontier Power giving us the opportunity to do better planning as we come out of the factory to get assets out in the field running faster to get more references around the 6.5 GWh that we've discharged. Really excited about how DawnOS is evolving and the performance that we've seen. When I look at how we cycle, look, having a technology, we're not a technology that's 50 years old. We're a relatively new technology. As we cycle, we learn from every cycle.

Speaker #4: Through multiple avenues of just building up the potential returns of frontier power itself. But also frontier power giving us the opportunity to do better planning as we come out of the factory to get assets out in the field running faster to get more references around the 6.5 gigawatt hours that we've discharged.

Speaker #4: Really excited about how John OS is evolving and the performance that we've seen. When I look at when I look at how we cycle, look, having a technology like we're not a technology that's 50 years old.

Speaker #4: We're relatively new technology. And as we cycle, we learn from every cycle. We update our software and we get more performance out of the system.

Joe Mastrangelo: We update our software. We get more performance out of the system. As we talked about, when you think about performance of Eos and its technology, you're starting to see the bottom end of our round trip efficiency creep up to the median, which means that the overall distribution is now skewing up to the high side. The next thing now is once you reduce variation is you shift the mean higher. Entitlement, you see it. We're running cycles at entitlement of 91%. We can run those cycles, going back to the question that Joseph asked. If you look at the cycles we run, we've gone down to as little as two and a half hours, as high as 11 or 14 hours off of the Z3 technology. It's a flexible technology that can meet multiple use cases.

Speaker #4: And as we talked about, like when you think about performance of EOS, and its technology, you're starting to see the bottom end of our round-trip efficiency creep up to the median, which means that the overall distribution is now skewing up to the high side.

Speaker #4: The next thing now is once you reduce variation as you shift the mean higher. Entitlement, you see it. We're running cycles that entitlement of 91%.

Speaker #4: We can run those cycles going back to the question that Joe asked. Like if you look at cycles we run, we've gone down to as little as 2.5 hours, two and a half hours as high as 11 or 14 hours off of the Z3 technology.

Speaker #4: It's a flexible technology that can meet multiple use cases. We've got to keep our head down and execute and make the company profitable. And that's what we're focused on as a leadership team.

Joe Mastrangelo: We've got to keep our head down and execute and make the company profitable. That's what we're focused on as a leadership team. We'll keep everybody updated on the progress. Thanks for listening today.

Speaker #4: We'll keep everybody updated on the progress. Thanks for listening today.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Q2 2026 Eos Energy Enterprises Inc Earnings Call

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