Eos Energy Enterprises Inc - Ordinary Shares - Class A Stock

Good morning, and welcome to Eos Energy Enterprises Second Quarter 2026 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording.

[Operator Instructions]

With that, I would like to turn the call over to Liz Higley, Head of Investor Relations. Thank you. You may begin.

Good morning, and welcome to Eos's Second Quarter 2026 Conference Call. Today, I'm joined by Eos's CEO, Joe Mastrangelo; COO, John Mahaz and CFO, Alessandro Lagi. 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 U.S. GAAP measure is included in our earnings release. 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 Investor Relations website at investors.eos.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's CEO, Joe Mastrangelo.

Thanks, Liz. Good morning. Thanks, everyone, for joining us. This quarter comes down to 3 simple things. We ship 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. Now let me walk you through all 3 of these. We're tightening our 2026 revenue outlook range to $300 million to $350 million. And 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 for mill facility because what it has begun to deliver. Line 1 will be down during the move and upgrade it to the operational improvements we've implemented on Line 2. The volume that would have produced is the difference in the upper end of our guidance range. 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 decision in a few moments. The low end of this range is roughly 2.5x our 2025 revenue and more than 19x in 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. While 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. 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 in Frontier Power USA.

The top end of the range is achievable and it comes down to how quickly we scale Thorn hill operations in a 24/7 production facility like we have today in Turtle Creek. We're planning for that, and we'll report against it every quarter. Moving to Slide 5, our second quarter 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 tubes and that's which drives margin improvement and closes the profitability gap. 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. First, discharge energy. The number we're looking the page is up nearly 0.5 gigawatt hour since our last call. The fleet now cumulatively has discharged 6.5 gigawatt hours of energy 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. 78% is the average across a 20-120 state-of-charge window. It includes units running on DawnOS and the units have not yet been upgraded to DawnOS. 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. 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 more work to do but 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 was very little gap between the P&L and cash flow. That burn rate needs to continue to come down and term positive. And the initiatives that John and Alessandro will walk you through are designed to drive that improvement. Now let's move on to Slide 6.

Let's focus on what wins our next order, 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 6 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 discharge 6.5 gigawatt hours I talked about earlier. 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. [indiscernible] of 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. 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 tube in the field runs. The duration tile shows the range our systems are operating in the field. From 2.5 hours to 14 and 1 product, 1 SKU dispatch, however the market needs it. 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. 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. Ordered operations roughly 2 years and noticed 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 7, the U.S. storage market is changing in ways that favors our technology, load growth from data centers and electrification is pulling capacities 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 3 consecutive capacity auctions. And the way the market now counts a resource towards capacity, favors those that hold output to the system full system need rather than the first 2 hours of it. Virginia has written the 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. 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 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. The largest energy providers are independent power producers who need to deliver multi-hour and multicycles 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 and 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 you utility with its regulator and its rate base.

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. So storage is judged on delivered costs, how fast the site can energize and how reliable 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, on book that is cost of goods sold and on book it as insurance, all 4 by hours and all 4 screen for supply chain origin. We manufacture in Pennsylvania with the 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 4 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 6 customers placed orders this quarter, 4 new and 2 repeat. Our pipeline of $24.6 billion, nearly 112 gigawatt hours is up 31% year-over-year. 51% of the pipeline is 8 hours 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. The commercial developments framed the second half. After the quarter closed, we were awarded a strategic partnership agreement under Golden Dome for America -- for the Golden Dome for America program with the U.S. Department Award. During the quarter, we signed a 750-megawatt hour master supply agreement with CAPAC covering Germany, Austria and Switzerland. And Frontier Power USA holds a 2-gigawatt hour capacity reservation agreement. 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 1 of the Blanqila 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, and that now brings me to Frontier power on the next slide. 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 up frontier power and deliver that pipeline conversion I was talking about a moment ago. We saw that strategy beginning 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. That project accounted for roughly 80% of second quarter revenue. It 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 the minority interest.

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 the [indiscernible] closing project financing, not technology acceptance. We saw qualified projects with real offtake sitting unbuilt because developers could not close their capital stack. So we've built the vehicle. Frontier Power USA supplies the capital EO 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-gigawatt hours of opportunity pipeline, 5 gigawatt hours acquired, selected or under active due diligence and 1.8 gigawatt hours under construction are approaching full notice to proceed. First projects under this vehicle are expected to be online by the third quarter of 2027. 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 3 ways. Frontier Power USA operates projects for recurring revenue. It can sell projects and recycle the capital to new ones and [indiscernible] , the platform itself becomes highly valuable. Eos participates in all 3. We are the long-term service agreement counterparty across the small 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. In every project, Frontier Power USA puts into operations, ads, 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, orders into assets operating in the field. Pay back the U.S. Department Award and the customers who placed orders this quarter growing. Both edits are running, and they compound as we execute our strategy and projects become operational. So we have a strong demand signal. We are building installed base operating hours as a capital partner that unlocks accelerated growth. Strong execution delivers profitable growth. And let me turn it over to the man responsible for all that John for an operational update.

Thanks, Joe, and good morning, everyone. -- about focus, disciplined operation and increased efficiency, [indiscernible] delivered on all 3. Cube output increased 20% sequentially and 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're beginning to see the work we've been doing translate into lower cost. Material costs improved by 10% sequentially, with the benefit of tariff free base paid in prior periods on an imported components. Excluding that, material cost per cube improved 1% sequentially and we expect further improvement in the third quarter as inventory balances are worked through production, and we realized 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. While that can add cost in the short term, it ultimately drives meaningful cost reductions over time. When we launched NOS in the third quarter of 2 a 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 and based on the field earnings. Had those enhancements not been incorporated, material costs would have been down 14.5%. We achieved this despite elevated inflation of 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. However, if you look at Turtle Creek on a stand-alone basis, overhead for 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 Thorn Hill as we brought Line 2 into commercial production. That's 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. This phased approach allowed us to add labor incrementally as we ramp up that line. Over the next several months, we'll continue to add shifts and increased utilization. As volumes ramp, we expect utilization to improve, fixed costs to be absorbed across greater production and the operating leverage built into Thorn Hill to become increasingly edited in our results. While we're pleased with the progress that [indiscernible] , 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 Thorn Hill comes in. The biggest opportunity ahead of us is not just the continuation of what we've already accomplished is the earnings power we unlock as we fully utilize a purpose-built, highly automated manufacturing platform.

During the first half of 2026, we produced 17% more tubes than we did in all of 2025, and we 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 second quarter production, we have yet to realize the full benefit of Thorn Hill, leading significant operational upside ahead. Thorn Hill is already delivering the performance we intended. Initial Line 2 battery cycle times are 10% faster and bipolar cycle terms are 11% faster than Line 1, with additional redundancies built in to improve line availability. That drives a near-term increase in overhead per cost and an improved as scale production, and we will continue to improve performance from here. As we move through the third quarter, we're evaluating the timing of consolidating Line 1 in the Thorn Hill. 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. 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 a single points of failure. The focus becomes much clearer. One building, multiple production lines, one overhead structure and more volume going 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 Thorn Hill. But 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 will walk you through on the next page. Thanks, everyone. With that, I'll turn it over to Alessandro.

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 His 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 organization across global energy and industrial businesses. What brought me here was the combination of a unique vision and differentiated technology, and 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. Eos designed this platform for the volume the business is growing into rather than the volume it adds, and that decision is now paying off. I strongly believe that Eos is at a real keeping 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 [indiscernible] for this partnership through the transition and for the financial foundation he has established.

With that, let me turn now to the second quarter. Revenue increased to [indiscernible] of $68.8 million, which is up 351% year-over-year and 21% sequentially. The with cube deliveries increasing 207% year-over-year and 20% sequentially. 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, and an adjusted gross margin of negative 52%. This marks our seventh consecutive quarter of gross margin improvement and reflects the operational progress we're making across the business.

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. In these regards, 2 items impacted the quarter. First, Thorn Hill. As you heard from John, a newly commissioned line operates below its long-term utilization targets, which weighed on fixed asset absorption. As throughput increases and the line matures, absorption improves. Second is steel 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 quarter, and we continue to expect in to diminish significantly by the fourth quarter.

Operating expenses totaled $35 million, 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. 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. 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 noncash fair value adjustments related to our capital structure. Specifically, changes in our share price results in mark-to-market revaluation of warrants and derivative liabilities. As an example, when our share price increases, the value of certain water also increases, which can result in a higher account liability and a corresponding noncash expense.

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 track adjusted EBITDA during the quarter 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 2 build-out at Thorn Hill. As a result, we ended up 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. We are preparing the advanced request for the second year retranche and expect to close it by quarter ahead, 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 negative 983% in the second quarter of 2024 to negative 40% this quarter. That is more than 940 points of improvement in 2 years. Two years ago, we carried the cost of building a manufacturing platform well ahead of volume. We invested in automation, expanded the footprint, quantified suppliers and build an organization for the business we believe we could become. Over the last year, those investments become translating into performance. We increased production, improved yields, reduced manufacturing costs and benefited from the supplier economics as volume grew. This quarter continued our 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 deployments scale, and that [indiscernible] creates near-term margin pressure.

The heavy lifting of building the platform is largely complete and now the work is leveraging it. That is what the right side of this page shows. There are 4 drivers of cost out that we're pushing with detailed plans in place that John just walked us through. 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. 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 costs. 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 and we move product between floors, buildings and warehouses with label intensive processes using temporary labor.

At Thorn Hill, the majority of that movement is automated with conveyance and automatic mobile rubles. 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 with our walls and lead principles apply. As both projects become operational, we expect this cost to increase. However, we view this as an attractive opportunity over time and believe it can become a profitable area of the business as we continue to build and scale our internal capabilities.

Finally, we expect approximately 8 points from continued yield improvements in our subassembly processes. We have already made solid progress here and as tooling and equipment upgrades are completed at a tighter component tolerance are implemented, we expect to further reduce scrap and improve first-pass yield. So 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.

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

[Operator Instructions]

Our first question comes from Christopher Suter with Truist.

So just to kind of unpack the updated revenue guidance. And the path here, the low end is essentially 1.5 gigawatt hours for the rest of the year, just Thorn Hill the high end? Are we assuming that Line 1 comes back online at Thorn Hill is producing as well?

Chris, so lower end is basically continue the run rate of June throughout the rest of the year. to get to the $300 million. The higher end of that is to not so much get Line 1 up and running in Thorn Hill but to get Thorn Hill the full 24/7 operation by the time we get into the -- at the end of the fourth quarter.

Got it. Okay. So if Thorn Hill 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 gigawatt hour rate we need for the low end there?

So we'll continue to run Line 1 and Line 1 is running really well, and John has actually got line on to its nameplate performance. And the team continues to bring Thorn Hill up into operations. But the Thorn Hill up in operations right now is more of 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, add a second shift, get that up and running and go from there versus trying to do it all at once. But like what John and the team has done with the second line is nothing short of phenomenal when you look at the results you talked about on how the line has been performing initially.

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. Can you provide a bit more detail on some of the material costs and project drivers? I think the conversion in 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 like what those kind of drivers look like and how those progress over the next year?

So Chris, I think, and 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, and we're seeing the costs 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. John will keep driving that with the team on supplier cost out.

Then 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 that -- how we run DawnOS, simpler, taking cost out on that, scaling up with suppliers or 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. And 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. And then the third piece of it, which you talked about is as we've gone through and started 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, we were talking about we were talking about bringing in temp labor as we brought up -- as we brought up capability and then eventually phasing out that temporary labor and having all Eos, you see that in the 7 quarters of improved margin that we've delivered.

We're doing the same thing out in the field. You started off with people that worked out in the field, you build up your capabilities, we 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 insulation and commissioning.

Our next question comes from Stephen Gengaro with Stifel.

Two for me. The first one is, can you talk about the customer concentration that we see in the 2Q rev and 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?

Yes. I mean, look, Stephen, I think when you look at 2Q, like 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.

And then also, 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 the company and build valuation around that. I think inside of this, like, over time, there's going to be a blend of of bringing in both Frontier Power as we execute and then also price 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 sure you have 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. And it just gives also the commercial team the ability to go out and sell slots in the factory to be able to accrete to deliver revenue and accrete margin.

[Operator Instructions]

We have another question from the line of Stephen Gengaro.

Sorry, Joe, I was muted, but just a follow-up to that in another question. But the follow-up was, I understand the FPSA side. But in your pipeline of opportunities and the customers you're talking to you, how should we expect that now 50% of your backlog is from that single entity. How should we think about that customer diversification of valve because that's something that we get a lot of questions on from investors. And I'm 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 nonaffiliated entity in the backlog/

I mean, Stephen, if we're adding assets that deliver returns in the Frontier Power U.S.A., I think it's great. What I'd like to see is less percentages change and more of the size of the pie grow. And I think that's what we're focused on. I think getting Frontier power and being able to execute quickly, getting projects referenced down 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 at arm's length. So we're looking at projects that deliver returns and support long-term asset growth into Frontier power.

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. We feel also good about the recent announcement that we have with the Department award because I think we talked about the specific program where we're in a strategic partnership. But MicroRidge, and when you look at -- when you look at energy consumption, the government is one of the largest energy consumers in the United States. So 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 that 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. 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. 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 project developers doing out in the market -- in the marketplace and having a partner where we can execute through would be great. And keeping that 50% split on the other side and making the pie bigger from the 800 is the goal that the team has.

Great. And when you think about the mobilization of Line 1 over time and consolidating the ton Hill, and there's sort of 2 questions behind that. One is, are you doing it now versus waiting because of just the timing of backlog delivering your ability to meet delivery obligations and Mobile line? Or is it because you've seen such higher efficiency out of Thorn Hill, it's critical to driving margin expansion.

Yes, Stephen. Look, I think there was a couple of factors that came into this is -- just as you look at how the backlog conversion was laying out, we want to hit January running. Like when you look at this, like, we've seen the growth of the company, and I want to emphasize everybody that Turtle Creek is and could -- is operating to the nameplate. Just between the nameplate, just between all the movements and things you have to do it just becomes complicated. And this just simplifies. It's a simplification effort to get to scale next year. And 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.

And really focuses us on executing around the 2 lines. 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 4Q 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 and how it's performing versus Line 1. This is not about Turtle Creek doesn't work. It's a story of Thorn Hill works better. And why do we wind up where we wound up. Steve, 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 has laid out the way it's laid out in Turtle Creek as we had to fit it into the building that we can afford. Thorn Hill gives you now the straight shot to be able to do this without forklift, without pallet movers. It just simplifies the entire operation, which 5 years ago, we couldn't afford to do it. 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 Thorn Hill and come up with a flagship factory. But when you go see it, you sit there and you say, "I see the difference.

When you look at and you think about -- you've been in the factory, Steve, when you think about the second floor of the building where we're manufacturing bipolars and you walk that floor and then go to Thorn Hill, you see and feel the difference of the efficiencies that we gain the material movements and how fast things can flow. And the fact that John's got it running at 9 seconds is a testament to all the hard work that the team has done and the fact that, yes, we may have problems in everybody that scales in manufacturing operations. we'll stub their toe here or there, but we don't stub our toe in the same thing twice. And that's what the results are showing, and that's why we're doing what we're doing.

Great. 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 FT USA and your ownership position in that business, how do we think about the profitability of FPS like when does that business become profitable? And then those profits kind of you've been obtaining the 1/3 of those profits?

Yes. So Steve, 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.

Our next question comes from Joseph Osha with Guggenheim.

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're doing anything, what kind of durations you're seeing your customers ask for?

Yes, 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. And we've always talked about -- and you and I have talked about this in the past, there's 2 things. There's 2 segments within data centers. Segment 1 is co-locating with the data center. Segment 2 is having a storage asset in 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 talent relationship is all about is getting those projects with talent that will be in PJM and in Pennsylvania, and having them supporting the demand load from data centers. So a lot happening there.

But obviously, we're at the time lines 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. 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 they can do and everything else. 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. We can perform on inference and do millisecond response times, we could do, as we've said many times, we do all the things that we talked about before that 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 building -- with putting siting energy storage alongside a data center.

Okay. 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. Is that a correct way to think about it?

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. 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 is doing and the customers that are talking to us about that. That's not how I would characterize it.

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 to the someone else told me yesterday, they're shipping mostly 2 hours. So are you seeing requests in that part of the market for shorter duration devices?

The way I would term it, Joe, is you see multiple cycles and 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. So yes, like 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. 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. 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.

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

Thanks, everyone, for listening today. Look, we continue to make progress. I think one comment that came out were very clear on the goal of the company is to become profitable and become EBITDA profitable, gross margin is a signpost and a journey to becoming profitable and generating free cash flow. And that's what we'll keep everybody updated on as we move forward. It's the focus of John and Alessandro, and 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 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 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. And as we cycle, we learn from every cycle, we update our software and we get more performance out of the system. 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 chip 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 as you shift the mean hire. Entitlement, you see it, we're running cycles at entitlement of 91%. We can run those cycles going back to the question that Joe asked like, if you look at the cycles we run, we've gone down to as little as 2.5 hours, 2.5 hours as high as the highest or 14 hours off of the G3 technology. 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. We'll keep everybody updated on the progress. Thanks for listening today.

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

Good morning, everybody. Welcome to day 1 of the JPMorgan Natural Resources Conference. My name is Mark Strouse. I cover Clean Energy and Power Infrastructure at JPMorgan. Very happy to have Joe Mastrangelo, CEO of Eos. Joe, welcome.

Thank you. Good morning.

So I want to keep this as open as possible. So we will have mics going around. If anybody has a question, feel free to raise your hand. Joe, maybe just kind of assuming there are some people that are less initiated on the stock, just kind of give us an overview of what you're all about.

Yes. So Eos is a stationary energy storage company. We're 15 years old. We have an aqueous zinc bromine battery technology, so water-based battery that we have been developing over the past 10 years. We're in our third product iteration. We have over 6 gigawatt hours of energy that's been discharged out in the field. We are 90% U.S.-based supply chain with a factory based in Pittsburgh and a new manufacturing line coming online right now.

Great. Okay. Maybe can we start with manufacturing? Just give us an update on kind of your manufacturing processes, you ran into some issues at the end of last year. I think on the 1Q call, things did improve considerably. Kind of where does that stand today? And then kind of over the near to medium term, talk about robotics, talk about automation, how that's being utilized in your factories?

Yes. I think, Mark, the thing -- just take a step back on what the team has done. You focused on like product invention, but as part of a product invention, also invented a manufacturing process. I think the team -- like the approach that we had to this was develop the product, figure out how to make good parts because we are vertically integrated back into -- we bring raw materials in, we build all of our subassemblies and then manufacture the battery module and then manufacture the system itself to put out in the field.

We -- not only did we develop a new product, we developed a new manufacturing process, which went online 18 months ago. That process of bringing that online, we've gone through the learning curve that you would do in any new process. The thing that I always like to focus on is, in 2024, we had $15 million of revenue. In 2025, we had $115 million of revenue. Great performance, but lower than what we expected to perform at.

What we learned, and this is what we've built into as we think about the company moving forward in manufacturing is having the redundancies to be able to continue production. Like when you're a single SKU company, it gives you simplicity on the one hand, but at the same time, it increases your risk around what you're doing with that product. When you're a single SKU company with one manufacturing line, you're exposed to any hiccups that you have in your supply chain or in your production. And we had those challenges in the fourth quarter.

Fast forward to the first quarter and what the team was able to deliver, really stabilized production, stabilize the performance of the line. And it really -- it's really not just the line itself. So you have to realize that the way the company started, we wound up in Pittsburgh because we moved into a 120-year-old facility that was $7 a square foot. Trying to build a state-of-the-art line inside of infrastructure that is that old creates challenges to keep it up and running and sustainable as you start operating and learning what you need to do to be able to operate.

What we're doing now, what we announced a week ago was we've gone live on a new production line in our new facility in Thorn Hill outside of Pittsburgh, which puts us in a state-of-the-art building and takes all the learnings from Line 1 and incorporates them into Line 2. We're able to bring that Line on -- into production on schedule and are producing batteries today that when we brought Line 1 on -- it took us about 6 months to get to the level of production we are on day 5. So there's always going to be lessons learned. There's always going to be growth as you go through this. But what we're trying to do is bring the stability and the predictability that everyone expects from a company that's delivering industrial hardware.

Okay. Okay. That's great. All right. So you mentioned Thorn Hill, Line 1, Line 2, Line 3, Line 4, kind of can you talk about the cadence of kind of timing of those lines, but also kind of just a refresher just kind of the magnitude of each of those lines?

Yes. So start with like what drives a new manufacturing line is obviously orders volume, customer demand. And we're seeing demand, as you can -- as you've seen in the past week here, we're gaining traction out in the market and filling the factory. What we've done and what we've learned going from Line 1 to Line 2 is, if we place the advance orders for long lead items on our manufacturing line, we can implement a line in 6 months. So if you take a look at Thorn Hill, right, and that sounds great, but let's talk about reality and what the team has done.

If you look at Thorn Hill, we moved into the Thorn Hill facility at the beginning of this year. We not only got the building ready to put a line in, put everything that you need along from a power standpoint, from exhaust, tooling, air compression, everything you need to be able to put a factory inside of a building, we got that done and brought a line up in June of this year. So we do now going forward is you place long lead material with our automation suppliers. And then once they have that long lead material, we can give them a demand signal and bring a line and bring a line into operation in less than 6 months.

So John Mahaz and the team are positioning us to be able to do that. I think as you look at where we are and as we get through the Summer, we'll get Line 2 up and running. We'll continue to improve the performance of Line 1, and we'll look at Lines 3 and 4 as we look at the demand signals that we're seeing out in the market. And we are starting to see order -- opportunities convert into orders, which are filling the factory, which means we're going to have to start really thinking about placing the orders for that long lead material and positioning ourselves for incremental capacity as we grow.

Yes. Okay. All right. So Frontier Power, this is a new development this year. Just give an overview, what exactly is that? Why did you form it? What are some of the challenges that this is designed to solve?

Yes. So what we were seeing in the market, right? And I think a lot of the questions and things that we talk about as we're going through discussing the performance of the company was a pipeline that was growing and a customer base that was selecting our technology, right? The selection of the technology, although hard, started to become the easier discussion with customers. So you get to the point where the customer says, I have a project, I want to use Eos technology to be able to build out my project.

From there, you basically start another sales process, which is go out and get your financing, go out and start building your product. What we started to see from a sales -- utilization from how the -- what the sales force was working on, as you started getting 10 or 15 projects that have selected cc technology, we're spending a lot of time going out trying to secure financing. When you're doing that on an ad hoc or project-by-project basis, it becomes unfocused and you wind up where you're bouncing between different financial institutions.

We sat down -- this is probably back in the first quarter, we sat down and said, what can we do to accelerate the conversion of opportunities where customers have selected Eos? How do we accelerate that selection into assets out in the field and running? And we really sat down and said, let's look at companies that have side-by-side financing organizations alongside of it. And we came up with the idea of Frontier Power.

We came up with a way with Cerberus to -- who's our largest shareholder. We came up with Cerberus to fund that entity through them putting equity into Frontier Power and us putting equity in through a rights offering that we're in the process of launching here at the end of this month. And when we looked at that, we said, look, if we can get $300 million of equity into that entity and lever that 5:1, we now have close to $2 billion of capital to be able to go out and close projects. And what you've seen since we've announced that is you've seen the orders announcements and the pipeline flows coming in and turning opportunities into orders.

So we're excited about being able to do this. And I think from a shareholder standpoint, of which I am a shareholder of Eos, I look at this and say, before we were out shopping to different financial institutions to do financing, all that value creation was going to an entity outside of Eos. Today, the way we structure that is we do these transactions on an arm's length basis, but our Eos shareholders will be able to participate in the returns on those projects at 49%, which is the anticipated split of the equity as we look to the future.

Yes. Okay. I think the latest number is about 2 gigawatt hours of capacity reservations for Frontier. What do you define as a capacity reservation? And then how should we think about that converting into firm orders time line?

Yes. So one of the things that we looked at, and this gets back to the arm's length nature of Frontier and Eos was, you look at some of the opportunities we have coming down into the pipeline and converting into orders. So you have things like our relationship with Talen going into the PJM backstop auction. You have the relationship with Frontier U.K., which is a separate company from Frontier Power USA, who has a large bid into the U.K. Cap and Floor scheme.

And you started looking at the capacity we had and we said, look, we're not going to be able to give preferential slotting to Frontier Power USA just because there are an arm's length financing where we have equity. So we said -- when we looked at it, we said we should reserve capacity. And we looked at that and said, let's place a purchase order, let's put a deposit to reserve that 2 gigawatt hours of capacity where they have to give us demand signals where we deliver. And you look at in the 3 or 4 weeks since we founded Frontier Power USA, we've announced 480 megawatt hours of orders converting under that capacity agreement.

So we've already used up close to 25% of that capacity reservation agreement that we have with them that we'll continue to see projects and opportunities come into that. We think we can do more with Bimergen, which we announced an order with them a week ago. We think the relationship that Frontier Power announced with Stella gives us opportunities with their pipeline. And that's the beauty of really having Frontier Power and Eos side by side. It's about focusing our efforts. So the EOS team is focused on building and getting assets in operation out in the field and delivering that performance. And Frontier Power is out building relationships to look and secure pipeline for us to fill the factory and allow us to grow over time.

Okay. All right. So talking about pipeline, you named some specific customers. Just kind of generally, can you talk about kind of the mix of what you're seeing in your pipeline from utilities versus hyperscalers versus other customers?

Yes. So obviously, Mark, like the hyperscaler market is growing. The opportunity pipeline is expanding quickly. But the traditional and what I always like to say, and I've taken a little bit of criticism around talking about other things besides hyperscalers, there's a whole another market out there, right? I don't want to lose sight on what was traditional and was a big market before the hyperscalers came in. And when you look at stand-alone energy storage and energy storage plus, a generating asset, there's still a lot of demand out there, and there's still opportunities to grow.

At the same time, we see hyperscalers growing as an opportunity set. And we feel like our technology fits well into what their use cases are. When you look at like inference learning, that's the ultimate -- if you look at it, that's the ultimate variable demand signal that you get on the electric grid. And we've tested about an hour from here in our facility in Edison, New Jersey, some of the largest battery testing facilities in the United States. We run everyday cycles as if you're running an inference session using the demand curve for the CPUs that are used in data centers to prove out that the technology can handle it. And we've issued a white paper on it. We're pretty excited about that. We continue to work through this. But like the one thing I would tell everybody is, yes, I would love to be able to give a TikTok type answer on converting orders. This stuff takes time, and it's complicated, and we continue to work through that and prove out the technology.

Okay. All right. That's great. All right. So obviously, part of this is technology, part of it is geopolitics, too. Can you just talk about OBBB, FEOC are still being interpreted by the market. Just kind of what you're hearing from customers regarding kind of policy uncertainty? And is that just driving kind of incremental business towards your American-made product?

Yes. And I think you'll continue to see that. And I think -- I mean, look, part of it is politics, and that's the world that we live in. For us, this all started off as a simplification effort and ability to scale the business. Like when we -- I'm coming up on my 8-year anniversary with Eos. When I came in 8 years ago and the strategy at the time was build the battery in China, fill it with its electrolyte in the U.S., ship it to the customer. Where we were financially, we couldn't afford to do that.

And having done factories around the world in my career, you looked at the amount of effort that we had, and it was just somewhat easier to do it in the U.S. like it's easier to put a team in a rental car than it is to put a team on an airplane halfway around the world where you can't monitor your supplier performance. And what we found as we started doing that was a great U.S. supply chain that allowed us to build to 90% of our build material comes from the U.S.

That's turned into a strategic advantage as people look at supply chain simplification and having domestic content in the U.S. Now the beauty of this is the way that we design this is it's U.S. manufactured for U.S. demand. But if you look at the demand in the U.K. or in Europe, as that grows, we can take the American flag that's on an Eos Cube today and put the Union Jack on it or put the EU flag on it, localize the supply chain and create jobs.

The beauty of what we do is if you look at what we've done, and we've proven this in Pennsylvania as we've created close to 500 jobs, 500 good paying -- union paying manufacturing jobs. When you scale a facility at 8 gigawatt hours, you're talking about creating 1,000 jobs. That's jobs that are local, that's jobs that create a path to middle class for people. And from us as a company and as an investor base is it reduces our logistics costs because we're manufacturing where the demand is. So we have lower cost of shipping and lower cost to bring assets online.

Okay. All right. I wanted to go back to -- I think you talked about this a bit earlier, but the Talen JV that you have, can you just talk about the lead generation that you're seeing there, the types of customers and use cases that are emerging from that PJM pipeline and then kind of milestones that investors should be looking for to gauge progress?

Yes. Talen has been a great partnership for us. I think we've made each other smarter as companies. I think Talen brings the operator mindset, the existing assets that they have, the knowledge of how to bring capacity online. What we've looked at with them is both taking their existing power plants, adding energy storage to this. What I've always said like in a prior life, I led a large gas power systems business. So when you look at gas turbines and Talen is one of the largest gas turbine operators in PJM, when you look at a gas turbine, you don't want to be cycling your gas turbines day by day.

Like you don't want your gas turbine to look like an airplane taking off and landing as you vary the performance of that because it reduces -- it increases your service time, reduces part life. So what you can do is you can augment that with energy storage to operate at a more optimal and efficient level in the gas turbine. And we looked at that with Mac and the team at Talen and came up with what we bid into the recent PJM auction, which will transition into the backstop auction, but also are looking at new build opportunities, greenfield that would support hyperscaling opportunities in the PJM and specifically in Pennsylvania.

So there's a lot of work that we're doing together as a team, and we're excited. And I think Mac and his team are excited as well. And I think these are the type of partnerships that we like because although you kind of look at them as an IPP, it's an entrepreneurial IPP that's looking to do something different and create the use cases and the technology to be able to deliver the demand curve of the future.

Okay. Can you talk about kind of cost declines, cost per watt or -- watt hour declines? The 45x will start phasing out beginning in 2030. Kind of what does the outlook for this business look like 7 years from now without those credits?

Yes. I mean we've never planned -- we've always planned on the 45x as a bridge to becoming profitable. So we've never relied on that for being profitable. Now I always try like when you think about how we lead the business and with our new CFO coming in with his industrial background, like how we build the robust road map to profitability. So there's different components of that, right? So there's material cost. When you look at our bill of material, the team has done a great job driving out material cost on the battery module.

Then outside of that, you have the electronics and the software and the firmware to be able to operate the system. We launched a new software platform, which increased the cost of the system, but improved the performance and lowered the cost of ownership for the customer. So we made a trade-off in the short term. So we can continue to drive cost down on that. When you look at our bill of material inherently, it's a very inexpensive commodity-based bill of material. Then on top of that, you layer in material -- labor and overhead.

So what John Mahaz has done is he's taken the labor content down on a quarter-by-quarter basis. He's reduced the rework and the scrap that we've had, which then starts to get better leverage, which you see in our numbers when you look at our numbers. The next piece of this then becomes project building out in the field and project execution, which we have to get a lot more efficient on how we do that. We put those pieces together and have a road map to this, and this will be a profitable business in the future. We've talked about that. We've talked about where we want to land at the end of the year, and we got to continue working through that as we scale the company and work through rightsizing and optimizing the 2 factories.

But if you look at everything inside the company, it's a company that will generate a profit. There's a lot of work we have to do, and we have the team that can deliver those results.

Okay. Any questions? Maybe on that point. So kind of gross margin profitability in the second half of this year. Any update you want to make at the JPMorgan conference here?

No. No. I mean we're continuing to work to what we've always discussed. As I said, we're -- like I'm really excited about what we're seeing in the new line and the production coming off that line and the optionality it gives us as we go into the second half. We've got to continue to deliver and drive performance around what we have and get to the entitlement that we have for the company as far as profit goes.

Yes. You have talked about kind of customer site readiness that you can kind of push around revenue quarter-to-quarter. Can you just talk about how that is trending recently? I mean we've seen some EPCs talking about weather and whatnot, obviously, depending on where they are in the country. But just kind of what does that look like for Eos? And then any other just kind of broader issues that you're seeing as far as permitting or financing, anything like that?

Yes. So given the growth in the industry and the build that we're seeing, there's a lot of demand on the overall energy value chain. When you think about delivering power, delivering an energy storage system, we're a part of a broader system. I think as we look at that system, we think there's opportunities for us to take on additional scope to allow us to accelerate execution of those projects. But it's not just like the site readiness is a piece of this. There's a part of like you need all the components to arrive when they have to arrive. There's a timing -- as you brought up, there's a timing around financing, which we've tried to address with Frontier Power USA.

The agreement that Frontier Power USA has with Stella opens up the ability to do project execution. So what we're trying to do is derisk that process of bringing things online because what we've seen is as we plan revenue, like -- and I talked about this in our annual shareholder letter. Like as we plan capacity in the factory, we plan capacity around when the customer wants delivery, and that is going to have ebbs and flows depending on their ability to be able to execute and when they need the product.

So it's not just go out and sell and you have a 2-gigawatt hour line, we want to get to the day where we're there. We're not there yet, and we're tied to when the customers' demand signals are. We've got to work through that complexity. It's something that in my background of having worked in oil and gas, I've worked on some pretty complex projects. You just got to get your project execution where it needs to be to be able to deliver on time, not just yours, but working with the customer to be able to do that. And that, as I talked about earlier, that's also an area that's going to help us as we start looking at profitability for the company on a gross profit basis.

Okay. Sorry, do you mind waiting for the mic?

On the conference call, the last conference call, you talked about the improvements in efficiency. Can you just elaborate on that for us?

Yes. So what we -- obviously, the more you run, the more you run and the more you learn. And we've learned a lot of things around how our material flows about how we operate. When we brought online our bipolar manufacturing, which is a component inside of the battery module, we gained a lot of capacity and ability to get better throughput on the assets that we have. So a lot of what we're seeing is asset utilization. But when you look at, we've always talked about the line running at 10 seconds of battery module.

In the new facility, which kind of debottlenecks the layout that we have in our current factory, you go from the raw materials traveling over 2 miles from entry to shipment to customer to in the new facility, it goes 1,400 feet. So that level of efficiency drives down cost, it reduces material handling. And what we're seeing initially is that we can produce battery modules in under 9 seconds on the second line.

What I'm used to in -- given my background is you should be able to drive efficiency. And every company I've ever worked for, I was leading businesses with 100-year-old products that were getting 3% to 4% productivity every year. In a new product like ours, we should do better than that, and we should do better than that for a period of time. We just keep focused on every day getting a little bit better and using the lean mindset to improve performance.

Anybody else? Okay. I think we can wrap. Joe, thank you so much.

Thanks, Mark. Thanks for the time. Thanks, everyone.

Good morning, and welcome to Eos Energy Enterprises' First Quarter 2026 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. [Operator Instructions]

With that, I would like to turn the call over to Liz Higley, Head of Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to Eos' First Quarter 2026 Conference Call. Today, I'm joined by Eos' CEO, Joe Mastrangelo; COO, John Mahaz; and CCO and Interim CFO, Nathan Kroeker.

This call may include forward-looking statements, including, but not limited to, current expectations with respect to future results and outlook for our company. Should any of these risks materialize or should our assumptions prove to be incorrect, our actual results may differ materially from our expectations or those implied by these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to are described in our SEC filings.

Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update these statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law.

Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to U.S. GAAP financial information, is provided in the press release. Non-GAAP information should be considered as supplemental and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.

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

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

Thanks, Liz, and good morning, everyone. We've got a lot to cover today, including Frontier Power USA, which we just announced. Before going into the quarter, I want to start with our current market dynamics. What we are announcing today is built for that.

America is rebuilding its industrial base. It is happening in semiconductors and defense, in critical minerals and advanced manufacturing. In the data centers that will power the next generation of AI, in every one of those things, every factory, every fab, every facility runs on electricity. Energy demand today is multifaceted. This is the largest reindustrialization effort the United States has undertaken in the last 75 years, and it is happening at exactly the moment when the global energy system is being rebuilt around new technologies, new fuels and new supply chains.

The grid we have was built for a different economy. The grid we need has to handle load that ramps faster, swings harder and concentrates in ways the system was never engineered to absorb. That is the opportunity in front of us. The timeline for adding new capacity does not match the speed at which advanced manufacturing, electrified industry and AI are being built.

The architecture must change, and that's where storage comes in, deploying long-duration dispatchable storage that brings capacity online quickly using existing infrastructure. That storage layer improves system reliability at the speed the market requires. That shift from waiting on transmission to building closer to demand load is one of the most consequential changes in the U.S. power market in a generation.

Layer on top of that the current policy environment, tariffs, FEOC rules under investment tax credit and Section 45X tax credits, along with the 2026 National Defense Authorization Act, all point in one direction. The energy infrastructure that powers the American reindustrialization needs to be and should be built in America. This is the market Eos was built to serve, long duration, American-made, manufactured at scale, designed to power the industries that will define the next 25 years.

An example of this is the work we are doing with Talen Energy. Talen has been at the leading edge in shaping how hyperscale power will get delivered in PJM. Earlier this month, Talen submitted more than 3 gigawatt-hours of new long-duration energy storage projects into the PJM Interconnection queue, capacity that can be powered by American-made batteries built in Pennsylvania.

Opportunities like this are one of many we are pursuing and why we are expanding our manufacturing footprint in the same Pennsylvania industrial corridor. John will walk through our plan to start initial production at our new Thorn Hill facility. But as we speak, the robots are moving, and we are debugging the line to start building non-production battery modules.

Now let's focus on our results. In the first quarter, we delivered $57 million in revenue, more than 5x the same quarter last year. Combined with the fourth quarter, we delivered $115 million across the last 2 quarters, more revenue than we delivered in all of 2025, doing what took a year in just 6 months. Underlying that, the operating signals are moving in the right direction. Cube output is up 17% sequentially. Gross loss improved by $10 million on that higher output. We finished the quarter with $472 million in cash.

Our first quarter was the shape of a company in build mode, and this was the expected cash profile that tied to our capacity expansion investments. We expect approximately $60 million of that Q1 cash to convert back onto the balance sheet with the expected next DOE loan drawdown, the PTC tax credit monetization and customer invoicing.

We ended Q1 with a $645 million backlog. That number increases meaningfully with the 2 gigawatt-hour Capacity Reservation Agreement we announced this morning with Frontier Power USA. That increase is not on a one-for-one basis with the reservation's gross value, as a portion of the agreement is expected to execute a project that is already reflected in backlog that will be financed by Frontier Power USA. The commercial pipeline we are addressing now stands at over 100 gigawatt-hours, and Nathan will walk you through the details later.

But first, there's one number I'd like to focus on. 55% of that pipeline is at 8-hour-plus duration. That is the market segment where Eos competes both on physics and on the economics. With that as a backdrop, there are three things I'd like to highlight. First, the demand is structural and is moving towards us. The Talen relationship is one expression of that. The shift in pipeline duration is the other. Customers are asking for flexible multi-hour storage paired with firm generation, siting where the grid can absorb it. That is exactly what we build.

Second, our execution is becoming more consistent, record output, sequential improvements in gross margin and adjusted EBITDA. The manufacturing line is converting our input dollars into output at a rate that's improving every quarter. We are not yet near our entitlement, but the progress is the trajectory you want to see from a company at this stage of scaling.

And lastly, I'm very excited to talk about Frontier USA. Let's move to the next slide. The single biggest barrier to long-duration storage adoption today is not technology, it's not demand. It is bankability. The technology is ready. The demand is structural. But for every project, it still has to stitch together the same 4 components, capital, insurance, project construction and an offtake agreement. Usually, this is done sequentially, one at a time.

On one side of this page, there's Eos' vertically integrated technology stack, the Z3 battery module, DawnOS advanced controls and Indensity system configuration. And the industrial service model that underpins all 3 is a differentiator, fast field service with predictable maintenance and overhaul capability borrowed from the aviation and traditional power industries.

We have engineered Indensity to hold nameplate performance across the full life of the asset. There's no more augmentation. Working as one from the cell to the system for the life of the project, we are the only American manufacturer at scale with this technology stack.

On the other side stands Frontier's project execution capability, project development, including site origination, permitting, interconnect and offtake, insurance-backed financing and asset operations across full system life. Standing behind all of it, an independent leadership team drawn from the operators and developers who built hundreds of deployments, closed gigawatts of project finance with the institutional discipline to execute this at scale. Frontier closes that gap by bringing those 2 stacks together into one platform. And in the middle, what do our customers actually get? They get accelerated deployment, guaranteed performance and a lower total cost of ownership.

This is an expected self-reinforcing growth engine. Cash flow generated by Frontier's operating projects is designed to be reinvested back into the platform, which will fund new project origination, accelerate Eos equipment deployment and compound the value of the integrated tech stack. Each project that's completed strengthens the next. DawnOS performance data sharpens our technology underwriting. Project returns, fund expansion and the operating track record build the basis for the next financing round. The equity recycles, debt capacity grows and the platform continues to scale.

Now let me walk you through how we plan to structure the capital on our next page. Frontier Power USA is expected to be capitalized in 3 layers, each addressing a distinct risk and a distinct cost of capital. The first layer is equity. Cerberus is contributing $100 million in institutional capital, paired with operating expertise that strengthens our governance, our underwriting and our access to the project finance market.

Eos is targeting a $150 million contribution funded through a pro rata rights offering, subject to traditional closing conditions. That structure is deliberate. We believe it allows our existing shareholders to participate in the upside of this platform directly through their ownership in Eos. You can see on the slide the structure of Frontier Power USA on day 1. That contribution includes an originated pipeline, an exclusive insurance offering, a structured debt financing path and an experienced management team. Every dollar of that accrues back to the platform.

The second layer, and this is the structural innovation, a technology performance insurance wrap written by Ariel Green at Lloyd's of London. Ariel Green wraps each project with a performance guarantee that converts what the market has historically treated as a technology risk into an insurance-rated obligation. That wrap is the unlock of this offering. Because of it, the third layer is senior project debt, targeting more than $1 billion and positioned to be marketed with investment-grade characteristics.

Equity from Cerberus and Eos, an insurance wrap from Ariel Green, senior debt with investment-grade characteristics, together, this 3-layer structure is designed to expand the availability of capital and accelerate the deployment of Eos solutions. That is the innovation. That is what compresses the project timelines. That is what closes the bankability gap.

Moving to the next page. Let me spend a moment on the rights offering. It's structured intentionally for the shareholders who have built this company alongside us. To fund our planned equity participation in Frontier, we intend to launch a pro rata rights offering targeting $150 million. The structure is designed to do one thing, let the Eos shareholders who have stayed with this company through the buildup of our technology, our manufacturing and our pipeline participate in what comes next.

In this rights offering, existing shareholders, including retail, would receive transferable subscription rights to participate on a pro rata basis. The rights are intended to be transferable to broaden access and preserve flexibility for shareholders. When we think about dilution, the framework is the following, shareholders who participate increase their ownership relative to the new share count, and those who choose not to participate experience some dilution.

If you look at the transition in aggregate at today's share price, with a full subscription, the overall impact is accretive for shareholders who would participate. We believe that's a very disciplined outcome, particularly given how the capital is being deployed, into assets [indiscernible] increase the long-term value per share.

We could have raised this capital from a single institutional sponsor, but chose not to. Shareholders who have backed this company through Z3, Indensity, from DawnOS and the Thorn Hill expansion should have the option to participate in what comes next. This is by design. Everything we've just talked about, the partners, the capital structure, the insurance wrap only works because the technology underneath it performs.

Now let's drill down a little further on that. We recently crossed 6 gigawatt-hours of discharge energy on Eos technology, spanning roughly 3.9 million cycles. That figure includes every electron our technology has discharged from our earliest deployments and now through Z3, which accounts for 0.5 gigawatt-hour of energy and over 1 million cycles.

The right side of the slide shows the architectural shift that sits behind these numbers. We moved from string-level battery management to modern module-level battery management under DawnOS. So what do I mean behind that? Before, a single performing module could pull down the performance of a string or 1/12 of a cube. Today, every module is now individually monitored, individually managed and individually dispatched.

The bottom left table is where the operational story turns into a commercial one, and it deserves a little bit more attention. Taking a specific site as an example, if you look on the left, you see performance before DawnOS. Average round-trip efficiency sat between 34% and 42% with standard deviations above 17 points. The fleet was capable of cycles above 70% on a balanced cycle and 30% on an unbalanced one.

I want to be precise about what changed because this is important. The energy was always there. The battery module design did not change. What changed was our ability to get the energy out of our systems efficiently. The variance you see in the Before column was driven by batteries becoming unbalanced, translating into lower string performance. Energy that was physically present in the batteries could not be discharged because the control architecture could not isolate and route around batteries discharging at different rates. This was not a chemistry limit, not a product limit. It was a limit in our control system.

DawnOS, paired with a module-level BMS, solved this challenge. The system now balances itself dynamically, maximizes discharge across every module in the system. This result is the After column, the average round-trip efficiency in the low- to mid-70s, with standard deviations now reduced to 5 to 8 points with a maximum performance of 88%.

There's 3 implications behind those numbers. First, on the installed base, DawnOS is being deployed across systems already in the field. It is the architecture that allows us to meet performance commitments consistently and at scale. This work carries a cost, and it is a manageable headwind that is more than outweighed by the performance improvement unlocked for our customers. The After column on this slide is what bankable Z3 performance look like, and it applies to the fleet, not just new shipments.

Second, our field fleet now shows a pattern that's worth discussing. Across every discharge band, 0 to 3 hours, 3 to 6 hours and 6-plus hours, the round-trip efficiency in an operating dispatch window holds in the high-70s on average and can push up into the 90s at its peak. It does not degrade as duration extends.

For other chemistries in the market, long duration is either a tax on efficiency, meaning it comes in lower, or a decrease in the product's useful life, which means faster augmentation. For Eos, it isn't. And the gap between average and peak at each duration band is the dispatch headroom, the efficiency that's already inside the asset waiting to be captured by the DawnOS architecture.

Third, the variance reduction is what makes that performance financeable. The gap between an average cycle and a max cycle compressed from roughly 30 points to around roughly 10. Project finance and tax equity counterparties underwrite to consistency, not to peaks. We are now delivering both, and we expect further improvements with increased DawnOS operating hours. As we learn, the system will get better.

Let me close with this. The market we are operating in today is the market this company was built for, American-made, long duration, bankable, deployable at scale. We have developed the technology and are scaling manufacturing and proving the product in the field. With Frontier Power USA, we are announcing the platform that we believe lets us deliver everything we have built to customers at the speed the market requires, at the scale that converts an industry tailwind into shareholder returns.

With that, I'll turn it over to John to walk through our operational performance.

Thanks, Joe, and it's great to be back with everyone. Today, I want to focus on where we are operationally and how that progress is positioning us for what's ahead. The teams in Turtle Creek and now at our new Thorn Hill facility have made tremendous progress advancing our operations. We're beginning to see the returns on the investments we've made over the last year to drive productivity. And importantly, we're doing more with less.

In Turtle Creek, we've achieved quarterly records across several key operating metrics and delivered meaningful improvement compared to the fourth quarter. Cube output increased 467% versus Q1 '25 and was up 17% sequentially from Q4. Direct labor per cube is down 47% year-over-year and 25% quarter-over-quarter. The year-over-year step reflects a 16% reduction in man hours per cube from bipolar automation. The sequential step reflects a 6% reduction as yield and efficiency improvements reduced overtime and temp labor.

This level of production translated into financial performance, with margins improving by approximately $10 million quarter-over-quarter as material costs came down and output scaled. This is the headline, and it is the clearest signal yet that the manufacturing system we have been building is beginning to deliver.

Two metrics moved against that trend this quarter, and I want to address both directly because they are deliberate. Material cost is up 4% year-over-year. That is the cost of transitioning from the prior BMS to DawnOS in the middle of last year. As Joe just discussed, we're seeing the results of the operability of the system, and we are working a program to simplify the design, reduce part count and optimize manufacturing. You can see it in the sequential number. Material cost is down 5% quarter-over-quarter as supplier optimization and design improvements take hold.

The trajectory is right, and the year-over-year line will follow. How we drive that trajectory matters. At the supplier level, we are running disciplined commercial performance through structured negotiations, clean sheet should-cost models and volume leverage. We are resetting legacy cost positions where needed and aligning pricing with market realities, building partnerships meant to hold up over time.

We are also pursuing new suppliers where it creates structural advantage, qualifying new suppliers in competitive locations, reducing single-source dependence and ensuring competition in every category of spend. At the material level, we are identifying alternate opportunities across resins, electronic components and metals, where form, fit and function can be maintained or improved at a lower cost point.

The second metric, manufacturing overhead per cube, is down 43% year-over-year and up 10% sequentially. We made that choice. We invested in equipment spares and maintenance capability to increase battery line uptime, which lets us run the factory with less labor and more output per shift. The 54% reduction in direct/indirect labor man hours per cube tells you the math is working. We will continue to invest in areas where that investment takes variable cost out of every cube that follows.

Now to Thorn Hill, because this is the program that scales what we have proven at Turtle Creek. Building readiness is complete. Line 2 power on is in process. Initial production is on track for the end of Q2, and we expect full production to occur in Q4.

Thorn Hill matters for 3 reasons. First, it is purpose-built around the lessons we have learned. Every automation step, every layout decision, every piece of equipment builds on the progress we have made at Turtle Creek. Spending time at Thorn Hill, I see the energy and pride of what the team is creating, a world-class operation that will deliver for our customers and shareholders.

Second, as we've been saying, the volume step changes the cost equation. As output ramps, fixed costs spread across more cubes, supplier pricing improves with committed volume and the labor and overhead efficiencies we are already showing on a per cube basis compound. Third, Thorn Hill positions us to compete on cost in a market that is moving fast. Our customers are sizing projects in gigawatt-hours, not megawatt-hours. And the asset base we are bringing online is what allows us to meet that demand at a price point that wins.

Stepping back, none of this is the result of a single quarter of effort. It is the output of an organization that has made lean methodology and continuous improvement the way we work, not a program we run. Every cube coming off the line is an opportunity to take cost out, take time out and put quality in. While we have made strides in all aspects of our operations, there remains plenty of additional opportunities to drive cost out. We have a comprehensive plan and actions to continue addressing these. That is our focus. That is how we are building this company, and that is how we drive towards gross margin profitability.

Thanks, everyone. With that, I'll turn it over to Nathan.

Thanks, John, and good morning, everybody. Starting on the commercial front, we ended the quarter with $645 million in backlog, representing 2.6 gigawatt-hours of storage after converting $57 million to revenue in the quarter. There have been two important updates since quarter end that will further increase these figures.

First, we entered a 2 gigawatt-hour firm capacity reservation agreement with Frontier Power USA to deliver several projects in its initial pipeline. As Joe talked about, one of the key components of any project is bankability, and we have several late-stage opportunities that are at the financing stage. Frontier USA provides an attractive alternative, allowing these customers to not just move forward, but to move forward at a lower cost of capital, giving our customers an advantage while generating returns for Frontier.

Second, we are expanding an existing project with a Southeast utility from 4 hours to 10 hours in duration, along with a full system upgrade to DawnOS. The customer chose to scale with Eos rather than diversify and to do so by adding additional capacity and duration. Both signals matter as more regions move toward longer-duration solutions to absorb load growth and data center demand.

Now turning to our pipeline. Total opportunities increased to $24 billion, representing 107 gigawatt-hours, which is up 3% sequentially and up 56% year-over-year. Average pricing in the pipeline reflects the project mix, with an increased percentage of large-scale Indensity deployments where unit economics improve with project size and where we remain competitive on a delivered cost basis.

Demand remains strong in both PJM and MISO. Working with Talen Energy, we are developing several large storage projects at their existing sites ahead of PJM's reliability backstop procurement process later this year, as Joe discussed earlier. In addition, we have a few customer projects that are progressing through permitting ahead of upcoming NYSERDA submissions. Each of these projects are progressing based on their standalone economics, with the bulk energy storage program as additional upside.

We continue to see increased engagement from utilities and utility-backed developers who are looking to own assets that support rising demand and grid reliability. At the same time, interest from hyperscalers in AI-driven projects continues to accelerate. These customers need reliable, dispatchable power and behind-the-meter solutions that respond in milliseconds to the duty cycles that AI inferencing imposes.

So what does that mean? Continuous rapid charging and discharging through deep erratic swings that are sustained over hours or even days. Eos is engineered for this profile. We have fully validated it at our Edison facility, from the Z3 module through a full Indensity core system using real data center load profiles. We've demonstrated consistent responses and stable performance across every transition.

That performance is why speed-to-power matters, and it is the foundation of our joint development agreement with TURBINE-X. Combining their access to additional gas-fired generation with our Indensity solution, we deliver fully integrated power systems for data centers and other applications. This agreement targets 2 gigawatt-hours of storage over the next several years, with initial deployments in 2027. TURBINE-X's newly announced Texas manufacturing facility strengthens that execution as projects move from development to deployment.

Now shifting to our financials. We delivered a strong first quarter, generating $57 million in revenue, up 445% year-over-year on more than 5.5x the production output of a year ago. In the last 2 quarters combined, we delivered $115 million in revenue, more than all of last year. Revenue was roughly flat quarter-over-quarter as project mix shifted with more cubes being delivered, while AC scope, including things like transformers and inverters, has decreased. We expected to recognize a few million dollars of AC scope and commissioning revenue in the first quarter, but customer site readiness delayed some of this revenue into future periods.

On the cost side, our automated manufacturing strategy is producing real gains across productivity, capacity, quality and unit cost. Gross loss for the quarter was $44.4 million, a 157 percentage point margin improvement year-over-year, driven by higher production volumes and continued product cost out. On a dollar basis, gross loss improved 18% sequentially as production volume increased 17%, reinforcing the trajectory in unit economics and operating leverage.

Excluding noncash stock-based compensation and depreciation and amortization, adjusted gross loss for the quarter was $39 million, a 133 percentage point margin improvement from the prior year. Operating expenses increased 23% year-over-year, reflecting targeted investments in supply chain, new product introduction and additional engineering talent to support scaling and product cost-out initiatives. About 17% of total OpEx was noncash-related.

We reported positive net income of $509 million. Due to our capital structure, net income is heavily impacted by changes in our share price and the noncash fair value accounting adjustments, primarily mark-to-market revaluations of our warrants and our derivatives. Adjusted EBITDA is the real operating measure to focus on here, where we ended the quarter with a loss of $68 million, a 294 percentage point margin improvement from the prior year. Now as we look to the rest of the year, we remain focused on disciplined growth and continued cost reductions.

Three quick things in closing. First, we are reaffirming our 2026 revenue outlook range of $300 million to $400 million. Second, our upcoming shareholder meeting is on June 3. Five proposals require shareholder support, and 1 carries a 67% approval threshold. Among the proposals is an increase in our authorized share count, which is required to support the Frontier investment. More broadly, maintaining an appropriate balance of authorized but unissued shares is standard corporate housekeeping and allows us to take advantage of strategic opportunities in the market. We are asking all shareholders to vote.

And finally, I am pleased to welcome Alessandro Lagi as Eos' incoming Chief Financial Officer. Alessandro brings deep public company finance leadership and track record of scaling industrial businesses through commercial inflection. He officially joins us in June, and his arrival allows me to return my full focus to commercial growth.

With that, thank you for your time today, and I'll pass it back to Joe.

Thanks, John. Thanks, Nathan. Thanks, everyone, for listening. I'm really excited to work again with Alessandro. We worked together earlier in our careers. I'm excited about his background in the energy industry and also very excited about his experience that he has in Johnson Controls across a multitude of global positions. I think Alessandro brings the right industrial background as a CFO to help us continue to scale the company.

I'd also like to take a moment just to thank Nathan for him holding down both seats here for an extended period of time and look forward to Nathan moving back over to focus exclusively on the commercial part of the business and continuing to grow Eos.

With that, we'll wrap up our prepared comments and turn it over to the operator for any questions. So let's open up for Q&A.

[Operator Instructions] Our first question comes from Mark Strouse with JPMorgan.

I just want to start with Frontier Power. Maybe can you talk -- I just want to make sure I'm thinking about this right. The initial investment from Eos and from Cerberus, can you talk about how many gigawatt-hours that would finance? And then to the extent that this does indeed grow, like you envision, can you just talk about kind of the capital stack for future projects, what the equity check would look like and what Eos' potential contributions to that equity check would be? Would you continue to participate? Or would the ownership percentage kind of dwindle down over time?

Mark, thanks. Look, I think the initial -- as we discussed, the initial capital cycle we're thinking about is leveraging that with debt. We're targeting around 5x leverage. That's why we have -- that's going to depend on where we come in on the rights offering. I think on the incremental questions of future investment and equity and where we go from there, look, the program is designed to recycle capital in from the returns on projects to continue to grow.

It's the classic flywheel that I talked about in my prepared comments. But I think it's a little bit too early to talk about what we would do as we're launching the platform, what we would do in the future here. So we'll take that as it comes, but we're very excited about being able to pull everything together because it's going to speed up discussions as we go through the pipeline and opportunities that we have and get to faster order closure.

Okay. Okay. And then just a quick kind of accounting follow-up, I guess. Given the 49% equity -- 49% stake, can you just talk about the rev rec? As you're delivering products, will you recognize that fully in the income statement? Is there any kind of below-the-line adjustments we should be thinking about?

Yes, I think this would be a typical equity investment. The revenue would come through the income statement just like it would if it was a direct sale to a third-party customer. The only difference would be we will break it out as a related party line up at the top of the income statement. But otherwise, you will see the full impact of the revenue in the income statement.

Yes, Mark, I think it's important just to note, it's arm's length. Frontier will have their own Board of Directors. They'll have their own management team, which we'll be announcing here shortly. I'm pretty excited about the people that we're talking to come in and run this.

But everything will be fully negotiated, as was the capacity reservation agreement for the 2 gigawatt-hours from a pricing standpoint, down payment and terms on that contract. It's all done as an independent company, independent third party. With our minority stake in that, obviously, the minority stake will be treated, from a Frontier standpoint, below the line.

Our next question comes from Martin Malloy with Johnson Rice & Company.

Congratulations on all the progress. My first question is on Frontier Power. Just wanted to try to maybe get a sense of customer conversations that you've had around this and how soon we should anticipate offtake agreements or project announcements utilizing the structure?

Look, I think this is -- as Joe talked about in his prepared remarks, we have a number of customer opportunities in our pipeline that are working on financing as one of the critical components of a successful project. This creates an attractive alternative for financing, a lower cost of capital, given the way we're structuring this.

So we're going to make the introductions to a number of customers. You see in the initial pipeline, there's a handful of projects that we're in active discussions on right now. I think there's a good chance we will be delivering on volume associated with some of those initial projects in 2026, but this really builds momentum going into 2027 and beyond as well.

And Marty, I think the big thing here I'd like to talk about is the advantage that it gives us. We were doing the lion's share of this work on a lot of the opportunities in the pipeline, but doing that transactionally on a project-by-project basis. And this now gives us a structured platform with the insurance wrap, raise the debt, get investment-grade characteristics, have an equity stake, allow our shareholders to participate in the returns on financing and really accelerate the conversation.

Because you're not going through the process of, let me apply, let me then pick my technology, then let me go through and understand my revenue stack, then let me go and get my financing, then let me go and do how I'm going to construct and build and go through that process to get to the first discharge cycle of the system. We think with this setup, we're going to be able to accelerate all that because we'll bring a pre-structured solution to customers as they come with projects for us to be able to sell our technology into.

And then for a follow-up question, just wanted to ask about reaching adjusted gross profit margin positive. I believe previously, you said second half '26. And with the operational improvements that you cited, can you give us an update there and degree of confidence in reaching that?

Yes, Marty, I mean, we're still targeting gross margin -- adjusted gross margin positive later this year, really driven by a lot of the things that John talked about in his remarks. He's making great progress on cost out, both on materials, direct labor. And then as we get the Thorn Hill facility up and running, we continue to see improvements in indirect labor and overhead and throughput as well. So that's really the driver of it, and we believe we will achieve positive adjusted EBITDA before the end of this year.

Our next question comes from Julien Dumoulin-Smith with Jefferies.

This is Hannah Velásquez on for Julien. Congrats on the quarter and congrats on the Frontier Power announcement. Similar to my other peers, I had a question on that one. So just to give us a sense of the backlog impact, I realize the 2.6 gigawatt-hours that you announced is as of quarter end. But what would your backlog be if we included the Frontier Power addition? Is it as simple as adding the 2 gigawatt-hours? Or is it on a project-by-project basis? I'm really trying to get a sense of what 2Q could look like from a backlog expansion perspective.

Yes. Look, I think it's too early to give where the backlog is going to be because there's other things in motion. What we said was you don't do it on a one-for-one basis because there's a project in backlog that will probably be converted and financed through Frontier, as I said in my prepared remarks. But we're not prepared today to give a midpoint or a forecast on backlog at the end of the quarter.

Okay. And just as a follow-up question separately on ASPs. I know you talked a bit about the downward trend line being attributed to mix. But is a portion of that downward or that deflation related to the competitiveness of lithium iron phosphate? Any detail there would be helpful, especially to get a sense of where ASPs could trend longer term.

I think looking at the pipeline is the best indication of where we see longer-term trends, and it's really driven by larger-scale projects that we're currently quoting with Indensity Core and the associated efficiencies gained with those larger-scale projects. But I think the best view of longer-term ASPs from our perspective is what you see in the pipeline. I mean those are active projects that we're actively bidding on, and that's how we're looking at it.

Our next question comes from Patrick Ouellette with Stifel.

It's Pat on for Stephen Gengaro. You reiterated the initial production for the second line for the end of 2Q. Just curious if you could touch on any key steps between now and then whether that's yields, throughput, things like that? And then how you're thinking about the ramp of the second line through the second half of the year?

Yes. And before John jumps in and goes through where we are on that, what I would say is when we go for our weekly review of progress up there, the team is making phenomenal progress in bringing the lineup. And every week, it looks like a totally different facility from the week before. And in fact, this week, we had a candidate come in to interview for a position at Eos who was a customer. And they had been in Turtle Creek and the interview started off with, I'm really impressed by what I saw because I was here 2 years ago. When can I start?

And I think those are the types of things you like to hear where people have reference points. And I think John and the team have done a great job positioning us to be able to deliver. And you see it in the numbers, but I'll turn it over to John to talk through where he's at with the program of really implementing lean. Lean manufacturing is the way we work.

Yes. So the line is completely installed. We're powering up all sections and doing debug currently. So we're on track to basically start production in June.

Okay. And so with the second line coming online and the rollout of Frontier USA, is there a way you're thinking about production and deployment off the 2 lines together and how that gets allocated just, say, to existing backlog and to Frontier USA?

Yes. So I think, look, a little bit early to comment on that one. We've got a range in the revenue, and that ties to how the lines ramp. What we're being very careful of is how the lines ramp up before making a commitment and really seeing what's happening.

We feel really good about it, but we want to see where we're at. We have a lot of optionality that we're going through and looking at as far as running 2 lines and 2 facilities, running 1 line in 1 facility, potentially future consolidation into 1 facility. Those are things we're going to be working on here over the next couple of months, and we'll come back with news on that as we solidify our plans around what we're going to do.

And our next question comes from Jeff Osborne with TD Cowen.

Just two from my side. Nathan or Joe, I'm trying to understand, since you brought up project financing, that seems to be a big topic on the call. Can you just walk through what the historical challenges were around traditional project finance with traditional banks? And then what led you to the structure? I'm just trying to understand what those obstacles were and then if that's ever an avenue for future growth beyond the Frontier USA.

Jeff, we would continue. I wouldn't call it obstacles. What I would say is we're coming at this with a pre-engineered solution. So the same banks that we're talking about will be the same people that provide debt into Frontier Power. What we've structured around this is instead of -- think about this.

Instead of doing this on a transaction-by-transaction basis, we're doing it on a platform basis, where you have the debt there wrapped by the insurance. So rather than going in, understanding, talking to the bank, bringing in Ariel Green, we had all the elements there before, we're putting it in a structure now where we can offer it faster and in an offering that allows the customers to get to closing and start an NTP, notice to proceed, faster.

I think when you look at this, we're excited about where we are, because near term, the Frontier pipeline far exceeds any implied -- going back to the earlier question, any implied capital raise in the platform. We've got a pipeline of opportunities that allow us to move faster and bring in expertise to help us close the job, close projects. At the same time, it allows us on the Eos technical stack to really focus on running the company, executing, delivering, taking cost out, building and improving around our controls architecture and DawnOS and having alongside of us a financial team and financial experts that can help us accelerate those conversations with customers.

Got it. And then just switching gears. You mentioned the Southeast utility. I think there was a large project last summer in 2025 that went live earlier this year. Can you just walk through what's specifically involved to move an existing project that's already installed and producing electrons at a 4-hour pace, moving to 10 and then installing DawnOS? Is that a complete overhaul of the power electronics, but the battery array and systems themselves are in place and not changed? It's just unclear, what led to that change.

Yes. So Jeff, it depends. So there's a couple of things in the question. So I'll try to take them one by one. So a 4- to 10-hour system with Eos, there's nothing to change other than the way you operate the system. That's the beauty of the technology.

The upgrade to DawnOS, that's a change out of the software. Obviously, we need the new printed circuit boards installed on the equipment. And there are, depending on the generation of technology -- like we've talked about, we've evolved our BMS over time for the Z3. There's 3 configurations out there. Depending on what configuration you have, like configuration 1 and 2, you've got to change the wiring plus the boards. Configuration 3, it's boards, and you run the BMS.

We do this on a project-by-project basis, but the performance that it unlocks and delivers to the customer warrants us doing this. We ran a -- as an example, we ran a 1-hour cycle yesterday, 1 hour at 84% round-trip efficiency. That's the type of performance we want to deliver in the market, and it's going to open up new revenue stacks for our customers and also allow us to put more product out in the field.

Perfect. Very quickly, one last follow-up on Frontier. I think Bloom did something similar years ago with Southern Company and had challenges around field performance. Can you just acknowledge what the reliability requirements are as part of Frontier Power as it relates to how your units have been running the last year or so relative to the expectations of that financial structuring? Is there any material changes that need to play out as it relates to field reliability over time?

No, Jeff. None at all. And I think like -- we just got to be careful here. The technology -- the underlying technology in the batteries work. As I talked about in my prepared comments, this is unlocking the performance that were in the batteries with the software that we need.

Now what's interesting is we've brought some people in to work inside the company that have many years of experience owning and operating lithium-ion systems. And lithium-ion has the same thing that we're talking about. What our new project lead says is that she remembers moving lithium-ion battery packs around to balance. You don't need to do that with our system. So this is something that's there, and we think our software controls and unlocks performance that isn't there for other technologies.

And one of the challenges that we had in our first generation that we put on the Z3 is, for speed-to-market, we installed an underlying printed circuit board and a core BMS that was used in lithium-ion. It just doesn't match up and give us the level of granularity you need to maximize performance. So getting a system, Jeff, that can go from a 1-hour and 83% round-trip efficiency up to a 10-hour, 12-hour discharge that then gets up approaching the 90s, to be able to do that on one system, as far as we know, there aren't any other products out there that can do that.

You're talking about -- if you look at a flow battery, like a vanadium flow battery, very low footprint, power density. And what we do, 6.4 megawatt-hours, a vanadium battery probably does under 0.5 megawatt at 50% round-trip efficiency. We're in the mid-80s on regular cycle. So we like the performance that we have. We like what the team is developing, and we like having Frontier Power alongside of us to accelerate decisions.

And yes, as in any product, we're always going to work on improving the reliability. And what Frontier Power unlocks, Jeff, and kind of the thing for us that opened the door was, when you look at how we designed Indensity, right, you take this flexible battery module, this low -- ability to control each module with a controls platform, with Indensity, a light bulb went off, where -- I was sitting there talking to Jeff Bornstein, who's on our Board, and saying Indensity is like an aircraft engine. Indensity is like an aeroderivative gas turbine. We can swap out modules, as you have to, and maintain nameplate performance.

What we're going to change with energy storage with Indensity is we'll guarantee nameplate for the life of the project. There's no more talking about augmentation. It's running it like an industrial asset, like you see with a gas turbine, or with an aircraft engine that you don't do the service while it's on the wing of the plane. You swap it out and keep going. That's what we've designed, and we're excited to bring that to market.

Our next question comes from Ryan Pfingst with B. Riley Securities.

First, can you talk more broadly about the competitive landscape and maybe any additional color on what customers have been indicating in terms of duration preferences?

Look, I think consistent with what we've said historically, and we see it increasing as customers continue to need longer-duration solutions. Market fundamentals have shifted in many of the markets. You're seeing programs like the NYSERDA bulk storage procurement. You're seeing PJM come out with the reliability backstop, Ofgem's Cap and Floor program in the U.K. that we've talked about previously.

I mean markets are recognizing that they need longer duration for grid reliability as well as to service the demanding load profiles that the increase in data centers is having on the grid, and long duration is the perfect solution for that. Joe already talked about the ability to run 1-hour cycles, 12-hour cycles from the same asset.

When we look at the erratic use cases of the hyperscalers, being able to ramp up and ramp down within milliseconds and do that many, many times a day, I mean, it's an abusive use case, and our battery is specifically engineered to handle that. And we're very excited about the technology and how it's designed to handle that. All of that lends itself to increasing durations and flexible assets, which we've got in the Z3 technology.

And Ryan, what I would just add on top of Nathan's comments is to simplify conversations, we make it sound like you're running 1 cycle a day every day multiplied by day. And that's not how the grid works. That's not how these assets will be utilized.

I don't view -- Nathan used some words about like a harsh and -- that's just the way AI is going to work. An inference -- if we all go on our phone right now and type something into an AI engine, you're creating an inference session. You're creating a spike in power demand. You're going to have to do that in milliseconds. The product does that.

When you do a large learning on AI, you need power for long periods of time. We're the buffer in the asset that can do both of those things successfully. And the way Indensity is set up, we can do both of those things on the same installation. Why? Because DawnOS can be parsed out into different parts of the system. So you can run an inference system on one part of it and a large learning system or long duration on another part of it.

It's about flexibility and giving the grid the shock absorber it needs as the power demand changes over time. And it protects core fossil assets from that variability. It's not just about, hey, we're doing solar plus storage or wind plus storage. It's anything plus storage that gives you frequency regulation, and we've got a product that can do it that's proving itself every day out in the field that customers are coming to us. And with Frontier Power, we now have the ability to accelerate those conversations.

Appreciate that. And then maybe a follow-up on that last comment. It sounds like Frontier Power will be key for order conversion. Are there any other gating items that you feel like you've addressed with customers in recent months that should benefit order conversion this year?

Look, I think some of the biggest things that are going to help order conversion are going to be the need for power and doing things faster than we've ever done before. I think, again, showing the operating performance of the product out in the field and then taking use cases from customers and running those use cases and showing that we can meet those use cases, that gets you to those decisions that are going to convert orders.

We feel good about the pipeline we have, the relationships we're building. Nathan talked about TURBINE-X. I think it's great to be with somebody like TURBINE-X that comes at this market with the philosophy of bringing aeroderivative-type technologies to different load cases. And partnering with them -- because you've got to remember, this isn't just like you plug -- this isn't building a LEGO set, right? You don't just plug things together, and there's your power plant. You have a controls architecture underneath, you have a controls architecture on top of it.

And the reason why we're working with people like TURBINE-X, people like FlexGen, which we've already talked about, is we can align those controls beforehand and get to power faster. Getting to power faster is what the market and our customers need, and that's what we're building.

Thank you. This concludes the [ question-and-answer session ]. I would now like to turn it back to Joe Mastrangelo for closing remarks.

Well, thanks, everyone, for listening today, the questions. We look forward to continuing to build a great company. The one thing I'll tell you that won't change about Eos is dedication of this team to building a great company.

We're really excited, obviously, about the Frontier Power partnership that we're building. The ability for our shareholders to participate in that makes me very excited personally because they've stood by us through trials and tribulations. We'll continue to grow the company, continue to improve performance and continue to build something that we all can be proud of. So thanks again, everybody.

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

Good morning, and welcome to Eos Energy Enterprises' Full Year 2025 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. [Operator Instructions] With that, I would like to turn the call over to Liz Higley, Head of Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to Eos' Fourth Quarter and Full Year 2025 Conference Call. Today, I'm joined by Eos' CEO, Joe Mastrangelo; COO, John Mehas; CTO, Francis Richey; and CCO and Interim CFO, Nathan Kroeker. This call may include forward-looking statements, including, but not limited to, current expectations with respect to future results and our outlook for our company. Should any of these risks materialize or should our assumptions prove to be incorrect, our actual results may differ materially from our expectations or those implied by these forward-looking statements.

The risks and uncertainties that forward-looking statements are subject to are described in our SEC filings. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update these statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law.

Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to U.S. GAAP financial information is provided in the press release. Non-GAAP information should be considered as supplemental and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same or as comparable to similar non-GAAP measures presented by other companies. This conference call will be available for replay via webcast through Eos' Investor Relations website at investors.eose.com.

Joe, John, Francis and Nathan will walk you through our business outlook and financial results before we proceed to Q&A. With that, I'll now turn the call over to Eos' CEO, Joe Mastrangelo.

Thanks, Liz. Good morning, everyone, and thanks for joining us. This quarter, we continue to operate in an energy environment defined by one clear trend, the acceleration of demand for power, combined with constrained grid flexibility and reliability. That creates opportunity for a company like Eos. What we've been talking about over the 5 years that we've been a public company is being able to bring a product that was flexible, reliable and can do multiple discharges in a day or long or short discharges with quick response times. That's exactly what the market is looking for.

And although data centers are in the headlines and data centers are changing the way that we think about our grid, and data centers are requiring us to make decisions on faster time horizons than we've ever done before in the energy sector, there are other demand drivers in the industry, things like electrification and transport and also electrification of heating and then the increased domestic production in the United States are creating higher load growth for a grid.

That fits in perfectly with our technology. We're moving to in energy storage is moving away from managing volatility to providing reliability. What you need is this buffer resource that allows you to keep the grid balanced but also allows you to adapt to quick changes in load growth. But a vision of a product and a vision of a company only goes so far, execution is what counts. And when you look at our quarter and our year, yes, we set records. Our volume was up. Our margins improved sequentially quarter-over-quarter and year-over-year. We had a great quarter as far as orders being booked, and Nathan will talk about how those orders fit into different use cases that are going to provide growth for the company in the future. But the bottom line is we missed our guidance, and that falls on me as the CEO of the company.

What John, Francis and Nathan and I will talk about today is building out the capabilities of our team, of our product and of how we bring that product to market and manufacture and install it to be able to provide reliable performance. And it's reliable performance not just to achieve guidance, which is important, but to achieve the operating requirements of our customer as the grid evolves and demand emerges. We think we have the product that meets those future needs. We've got to continue to build the company and continue to smooth out and deliver predictable performance for our shareholders and our customers. I think we have the team that is able to do that, and we'll show the initial results that are beginning to lay out how we can deliver reliably in the future.

When you think about on the bottom, yes, 7% -- 7x year-over-year growth on revenue, combined with our highest cash position that we've had in the company's history, along with closing the gap and moving towards profitability, we've removed the going concern language inside of our 10-K filing, which Nathan will talk about in a moment, which really allows us to really says we're operating the company strategically, which is important for the future.

At the same time, we launched Indensity, which Francis will give some more details on. But Indensity is really taking the product that we have and finding a way to package it that's easy to operate, easy to service, easy to manufacture and easy for customers to utilize multiple times in the day. It's not starting over, it's improving upon what we already have. At the same time, we're responsible to get our assets in the field up and running reliably, and Nathan and the projects team are doing just that.

As we look at the overall results, I'm proud of what we did and disappointed that we didn't meet the guidance, but we are going to work to make sure that, that doesn't happen again in the future.

Moving to the next page. Let's talk about how our installed base is expanding. Today, we cover 20% of the United States. We have 20 projects installed. The company continues to expand its footprint and continues to operate out in the field. Today, our Z3 product has discharged nearly 300 megawatt hours of power. Every cycle is a learning opportunity and every cycle is an opportunity for us to get better and to understand our customer requirements, and that's how we use it. At the same time, we do talk about concentration of revenue with a few large customers. But if you look at the lower right-hand side of this page, we had deliveries to 11 different customers, and we had revenue that came in from 18 different customers. The difference in that 7 is either commissioning and installation revenue or revenue from services on installed equipment that we did earlier.

When you look at this map, as we come in, in future quarters, we're going to add more states. We're going to target to get to 25% here over the next few months. And then at the same time, we're going to add in a map of Europe as we ship into Germany and wait for the cap and floor program to close in the U.K. We're excited about what the team is doing here. We want to give a picture of how we operate. We've talked about the operating hours out in the field in the past, and that's really where we learned, and that's where Indensity came from. These customers on this map giving us feedback to enable us to deliver a product that's going to meet the future needs of the industry while working with Nathan and John and the teams to make what we have out in the field more rugged to be able to operate flawlessly and to give customers the performance that they require.

Let's move to the next page and talk about some operational metrics. I want to start off in the upper left-hand side where we're looking at our quarterly revenue profile. If you go back to Q4 2024 and forward to Q2 of last year, you're looking at quarters that are basically growing 30%. That's basically taking our line, installing it, improving upon it and getting 30% throughput on the same asset base. Then you come into Q3 of 2025, where we started to bring bipolar manufacturing in, and you see a 2x step function from Q2 of '25 into Q2 -- Q3 of '25. Then we double it again, which is, again, bringing more of the bipolar manufacturing online. And by year-end, John will talk through that we achieved our 2-megawatt hour capacity coming out of the facility in Turtle Creek.

On an annualized basis, we're up 7x, and our capacity will support the demand that we see. What's important here as we think about capacity management and as John walks through this and I think about this, and you take what John is going to talk about and combine that with what Nathan is going to talk about commercially is you're not running the factory at full capacity at any one point in time. You're creating capacity to be able to create the opportunity for the company to grow and deliver and building in a buffer to be able to manage and weather through the blips that you're going to see in any factory. So anybody that's worked in an industrial process knows that nothing goes perfect and you got to plan for that. And that's what we're building here to get to the stable production that I talked about earlier.

We go to the bottom of the page, you're seeing a narrowing of the gap and improvement in margin. We're not at profitability yet, but we're on track. The company is structurally profitable. What we need to do now and what John will talk about is improve the efficiencies and the processes of how we operate the company. Thornhill and bringing our second line up and running is going to show us the full entitlement of how efficient we can be as a company. At the same time, you bring a lean mindset to what you do every day. That lean mindset tells you, I've got to get better in everything I do. There's waste in these numbers today. We know that.

We know we have to get better. And when you take all that in and start thinking about driving cost out of our product, taking and becoming more efficient in how we build it, getting out in the field because productivity and profitability go beyond the factory doors, becoming more efficient in how we operate in the field, and proving out and getting installations up and running faster than what we planned, that's how we deliver on profitability. And we have a clear line of sight on how to do that.

This is a profitable business when we execute to our capabilities, and that's what we're building right now. And density is a step function change in that, but Z3 Cube is a profitable product, and we will make that profitable. What Indensity does is it allows us to compete in a new way in the marketplace. It delivers better footprint density to customers. It allows us to build out capability faster. It makes it simpler to manufacture the product and Indensity gives us the ability to compete not only on price, but the ability to drive further cost out to deliver the profitability that we expect.

I'm excited about the work that John is doing and Francis is doing, and I'm really excited about what Nathan is seeing out in the marketplace. And I'll turn it over to John now to start that off and then hand it off to Francis and Nathan.

Thanks, Joe, and good morning, everyone. Great to be here with you all again this morning. Q4 was my first full quarter at Eos, and I'm going to speak candidly about where we are operationally. First, there's a real progress to acknowledge. We completed our subassembly automation, making our battery line fully automated. We closed 2025 with production records across all operations and delivered our fourth consecutive quarter of record revenue. 26 key suppliers supported this ramp to enable us to achieve our 2 gigawatt hour line capacity. That doesn't happen without a committed team doing a lot of things right. At the same time, we fell short of our operational targets, and that's on me. When we spoke last quarter, I felt confident in our ramp plan. We had strong early results and the excess capacity to deliver what we needed to hit our guidance.

Ultimately, 3 very fixable issues prevented us from delivering our commitments. First, we had one isolated supplier nonperformance that cost us a week of production. We addressed it directly, working closely with our supplier to quickly identify root causes and corrective actions. We implemented better controls internally and at our suppliers. That specific issue is behind us. Second, the ability for the automated bipolar production to hit quality targets took longer than expected. That drove rework and lost revenue. We improved tooling, reduced variation in the automation process and tightened material specifications to stabilize bipolar production. We have also added laser detection to give us better visibility and control of any process variation.

Third, our battery line downtime ran well above industry norms, the design intent of the line and our internal forecast. Best-in-class operations and our expectation is to run at roughly 10% equipment downtime. That's my expectation, and that's the expectation of our automation partners. As we push utilization higher throughout the year and ran the line for more hours, we were closer to the mid-30% range. Working closely with our automation partners, we addressed issues with our robotics, hardware, controls, maintenance schedules and spare parts. We have also improved our technical capability and strengthened our team to improve time to resolution.

Downtime has improved significantly in Q1. This is a controllable lever, and we have a path to world-class performance. None of these were demand issues, none were structural. This was a significant ramp of first-generation automation designs. While the magnitude of the issues was unanticipated by me, the resulting learnings, actions and execution are my responsibility.

Look, since I've been brought in, a major focus for me has been identifying single points of failure in the system. This was first-generation automation that was being run at high volumes for the first time. In some cases, you don't fully see those weaknesses until you stress the operation. We've now done that. It has allowed us to identify and address gaps in our automation, organization and operating system. We are systematically hardening the process to make sure these failures do not occur in the future. The results of our efforts have driven higher quality, repeatable and predictable operations in early Q1.

The biggest structural risk today is a lack of redundancy. If our primary line goes down, production stops. That changes with Line 2. And as I said on the last call, we're making design changes in that line to further improve our performance. Line 2 is progressing well and is preparing for factory acceptance testing in Wisconsin. We've intentionally built redundancy into critical stations. Once operational, eliminates our single largest point of failure and gives us flexibility that we simply don't have today.

We're also addressing efficiency. As I've mentioned before, today, materials travel across 3 floors and 2 buildings, over 2 miles from start to finish. That's not a cost-efficient design. With Line 2 and the Thornhill expansion, we're redesigning the layout around single-piece flow, significantly reducing material handling and complexity. As we work to achieve the entitlement for the line output, we have uncovered inefficiencies that result in longer end-to-end production times and higher labor costs to achieve that goal. We are fixing those challenges, and that will allow us to operate at a higher efficiency with a lower cost structure. We expect equipment to begin arriving in Q2 with fully automated production targeted in Q4.

Let me close with this. 2025 was a year of heavy automation implementation, capacity expansion and rapid change. Day 1 is never perfect. My job is to turn new capability into repeatable, disciplined operations. We've identified the gaps. We've addressed the root causes, and we're building the redundancy and process rigor required to scale reliably from here. I'm confident in the path forward and confident in the team's ability to execute it.

Let me turn this over to someone who's helped me get up to speed quickly, our CTO, Francis Richey.

Thanks, John. It's great to be joining the call today. I'm the Chief Technology Officer, and I've been with Eos for 11 years. I started at Eos when we were a 15-person company, and it's been a rewarding journey with an incredible team of scientists and engineers, developing the chemistry, battery, system and software over multiple product iterations. I'm a chemical engineer by training, and my passion is scaling and optimizing technology to build profitable products, particularly products utilizing electrochemistry.

Throughout my time at Eos, the market environment has evolved significantly, and Eos has evolved along with the market. We started with an aqueous zinc-based battery. As our technology continued to advance, we found more efficient ways to configure our systems and implement better power electronics to control performance, most recently with the Eos Z3 Cube.

Early customers simply wanted to buy a DC system of batteries, which they would integrate into larger AC systems. Now many want a full system where Eos provides batteries, software, controls, AC integration and site design, a complete project that can be easily installed and operated. Many of these storage solutions also require installation in an urban or suburban environment.

For more than 2 years, we've operated Z3 systems in the field and tested them even longer in our Edison test facility, learning how these systems operate in extreme environments. We've operated in very cold climates and also in hot desert environments with high winds that create sand and dust that can impact system operation. Look, the field is the ultimate proving ground, and this has helped us to improve system resilience and reliability as well as our software and controls, which led to the launch of DawnOS. DawnOS enables customers to manage and optimize system performance with individual battery monitoring and control to provide improved operability.

This is then where Indensity comes in. This is a product that we've codeveloped with our customers as we discuss their operating requirements and run load profiles in our Edison test facility. The same chemistry, same battery, same software and controls, different packaging and better performance. We're entering a new phase of growth and opportunity, one that differentiates Eos from any other commercially available battery energy storage solution. When we talk about Indensity as a differentiated product, we focus on 3 key elements: serviceability, cost and site energy density. The Indensity core significantly improves ease of serviceability. We took a page from the aviation industry and thought of an Indensity core like an aircraft engine that won't require on-wing service. Instead of disconnecting the entire system to service one piece of it, Indensity is designed for quick disconnect so that individual units can be safely serviced using a simple forklift, avoiding disruption of the entire system and allowing for uninterrupted operations.

This is an industry-wide advantage of our solution as we can now service each 133-kilowat-thour Indensity core without needing a crane, whereas competitors usually require a crane and the loss of multiple megawatt hours of energy during service or site-wide power augmentation. The modular core design allows units to be stacked vertically as many as 12 units high, significantly improving site energy density and allowing us to serve customers in areas incumbent technology simply can't access, such as in densely populated space-constrained locations where safety is often a key element in decision-making. This new solution allows us to easily configure systems to customer energy and space requirements.

This is an exciting time, and I've had the opportunity to lead Eos' evolution from cell testing to battery manufacturing to now providing battery energy storage systems integrated with advanced controls and software. I couldn't be more excited about the future and how our product meets the needs of our customers. Thanks, everyone. With that, I'll turn it over to Nathan.

Thanks, Francis, and good morning, everybody. Let me start on the commercial front, where we had a very active fourth quarter. And I want to start by looking at the results.

We ended the quarter with just over $701 million in backlog, booking nearly 1.1 gigawatt hours across 8 customers and 9 individual projects, representing a 9% sequential increase. During the quarter, we secured more than $240 million in new orders with a healthy diversification across commercial and industrial, distributed generation and front-of-the-meter utility scale applications. Now let me give you some background on 3 of these orders that highlight the operating flexibility of our technology and how we can work across the energy value chain in different customer use cases.

First of all, we signed a 50-megawatt hour master supply agreement with a developer in the Midwest to deliver projects that are supported by Commonwealth Edison's Distributed Generation rebate program. This program provides a $250 per kilowatt hour incentive for new energy storage systems, and we have already executed the first purchase order under this agreement with delivery being scheduled for later this year.

Now moving on to the second one I want to highlight and just as important, we signed 2 initial projects for systems to be installed at hotels in Florida with a developer that has a robust pipeline of additional projects, and we expect additional projects to materialize over the next 12 to 18 months.

And the last one I want to highlight, we secured an order from a global power company that is a focused renewable and energy storage platform to deliver a Z3 system to be installed at a national lab for integration testing. And we are actively working on large-scale opportunities with this customer, so this is a very meaningful project to show the Z3 performance capabilities.

All 3 of these projects highlight how we are building long-term partnerships that will scale into larger, more meaningful growth opportunities in the future.

Now turning our attention to the broader pipeline. We ended the quarter with a commercial pipeline of $23.6 billion, representing approximately 99 gigawatt hours of opportunity, up 4% sequentially and 64% year-over-year. Hyperscaler and AI-related projects remain a primary growth driver as we see customers looking for firm dispatchable capacity and behind-the-meter load smoothing solutions.

Leads specific to data centers increased by 50% quarter-over-quarter, while our active data center pipeline grew by more than 40%. Many of these opportunities are specifically designed for the Indensity solution. As disclosed in our public filings, Eos has been submitted for a 300-megawatt 8-hour project in the Brooklyn Navy Yard under NYSERDA's Bulk Storage procurement program.

We also have another project that was submitted under the same Bulk Storage program in ConEd Zone K with the customer that I highlighted earlier that is testing our product at the National Lab. From an application perspective, we are also seeing more opportunities shift toward colocation with generation assets, including both natural gas and renewables. These applications typically require longer discharge durations. And as a result of this shift, we are now seeing 63% of our pipeline consisting of 8-hour or longer systems.

I want to highlight PJM for a moment, where we've seen recent capacity market reforms with sustained elevated clearing prices that are improving the economics for long-duration storage. This aligns very well with our framework agreement that we have in place with Talen.

In addition, Bimergen, a long-term partner that is publicly traded on the New York Stock Exchange, announced their technical selection of the Z3 system for the 400-megawatt hour Redbird project in ERCOT. Following this project, there is an additional 2 gigawatts of project development pipeline that spans ERCOT, PJM and MISO that we are currently working on.

Overall, we are seeing very strong near-term backlog growth, combined with sustained long-term pipeline expansion, both of which are positioning the company very well as demand for integrated long-duration storage solutions continues to accelerate.

Now shifting over to the financials. We have a lot to be proud of. And as Joe and John mentioned earlier, we are focused on the work ahead of us that will deliver profitable growth. Now let's step back and look at 2025. It was a year full of real operational progress. We exited the year having full automated battery module manufacturing. We've implemented continuous process improvements. We launched DawnOS, and we executed multiple product component cutovers, all while scaling production significantly. These foundational moves are now clearly translating into financial performance.

We delivered our fourth consecutive quarter of record revenue and an additional consecutive quarter of gross margin improvement as production volumes ramped and subassembly automation went into production. In the fourth quarter, we generated $58 million in revenue, nearly double Q3. We exceeded the combined revenue of the first 3 quarters of 2025 as well as all prior year revenue combined since the company went public. We delivered $114.2 million in full year revenue, more than 7x year-over-year growth.

As John highlighted earlier, subassembly automation represents a meaningful inflection point in our manufacturing strategy. It expands available capacity, it improves product consistency and quality, and it enhances labor productivity, ultimately lowering overall unit costs. While this is only beginning to contribute late in Q3, what we saw in Q4 reinforces our confidence in how this business scales. As volumes increase, we are seeing improved fixed cost absorption, driving continued margin improvement.

Gross loss for the year was $143.8 million, a 408 percentage point margin improvement year-over-year, driven by significantly higher production volumes and continued product cost out. This quarter, we introduced a new non-GAAP metric, adjusted gross profit. This excludes stock-based compensation and depreciation and amortization, and we believe this provides a clearer view of core operating performance and better aligns us with industry peers. And on that basis, adjusted gross loss for the year was $128.5 million. 2025 operating expenses came in at $115.4 million, up 26% year-over-year, reflecting the targeted investments to support scaling initiatives and further enhanced product solutions.

Throughout the year we've invested in engineering, launched DawnOS and Indensity, we closed multiple financing transactions, all while bringing in high-impact new talent into the organization. Of the $115 million in OpEx, $25 million or 22% was comprised of noncash items, primarily driven by stock-based compensation and depreciation and amortization. The net loss for the year was $969.6 million compared to $685.9 million in the prior year.

Importantly, these results included $746.8 million of noncash impacts related to the fair value accounting adjustments, refinancing and other nonoperating items. The largest driver of the loss was from the 135% year-over-year increase in our stock price, which resulted in mark-to-market revaluations of both the warrants and the derivatives. Now as our share price continues to move, this line item will continue to fluctuate, and it is not tied to company operations.

And with that, we finished 2025 with an adjusted EBITDA loss of $219.1 million, showing an 812-point margin improvement. While up year-over-year in absolute dollars, the margin improvement and the 632% revenue growth demonstrate improving unit economics and operating leverage as we continue to scale the business. These gains were driven primarily by the operational efficiencies from increased manufacturing capacity and from higher production volumes.

Now turning to cash. We ended the year with just under $625 million worth of cash on the balance sheet, the strongest cash position in the company's history. Over the course of the year, we were very intentional about strengthening our balance sheet, and that really culminated with the refinancing that we completed in November, where we retired 80% of our existing 2030 converts, we reduced our interest rate by 500 basis points, and we added $474 million in cash. And we were able to free up an additional $11.5 million in restricted cash.

Additionally, with the exercise of our public warrants, we also generated approximately $80 million in gross proceeds. And as a result of all these actions and our current company outlook, we have removed the going concern language that we have had in our filings in prior years. This is a significant milestone that reflects the strength of our cash position and the continued improvements in our underlying operations.

Now taken together, 2025 was a foundational year for the business. We expanded customer relationships. We advanced key partnerships. We've scaled our production. We've implemented automation. We've improved our margins, and we've launched both a new software and a product configuration that builds on our existing technology while addressing the evolving market needs.

While there's still a lot of work ahead of us, the foundation that we have built positions us well for continued growth, improved profitability and long-term value creation. And with that, I'm going to turn the call over to Joe.

Thanks, Nathan. Let me wrap up with our outlook on 2026 as we initiate guidance on revenue. You can see the progression of our guidance from 7x. If you take the midpoint of the guidance range in 2026, it's 3x what we did in 2025. We feel confident about the guidance that we're giving, given what John and Francis have talked about. And when you think about this guidance, think of it this way, the $300 million is coming from backlog. And the range to the $400 million is tied to some of the bigger projects that we talked about as they go through the normal approval processes with the grid operators where our customers will be installing projects. We're excited about the things that you see, the NYSERDA projects that Nathan talked about, working with Talen in PJM, things that we're seeing as far as states like Virginia, ERCOT growth, data center growth. We feel confident that we'll begin shipping Indensity as we get into the second half, later part of this year. And that's how we go from the $300 million to $400 million.

As we go through the year, we'll give updates on where we are against that progress. And when you also think about this, one other thing that we've never given official guidance on what we've talked about a few times in earnings, we talked about becoming gross margin positive in Q1. Unfortunately, with where we wound up in volume last year, our material costs pushed out into 1Q. That's going to delay our path to profitability as we get into 2026. But we feel very confident on the projects that Francis is bringing from a technology standpoint that John is driving from a productivity and cost out -- material cost-out standpoint and Nathan delivering better efficiency out in the field that we will be gross margin positive in the second half of 2026. And we feel very confident on the guide that we're giving on the range of $300 million to $400 million.

So with that, I want to thank everybody for listening today.

And now we'll go to the Q&A portion, where we'll start off with some of our questions that came in over the [ SAE ] tool from our retail shareholder base. Okay. First one, "As part of Project AMAZE's 8 gigawatt hour annual production targets, where does EOS expect to be at the end of 2026 for annualized manufacturing nameplate capacity?"

Right now, we're targeting 4 gigawatt hours. That's in line with the customer requirements that we have. We really want to bring -- position Thornhill for rapid expansion. As we think about how we want to do this, the goal here is to be able to bring capacity online within the window of customer demand. And that's what John is trying to do, but it's not just the capacity of the equipment that we're installing, it's other portions of the overall supply chain. I'll turn it over to John here to add some comments. But the target for the year is 4 gigawatt hours of nameplate capacity coming out of 2026. That matches with where we see our backlog. And then from there, we'll be able to add capacity as required. I don't know, John, if you have anything you want to add.

Yes. Over the last few months, we've developed multiple automation partners for automation equipment to shrink lead times. We've developed a national building partner that can deliver a building in a short period of time that's in line with our automation commitments from an implementation standpoint. And then we've worked with our suppliers to understand where their inflection points are, where they have to add additional capacity and what their time lines are so that I can stay out ahead of Nathan on from an order standpoint.

And I would just add at the end here before we go to the next question. Look, we're not out chasing volume. We're building capability. We're building capability to reliably deliver. When you flip the switch in your home, you want the lights to come on and we want to deliver a product that enables us to do that. So we're going to be very disciplined on how we do that for delivering for customers and also disciplined about how we think about our working capital and cash balances as we also expand.

If I move to the second question, "What recent operational metrics and achievements validate achieving your Q1 2026 positive gross margin target? How much of the margin expansion is dependent on the Indensity transition versus efficiency gains on the existing Z3 module automation line?"

I think we talked -- I talked about the first part of that question on the last page when we issued guidance. Look, we feel like underlying this is a structurally profitable business that needs to get better at how it executes day by day, and we have a very clear path on how we want to do that. And we've got the leaders and the capability from a team standpoint and the equipment to be able to do that. I think the pages that John talked about and the operational page I had in there shows that structural profitability, we need to just execute to get there. The Z3 Cube is a profitable product. The Indensity core is adding to provide better performance to customers, allowing us to manufacture faster and allowing us to compete on price point head-to-head with any technology out in the market.

I don't know, John, if you want to add anything to that as far as how you see profitability evolving?

Yes. If I look at it from a lean methodology, all aspects of our operations have waste and opportunity for improvement. So I look at -- I talked earlier about downtime. So reducing downtime and increasing fixed asset utilization and labor utilization. Talked about yields, so improving the yields and reducing scrap. If I look at materials, we've got several projects that are going to reduce material costs, but not only reduce material costs, but also reduce assembly time and manufacturing time. We continue to look at ways to increase run rates, look at ways to increase efficiency. And then as we get into Thornhill, we'll have an optimized cost perspective from a material handling standpoint.

We're literally going from 2 miles down to 1,000 feet. So if you consider all the material handling that goes into there, there's a significant opportunity to reduce cost in just that one item.

And I think just closing out, like John brings up a great point on Thornhill. Over time, we're going to want to consolidate the footprint into one location to capture all those synergies, and we'll be -- that will be part of the plan as we move forward and think about expanding.

With that, we'll wrap up with the SAE questions. And operator, we'll turn it over to our sell side for any Q&A.

[Operator Instructions] Our first question comes from the line of Stephen Gengaro of Stifel.

My first question is on the guidance and maybe 2 parts. One is you, a couple of months ago you had a pretty high expectation for the fourth quarter. And clearly you fell short. And now we're looking at a pretty big ramp in '26. How do you think about the components of guidance and sort of derisking the parameters you put out versus guidance historically?

Yes, Stephen, thanks for the question. First, you look at the range, as I talked about when we talked about the guidance in and of itself, we're looking at the improvements that John has implemented coming out of fourth quarter, looking at the backlog of orders that we have to get to the bottom end of the range, then looking at the opportunities that we're working on, the fact that we're bringing a new line in to give us the top end of the range. But we tried to really look at -- we tried to really look at how we can change our discipline as a company to not have happened what happened in 2025. The range is $100 million, the midpoint is $350 million.

What hasn't changed about the company is the demand that's out there for the product. We're trying to do in 2026 is better control our scale, get the manufacturing throughput quality and margin expansion that we need and really look at like where we think we can land without going for like a degree of difficulty that's a 10, but coming in with something that we can manage to over time.

Okay. Great. That's helpful. And then just -- I imagine this is correct, but when we think about the quarterly growth, I mean, I would imagine that 1Q would be above 4Q, but the low point and then escalate throughout the year. Is that a reasonable pattern?

Yes. Well, look, Stephen, so part of what we have coming in -- and we don't give quarterly guidance, but from a standpoint of coming into the year, we're coming off a high point. We're delivering to customer schedules. I think we'll be around the fourth quarter number as we look at like what we have to deliver to customers, and there's some -- there's also commissioning revenue in there as well and then from there sequentially grow.

Our next question comes from the line of Julien Dumoulin-Smith of Jefferies.

Quick question. Just going back to the comment about the $300 million to $400 million range. Can you guys comment a little bit about like what exactly those bigger projects that you're talking about are? Like which ones in particular seem particularly right, right, again, just to maybe track against the milestones this year and what would materialize? And also, if you can speak a little bit against, you've got a materially larger backlog in aggregate. What's the duration of that backlog when you think about it, just given that, call it, $300 million of it is burning off this year, if you will?

Yes, Julien, great question. Look, I think we go back on the material large stuff. Look, I think we all know the industry needs power, needs power quickly. But at the same time, we still operate in a framework where approvals and queues are long. So we're kind of hedging that. But like Nathan talked about 2 large projects in NYSERDA that when approved by NYSERDA as part of their Bulk Storage buy would go into delivery almost immediately. So like that's 2 of them in there.

We've talked about PJM and what we're doing with Talen. There's other projects that we have that we haven't discussed with large hyperscalers that could potentially come in. And then Nathan talked about what appears to be -- when you look on the surface, they look like small projects, but they're small projects with a big pipeline of opportunity that you deliver and grow and continue to deliver. And we just got to work through that. We'll keep everybody updated on that as we move forward from there.

Got it. And then just if I can follow up there. The defense space seems intriguing here. Can you comment about that end market and the opportunity you see there? What does the project look like in that space, size, duration? And just even elaborate a little bit more about what you guys were talking about a second ago in the timing of seeing some of that come to fruition. Again, how -- what does that look like?

So defense, like I think you start off with NDAA, right, which is how the Defense Department of War purchases. In the NDAA, they're being told to buy American products. And I think we have that American product. As we go through that, there's a lot of things we have to go through as far as working with different branches of the government to get approval. I think a big thing that helps accelerate us is the due diligence process that we went through with the Department of Energy to get our loan.

But like we're working through across all branches of the military to see what the needs are. And like what we're looking at is what do they need and they also have -- there's also large power growth that they have and how do we meet those needs and then we go through and show them how the product is. But also as you work with the military, there's things that we're doing to make sure that we hit all their requirements because we want to hit the ground running. But that's something that we'll continue to work on, and we are working on, and we do spend a significant amount of time down in Washington walking everyone through what the technology is capable of.

Got it. Excellent. And then lastly, if I could just ask, just given where you are coming out for '26, how do you think about the ramp of Line 3 and 4, right? So how do you think about when and the timing and scaling of that, right? Obviously, you got Line 1 and now Line 2 here. But 3, 4, it's more of a '27 question, right?

Yes. And I think, Julien, like this goes back to disciplined execution, right? It's a great question, right? So John is taking us into a new building. The new building changes the game from a throughput efficiency and cost. Turtle Creek is a fully functioning factory that's up at 2 gigawatt hours of production. It hit its nameplate capacity coming out of 2025. But if you have a lean mindset, you're constantly looking at how to get things better, how to improve on things. That goes with how you operate your manufacturing, but also how you implement capacity expansion. So what we've told John is come up with a plan that we can execute and implement lines within the window of when a customer orders to when they ship. So as things come in, we'll be able to do that.

What John has done in his time -- not only did he increase output 80% in the fourth quarter, if you look at quarter-over-quarter sequential manufacturing output, he also went in and revamped our automation partnerships, got us in with Tier 1 automation providers, broke up how we were doing the different pieces of that and positioned those suppliers to be able to come up with a framework agreement approach with them where we can put a signal into them and they can deliver faster than what we're doing on Line 2 today.

Line 2 today, part of what's happening there is it's a new building. And there's a lot of work that we got to go through, and we want to make sure that we get that right and we get that ramp right and the transition and balancing between the 2 facilities.

Our next question comes from the line of Mark Strouse of JPMorgan.

Just curious if you can comment on the competitive environment that you're seeing recently. Obviously, you guys are making good progress with your backlog, but there's one of your publicly listed peers that's traditionally in lithium-ion, they have really been talking up their long-duration pipeline in the last couple of quarters. There was a very large project, long-duration project up in Minnesota that just recently got announced. Just kind of broadly speaking, I know those are completely different technologies in both of those cases, but just kind of broadly speaking about the competitive environment would be great.

Mark, I think, first off, it points to what we're showing in our backlog about longer duration discharges coming to fruition. I think it's great to have other companies that are doing it because it just goes to show that what we've been talking about for 5 years, the market is now there. I've said this many times, like there's many different use cases, and I always draw the correlation of energy storage is going to look like gas turbine technology over time. You have different types of gas turbines that do different things with different efficiency points. So I think what was announced in Minnesota, delivery in 2028 is a great example of people looking for longer duration energy storage, longer than what we do.

At the same time, Nathan showed like our pipeline is up by -- above 40% for longer duration. And we -- and it has now become 40% of our pipeline, sorry, I misspoke, but like it's becoming more and more. And I think like established players, there's a market out there for that product. I think we've come up with the work that Francis has done and the team, we've come up with a solution that delivers in that 4- to 16-hour spot, which is going to be very important.

And look, we've been running load profiles here in our test facility in Edison, New Jersey using the load profiles of data centers. And our technology matches up great with that. So we're encouraged by that, but there's a lot of demand out there, and I think it's great. There's other players. It's going to be a competitive marketplace, and I think we have a product that competes.

Our next question comes from the line of Craig Shere of Tuohy Brothers Investment Research.

So first, can you opine on the potential margin deltas, gross margin deltas between U.S. and international orders? Does American Made help in any way internationally to the degree some trading partners want to right-size trade balances on a national level? And can you give some color on the time line for that foreign power company national lab testing and the level of prospective order flow should they deem you're having the most optimal solution?

Yes, Craig, just a couple of things inside of that. Like I think where we're seeing interest in our product internationally has less to do with politics and more to do with performance. I think people are looking at what the product delivers and less about trade balances. I think having a product where we go through and talk about the intrinsic value of it is what's attracting our customers, whether that's domestic or international. I think we're starting to plant seeds starting off in Germany. And obviously, we have a big pipeline of opportunity in the U.K. that Nathan talked about.

Just on your last point here, like the customer that Nathan talked about is a global utility that's doing testing in the United States at a lab that is tied to a project for the NYSERDA program. So like we're going through that -- and by the way, that testing is great. Like we love doing that because it gives us data to show people about how the product performs and put this through its paces. And that's where doing stuff like this, that's what brings out Indensity and improved performance on the product that we have out in the field.

And would one assume that international sales are going to be slightly lower gross margin?

No, I wouldn't assume that.

Okay. And my last question, and I apologize if my quick math is incorrect, but it looks like you burned through maybe $65.75 million in operating cash flow before working capital changes in the quarter. Thoughts about tempering that bleed as you move into positive gross margin in the second half of '26.

Yes. Look, look, our goal, as Nathan talked about, like we've capitalized the company. We are focused on being good stewards of that capital. I think as you look at that, one of the reasons why we removed the going concern for the company this quarter is that we see a trajectory to be able to manage the company strategically and for the long term. And then obviously, like there was a ramp into a build plan that then levelizes, but then we'll ramp again. So we manage through that. But like as we look at where the company is, we have cash to be able to grow it over the long term.

Our next question comes from the line of Jeff Osborne of TD Cowen.

Just a couple of quick ones. I think last quarter you mentioned that the yield on the bipolar line that started, I believe, in July was 98%. I was wondering what the fabrication yields were in the fourth quarter.

Go ahead. Yes, John, take that one.

So the bipolar yields in the

[Audio Gap]

growing from there. So we're basically within January hitting the target. We've reduced that significantly, and we'll continue to do so. And we did not anticipate that with the automation. The goal for that automation is 97% first pass yield, and we're well on our way there.

Perfect. And then can you just touch on -- spend a few seconds on what sort of field performance has been, safety, reliability, commissioning schedules relative to expectations?

We're not hearing a response. [Technical Difficulty]

Yes, sorry about that. Don't know what happened.

Okay. Jeff, did you want to repeat your question in case they did not hear that.

Yes, sure thing. I was asking about, can you just spend a few seconds on sort of field reliability for units that have been shipped over the past 6 to 9 months, what commissioning cadence has been, safety issues, installation timing, et cetera, just as we think about that trend over the past 6 months or so as it relates to the guidance that you've given. I just want to understand what that lag is in reliability and uptime has been.

Yes. So Jeff, I don't know if you heard -- I don't know where we dropped off before. Look, we continue to go through and execute on the field, bringing a new product online, operating -- we were doing our operations meeting this morning and continue to see good cycles out in the field, as Francis talked about. We continue to learn on each cycle and incorporate those things back into the installed base from a commissioning cadence standpoint.

It's a mix and cadence of things where there's permitting challenges, there's bringing the site up to speed, there's getting our stuff up and running, there's integrating everything, and we work through that with the customer on a customer-by-customer basis. But if you go back to that page I showed, we shipped to 10 customers, recognized revenue on 18 customers, and that ties back to the commissioning that we have.

Got it. And just very quickly, are you capturing higher price as the duration use case extends out to 6, 8 hours and beyond? Or is pricing consistent with a sub-4 hour relative to longer duration?

Well, I mean, Jeff, I think it all depends on how you look at that. I think when you look at the value proposition of Eos and you look at our ASP in the backlog, the ASP in the backlog is higher than what you would expect for a shorter duration product. What we do is we sell on a levelized cost of storage basis, which is a little bit higher on the CapEx side, but a lot lower on the operating cost side, and that's what the customers evaluate to make their purchasing decision.

I am showing no further questions at this time. I would now like to turn it back to CEO, Joe Mastrangelo, for closing remarks.

Yes. Thanks, everyone. And again, thanks for the question and the continued engagement. A couple of points I want to close with. First, demand for long duration, domestically sourced energy storage is not a question. The grid is changing. The load growth is real, whether it's AI electrification, industrial reshoring, these are structural changes to the power grid in the United States, and they're not cyclical. The market is moving towards solutions that match what we bring to the market, and that's how we've positioned Eos for the long term.

Second, 2025 was building a foundation, strengthening our balance sheet, scaling manufacturing, standardizing our product architecture, improving operational cadence. We delivered great revenue growth. It reflects the progress that we've made. It's not linear yet, but it's directional and it's improving.

Third, 2026 is a year where we have to show disciplined execution. Our guidance reflects what we believe we control as we sit here today, and we'll keep everybody updated as we go through the year and where we wind up. I feel good about where the team is positioned. And as execution improves, predictability improves. So we know we've got -- that's what -- that's ultimately where we need to focus on, and that is where the team is focused on a day-to-day basis.

And then profitability for the company, look, it's a scaling equation. Automation how we move material, efficiency, bring a lean mindset, finding waste, eliminating waste, resetting it, going back and doing it again and again and again, you see the sequential improvement in margin that we need to continue until we become margin profitable, and that's the goal of the company for -- to deliver long-term value to both shareholders and customers.

Look, we strengthened our liquidity. It helps us operate the company more strategically. It gives us runway to be able to execute. Eos is an infrastructure business, right? Infrastructure businesses are built on discipline, consistency and operational trust, that's what we're building, and that's what we have to show and deliver. We appreciate the questions and the focus and really the attention to Eos across the board of all of our stakeholders. And we look forward to demonstrating this continued improvement in progress quarter-over-quarter as we build a great energy infrastructure company. Thanks for listening today.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

I think about energy pretty simply. Right now works really well on some places and not well at all and others and even where it does work, it's understrength. Demand keeps rising, expectations keep rising. The system wasn't built for today's reality. We built grids around predictability, around the idea that you could plan everything in advance. That's not the world we live in anymore. What worries me is that progress still depends on where you are, whether you're in the right place on the right part of the grid. It shouldn't work that way. Power shouldn't be the thing that slows us down. It shouldn't be the reason a city can't thrive or an industry can't move faster or data center capability can't grow.

To me, energy working everywhere means you don't have to think about it. That's where energy storage changes everything, not as a bolt-on or a backup, but as the foundation of how the system works. When storage is done right, variability stops being a problem. You could smooth it, shape it, dispatch it. And once energy stops being constrained, a lot of other things open up. You can build where it makes sense. You can scale without hesitation. You can move faster without breaking things. That's the future that everyone at Eos is focused on. It's not flashy, it's not hypothetical, just energy that shows up, does it's job and lets everything else move forward because when energy works everywhere it's stops being the limit and that changes everything that comes next.

[Presentation]

Trying to build what comes next with yesterday's tools only gets you so far. At some point, you have to step back and ask a basic question. If you were designing an energy system for today, one that actually reflects how the world works now. Where would you start? We decided to start at the smallest level from the electron up. That led us back to zinc chemistry. We refined it, we hardened it and we built the Z3 module, safe by design, durable by nature and flexible enough to scale without breaking. The hardware alone isn't enough anymore. So we built intelligence right into the system. Eos DawnOS is our controls and analytic platform. It gives every module the ability to sense what's happening, respond in real time and adapt as conditions change. Every step we took, every decision we made, all pointed in the same direction, EOS Indensity.

Indensity is a gigawatt energy storage architecture, designed for the reality we're in, not one we used to plan for. It's built with what we at EOS call spatial intelligence. Spatial intelligence, using space intelligently. So it fits alongside real places, real people and real infrastructure. It scales, it flexes. It's safe and it's dense, dense enough to move past the limits of what we've been dealing with. We're delivering roughly 4x the energy of most other incumbent systems, targeting a gigawatt hour per acre, bringing high-density storage in places where it simply wasn't possible before. At the center of it all is the Eos Indensity Core, a completely redesigned modular building block for how power gets built from here on out.

And now let me bring out someone who's put a decade worth of ideas into Indensity, Eos' Chief Technology Officer, Francis Richey. Francis?

Thanks, John. As the energy storage industry has pushed for higher and higher energy density inside standard 20-foot shipping containers, an unsurprising set of practical challenges has followed, exceeding weight limits during transport, safety concerns when so much energy is concentrated in a very small space, real serviceability issues when modules become so large and are packed so tightly that access becomes difficult.

Rather than accepting those trade-offs, we stepped back and took a fundamentally different approach. We chose to design smaller to build units that would be lighter weight, easier to service and with improved safety. That design philosophy led us to the Eos Indensity Core. Each Indensity Core is a compact, fully integrated energy storage unit, a single string of our Z3 battery modules combined with our DawnOS advanced controls and software. Power control is built into every single unit as is onboard cooling. It's outdoor rated, self-contained and designed for simple, straightforward installation. Simple to place with a forklift, easy to service, fast to connect into an electrical system, and it can be stacked vertically, which ultimately enabled our Eos Indensity solution to deliver much higher site level energy density than traditional systems, roughly 4x more per acre.

Indensity changes how we think about space. It transforms tight footprints and vertical real estate into usable energy capacity. Every configuration maximizes what a site can deliver while giving customers control over how their site is designed based on how much energy they need. In rural settings, the Indensity Core can be configured 3 high, enabling EOS Indensity systems to reach roughly 250-megawatt hours per acre. In more constrained suburban environments, configuring 6 high enables about 500 megawatt hours per acre.

And in dense urban environments where land is a premium and storage is essential, the system can scale up to 12 high, achieving roughly 1 gigawatt hour per acre. The process is straightforward. A simple steel superstructure is assembled first and Indensity cores are slotted into place, allowing scale without complexity. Indensity is built around flexibility in real-world operation. The Z3 battery and DawnOS control system allow customers to charge and discharge from 4 to 16 hours and beyond. The system supports both partial and multiple cycles per day as well as responds to grid power demands in as little as 5 milliseconds, all while taking advantage of inherently long cycle life, low capacity fade that static aqueous zinc-halide batteries are well known for.

Indensity powers through the toughest operational requirements. It allows for a large temperature window with minimal auxiliary load and no calendar degradation. The system is happy, idling at 0 volts and 0% state of charge indefinitely without the need for cooling, heating or maintaining a minimal voltage or state of charge during these idle periods. Safety is a foundational piece to Indensity. It is not an add-on. The Z3 battery chemistry uses a nonflammable aqueous electrolyte.

Eos Indensity core operates at the sound level of a quiet conversation, uses built-in cooling fans and its major components are recyclable. At scale, Indensity continues to prioritize safety. No exposed metal, all electrical connections and circuit boards are protected, and there's generous spacing between modules to support airflow turnover as well as cooling. Protective controls are handled by DawnOS, our state-of-the-art battery management system designed specifically for Eos chemistry. Each module can be isolated down to 40 volts and each Indensity Core can be isolated independently using a DC-DC converter. Taken together, these features allow Indensity systems to operate safely and sit alongside high-value infrastructure and within dense urban environments.

This isn't the vision of one or the idea of another. This is a team of professionals that have been working on energy storage for a long time, more than 15 years. And during that time, we've learned where the limits really are and which ones don't actually need to exist. We've pushed those boundaries, tested assumptions, Indensity is what comes out of that work. It's a system built to grow to adapt as conditions change to respond to demand before it becomes a problem, not just for one application or one place but wherever energy actually has to perform. This isn't storage for storage sake. It's energy that keeps up, energy that supports bigger ideas, tougher missions, and faster progress without asking for compromises. The system where energy isn't the thing holding you back, it's the thing that propels you forward. And that's what Indensity is about, not a promise, not a vision, something real, something ready, something limits.

Hello, and welcome to the Eos Energy Third Quarter 2025 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions] Thank you.

Now, I would like to turn the call over to Liz Higley, Vice President of Investor Relations. You may begin.

Good morning, everyone, and welcome to Eos' third quarter 2025 conference call. Today, I'm joined by Eos' CEO, Joe Mastrangelo; COO, John Mahaz; and CCO and Interim CFO, Nathan Kroeker.

This call, including Q&A, may include forward-looking statements, including, but not limited to, current expectations with respect to future results and outlook for our company. Should any of these risks materialize or should our assumptions prove to be incorrect, our actual results may differ materially from our expectations or those implied by these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to are described in our SEC filings. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made.

We undertake no obligation to update these statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law.

Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to U.S. GAAP financial information is provided in the press release.

Non-GAAP information should be considered as supplemental and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies. This conference call will be available for replay via webcast through Eos' Investor Relations website at investors.eose.com.

Joe, John and Nathan will walk you through our business outlook and financial results before we proceed to Q&A.

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

Thanks, Liz, and welcome, everyone, to our third quarter earnings meeting. I'd like to start off on our classic page, our operating highlights. I really want to talk about -- Nathan and John will dive into the numbers here a little bit, but I want to spend a moment on the commercial pipeline and the orders booking and the recent announcements that we made to just talk about the team that's been at work here. Nathan moved over to be our Chief Commercial Officer back in the spring, and you're starting to see the results of both him and Justin Vagnozzi, who's been here for almost 2 years. You're seeing the pipeline going up. You're seeing MOUs and getting on the same side of the table with the customer transferring into orders, and you're seeing those orders go into backlog and then ultimately out the door shipping.

At the same time that, we've won a couple of orders here after the quarter closed, we signed a very important strategic agreement with Talen Energy that, I'll talk about a little bit further, how we're thinking about this on the subsequent page in the deck.

Around revenue, look, John has been here with us for 60 days, and he's going to go through the details of what he found and what he's done in those first 60 days. But we've had a team on the field here for the last year. Jason Greggs, Josh Payne, Jessica Troiano have been doing a fantastic job helping us position the supply chain, help us position cost to get to profitability and really position us to scale this business.

You've seen our best quarter-to-date on revenue in the history of the company. It's a phenomenal performance by the team in the third quarter. And more John will talk about how we started off fourth quarter, which really leads us to reiterate guidance, which I'll talk about at the end of the presentation.

On the cash side, you saw that we hit our last cash milestone around customer cash. And again, this is attributable to 2 hats that Nathan wears, being the Chief Commercial Officer, working on both the order side and the project side along with being the CFO, we brought in $43 million of customer cash here already in the fourth quarter. The business is becoming more stable and being positioned to scale as we move forward. It's an exciting time to think about what the future holds.

And I want to move to the next page to talk about some of the announcements that we made a few weeks ago. Look, I know when we talk about our new building, people are going to ask why now? Why didn't you do this to begin with. And I just want to take a moment to talk about where we were and how we wound up where we are.

We started off in Turtle Creek in 2019. We took a building that was very low cost and we expanded into a footprint with our landlord. That footprint, as we expanded, is not optimized. This new building gives us an optimized footprint to build a world-class factory to take cycle times down to drive cost down and to get this product where it should be as a market leader, both on performance and cost. I'm excited about what we're going to be doing in our new factory as we get into next year and how John is positioning us to expand capacity to meet demand.

On our new software hub in downtown Pittsburgh, it's an honor for us to be part of the revitalization of downtown Pittsburgh. It's an honor for us to be sitting here and thinking about coming to Pittsburgh, because we knew we could build things and now tapping into the brain power and the ecosystem to make how we're building things even smarter.

Being able to recruit, when you look at the work that we've done and Michelle Buczkowski coming in as our Chief People Officer last year. When you look at our company, our turnover rates are in line with high-growth start-up companies. And we brought in a lot of talent to make this company better over the last 24 months and particularly in the last 12 months.

I'm excited to be moving into the new building. You can see a rendering of what the building will look like. We're not taking the whole building. We're taking 3 floors, but it will be branded as an Eos Building. And we look forward to the day where all of our shareholders will be able to watch a Pirate's game or a Sealers game and see that Eos logo in the skyline. It's very humbling to think about where we've come from but it's also very exciting to think about where we're going.

So, if we go to the next page, I want to talk about the market itself. So, I want to take a second here to talk about what we're trying to do as a country and as an industry and ultimately globally to truly scale into the power requirements that we need to future growth and future economic growth around the world. We're in the third energy super cycle of my career. What I'm hoping for in this energy super cycle is not that we just do the same things we've always done of adding capacity in big chunks and then looking to see if we've met demand. I think we can do this smarter.

I think energy storage makes this expansion even better. I've said this before, our systems don't care if you put a brown electron in from traditional power generation or a green electron in from renewables. They take electrons and store them for when they're needed. So, what does that mean? Well, let me just talk about -- put for a second, go back to my old life before Eos and talk about traditional power generation. Traditional power generation, it's installed for peaks. You build capacity for a peak once a year that may happen. The capacity factors of how that generation works are in the 33% to 65% range. That means the assets are sitting idle more than they're probably actually running.

So what does energy storage do? For every 5% that you can increase the capacity factor of a gas turbine of steam-fired coal plant of a nuclear facility or pumped hydro storage, every 5% increase in capacity factor is like powering 50 million homes. What does that mean? Let me put that in context. That's powering for 1 year, California, Texas, New York, Pennsylvania and Illinois. We need power, we need energy storage and we need energy storage now, and that's what we're positioning this company to deliver.

At the same time, if you look at renewables, let's say you say, renewables, inefficient, they have intermittency. But just take the installed base of the renewables we have now. Don't add anything to it. Let's imagine that we don't add any more wind or solar to the power infrastructure. Just putting energy storage systems on that existing installed base. So what's curtailment mean? Curtailment means that the wind is blowing or the sun is shining and there's no demand for those electrons.

Adding energy storage at those points in time, you can add 10 gigawatt hours of BESS and power 750,000 homes for a year. That would be like powering Philadelphia for the year. Don't add any additional capacity, put energy storage alongside of it, make our energy infrastructure more efficient and make it available to consumers and industries when it's required.

When you think about what all that trials and tribulations and variances and how things work on the upfront generation side, that has an impact on how we deliver the electrons to the end user. We have a lot of congestion on our grid, congestion, think of it as a traffic jam. Energy storage on both ends of that traffic jam on the source and the use allows you to decongest and reduce cost in the overall system.

Take what we have, make it more efficient, make it lower cost, deliver the electrons when they're needed and generate those electrons as efficiently as they possibly can. Now we're talking about this super cycle being driven by AI and the build-out of hyperscalers. And yes, they're creating new demand in the system. But at the same time, we have to deliver that demand at a cost-effective way so that consumers don't see their energy prices go up.

The way you do that is with energy storage. And what's our value proposition as Eos? And I'm going to talk about Eos. We need all types of energy storage, but let me specifically talk about what we bring as Eos. If you go with a traditional cube solution that we've been putting out in the market with 1 acre, you can deliver 100-megawatt hours of cubes. If you take that same 1 acre and do an in-building solution, because of the way of our architecture of our product and how it operates, you can deliver a gigawatt hour in 1 acre. That's 4 times what is out in the market today. That's being able to take bulk storage available today, bring it to the market, get that running and get what we have operating more efficiently and deliver more electrons when they're needed. So, we can win the race of AI.

At the same time, our round trip efficiency, I'm going to show you data on the next page. Our round trip efficiency is in the mid-80s to the low 90s, but that's across a very wide operating range. There's no other technology that can deliver that type of performance over that wide of an operating range. Not only do you have to sit there and say, do a 12-hour continuous cycle or 16-hour continuous cycle.

You want to do a 4-hour cycle than a 5-hour cycle later in the day, our technology will do that and deliver that same round-trip efficiency independent of what the ambient temperature is. So, we have a wide operating range, ability to go across multiple temperatures and we can respond to fluctuations in demand. So, think about this 5 milliseconds. I can't even -- that's faster than snapping your fingers.

So, if demand changes or excess capacity comes on, our system responds 5 times faster than what the grid requires. It's leading in the industry in that area. At the same time, our system will run for 25 years, and you don't need to add extra capacity in there because we have very low degradation.

And then our auxiliary loads. A lot of the times when you hear things about high round trip efficiency of other technologies, they don't tell you about the power they need to keep them cool or to keep them safe. We use 1% to 2%. So, when we talk our high 80s to low 90s, low 90 round trip efficiency, we're talking about that in the terms of including the offloads. That's a net number that goes on to the grid. And they're non-flammable. And we'll -- and I've talked about this before and talk about this again.

Yes, if you overcharge our battery more than 200%, you run the risk of the electrolyte heating up and having steam come out of the battery. That steam is nontoxic. We tested it as this has happened. It happens. It's happened. It's a safety feature of our battery. It's what makes it non-flammable. And we've been able to operate through those incidents, basically replace batteries, keep the system in place and start operating again.

Now, let's go to the next page and talk about operations, Z3 field performance as of the end of October. This is really, really encouraging with Francis Richey and the team in Edison, these guys have been with Eos for nearly 10 years. They've developed a product that is a killer product out in the marketplace. I'm proud to see these initial results of how we're operating.

If you look at the bottom left-hand side, you can see the average performance of the 4 sites that are operating. And if you look at the right-hand side, you can see the top performance of how they're operating. But what I'd like to point out to you is look at that wide temperature range. Normally, like if you're an engineer and you're a technologist listening to this, you know thermodynamics. You get to extreme temperatures, performance usually drops off. But look at our performance against those fluctuations in temperature. It's relatively flat. More to come on the performance of this product. We are very encouraged about what we're seeing and feel like this product meets all the demands I talked about on the prior page.

Now, let's go to my last page here before I turn it over to John, our improved operating performance. Look, you see the performance and the increase in revenue quarter-over-quarter-over-quarter. This is all about taking production bottlenecks out, eliminating single points of failure in manufacturing, bringing someone in with John's experience is only going to make this better with time. We were able to double our revenue number from second quarter into third quarter.

And going into fourth quarter, we feel really confident on what we're seeing in the first 40 days of the quarter as far as how we're going to be able to execute for the rest of this year and going forward. But on the right-hand side, what's most important for everyone here on the phone is our ability to generate returns on that volume. And if you look at those lines, those lines are rapidly approaching breakeven and ultimately profitability. And what's most important is you see the gap between our gross margin and our adjusted EBITDA margin closing. That's because we've always talked about the ability to scale this business on a low-cost base and deliver profitability.

I'm excited about where we are. We still have a lot of work left to do. We have a great product. There's going to be more to come. We're really excited. John and Nathan will walk through both operations, commercial and financial. But this was a really good quarter delivered by a team that's wired to win and wants to be the best in the industry.

And with that, I'll turn it over to John to walk through operations.

Thanks, Joe, and good morning, everyone. Really excited to be here today to talk to you about Eos. It's been just over 60 days since I joined Eos. And as an operations leader, there's truly no better time to join a company than when it is set up for large-scale growth.

Before diving into what the team has accomplished and what we're focused on going forward, I just want to briefly introduce myself. I bring more than 35 years of experience leading large-scale, high-quality, efficient and cost-effective operations around the world. I worked for organizations that are recognized for world-class execution. And I not only know what world-class looks like, I have also built and led teams to deliver it. My experience has taught me how to drive operational excellence, building systems that are efficient, repeatable and cost effective at scale. Those lessons translate directly into what we're doing here at Eos.

What's impressed me most about Eos is the simplicity and scalability of the product, a single product SKU and a highly automated manufacturing process tailored around it. The team has done the hard work, improving the process, tightening the supply chain and hitting cycle time milestones that demonstrate this technology can scale.

As we move into the next phase of growth, my focus is on driving consistency and repeatability, creating a global playbook that allows us to replicate this model wherever our customers need long-duration energy storage. We see meaningful opportunities to take cost out of every aspect of the product, not just materials, but labor efficiency and overhead, as Joe has discussed many times on prior calls. Through process optimization, automation, layout design and lean principles, we'll be able to increase revenue per head, square foot and CapEx.

But before I get into what's next, I want to acknowledge the environment I walked into. The foundation of any company is its people, and it's clear that we have at Eos is a team that's hungry to win. I inherited an operations team that's intelligent, experienced and driven to take care of their employees, delight their customers and deliver for their shareholders, a culture of teamwork, winning the day and continuous improvement, a design team that has built an exceptional product and continues to work closely with the operations to enhance quality, efficiency and cost.

So, let's take a look at what the team has accomplished in the 2 months I have been here, focusing on 5 key areas: safety, quality, cost, output and capacity expansion. Safety is our top priority. We reduced safety incidents by 84% from Q2 to Q3 and year-to-date are 41% better than industry average.

In September, we did 4 times the production volumes that we did in August with 0 lost time safety incidents. My goal is clear. I'm entrusted to keep our people safe and send them home to their families each and every day. Quality. We have made significant progress and decreased battery defects by 45% from Q2 to Q3.

Bipolars account for about 70% of the total battery defects. And with a complete cutover from manual to 100% automated bipolar production at the beginning of Q4, we expect to drive that down by another 63%. With cost, we have a single product to focus on. What does that mean? I'll give you a couple of examples.

One, we have 5 buyers. The activity level on cost has not changed, whether we buy for 1 line, 10 lines or 50 lines. The organization is already scaled in all key areas for growth. Two, our supply base consists of 9 key suppliers making up 80% of our bill of material. To date, we have never done a large buy-in buy with our suppliers because of uncertainty around capacity installation and production ramp. We are now in the position to do so.

We hosted these suppliers in Turtle Creek a few weeks ago, where we reviewed our capacity forecast and opportunity pipeline. As they ramp their production, they will have the ability to get more efficient and realize cost absorption. With that as the backdrop, we expect to achieve further cost out in sync with the volume increases. With this and other cost initiatives, we expect to exit Q1 gross margin positive.

Moving to production output. We're now positioned to deliver a significant step change in Q4. In Q3, our automated battery line operated at 15% capacity utilization of its full 2 gigawatt potential, limited by subassembly bipolar equipment availability.

In Q4, we expect to ship 3 times the volume we did in Q3. We'll accomplish this by increasing capacity utilization by 167%, ramping additional shifts along with having all 8 bipolar cells in full production. My team is laser-focused on hitting the output to achieve our revenue guidance and we're set up to do just that.

In October alone, we've already shipped 179% more tubes than we did in the first month of Q3. And in just the first 4 days of November, the team has already shipped 83% of August total volume. Let me say that again. What took us a month to accomplish just 3 months ago will now take us only 6 days.

Now, looking ahead, our next big step comes with the new building and the installation of line 2 expected in spring of 2026. What excites me here is how we'll be able to utilize the layout and the opportunities we have to be even more efficient. The space is designed for single-piece flow, enabling lower cost and higher throughput.

Let me give you an example of what I mean by this. Today, we're moving product across 3 floors and 2 buildings and from start to finish, which translates to materials traveling 2.1 miles. There are significant material handling costs associated with this.

In the new building, we expect this cost to decrease by 86% as we will have a one floor single piece flow in our end-to-end operation. This not only improves cost but gives us the ability to increase throughput. You've heard us talk about having a battery come off the line every 10 seconds. What we're focusing on now is reducing that time even further. With changes to line 2 design, we should be able to further reduce cycle time. Once validated, we will then go back and retrofit line 1. We will continue to implement enhancements to the automation equipment to reduce cycle time.

Finally, we're preparing to scale by diversifying our operations' supply base. With multiple partners in place, we're positioned to have our suppliers build the line every 90 days if needed. That flexibility gives us the ability to stay ahead of demand and deliver for our customers when I get the green light from Nathan.

With that, I want to thank everyone for their time, and I'll let Nathan talk through the commercial highlights.

Thanks, John. It's been great working with you and having you as part of the Eos team.

Look, I've been looking forward to being on the call with you today and sharing what's been going on commercially. It's been an exciting few weeks since John has joined us and you can feel the momentum building across the organization. Let's start with the commercial front where we've made significant progress since we last updated you.

Just last week, we announced our first purchase order with Frontier Power, a 228-megawatt hour deal supporting several long-duration storage demonstrations across multiple markets. This first order is the initial movement of Frontier MOU volumes from pipeline into backlog. This PO is very strategic as it is for deployments ahead of Frontier's U.K. Cap-and-Floor projects. That means we're getting systems in the ground early and showing the market what our technology can do ahead of the Cap-and-Floor projects as we continue to support Frontier on their submissions.

To put the Cap-and-Floor program in perspective, there were a total of 177 projects submitted by various developers but only 77 advanced to round 2, and every single one of the 16 projects that Frontier submitted using our technology moved forward. That means Eos is represented in over 20% of the projects that made it to round 2.

We have nearly 11 gigawatt hours in the second phase, more than double what was anticipated when we signed the MOU with Frontier earlier this year. That's a powerful endorsement of our technology and our ability to deliver at scale. And just to remind everyone, under Cap-and-Floor rules, projects must deliver at least 8 hours of discharge, which plays directly to our strengths in long-duration storage.

We recently announced a 750-megawatt hour supply contract or MSA with MN8 Energy, one of the largest independent renewable energy operators in the U.S. We began our relationship with MN8 in 2023. Earlier this year, we announced an MOU where our 2 companies were working together to develop an opportunity pipeline. That MOU has now transitioned from pipeline into backlog as an order for 750 megawatt hours. This illustrates how our commercial process works.

The first couple of 10-hour projects are expected to total 200-megawatt hours and uniquely pair solar with long-duration storage in support of hyperscaler offtake requirements. This is a strong signal that the market is shifting and that customers want not just long-duration storage, but an American-made solution to power data centers and industrial operations.

Zooming out for a moment, our commercial pipeline continues to grow as we ended the quarter at $22.6 billion, a net increase of 21% quarter-over-quarter, representing about 91 gigawatt hours of potential projects. And no surprise here, data centers are the fastest-growing part of the pipeline, now making up 22% of the volume. And perhaps even more encouraging, 64% of our pipeline volume is now at 6 hours or more in duration, validating what we’ve been saying, the world needs longer duration solutions.

Geographically, we're beginning to see a significant increase in activity in PJM and New York ISO, along with the existing growth we've previously highlighted in SPP and MISO. For example, the NYSERDA bulk storage RFP, which is similar to the U.K. Cap-and-Floor mechanism, requires that 20% of the procurement be 8-hour systems and 20% be in Zone J, which includes Manhattan. This is exciting for us as this aligns exceptionally well with our technology and our ability to be deployed in populated areas.

With the rising demand from data centers and electrification, customers are focused on speed to power, high-density energy delivery and derisking supply chains with U.S.-made technology, all areas where Eos is uniquely positioned to deliver.

Finally, on backlog, we ended the quarter at $644 million with 2.5 gigawatt hours of storage, not including nearly 1 gigawatt hour in new orders that we've booked since the end of the quarter. This is down slightly quarter-over-quarter as we continue converting backlog into revenue on shipments.

During the quarter, we delivered over $30 million in revenue while adding an initial order for behind-the-meter storage for a large client in Germany. While Q3 may appear slower on paper, Q4 is already off to a strong start with more than $220 million in new orders booked and significant forward momentum on several large pipeline opportunities. We've built strong partnerships with leaders like Frontier and MN8 and we continue working on additional opportunities to support the large and growing hyperscaler demand for reliable power.

Moving to our financials. We again delivered record quarterly revenue as production volumes continued to ramp with gross margins improving sequentially for the past 4 quarters. We're really encouraged by our progress and remain confident in our ability to scale, now that subassembly automation is nearing completion and delivering increased manufacturing capacity and quality, as John highlighted earlier.

Revenue for the quarter was $30.5 million, double what we reported in Q2, supported by shipments to 5 different customers. To put that in perspective, we nearly doubled our 2024 revenue in the third quarter, showing how quickly production is accelerating in Turtle Creek as our automation efforts take hold.

Average selling price was also higher and more in line with our expectations going forward. You'll recall that in Q2, 50% of our production volume was delivered to a single strategic customer at a lower ASP, which was a drag on revenue for that quarter.

I'd like to highlight that, as Joe mentioned earlier, this system has begun cycling and running in the field at some of the highest RTEs we've ever seen.

Gross loss for the quarter was $33.9 million, just slightly more than last quarter as revenue doubled on increased volume, driving a 92-point improvement in gross margin and demonstrating the scalability of our operations as we ramp. We're continuing to see steady quarter-over-quarter margin improvements and remain on track to reach positive contribution margin in the fourth quarter and positive gross margin as we exit the first quarter of 2026, as John previously said.

Building on the improvements in gross margin, operating expenses for the quarter totaled $27.3 million, an improvement of $5.6 million from Q2 and 4% better than prior year. 20% of this quarter's OpEx reflects noncash items such as stock-based compensation. We ended the quarter with a net loss of $641.1 million, which was primarily driven by noncash fair value adjustments of approximately $569 million related to warrants and derivatives on our balance sheet.

And to be clear, this is not an operating loss. The adjustments are largely driven by a 122% increase in our stock price quarter-over-quarter and the corresponding mark-to-market revaluation. These stock price fluctuations can and will continue to drive volatility below the line but they have no impact on our operating results or our cash position.

Adjusted EBITDA loss was $52.7 million compared to $51.6 million in Q2. Importantly, net margin improved by 166 basis points, reinforcing that the efficiency gains we're achieving in production are scaling across the business. The continued increase in production volumes that both John and Joe talked about should be moving us to positive contribution margins in the fourth quarter. After that important milestone, we'll start closing the gap on EBITDA margins and continue moving toward profitability.

Turning to the balance sheet. We ended the third quarter with $126.8 million in total cash. A couple of things on cash post quarter close. First, you heard Joe talk about the customer receipts we received in October. Second, we just completed another sale of our production tax credits, monetizing $11.8 million of 45X credits that were generated in the first few quarters of this year.

Consistent with prior transactions, we realized $0.90 on the dollar on this sale. And lastly, we've seen an increasing number of exercises in both our public and private warrants as all warrants are now in the money. The last day to trade these public warrants is November 17.

Just as importantly, we've completed the final Cerberus milestone tied to customer cash receipts under our term loan. This means that we've achieved all 16 milestones, with no additional equity, preferred stock or warrants being issued to Cerberus, and I want to thank all of the Eos employees for making this happen.

With that, I want to thank everyone for joining us this morning, and I'll now turn it over to Joe before heading into Q&A.

Thanks, Nathan. Before we move into Q&A, I'd like to reiterate guidance to the low end of our range. Nathan and the commercial team have positioned us with the backlog that allows us to deliver, and you've heard from John and the impact he's making on improving our operations performance that are keeping us on track to earn between $150 million and $160 million in revenue for the total year. I also feel compelled to make a few comments about the short report that was issued about Eos last week. When the report surfaced last Thursday, I was in a meeting in New York with the CEO of a large independent power producer, the North American CEO of a large energy storage operator and the CEO of one of Eos' largest financial investors. We were discussing a strategy to meet America's accelerating power demands with a mix of generating technologies combined with Eos Z3 systems.

While I was finishing up the meeting, our team quickly mobilized to review what's being said about our company. We take these issues very seriously and immediately engaged our outside SEC counsel and our external auditors in this review. We are certain that the allegations in the short report are without any merit. Short reports are a fact of life these days, but the silver lining is that I am humbled by the support we received over the prior week from the Department of Energy to the California Energy Commission, to the Edison Fire Department, our customers, large institutional investors and our vast retail investor base.

I'm proud to say that, I work at Eos. We're a team of 750 people who are building a great company. And collectively, we own 11% of the company's equity. When I got back to Turtle Creek, I found a galvanized team with a singular focus to finish what we started and prove that great and innovative products can still be designed and manufactured in the United States. We are a team that is wired to win.

With that, let's start by taking a few questions submitted online. I'll turn it over to Liz. Thanks.

Thanks, Joe. So, moving to a few of the questions we've received online with the first question being, can you provide an update on the time line around Factory 2 outside TA? And if Project AMAZE will need to be completed before Factory 2 lines go live?

Thanks for the question. As we discussed earlier in my opening remarks, we now have building partners and automation partners that can deliver a line every 90 days. This work can all be done simultaneously going forward.

Thanks, John. Next question. As the company navigates a capital-intensive scale-up phase, how are you balancing the need for fresh funding with imperative to avoid excessive shareholder dilution? And what milestones might unlock access to lower cost capital?

Thanks, Liz. As you just heard John say, we're positioned to add manufacturing capacity to meet this growing demand. We're in an energy super cycle and it's my job to deliver the orders and the capital to support this growth. And I'm committed to doing this in the most cost-effective way possible for the company. All right.

Thanks, Nathan. I think the next one here is for Joe. What is the long-term vision? And how do you plan to surpass or match the competition?

Thanks, Liz. So, look, I mean, you heard John talk about positioning us to be able to add capacity in a 90-day rhythm. That's great when you talk about being an energy super cycle. Nathan is out there with his 2 hats, winning the orders to fill the factory and securing the capital to drive growth. I'm just excited about the product that the team has delivered. I mean, we've got some things that we're working on that we're really excited about that will position us to be the energy storage product to help meet the needs of this energy super cycle.

We've got some work to do to continue to close the gap on profitability, and I feel really good about the playbook the team has to be able to do that. But at the same time, we've got to make this the easiest technology to work with out in the field, and that's why we're investing in a software hub here in Pittsburgh. And I think when you think about what we want to do is take a great technology, build it quickly and operate it easily out in the field. That's the simple strategy of this company and what everybody is executing on.

With that, we'll turn it back over to the operator and see if there's any questions from our sell-side analysts. Thanks.

[Operator Instructions] And your first question comes from the line of Julien Dumoulin-Smith with Jefferies.

Maybe just to kick things off here. I know you tweaked the '25 guide here. But if you think about like the quarter-over-quarter run rate and trajectory, I know you articulated this more in operational terms in your prepared remarks. But how would you think about as you exit '25 with that 4Q that's implied with your full year '25 guide, how do you think about that ramping into '26 here and what that trajectory suggests? If you just look at the 2Q, 3Q, 4Q trajectory on top line, I'm just really curious how you think about that revenue trajectory going into '26, and the ability for your commercial -- yes, go forward.

No, thanks for the question. So, in my prepared remarks, I talked about -- so Q3, we were at 15% capacity utilization. If we look at going forward, we'll exit Q4 running our complete asset base 24/7. So, you're looking at going from a 15% capacity utilization to 90-plus from a capacity utilization standpoint. So, a lot of work was done in Q3, installing capacity, training our workforce, training the additional shifts and all the costs associated with it. So, as you fast forward, all the ramping will be done. So, as we enter Q1 at the very start, we'll be at OEs higher than 90% and we'll be fully realizing and utilizing the capacity.

And then Julien, on the revenue side, and I'll let Nathan kind of add some comments there because that kind of falls into his 2 hats.

Yes. No, I mean, John did a good job of laying out what we're doing this year. I think as we look forward into 2026, we're seeing a tremendous amount of activity in our pipeline, right? Pipeline is up 21%. 22% of that now is data center activity. We talked about kind of the sales cycle and how these things mature over a period of months, even quarters. And we continue to see very strong activity in the pipeline as we move forward.

Good news is John's capacity expansion now can be moved in 3-month increments as the orders come in. And I think we're going to see new orders come in. We're going to add capacity to line up with those orders and I see consistent revenue growth over time. Yes.

And Julien, the only the thing I would add on the pipeline and order side, we've always been very conservative about what we do with our backlog and our orders pipeline. Nathan's got some things going on that are MOUs that we haven't been able to announce names yet, and he continues to work with Justin and the entire team to get some of these hyperscalers to go from an MOU to firm projects. And we really only want to talk about them when we close them and there's project names that we can talk about, like we do with Frontier.

And I'll make one more point. So, you think about the -- all the assets that we're installing, so we're learning as we go, right? So first bipolar line comes in, took us several weeks to get it up and running. 6 and 7 that we just got up, now we're talking days. The same thing will fast forward to when we launch line 2 in the spring. All those learnings, so we're able to shrink the ramp, shrink the time to get up to full capacity. So, everything we're doing now we're learning because it's -- so with the data, we're going to be able to aggressively move forward much quicker than we are right now.

Awesome. And guys, if I can take sort of the natural extension of that last question, how are you thinking about the ramp here, right? I mean it's pretty phenomenal what you've just achieved in the last 6 months here, as you just described. How do you think about the cadence of ramping further lines? And then also, related to that, how do you think about the financing side of that, right? So you've got the $43 million from Cerberus, you have the $24 million award.

You've got unrestricted balance of $60 million. You've got an ability to tap DOE. How do you think about financing that against potentially what seems like an accelerated ramp on CapEx? I don't want to put words in your mouth when I say accelerated, but I'm curious on how you think about just teeing this all up and setting expectations.

I think, Julien, I -- let's kind of put the puzzle together there that you're laying out. We have a loan from the LPO from the Department of Energy that finances 4 lines, right? And we're going to line 2. What John is trying to do is like what we -- and what we have to do is reduce the cycle between starting and getting a line up and running so we start producing revenue off of that so that the capital requirements in effect, become operational versus financial. That being said, we're in a moment of time here where the industry and the world needs our product and we've got to be able to ramp into that as quickly as possible.

I've said many times, like we don't want underutilized capacity sitting around. But we're looking at all this. And what John has put together from the different automation suppliers that he now has and breaking this up into pieces and getting everybody focused on delivering to that goal, we'll be able to get that capacity online in 90 days, which is well within the cycle time of how Nathan is selling the product. So, part of it will be what we already have in place. Other things will be -- come from operations and deposits from customers as we close orders. And then we'll look to be opportunistic if need be for growth capital if we have to.

Awesome. Excellent. One last tweak here. You talked a lot about operational metrics improving, but it seems like the latest quarter ASPs went up materially. Again, you tell me if we're reading that right. And you also flagged, I think, in the Q here, a concentration with like 80-plus percent tied to a single customer. This is not the same customer as you guys have been concentrated to in the past, I presume. Can you talk to that just a little bit about the ASP dynamics and the customer maybe of late?

Yes. We talked about this a @little bit last quarter as well. So Q2, I think, was the anomaly because we had one strategic customer that was a drag on revenue in Q2. What we're seeing in Q3 was revenue rates reverting back to what we view as a more normal run rate. And then deliveries in the quarter, I mean, it was fiveindividual customers. They're not all equally weighted. But I would say the customer base that we delivered to in Q3 was representative of what customer base would look like going forward.

And Julien, I just want to add 2 points on top of what Nathan just said. ASP, like you could -- like I try not to pick individual contracts. We're managing a portfolio. Like any portfolio, highs, lows, but you got to get your average where it makes sense, and the average of the portfolio is up and it's up because people are seeing the value of the technology.

Now, on this strategic customer that we talked about last quarter, look, we're getting data from that system out in the field and it's on that page that we talked about and the data is phenomenal. So I look at that as kind of an investment in our future where we needed to get Z3 out in the field at scale and see it operate, and it's delivering on those results. So, it's a mix of all things. But the overall portfolio of the order book, ASP is higher than what it was.

Yes, absolutely. I'm very curious to see some of these strategic partners in their Analyst Days in coming weeks.

Your next question comes from the line of Stephen Gengaro with Stifel. Please.

So I think 2 things for me. One is just a follow up on the last question. I'm not sure how much you want to say, but you talked about sort of the average selling price kind of across the portfolio. Is that -- how does that look in the backlog and the recent awards that you're booking relative to kind of what you're realizing now?

Look, I mean, you can do the math on the backlog page, right? I mean we -- you can see total dollars and total gigawatt hours and how that's trended over time. And it stayed pretty consistent over time. I mean, we're not seeing long term -- long term, I think, the revenue rates that we've realized and expect to realize going forward are going to be pretty consistent.

When you get larger orders, we're working with customers and say, okay, what is our cost curve doing, what can we do from a large volume buy perspective. You saw the chart we showed on Page 8, I think it was, where you see margins improving over time. You see net margins improving over time as we continue to scale the business. But we think we're going to turn the corner here and get to positive contribution margin into this quarter, positive gross margin exiting Q1 on a path to profitable positive EBITDA after that.

And Steve, what I would add on top of that, look, part of my job is handing out the targets to people and the orders that were recently closed are well within the ASP portfolio target that Nathan has as CCO.

That's helpful, because I couldn't do the math on the post-quarter announcement, but that's fine.

And remember, -- we're talking about, Stephen, that's post quarter close that happened after the quarter, after 3Q. So that will be out in 4Q.

Yes. The other one I had is -- it's around the margins, but it's around the cost side. When we think about the progression of margin and some of your bigger costs that go into making the product. How should we -- like what are the necessary levers that get you to gross margin positive? Is it the supply chain improving? Is it the COGS coming down per unit? Is it just scale? Like are there -- is there color you can give us around how to think about the cost structure? That's the biggest -- as you've been successful with the ramp and the backlog growth, that's the biggest question we get from investors pretty consistently is, what does this look like at scale from a profitability perspective? So, I'm curious if you could give some incremental color.

So, from a cost perspective, I already talked about the asset utilization. The same thing is true here is with our suppliers. So, they've had to put a lot of assets in place to be able to support this ramp. So, as we ramp, they're ramping. So, they're seeing cost optimization, they're seeing cost absorption, which will translate in cost reduction from a parts situation.

Then you kind of look at labor costs. So, a lot of what we're focused on right now is taking cost out and making things more efficient. So, I'll give you one example. We were focused on our gate and with that, we were looking at travel time, material, the way they're presented. Basically, all aspects of that operation came in on 1 weekend, completely changed the way we were doing that operation. And the 5 days prior to what we did versus the 5 days ahead, we doubled the output. So, the work we're doing is not having incremental gains, it's having step function gains. So, we talked about labor, you talked about utilization. Again, we'll be at 100% utilization coming out of Q4. So you're going to get match the asset. Then it's about taking cycle times out.

So, if I can -- we've got a heavy automated process. So, if I can take 10 seconds down to 9.8 seconds, down to 9.6 seconds, and that work is absolutely doable. Again, you keep moving it forward. The one thing I like about being here is where I came from, I had thousands of different products. So, the focus would shift every day. Now -- come in every day and focus on the one product. So, this journey never ends. There -- we will continue to look at all of our cost buckets and continue to put projects together that will close those out.

We, right now, just in taking material cost out, forget cost savings and what we're asking from the vendor, we've got 61 different projects that we're doing right now to take the amount of parts that we have out, to take the cost out, 61 projects, and all of those projects will be closed before we exit Q2. So that's the way I kind of think about it.

And there are no further questions at this time. I will now turn the call back over to Joe Mastrangelo, CEO, for closing remarks.

Thank you. Thanks, everyone, for listening. Look, one thing I want to talk about here in the closing is like the project that Nathan and Justin closed with Frontier Power, because this kind of lays out another strategic puzzle piece for us as we grow the company.

Look, we met Frontier back in January. Nathan and Justin met them at a trade show in the U.K. We developed a relationship, signed an MOU, got a project pipeline. And every week, we meet with Cerberus, and we go through where we are in cash, where we are financially, how are we doing in performance. And we look at Frontier not as a transaction, but as a platform. Cerberus financed Frontier because we view this as experienced operational leadership in the industry that can help us build a platform to expand out in Europe. We're excited about how that's going to look as we move forward and really look forward to partnering with the team at Frontier.

At the same time, we're looking at what John is doing operationally, and you heard a really -- it's fun working with him. It's great having him on the team and seeing what he's been able to deliver and the whole team underneath him. We just have to keep growing, keep focused and knowing that the industry needs our product. We got to continue executing and we got to keep making this simpler and easier to do business with. We look forward to keeping everyone updated on the progress. I want to thank everyone for listening today. Thanks a lot. Talk to you soon.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.