Eos Energy Enterprises, Inc.

Good morning and welcome to the EOS Energy Enterprises fourth quarter and full year 2021 conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. With that, I would like to turn the call over to Laura Ellis, VP of Investor Relations. Thank you. You may begin.

Thank you. Good morning, everyone, and thank you for joining us for EOS's Financial Results Conference Call for the fourth quarter and full year ending December 31, 2021. On the call today, we have EOS CEO Joe Mastrangelo and CFO Randy Gonzalez. Before we begin, allow me to provide a disclaimer regarding forward-looking statements. This call, including the Q&A portion of the call, may include forward-looking statements related to the expected future results for our company, which are subject to certain risks, uncertainties, and assumptions. Should any of these risks materialize or should our assumptions prove to be incorrect, our actual results may differ materially from our projections or those implied by these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Our remarks during today's discussion should be considered to incorporate this information by reference. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made during this call to reflect events or circumstances after today, or to reflect new information or the occurrence of unanticipated events, except as required by law. 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 in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies. This conference call will be available for replay via webcast through EOS's Investor Relations website at investors.eose.com. Joe and Randy will walk you through the company highlights, financial results, and business priorities before we proceed to Q&A. With that, I'll now turn the call over to Joe.

Thanks, Laura, and welcome, everyone. Great to walk you through our 4Q in 2021 operating results. If we move to page 3, I'm going to start where we always do, and that's with how much energy have we discharged out of our systems. Since the last time we were together at the end of 3Q, we've discharged nearly 100 megawatt hours of energy from our systems, both either out in the field or on test. We're now over 400 megawatt hours and just continues to show the robustness and the proven nature of the technology that we have out in the marketplace. For me personally, the journey here over the last year or so, it's really fantastic to be sitting here and thinking about having nearly 600 megawatt hours of orders and backlog, almost totaling $150 million. But the lion's share of the work that the team has done over the past few months is really beefing up our opportunity pipeline. As we've gone out and proven the technology and shown the value, our pipeline is now 25 gigawatt hours of opportunities and over $4 billion. That bodes well as we walk through here today on what we think we can do as we go through 2022. Lastly, when you think about the operations of the company, we were able to recognize $4.6 million of revenue The team had a really good fourth quarter, which Randy will walk you through a little bit more details on that. But I think when you summarize this page, you're really starting to see the company now transitioning from an R&D company to a full-fledged operating company. And if we move to the next page, you can see we show some of the core operating highlights for the quarter for the company. We are on a rapid growth trajectory as a company. When you look at growing our operational scale, which is really positioning us for the future, We signed and announced earlier this week the doubling of our manufacturing footprint in Turtle Creek, Pennsylvania to be able to build our 800 megawatt hour a year capacity. At the same time, we are piloting a manufacturing line here in Edison, New Jersey for our new Z3 product. That product has been on test and we've produced our first units. I think one of the more important things What you may think of as a soft thing but is very important out in the market is the fact that we received ISO 9001 certification for our manufacturing facility in Turtle Creek. This is critical for us as we go out and show customers the capability that we have and the maturity that we're starting to gain in our manufacturing process. When you look at those manufacturing process, we had a very strong quarter. We had a 68% increase in output versus the first half of 2021, you know, our first pass yields towards the end of the year, we're approaching 90%. And we're consistently going above that as you look at the first few days here in 2022. And we've reduced our cycle time by nearly 75%. And that's shown in the financial results that we're delivering today, you know, we have shipped more than 50 containers out in the field, which is really great performance by the entire operating team. As we talked about on the commercial side, sales volume is up four times versus the third quarter. We signed 176 million of new customer LOIs and firm commitments that when you think about our business model, which I'll talk about in the next section, that's a leading indicator for orders that are going to come in the near term as customers close out their contracts. And as I said earlier, The pipeline is rapidly growing, and we see more and more people wanting to have longer-duration storage and coming to EOS as the provider of that solution as they think about how they want to monetize their assets. As we move forward and shift into orders growth and revenue, I want to start off on page six just to baseline back on how we think about the market segmentation. So we always break this down into three segments. The short duration, zero to three hours. This is where lithium ion is really strong and provides a great solution to the marketplace. The long duration, 12 plus, where there are a lot of competitors that are developing technology and starting to ramp up their manufacturing processes, much like we've done over the last 18 months. And then you have this medium or intraday, or what I like to call, truly the flexibility, simplicity, and safety segment of the marketplace. You know, it's going to be 115 gigawatt hours. EOS has the perfect solution for this customer need. And when we look at this, we think about, you know, when you're delivering solutions that need to offset the intermittency of renewables, you need to have flexibility. They can't be static, rigid systems. And that's exactly what our technology does, and it's exactly why You see us with this nearly 600 megawatt hour of backlog and a pipeline that's rapidly growing and expanding as the commercial team is out selling our solution into the customer base. When you take a look at this next slide, you see that we have significant competitive advantages versus the incumbent lithium-ion, not just on our ability to operate across a wider operating range with a larger... depth of discharge, higher operating range when it comes to temperature, and a lower degradation, but also a cost advantage that's derived from the fact that we have principally five earth-abundant raw materials in our overall system. Our supply chain is domestically based. We've stabilized it and de-risked it over the last four months. We ship our product unlike other products in the marketplace. It's shipped fully integrated in its container with zero voltage in there which increases the safety of the product when it's being shipped to the site either by over the ocean or over the roads on a truck. We have a longer operational lifetime when you think about our system and how it charges and discharges with every cycle that we operate our battery. You're basically resetting that battery and increasing and maintaining its useful life to 15 to 20 years the same performance. We don't have any auxiliary systems, either HVAC, you know, heating, ventilation, and air conditioning to operate in a narrow temperature range, or unlike flow batteries, we don't have high pressure pumps to move our electrolyte out of large tanks through a membrane and a catalyst to generate electricity. We're a self-contained system that's very safe, and it's hard to damage the system when you're outside of the suggested operating specifications of the product. And at the end of its useful life, 20 years from now, Many of us probably won't be in the industry anymore. This product will be able to be recycled very simply and cheaply, and all the raw materials can be put to use into a new use. So we think not only does this offer the flexibility, not only does this help decarbonize our energy value chain, but it also has a compelling overall from birth to rebirth life cycle that adds to exactly what we're trying to do as we think about renewable energy for the energy value chain. If we move from page seven to page eight, just want to walk through our traditional page on the pipeline, right? So as everyone knows, we call our pipeline projects where we have a technical use case from our customers that we can provide a technical proposal and a financial proposal against. We do do early generation ideation or idea generation with customers where we have another 4 billion of opportunities that we're working on with our customers. But these are things where people come with ideas. So when you think about this page and you move it from left to right, that lead generation, in general, you're getting a 50-50 hit rate from lead generation into pipeline. From pipeline, which I would call active proposals and letters of intent, firm commitments, that's about a 30% hit rate, and then you have booked orders. So when you think about where the company is, and how we've positioned it for future growth. The company is well positioned to continue to grow its backlog and to continue to expand. And we like what we see from the customers that we've been working with. In that LOI firm commitment bucket is a 240 megawatt hour project with BridgeLink in West Texas, which is an ERCOT project, which we feel really good about what BridgeLink wants to do. And we're working with them on the same side of the table to close that out and turn that into an order here relatively quickly. So we're pretty excited about what the team has done to position ourselves for future growth, and we'll continue to keep everyone updated as we think about this. Now, although on the booked order side, when you look and it says no change versus the last time we were together for earnings, we did book over $51 million of orders with blue chip customers like Amoresco, Duke, and Blue Ridge, and Pine Gate Power. So we're pretty excited about those booked orders for the year and where the backlog stands. If you go to the next page and just think about the backlog, there's 28 projects with 14 customers, so we do have customers coming back for multiple projects, which is a testament to what the team has done is establishing us in the marketplace. When you think about the backlog in and of itself, it's important to note that $114 million of this is the capital equipment shipping the product out into the field, but we've already started to create a recurring revenue stream with long-term service agreements, which are $34 million of the opportunities that you have in the backlog. And then there are some asset leasing projects that we go through. When you think about that and you look at why that number has gone down versus the third quarter, That's basically because we had one project where the customer found their own financing and is in the process of closing that, and EOS is no longer going to finance that project, but we're working now in the factory to be able to manufacture that product and get it out in the field, and that's another project down in Texas in the ERCOT operating region. So we're very excited about where we are from a backlog standpoint, how the commercial model has evolved over the past 12 months and will continue to drive growth and backlog for the company to start delivering higher revenue numbers as we look to the rest of 2022. If we now shift into and talk about manufacturing and our ability to deliver product, again, I just would start off and say, signing the lease and expanding our manufacturing capacity in Turtle Creek is very important for us to be able to continue to grow the company. At the same time, being approved by the Department of Energy through its phase one loan program and now starting off on phase two also offers us a way to be able to finance the future capacity growth of the company as we look to the future. You know, I'm really proud of what the team has done out in Turtle Creek. If you focus on the left-hand side of the page, we've seen continuous yield improvement in the factory. You know, I talked earlier about how we're getting more output out of the same asset base. We've expanded our manufacturing workforce. You know, we're really proud of the team that we have there. You know, one thing I would say is like, not only does our company do good things for the energy value change, we're doing good things for the community that we operate in. When you look at our supervisors on the shop floor today, we're the first employees that came into the factory 18 months ago, and our workforce is an impressive workforce. We've got nearly 15% are veterans and 40% minority, and people can come in and we've got a really good growth trajectory, career trajectory for people to really work in the green tech sector in what used to be coal country of the United States. And we've also started to optimize our processes and our cycle time. And this is something that never stops. You've got to be relentless about this. You've got to bring lean. We have a new supply chain leader who's joined the company who comes with a very extensive background both in technology and and in manufacturing is only going to help us get that better. And when you look at the right-hand side of this page, you can see the first shots of our new facility in Turtle Creek. We've gone through, signed the lease, as I talked about earlier. And what you can see on that far right picture is we've started to lay out mock manufacturing flow on the shop floor so that we can start looking at how the the product and the raw material is going to flow through the factory to optimize that and get more and more output off of the same asset base. And this is critical because when you look at the investment in this facility, it's $50 million to get one gigawatt hour of capacity, which is 60% less than what it would cost if you were doing a comparable lithium-ion facility. So we've designed... the entire business to be modular in the product and how you configure and ship in the field, but also be modular in our CapEx program so that we can either accelerate or slow down our capital spend depending on what we see happening in the marketplace. So the team in Turtle Creek is something that we're really proud of and all investors should be proud of what that team has built. in such a short period of time, and better days are even coming now. As I said, the initial results of 2022 are better than what we saw in fourth quarter, and we're excited about where we're going to be as we move forward. So with that, I'll turn over to our new CFO, Randy Gonzalez, to welcome him formally and publicly to the team, and then let Randy take it from here.