Eos Energy Enterprises, Inc.

Good morning, and welcome to EOS Energy Enterprises' first quarter 2023 conference call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. With that, I would like to turn the call over to Laura Ellis, Vice President of Investor Relations. Thank you. You may begin.

Thank you. Good morning, everyone, and thank you for joining us for EOS's financial results and conference call for the first quarter of 2023. On the call today, we have EOS CEO, Joe Mastrangelo, and CFO, Nathan Craker. Before we begin, allow me to provide a disclaimer regarding forward-looking statements. This call, including the Q&A portion of the call, may include forward-looking statements, including but not limited to current expectations with respect to future results 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 expectation or those implied by these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to are described in our SEC filing. 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 may 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. The conference call will be available for replay via webcast through EOS's Investor Relations website at investors.eose.com. Joe and Nathan will walk you through the company highlights, financial results, and business priorities before we proceed to Q&A. With that, I'll now turn the call over to EO CEO, Joe Mastrangelo.

Thanks, Laura. Let's move quickly to page three. I mean, this is really a capstone page of the progress that the company has made in its 15-year history. And really, when I sit back and think about my five years in the company and And just being able to sit here and talk about discharging a gigawatt hour of energy out in the field is very exciting. When you think about that gigawatt of energy out in the field, 700 megawatt hours of that came in 2023. And when you put that in perspective, that's the equivalent of powering 140,000 homes for up to four hours. I think this is just a lot of work here done by the entire team throughout the history of the company to get to this moment. And it's just one of those moments where you kind of get the news from the team, sit back and reflect how far the company has come, but then also realize how much more work we have to do to move forward around the potential of this product that's delivered this gigawatt of energy today. Moving on to page four on the operating highlights, you'll continue to see good progress. Commercially, I'll go through some more details on the pipeline in a future slide, but we continue to see the opportunity pipeline increase. We booked a large order for $87 million, nearly $87 million, and that brought our backlog up to $535 million with representing 2.2 gigawatt hours of power. Talked about the discharge energy. I think another piece of this, and Nathan will get into some more details later, is around revenue, delivering $8.8 million of revenue, 168% increase over first quarter of 2022. along with seeing the progress of our cost out in the product where you can see in the numbers, revenue coming up, the loss at gross margin coming down and closing the gap on our losses of operating profit. Cash on hand, we closed the quarter with $16 million. That doesn't include the funds that we raised in 2Q, $55 million, and Nathan will walk through later on. Our financing strategy, which I think we put in place that financing strategy Over a year ago, we've been very consistent about how we've talked about using the different tools, and we continue to use those tools to allow us to position the company for growth and deliver the results that you're seeing and the progress that you're seeing against the overall strategy of becoming a profitable operating company. Now, let's move forward and talk about the commercial pipeline and orders backlog. Go to page six, where we go to our classic page. of how we look at pipeline. We keep the page in the same format so you don't have to figure out the format when you look at it. You can focus on the numbers. So focusing on the numbers. Lead generation, once again, these are people coming to us, customers coming to us with ideas of projects that stands at over $9.5 billion, 57 gigawatt hours. There's a lot of churn in that $1 billion increase. You have things that drop out, things that move into current pipeline, and things that come in. Teams doing a great job building relationships. with potential new customers and really working through and showing the power of the EOS technology and how it can help deliver longer duration energy storage which is critical for the energy transition. When you look at our current pipeline, current pipeline is up in Q2 and we signed over $500 million of LOIs. Now think again about how we think about the movement through our pipeline. We don't call it current pipeline unless we have a technical use case where we can provide a technical proposal to the customer, which then leads us to giving them a non-binding financial quote, which that stands at $6 billion in and of itself. Our goal with that combined $7 billion is to then get customers to sign an LOI with us, so we get on the same side of the table with them and close a project out to allow them to generate revenue and allow us to put product out in the field. That stands now at $1.5 billion, with seven gigawatt hours of potential. We work through those, and when you think about the timing of LOI, the firm commitment, you're working through various different aspects on commercial terms, permitting, land rights, and interconnections to be able to get to a firm commitment that then goes into our backlog, which as I stated earlier, stands at $535 million, up $71 million versus fourth quarter. So starting to see some traction. on the team closing orders, starting to see opportunities moving to LOI. And I think as we get more clarity around the IRA legislation in the United States, we're going to see more and more orders work through the pipeline, opportunities work through this pipeline. While at the same time, you're starting to see Europe looking at what they're calling their Green New Deal, which is going to drive more activity over in Europe. And we're starting to see pipeline grow there as well and our focus on the European continent as far as where we can deliver product as they look to diversify their energy mix. Moving on to page seven, this is a page where I wanted to take a look back to our original customers when we first went public nearly over two years ago. We had three what I would call emerging customers in IEP, EnerSmart, and Carson Energy. When you look at what those customers and what we've done, this is really building a relationship back in 2020, creating letter of intent and booked orders, delivering on some of those booked orders, but also working with the customer from letter of intent into a booked order into a delivery. I think this just shows that process that I just talked about in real life with real orders that are going to be shipping here in 2023 and early 2024. We're excited about these relationships. And these are the types of customers that when you look at the space, you've got to go out and grow with them and find ways for them to grow and find ways for us to deliver profitable solutions for them. The bottom of the page talks about some more established customers. Pine Gate, Eastover, that's the project that I showed on the first page. This was a booked order back in 2021. We started delivering it in 2022. That was the focus of ramping up the factory. To see that project running cycles around 50 megawatt hours per day is very exciting for the team. And that also will lead us to additional add-on projects under our MSA with Pine Gate as we look to move forward in the future. The California Energy Commission or the CEC, you know, this is something that started back in like 2017, 2018, running pilot projects. The CEC relationship started with running individual cells, than doing individual pilot projects in California, which then led to a commercial order in 2022, which was the bulk of the revenue that we delivered in first quarter of 2023, with additional shipments to come in the second half of 2023. But an exciting development for us as you think about developing that relationship and proving out your ability for your technology to deliver the operating needs of customers, which then is going to create additional pipeline for us, and California remains an important market for us as we look to the future. I talked earlier about Europe, and Enel Green Power is another customer that we've been building a relationship with over time. Going back again to pre-public company days, to come up with a booked order in 2021, to work through with them to get all the siting and shipping and logistics around getting that project installed in Europe and operating in 2024 with delivery in late 2023. It's exciting for us when you look at what's going to come in Europe and working with a partner like Enel adds credibility to what our technology can and will do out in the marketplace. We shift now from the commercial side and go into operating excellence. What I want to leave the commercial section on is the concept of you're planting seeds to eventually grow trees, to eventually create an installed base, to eventually create a service annuity for our company. That takes time to do that in an industry that's very thoughtful because all of us are users of our product in that when we flip a light switch in our home, We expect the lights to come on. So you've got a high hurdle to prove out your technology. And that's what the team here at EOS has been working on every day in the five years that I've been here. And that really takes us to slide nine. So when you look at slide nine, this is the proof point of EOS being able to rapidly scale production in a very cost-effective manner. When you look back at March of 2022, we had an empty building in Turtle Creek. with two infrared welders in there. When you think about where we were in April of 2023, you wind up with a – that is a picture of the production line as we delivered the last new units to the field for Gen 2.3. You know, this facility not only ramped up, but it also achieved cost out, which Nathan will talk about. We shipped 208 energy blocks. We produced over 34,000 batteries. And as I talked about, we've run what we believe is one of the largest cycles ever done by a non-lithium ion technology in the world. And when you think about documented cycles, as far as we can tell, this might be the largest one, but we've got some more work to make sure that that's true. But we're proud of the fact that this 47 megawatt hour cycle proves out that the technology can scale. What we did in the factory over the last 12 months proves out our ability to scale our technology and our ability to produce product, quality product out into the field. Now, that foundation takes us to page 10, which is the EOS Z3, the next generation of our technology. Same proven electrolyte inside of a new mechanical design, inside of a new cube configuration that not only allows us to take cost out, but also improves performance. So where are we in the journey? When you think about what we did in one cube, deliver those last units for Gen 2.3, inside of that, that was part and parcel, if you will, with our strategy in 4Q of delivering the product in 2023 to generate the investment tax credits for our customers and the production tax credits for ourselves. But what we've been also working on at that same time is getting the discrete manufacturing operations up and running for the Z3 battery. We're very excited about what we've done here. We've invested $1 million. The line today could do 110 megawatt hours of annualized capacity. But more importantly, what you do with that $1 million investment is you learn how to make your product. There's a list of little things that we learned that if you would have gone out and put a massive factory in place, you would have crippled the company with the learnings that you had in each individual discrete manufacturing step. So when you think about what we do, first figure out how to get your manufacturing steps correct, then go to a semi-automated manufacturing sales. And that's where we are and what we're doing in Q2. So Q2 is now investing an additional incremental $5 to $7 million to expand the capacity of that line, get more throughput, take the lessons learned, and codify them into our manufacturing processes to start delivering commercial product into the field. Second quarter is a transition quarter from us, from the Gen 2.3 into the Z3. Now, while we're doing that, when you think about this from physical location, The pictures I showed you on the prior page, that's the downstairs floor in what is called Building 700 in Turtle Creek. The pictures you see here are the upstairs floor where we're doing the modeling of steps one and two for the Z3 manufacturing line. At the same time we're doing that, we're taking that downstairs floor that was an empty building in March of last year and emptying it out again to set up a spare part manufacturing line to manufacture batteries for services and start to lay the groundwork for phase three of our scale-up, which is a fully automated manufacturing line, which we're forecasting to bring online by the end of this year. We're very excited. We've picked our automation partner, a proven partner in both the battery space and with a lot of experience in automation. And you've got to remember, and I've said this before, Page 8, page 9, excuse me, where we talk about Gen 2.3, that's a 90-minute cycle time from components to a finished battery. Phase 3 here on page 10 is about 90 seconds. So the throughput that we'll get on an asset base is really significantly higher than what we're doing as we go through generations. That's why we've made the transition to the Z3. What I would tell you before turning it over to Nathan to walk through the financial results and how we're performing against our goals and objectives is we're really proud of what gets me excited every day coming into work is the fact that this is a company where the technology was invented by American minds. It's built with American hands using predominantly American raw materials on American-made manufacturing equipment. This proves that in the United States we can still manufacture product, we can still innovate, and we can still lead the next generation of energy technology. So it's an exciting time with a lot of work to do still, and you have a team that's committed to delivering that. And I'll turn it over to Nathan now to walk us through the financials. Thanks.

Thanks, Joe. Good morning, everyone. I want to begin by walking you through the first quarter financial performance, discuss our liquidity position and capital structure, and then provide progress against our 2023 company objectives. Overall, a strong performance by the team as we finished the last production of the Gen 2.3 energy blocks that were shipped in the quarter, and now we're beginning to transition the factory to Z3 production. Revenue for the quarter was $8.8 million, almost three times our revenue from one year ago, driven by increased production and deliveries over last year. Cost of goods sold for the quarter was $26.9 million, a decrease of 8.6 million compared to the first quarter of 2022, primarily driven by a 25% reduction in unit product costs, and all of this in a world that's characterized by supply chain disruption and high inflation. As we've said previously, we have a number of clearly defined product cost-out initiatives that fall into three primary categories, better pricing and quality from our supply chain, increased energy density, and improved manufacturability of our battery systems. While we have made very good progress on our cost-out initiatives to date, despite deferring some of our Q4 shipments into 2023 in order to take advantage of the IRA credits, we expect unit costs to continue to trend down going forward as we implement incremental changes and realize further savings. R&D investment was $5.4 million a slight increase compared to the first quarter last year as we've made product and process design improvements in anticipation of manufacturing the Z3 battery. It's important to note that $400,000 was non-cash related items. SG&A for the quarter was $14.0 million, including $3.1 million of non-cash items, which is $300,000 lower than the first quarter of the prior year. driven primarily by reduced third-party spend as we brought much of our initial startup overheads in-house at a lower cost. We continue to focus on managing our corporate overhead expenses as 85% of our 300-plus employees are directly involved in designing, building, selling, or commissioning our battery systems. Interest expense was $18.6 million for the quarter, of which $4.8 million was driven by the Senior Secured Term Loan with Atlas and the Equipment Financing Facility with Trinity Capital. The other $13.8 million was related to the interest expense and amortization from our convertible notes. The resulting operating loss was $38.3 million with a net loss of $71.6 million. This translates to $38.6 million in net loss when you exclude $33 million in non-cash items. The primary non-cash items are the interest that we pick on our convertible notes, the change in fair value of our derivatives, stock compensation, and depreciation. This compares to $48.5 million in net loss adjusted for non-cash items in one Q of 2022. which represents a 20% improvement year over year. Now turning to slide 13, I want to provide some insight into how we're positioning ourselves to fund the future growth of our manufacturing capabilities in order to meet our increasing backlog of demand. While capital markets have been challenging in general, we've been working hard to provide funding optionality to best position EOS for further growth and capture the opportunity that sits in front of us as the market is accelerating and overall demand for long-duration energy storage continues to increase. Year to date, we've raised $90 million, utilizing a variety of different financing instruments. In the first quarter, we raised $35 million, which is $13.75 million raised through convertible notes with existing investors, $21.25 million under our standby equity purchase agreement that we have in place with Yorkville. And then most recently, in April, we announced a $40 million registered direct offering in private placement. These funds will support our ongoing operations as well as enable us to begin constructing the automated line for Z3. I'll take this opportunity to reiterate that if these investors exercise their warrants after they become exercisable in October, we could receive up to $50 million in additional proceeds. You can see from the middle column on this slide that we have capital flexibility and we'll continue to use our financing facilities on an as-needed basis to capture market share and deliver on customer commitments. As a reminder, EOS has an effective S3 shelf registration filed with the SEC for up to $300 million of common stock, preferred stock, and or debt securities. $100 million of this is allocated to our ATM, $75 million to the SEPA, and $40 million for the registered direct offering that we just announced in April. I do want to clarify how these tools work. The ATM is one of our most cost-effective ways to raise equity capital. However, it is subject to blackout periods, market demand, and daily trading volumes. The issuance of convertible notes under supplements to the SEPA is similar to the ATM, but also provides us with the key benefit of certainty in the amount raised with each issuance. While our most recent capital raise was equity, we continue to see significant interest from debt investors and will continue to evaluate these options for future capital needs. In addition to debt and equity markets, we continue to pursue other opportunities for funding and leveraging the incentives for U.S. clean energy companies so that we can continue to accelerate our competitiveness in the marketplace. We expect to secure state and local incentives alongside federal support. You may have noticed that we recorded an $800,000 benefit in our Q1 financials related to the IRA tax credits. And while the industry continues to wait on additional clarity on how and when these can be monetized, we expect this number to grow as we scale up production. We have substantially completed the due diligence for our Department of Energy loan and are actively negotiating the final provisions of a term sheet with the Loan Program Office. The combined federal, state, and local industrial policy tools that have come together in recent years is allowing the U.S. to be competitive in the clean tech space, and we believe this will help accelerate our own competitiveness. In addition, we are forming a consortium of community leaders, universities, and supply chain partners in anticipation of pursuing grants issued under the bipartisan infrastructure law. The application process for these grants is currently expected to open in early summer with awards being announced early next year. In summary, we believe we have significant capital flexibility and we will continue to use these financing facilities on an as-needed basis to capture the market and deliver on customer commitments. We believe we are well positioned to capture a once-in-a-generation opportunity. Now, turning to slide 14, We want to provide an update on our progress against the full year 2023 company objectives. The first quarter reflects a strong performance by the team as we're shifting the manufacturing process from Gen 2.3 to Z3. While we are off to a good start, there's still a lot of work for us to do in order to reach these full year goals. In the first quarter, we increased our opportunity pipeline by a billion dollars, and we booked over $86 million with two new orders. The first is with one of the largest operators of energy storage in the U.S., and the second is an additional project with one of our existing customers. We also signed three new letters of intent for a total of 850 megawatt hours. We continue to see market demand surging, and we expect to convert these letters of intent into booked orders in the coming quarters. We are on track for a $30 to $50 million revenue target. In the first quarter, we had revenue of $8.8 million. And as we think about 2023, we expect the revenue to be back-end weighted, as Q2 is very much a transitional quarter for us as we make the shift from manufacturing Gen 2.3 batteries to the Z3 cubes. Securing adequate funding will allow us to rapidly scale capacity in the next 12 months and we expect our first fully automated line in the fourth quarter of this year. Lastly, while all of this is occurring, one of our main priorities continues to be to take cost out of the product. We have identified seven key projects to increase energy density, improve our supply chain, and streamline the manufacturability of our product, and we believe we should realize a 15% product cost reduction from the current expected launch cost of the Z3 product. As a reminder, with the delivery of a couple of recent cost-out projects, the Z3 battery is expected to launch at half the launch cost of the Gen 2.3 product back in 2020. We have seen clear advantages with Z3 over the Gen 2.3 product in efficiency, energy density, material quality, and overall manufacturability, and we're excited to scale this product and deliver it to the market. I want to thank everybody for their time today and listening into our call. I would now like to turn it over to the operator for questions. Operator, please open the line for questions.

Thank you. To ask a question, please press star 1-1 on your touchtone telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Christopher Souther with V. Reilly. Your line is now open.

Hey, guys. Thanks for taking my questions here. Maybe just starting off on the DOE loan process, any additional color you can share around timing and the term sheet negotiation process I think would be pretty helpful.

Sure, Chris, it's Nathan. It's good to hear your voice. I will tell you, I mean, we can't say a lot more than what we've already said publicly. I'll just let you know that I've spent time in D.C. several times over the last couple of weeks. I would reiterate, we are making good progress. We feel positive about where we're at. Unfortunately, you know, the size of the organization we're dealing with, this process is taking longer than we would like. The overall Size of the loan hasn't changed from what we've said previously, 250 plus. And, you know, we're optimistic that we'll have something to announce in the near future.

Got it. Okay. That's helpful. And then maybe just on the cost of goods sold, you know, decline, you know, could you give us a walk for the first quarter? It's nice to see the reduction along with the big uptick in revenue, but it seemed like you know, a good chunk of deployments may have been in inventory at your end. I just want to get a sense of what the fixed portion of COGS looks like in the quarter and the cadence of that as we transition into Q and then ramp up in the second half. You know, I think you called out launch costs being half what they were for Q.3, but, you know, maybe you could just provide a little bit more color there.

Yeah, I don't know that I can give you the walk quarter to quarter, but I'll just let you know, 40% of COGS is materials and freight directly related to manufacturing. 15%, 16% is the labor cost associated with building and installing and commissioning batteries. 15% of it is depreciation. And then the other 30% is all the other little stuff.

And Chris, the only thing I would add on your question here is, This is flowing through the cost-out work that we did all of last year into the income statement. We didn't ship out of inventory in one queue. We built the product, and that was the strategy that we laid out last year in 4Q to manufacture product in one queue to take advantage of the IRA incentives, and you see those incentives, which were reported that manufacturing generated $780,000 in initial production tax credits under the IRA.

Got it. Okay. That's helpful. I'll hop in the queue. Thanks, guys.

Thanks. Thanks, Chris.

Thank you.

Our next question comes from the line of Martin Molloy with Johnson Rice. Your line is now open.

Good morning. Congratulations on the transition here to Z3 and the backlog build. I wanted to Just ask about the procurement, raw materials components as you ramp up. Are there any raw materials or components that might be more of a concern as you ramp up? And maybe you could talk about the availability of zinc bromide. I think you're purchasing a lot of it from Tetra. Are they able to supply what you need, or are there other suppliers available?

So, hey, Marty, good morning. Yes, they can supply to our demand, and they have capacity greater than what we're planning on manufacturing in 2023. From the standpoint of the bill of materials, when you look out at the ramp that we're going to go through, you know, we're ramping into a new production process, as I talked about on the Z3. What I would say is, like everyone, and we've talked about this every quarter, there are the normal supply chain blips and risks that you have to mitigate against that are consistent with other manufacturers that you see, and that's around your power electronics equipment, your chips for BMS. But we feel like we've secured that supply, and we just have to manage through that. the core raw materials you know to build batteries and enclosures you know we've got partners that are able to deliver to the demand and we just got to work through that demand curve where the focus for us is getting the timing right of receiving the material as we ramp production okay and my second question just wanted to from your customer conversations are our customers

waiting for clarification on some of the provisions of the IRA before they're placing orders with you all? Is there some pent-up demand, do you think, that's related to waiting for the clarification of some of the key domestic content, et cetera, provisions in the IRA?

Yeah, Marty, I think 100% agree with your question. I think that's why you see the buildup in LOIs. with customers, where customers are saying, I've got a project. EOS is my technology. I want to lock in the technology and my delivery, but I want to work through and see where the guidance comes out on. What I'm hopeful for on the domestic content part, which I think is one of the more important provisions that we all need to understand, everybody gets a 30% investment tax credit for installing storage. Then there's a 10% if you install it in an energy transition zone. So going to places where there were former coal plants that are now being transitioned into renewable energy, you get another 10% for that. And we're seeing a lot of projects that tie into that 10%. Then there's a 10% of made in America. And what we have been pushing for, what we continue to say is, Made in America needs to be manufactured in America, not assembled in America using batteries manufactured overseas. So we're hopeful that that will come through, and that will be a big differentiator. What I would say, though, is around those tax credits, I think it's going to be a significant uptick in demand, but we don't plan the business around having to have it. It's something that will help us and incentivize customers to buy from us, But the underlying fundamentals outside of the IRA for demand are still there that fit in with the product. So the made in America, not only is it a tax incentive, but it's a security of supply chain when you think about what's happened over the last two years. The market shifting to longer duration energy storage and our product being able to deliver that variation or flexibility of operation. And then the long life of the product. We've got fundamentals underneath that meet a market demand that's only going to be accelerated with the IRA. But I do agree with you that there is a little bit of pent-up demand as people are waiting for guidance.

Great. Thank you. I'll get back to you. Thanks, Mark.

Thank you. As a reminder, to answer the question at this time, please press star 1-1 on your touch-tone telephone. Our next question comes from the line of Joseph Osho with Guggenheim. Your line is now open.

Hey, good morning. My compliments on the progress. A couple of questions. First, you were talking about the 45X manufacturing credits. Is there a plan to monetize those other than from just waiting on the IRS? I'm curious what your plan is for those, and then I have a follow-up.

Yeah, we're looking at options, Joe, on how we can monetize those and when we can monetize those. We're still working through the details and nothing more definitive that we want to share at this point in time.

Okay, and I assume you are taking direct pay, right? Yes, yes. Okay. The second question, just wondering if you can update us a little bit on what you see as you undertake the transition to Gen 3, you know, what some of the key things manufacturing challenges are key attributes of that new assembly process that we as analysts should be focused on.

Yeah, thanks, Joe. Good morning. Yeah, so inside that slide that we showed on page 10, that phase one of developing discrete manufacturing, we've worked through lot of the details and bugs that come up when you're starting a manufacturing process. As we move forward, you know, you're basically, you know, this is going from like the minor leagues into the big leagues into the all-star game. That's how I think about it and the pace of how you're trying to do it, you know, accelerates on every step. So it's, you know, we have a process that allows us to build a quality battery that performs today and you know, the next phase of this as we transition into phase two and semi-automated manufacturing is stepping up the speed at which we do that. And you got to make sure that that speed still delivers the quality that you got under phase one. So that is a piece that we look at. And then the third one is how you pull that together as we get into the second half of the year and fourth quarter with the automated line of, again, taking that down to that 90-second target cycle time to be able to deliver product off the line. So to me, when I look at this, I think we have figured out the equipment that we're going to use, the discrete manufacturing process that we're going to use. The next phase of this is, how do you want to lay out your line? How do you want to staff your line? How do you want to increase the throughput? And then getting to automation. Now, the reality is on the automation side, This is our first automated line. This is our first automated manufacturing line that we've had in EOS. We believe we've got a great partner that's done this before in the industry and also has done a lot of work in the automotive industry that will help us. But what I've learned in my five years here is you don't know until you actually know, as crazy as that statement sounds. So we just have to manage them one by one. And I think what we've done... is we've set up a process where we go through this on a working level every day and then three times a week, the entire leadership team going through what are the lessons learned and challenges we have and just knock them off one by one.

Okay, thank you. And just on the back of that, what can you say about how you see your path to positive gross margin at this point?

Yeah, I think, Joe, we're confident that we'll see positive gross margin tomorrow. As soon as we get this fully automated line implemented and running, the exact timing of that, you're not communicating because it is dependent on the DOE funding and additional capital raising. But I'm very confident that we'll be gross margin positive when we get this fully automated line.

All right. So that's very helpful. That toggle to positive gross margin does depend on getting this fully automated facility up and running. Yep. Yep. All right. Okay, thank you very much. Thanks, Jill.

Thank you. And I'm currently showing no further questions at this time. I'd like to hand the call back over to Joe Mastrangelo for closing remarks.

Thanks. You know, look, I think the team, we continue to make progress here, and, you know, it's progress that you can see and measure in the numbers. And I think one thing that I'd like to hit on is I'd like to take, you know, we talk about Revenue growth, we talk about gross margin growth, cost out of the product. But what I'd like to take a moment on is just kind of flip this and look at this on how I think about the performance as also an investor in EOS. Our earnings per share, if you look at the EPS numbers year over year, we were at 85 cents lost last year and we were at an 82 cent loss this year. But I think we got to peel back the onion and think about how we run the company. We really run this company on a cash basis. So if you take those same numbers and strip out the non-cash numbers in that EPS loss, you would have been at a $0.90 loss in 1Q last year. If you take out the non-cash items, which were principally driven by the increase in our stock price as it tied to our convertible notes that we had for capital raise, our loss on an earnings per share basis goes down to 44 cents. So it's half of what it was a year ago that shows the journey of where we want to get to and gives me the confidence that we have the team, the plan, and we've got a lot of risk and opportunity that we've got to manage to get there. But you're starting to see in our third year here of being public, the roadmap of how we're going to get to profitability. With a lot of risk inside of it and a lot of things we still have to do, but you're starting to see those numbers tying back to the vision that we laid out three years ago. That's also why I really wanted to include in there our commercial page to talk about this is not a sell it, ship it market where it's very easy. It's a winding road where you've got to develop long-term relationships in an industry where the customers want to make sure they get it right the first time. So you've got a high bar to prove yourself. And we're challenging ourselves every day to meet that high bar, both on how we win out in the marketplace and how we deliver the product and drive this company to become profitable over time. And we're continuing to be committed on that. And I want to thank everybody for their time this morning. I look forward to keeping you updated on the journey as we move forward from here.

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