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.