Eos Energy Enterprises, Inc.

Good morning and welcome to the EOS Energy Enterprise's third quarter 2024 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'd like to turn the call over to Liz Higley, Director of Investor Relations. Thank you. You may begin.

Good morning, everyone, and thank you for joining us for EOS's financial results and conference call for the third quarter 2024. 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 and outlook for our company, and statements regarding our ability to secure final approval of a loan from the Department of Energy LPO or our anticipated use of proceeds from any loan facility provided by the U.S. Department of Energy, 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 certainties 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 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 expect 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 or comparable to similar non-GAAP measures presented by other companies. This conference call will be available for replay via webcast or EOS Investor Relations website at investors.eosc.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 now turn the call over to CEO Joe Mastrangelo.

Thanks, Liz. Welcome, everyone. Thanks for taking the time this morning to listen in. We start off on our page with operating highlights. I just want to start off with the tremendous progress that we're making commercially, and I think that's shown by the announcement that we made this morning on the $73 million order with the City Utilities of Springfield, Missouri. Really a phenomenal job by the commercial team. getting our first large order in the municipal market. This is the largest order that City Utilities has ever placed for an energy storage system. We're proud that they selected EOTEN's technology. For this project, we look forward to start delivering this project throughout 2025. Really an exciting time for us. I think showing the power of the V3 and what it can do out in the marketplace. At the same time, we also have what people would think is a small order. We'd want more and want more as a repeat customer and just show the relationships as a team building out in the marketplace and the fact that the technology also really works in a microgrid application. So two really strong examples of the commercial offering and the performance of the product on the field. At the same time, two big things that we also have announced recently regarding finance. Nathan has been working on creating the financing capacity for us to scale the company. Last week we announced achieving the milestones and getting to $65 million. does not reflect that $65 million. It's a great job, not only in partnership with Cerberus, but also the team in delivering and bringing that funding in. At the same time, we've submitted our paperwork for the final U.S. government approval for a loan with the loan programs of the Daily Loan Programs Office for a Title 17 loan. Very excited to bring that to closure here by year end. It's a process of going through that as the company has evolved and changed. We feel really good about the partnership we've built and the ability to allow us to scale the company further. On the lower left-hand side of the page, the technology continues to prove itself out in the field. We're now at 4.4 gigawatt hours, over 4 gigawatt hours discharge out in the field. That discharge out in the field is very important because it shows customers using the product that incremental 400 megawatt hours that you have to get to 4.4 is also very important because that's the energy that we're generating when we test and prove out the resiliency, performance, and operating characteristics of the product. When your battery is tested before it gets out in the field, we're really excited about the performance that we see. The middle of this page, the bottom of the middle of this page, is the area where we're disappointed in our performance. Executing our supply chain strategies, doing a million things correctly, if one of those things don't go well, you have a problem. And that's what happened to us here in the third quarter. And when you look at what we talked about last year about developing a new cube design that allows us to improve the performance of our product out in the field and get better footprint density, we had some challenges in opening and bringing that supply chain online, which we're working through to be able to bring that product online. Now, we're gonna work through that. We're gonna work through with the supplier. We're gonna continue to develop and grow. The good news is it hasn't had any impact on our backlog. We continue to work with customers on timing of deliveries and continue to work on supply chain diversification. We can and expect to do better than this in the future. What's important here is we've brought in some new leadership around the operational team and some new talent that I've experienced across the industry, both in other battery technologies and other competitors and in integrators. So we're bringing in experienced people that have done this before to help us scale the company as we move forward. While we're not happy with where we are, I feel very confident with the team's ability execute and deliver as we look to the future. Going to the next page, I'm going to talk about some of these on the prior page. I just want to hit on a couple things around the service milestones. The line continues to perform and we're really happy with our ability to build a good battery. Cycle times are less than 10 seconds and our first patch yield is greater than 97%. We continue to see the performance of that line and what it means to us as far as being able to scale and deliver on large projects and be really the foundation for everything we're gonna do going forward. We're also, the team is also ahead of target on its concept also, so I'll talk a little bit more about that as we get into the presentation here on the next page. But really, I think the foundation, the thesis of the investment from Cerberus, we're proving that out to be true every day, and we're just gonna continue noticeably grindstone, execute, and deliver for customers and shareholders. The commercial momentum, I talked about the two new orders that we want, very exciting, but at the same time, working with Cerberus, we've been able to pull together a full bankability offering out in the marketplace. Some of the things we've talked about in the past, when Nathan gets to our pipeline page, is how do you move things down through that pipeline? We're now bringing, I'll talk about in more details, the ability for customers to look at us and say, this is a bankable technology, and I have the backslips that I need to take the risk to move with a new technology. We see, because of that, we see the large utility pipeline strengthening. We'll talk about the numbers that we have on the line, but what I can tell you is that more and more people are coming to us, more and more customers are coming to us to really look at the inherent benefits of the technology. What we've learned from the standpoint of operating the business through the due diligence that we've gone through both with the DOE and with Cerberus is that we have a technology with differentiated performance. We probably haven't done the best job historically in presenting that technology and what it means to deliver benefits to the customer. And that's why you see things like seeing utilities becoming a bookable order in less than six months from when we first got the request for quotation in the door. So we've moved now to operational scale and capacity. We are delivering on our cost-out roadmap and we are optimizing our production supply. On the left-hand side of this page, as far as cost-out progress, very critical for us And we really look to switch our mindset from having a path to profitability to delivering profitable growth. Our goal as a company is to grow but deliver profits while doing so. The left-hand side of this page allows us to do that.