Eos Energy Enterprises, Inc.

Good morning and welcome to ES Energy Enterprise fourth 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. With that, I would like to turn the call over to Liz Higley, Director of Vesta Relations. Please go ahead.

Good morning, everyone, and welcome to EOS's fourth quarter and full year 2024 conference call. Today I'm joined by EOS CEO Joe Mastrangelo and newly appointed Chief Commercial Officer Nathan Craker. 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. 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 filings. Forward-looking statements represent our beliefs and assumptions only as 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.eosc.com. Joe and Nathan will walk you through our business highlights 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 the total year 2024 earnings call for EOS. Strong year by the team. I think you've got to look inside of the numbers here to see really the performance in continuing to position EOS for the long term in the long-duration energy storage market. As we saw, we hit our revised guidance that we came out with at the end of last year. The team continues to execute. As we look at the operating highlights on page four, continue to see a strong commercial pipeline, specifically around long-duration energy storage. Our pipeline is becoming more vibrant, in my view, and really positioning to where EOS wins in the marketplace. Continues to grow. We had a solid year on booked orders with $310.7 million. And the orders backlog now approaching $700 million and over 2.5 gigawatt hours, positioning us to grow for the future. As you look at technology working out in the field, we're approaching 5 gigawatt hours of discharge energy out in the field. When you look at the number of cycles that we're talking about, the number of cycles that we've put on the technology is becoming immense with over 34,000 cycles out in the field, really showing the strength of what the EOS technology can do. With revenue, as I said earlier, we slightly exceeded what our revised guidance was at the end of last year. Really strong performance by the operating team in Turtle Creek. And then on the cash side, Nathan will give a little bit more details, but $103 million in the bank, that doesn't include the $40.5 million that we drew on the last draw for the service loan. So when you think about 2024 and really go through the year, you know, really started off and really turned the corner in the second quarter when we closed the loan from Cerberus and created the strategic investment from them, which then flowed into closing the DOE loan, which then allowed us to really bring the SOTA line, the state-of-the-art line, in operation and really position EOS as a strong, long-duration energy storage operating company. If we go to the next page on page five, I'd like to talk a little bit about the external environment, what we're seeing and how we're positioning the company against that backdrop. Really what we're doing is scaling a company into a high-growth environment. It's very exciting for all of us here at EOS on a day-to-day basis. When you look at the external landscape, there's a couple of truths that we really need to look at as you think about how this company will grow over time. The reality is energy demand is going to double out into 2050. But inside those numbers, you've got to think about there's a couple of things happening here. We talk about and want to focus on the tremendous growth that we see here in the United States. We also need to think about globally. Part of what we're trying to do is also there's a lot of what I would call energy poverty in the world. We have people that don't have sustainable, reliable power that as we grow the company and think about positioning ourselves for the long term, we can lean into that because we have such a simple, easy solution to operate in the harshest environments that fit well with that growth as we look to the future. At the same time, you're seeing a 25% tagger over the next 10 years for long-duration energy storage. So strong market, really evolving towards the EOS solution that will allow us to grow over the long term. At the same time, we are operating in an uncertain regulatory environment. The uncertainty of that regulatory environment, when you really think about it, EOS, we've been working for nearly seven years on building an American-made product. So when you think about our bill of materials being 90% U.S. source, that protects us against the tariffs that we're seeing happening. The same time when you think about the IRA and the production tax credit and the investment tax credit, I believe and I think as people look at this, having a long-term investment tax credit is only going to help us as we grow into American energy independence and dominance, if you will, to having that long-term ITC. At the same time, the production tax credit is a great program, but that program needs to close loopholes around being able to utilize the production tax credit for repackaging and products that are built elsewhere. What EOS does is EOS is bringing a product that has raw materials sourced in the United States, manufactured in the United States, containerized in the United States, and shipped to customers. So we really look at these regulatory uncertainties and think of the way we've been positioning the company over the past seven years. But we also need to remember that what we've always talked about, what I've always said, is that we love having the incentives that are out there, but we've never relied on them to make the company successful. And that holds true even today. Now, when you think about, and I think one of the big questions that everybody may have on their mind is, what's going to happen with the loan from the Department of Energy? What I would say is where we stand today, and I can only talk about where we stand today, our relationship with the loan program office has not changed. We're continuing to work with them on a regular basis to go through the execution around Project Amaze and bringing our capacity online in Pennsylvania. And we remain confident that we'll continue that relationship as it goes forward because this is an American-made technology that plays into a large-scale need for not only the United States, but the United States allies and also other parts of the world that are experiencing energy poverty and would like to get into the developed world as they think about readily available electricity for the world. When you get to the middle, you talk about commercial growth. Commercial growth, what I find on the commercial growth side right now, you're starting to see a consolidation in the industry. You're starting to see companies coming out and really repositioning themselves with new technologies, new durations, changing from battery companies to become solar companies. EOS, we're sticking to our strategy. We've always thought about, we spend a lot of time, people talk about features and specific performance parameters of products. But what we sell is a solution. What we sell is readily available megawatt hours that customers can use. We're not selling a battery technology per se, but underlying that solution is a very flexible battery technology that provides a levelized cost of storage advantage. We're not outselling the features around what an EOS battery can do, but we sell the returns and the ability to use that technology in a variety of ways to meet the demand that I was talking about earlier out in the marketplace. What we play into then is the fact that this is a secure technology. It's compliant in every sense of the word from an energy security standpoint today. It's safe. It's non-flammable. Thermal runaway risk is non-existent with our product. And its reliability of the product and how it can operate and the simplicity of how it can operate is accelerating the demand that I talked about on the prior page and Nathan will talk about in a few moments. The same time that you're seeing that growth, we've got to scale the operations of this company. The first two months of 2025, we've set production records in our facility in Turtle Creek. The team is now operating at a level that continues to improve on a day-by-day, month-by-month basis. And that makes me feel good about how we're going to scale into the year as we think about 2025. We're also working through and have talked about sub-assembly automation, which will drive our capacity and get us to our current cost-out entitlement, which then delivers a profitable product. Now, what's important on sub-assembly automation is is this is not something that we're talking about doing. It's something that we're doing right now. There's equipment that has been arriving in the Turtle Creek for performing factory acceptance testing to prepare for site acceptance testing to start bringing this technology online in the second and third quarter of this year. So this will allow us to achieve the two gigawatt hour capacity out of the Turtle Creek facility with one line, which allows us to grow and deliver on our backlog. At the same time, what we're seeing is projects' durations are getting longer on energy storage projects, and it's not just thinking about an eight-hour project, a six-hour project. It's not that simple. What people talk about is eight-hour discharge in a 24-hour period that could be cut up into many different discharge durations. It could be two hours and six hours, four hours and four hours, eight hours straight in a row, seven and one hour. EOS is the only readily available technology that can do that, where when you do those multiple cycles in a day, you're not degrading the product, you're not causing it to lose its performance, and you're not causing it to use up its useful life faster. So we feel like we fit into that long-term. Now, what that means, though, is projects are getting bigger with durations longer, is that customers come in and they look at the facility in Turtle Creek and are impressed. But then think about having a gigawatt-hour project and saying, wow, if I do a gigawatt hour, that's 50% of your current capacity. So what we're doing now, and this is a change in our strategy, as I've always said, we'll build capacity as we get backlogged. We're going out and we're building capacity because we know the demand is there for the product as we look forward, and I'll talk about that on the next page. So if you go to the next page on page six, that record production that we're seeing off the line is still with a 98% first pass yield, We've actually lowered the cycle time of the line to below 10 seconds and continue to find ways to improve both of those numbers. When you look at Pennsylvania, we're finalizing where future lines will go outside of what we're going to install in our current Turtle Creek facility to continue to grow our presence in the Pittsburgh-Mont Valley area. At the same time, on our capacity expansion I was talking about on the prior page, sub-assembly automation coming online in Q2 and Q3. We're really looking at containerization, so putting battery modules into the cubes or into the boxes that then get shipped to customers. We're thinking like an automotive company and how we want to get that into a moving line versus a static line, and we believe we've found ways to improve throughput that will allow us to get more shipments out of our existing facility. At the same time, we've put out a request for quotation for three state-of-the-art lines, so we're going to source six gigawatt hours of capacity for to be able to build into the larger orders that we're seeing, the larger potential projects that we're seeing coming on the marketplace. So when you really think about this, we want to have customers come and say, if I give an order, they're going to be able to build it. We know that the technology works on the state-of-the-art line. We know we can continue to improve it and make it better. And at the same time, we want to go out, and as we've always talked about, we don't need one massive factory. We want to build smaller facilities closer together. to where the demand is to be able to reduce total logistics costs for projects. So we've gone out. We have eight states bidding on where Factory 2.0 is going to go. And we're negotiating state incentive packages, which I think will lower the total capital costs of being able to do this expansion. And we're going to shortlist these sites here over the next few weeks and then continue to move forward of coming out and saying where will be the second home for EOS as we think about expanding our capacity to be able to deliver these large-scale lines it's exciting and the team has really done a great job here as far as finding places that we could potentially be part of and we look forward to keeping everybody updated on that as we progress go to page seven want to talk about delivering a profitable z3 product you know the team did a phenomenal job of taking out direct material so so the overall when you look at this the fact that we delivered lower volume than anticipated last year impacted the financials that you see in for the company in 2024, notwithstanding the fact that we had lower volume. So think about this for a minute. The volume was lower than what we thought, but the material cost was lower than what we forecasted. So the entitlement of this product and continuing to really drive costs out, reset the baseline, redo your funnel, come up with new opportunities, and continue to take costs out, we're just a team that's going to continue to drive this and continue to take material costs out. And we think get on a leadership basis. When you think about how people talk about cost of product, when you're comparing us against other technologies, other technologies talk about sales and sell cost. We have a module, a module that has 20 cells inside of it. If you do this on a sell basis, we're really the cost leader when you look at the market. It's a simple manufacturing process. When you look at the line that we have up and running, we met the labor plan for what we did in the state-of-the-art line. But at the same time, Given the fact that we didn't automate the sub-assemblies, we had to add labor to continue to produce. That labor will come down over time and we'll get the labor cost down to where we believe it will be in a market leadership position from direct material labor. The third piece of getting to profitability is delivering on your manufacturing overhead, your footprint. The team did a great job controlling expenses and avoiding extra costs as we revised our revenue estimate prior year. But we really look at this and say, given the facility we have, given the capacity that we can drive, given the labor that's required to do this, when at scale, and given the material costs, we have a profitable product. And I'd like to also point out, when you think about our backlog, some of the projects that are in our backlog date back to when we were launching the company. They're at lower price points than what we are selling today. If you take where the team is selling the product today with the cost that we have today, you have a profitable Z3 product. We've got to scale into that and grow that over time, but I feel really good about the product we have, the ability to build it, and the ability to really grow this company as we look to the future. With that, I'll turn it over to Nathan to walk through the commercial portion of the presentation and the financials.