Eos Energy Enterprises, Inc.

Good morning and welcome to EOS Energy Enterprises' second quarter 2025 conference call. As a reminder, today's call has been 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, Head of Investor Relations. Thank you. You may begin.

Good morning everyone and welcome to EOS's second quarter 2025 conference call. Today I'm joined by EOS CEO Joe Mastrangelo and CCO and interim CFO Nathan Kraker. 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, uncertainties 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 dates of statements are made. We undertake no obligation to update these statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events 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 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 or EOS's investor relations website at investors.eose.com. Joe and Nathan will walk you through our business outlook 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. Welcome, everyone, to the 2Q earnings call. I want to start off with our operating highlights page. Nathan will walk through the details of the numbers on the page. I want to talk about a couple themes. Last month, I was able to attend the Pennsylvania Energy and Innovation Summit hosted by Senator McCormick and attended by the president. It was a great two days that we had here. What it proved to me is that energy is at the forefront of everything that we want to do as a country to grow the country and EOS plays a very important role in how we position the United States for its energy future. A modern grid is going to require bulk stationary storage. It eases congestion. The easiest way to think about congestion is when there's too many electrons trying to get onto the grid and there's not enough electrons getting off the grid. So we are able to take those, park them in our system and put them back on to better match supply and demand curves in the market. One of the most important things I've learned through my 35-year career in the energy industry is Every electron counts and any efficiency you can bring to the system makes the system more robust and also allows you to avoid costly new investments and make what you have produce better. And that's what curtailment is about. Curtailment is when you take existing generating assets and stop them from operating because you can't put them on the grid. Again, an EOS solution, a standalone energy storage, Nathan will talk about how 50% of what's in our pipeline today is standalone energy storage. allows you to keep running those assets, put the electrons in a parking lot, if you will, and then put them back on the grid. So think of the grid like a highway. When there's a lot of traffic and you can't get on that on-ramp, park in your EOS energy storage system, and when it frees up and one of the exit ramps wants power, we'll put it back on that highway and get it delivered cost-effectively to the people that use it. The other piece that I would say on the summit is really you saw the strength of the company being in Pittsburgh. I think what you see is this ecosystem of technology, ability to manufacture, the infrastructure around universities, which is allowing us to build a great company. What you saw in Q2, I'll get into some more details, is we have record revenue, 122% higher quarter over quarter shipments. Great performance by the operating team here. I'll go into some details in a couple of pages, but like really proud of our ability to scale the enterprise. And when you think about that 122% increased shipments, it was with the same processes and labor that we had in the first quarter. So the team is finding ways to do things better bringing efficiency into our operations every day and getting better output and throughput over the assets that we have. And we are continuing to scale operations. I will talk about the ramp and bringing on sub-assemblies, which unlocks the full capacity of our first state-of-the-art manufacturing line. And at the same time, we announced signing ordering our second line as we start to position the company for the growth that we see flowing through the pipeline. What I would say before we move to the next page is as it comes to the pipeline and orders backlog, things are moving, the operating dials and the steps that were worked through with customers to get to an order are progressing. There was a little bit of a pause here as the OBV was approved. I think we're seeing now an acceleration. That acceleration was no more evidence than what we saw here in Pittsburgh back at Senator McCormick's Energy and Innovation Summit. So I think Nathan will walk through the progress that he's making, but we see projects evolving. We see big hyperscalers and developers coming to EOS because of the things we've been working on for the last seven years of developing an American supply chain, coming up with a cost effective, reliable and safe solution. So if we move to the next page, I want to talk about that solution for a second. So our systems are built for resiliency. We've talked about the leadership team that we have in this company in my background. I spent half of my career in the oil and gas industry and the other half in traditional fossil generation. So what you learn being in those industries is the fact that the grid requires robust solutions that can survive the harshest environments and the things that you don't plan for. So that all starts on the left-hand side of the page at our Edison proving ground, where we test our technology beyond the operating conditions that you see out in the field. What we've been doing over the past months is testing the Z3, and we've increased our ability to get energy out of the product by 40% from the product launch and have a very clear roadmap of how we get better energy efficiency out of the product and also developing the software. So when you look at Our financials and see the line on R&D, what we're spending on that R&D money is making this product that we have better and putting the software over the top of it so that it gives the operability that our customers demand. In the middle pieces, we do abuse testing on this product. We had an event at our Edison facility where we had an overcharge on a cube that we were testing. That overcharge on the cube resulted in smoldering of plastic inside of the cube. Not wasting a crisis, we took over 1,000 air quality measurements while that was happening. We wanted to be able to get the data to show customers that when you do have a problem, and problems will always happen, that this is a safe, non-toxic product to put into your neighborhood or onto your job location. And we found no hazardous readings in any of the measurements that we took. These 1,000 measurements were taken all across Edison. We never closed operations at our facility in Edison, New Jersey. And we worked with the local fire department to use water to get the smoldering to stop. And that water was tested at the end. We collected all that water, put it in a tank, tested it, and found that that water was as clean as it was when it went onto the cube, so proved out the thought. That's why we have the proving ground. That's why we run the testing, and that's why we look to make a product that can stand up to the harshest conditions that the industry can bring. On the third column, you may have heard about a cube winding up on the highway as we were delivering it to a customer, but you probably didn't hear about it because nothing actually happened. The picture you see is the cube sitting on the highway. There was an accident, as accidents will happen. In one hour, that cube was picked up, delivered, and we were able to extract battery modules out of that cube, bring them back to Edison and run them, and they performed as if they were new modules. So once again, proving that we have a durable solution that's safe. and also at the end of all this, recyclable. That incident that we had on the left-hand side of the page, everything that was inside the cube was extracted and recycled using normal recycling methods to prove once again that EOS has a full life cycle to be able to deliver for customers. On the far right is one of our Z3 installations. We've been running the product out in the field and happy to report that we are consistently delivering between 87% to 89% round-trip efficiency on sub-four-hour discharge cycles. Now, we've always talked about EOS being a longer-duration technology, but what we're learning with the Z3 and what we're learning with the software that we're developing is that we can extract better performance out of the technology. So as we look and we see these shorter cycles that we've been running for this customer, we're seeing round-trip efficiency that's on par with any other technology in the markets. When you hear higher efficiencies coming from other technologies, you have to net out the cost of running HVAC on the parasitic loads, which we don't have. And you wind up where, as we talk, and Nathan and the team are out selling, you hear that we topped out at 89.5% round trip efficiency on a four-hour discharge cycle. That efficiency is in line with what everybody else is doing. So we really look at this and say, if you want something that's America's battery, made in the USA with a US supply chain, that's had extensive testing and operating out in the field, We've abuse tested it and learned that it's safe for the environment. We then have looked at it and said that if we do have an accident, nothing will happen. You clean it up and you keep moving on. And when you operate this technology, that flexibility gives you better performance than what you see from other technologies. It's a compelling value proposition that we're outselling the customers every day. And that's why you see the pipeline growing the way it is. And that's why you see things like our partner in the UK bidding twice the amount of our MOU into the cap and floor scheme in the UK, because they know that this technology is built to last and has the resiliency that the industry requires. Now, if we move to the next page, I do want to talk about, you know, we talk quarterly results here, but I want to take a step back and really, you know, thinking of a company that you're building for the long term in 13-week increments, sometimes you lose the actual trends that are happening in the business. So what we did on this page was really take the second half of last year and compared it to the first half of this year. So you could see 3x revenue growth, 4x factory shipments. Nathan will talk about why you have the disconnect there in revenue versus shipments. We did ship what I would call a very important strategic project that was at a lower price point. If you put in the average price that we have in our backlog on those shipments, our sales would have topped out over 20 million for the quarter. But the project that we're installing is very important for us to prove out the technology and to show that the things I talked about the prior page work out in the field with a blue chip operator. If you look at gross margins, we've talked about get more volume over the asset base that we have and the margins will come. You can see that clearly as the team gets more throughput through the factory that gross margins are improving. We're going to be transitioning to CM positive cubes here as we get into the fourth quarter and targeting gross margin positive in the first quarter of next year. It's pretty exciting for us. You know, we built in advance a facility that can handle two gigawatt hours of production. And as we bring online, sub assembly automation we're starting to we'll start to approach that as we get the year end and you'll see the company delivering the gross margins that are positive for the product that we put out in the field and our adjusted EBITDA actually when you look at that that improvement is not just in line with the gross margin improvement it's actually better than gross margin because we're getting leverage over the investment that we're making in our base costs you know we've done some scaling in different areas to be able to manage the business and That scaling will stand the test of time, particularly when you think about functions like finance and legal and other things that you need to run a public company. As we bring in the operating systems to be able to run the company, we'll have a team that's worked through the growing pains of scaling the company, and it's going to make us more efficient when we're at scale. But the most important thing that we're doing is we're making investments in core functions that allow the business to operate better. Things like the sales team to get out and grow the backlog. Other things like bringing in engineering resources to help us be more efficient on the factory floor, to take cost out of the product. Those are the things that we're investing in when you look at that operating cost that we have in the model. And we're getting 2x operating leverage when you think about what we're doing on the adjusted EBITDA versus gross margins. So we're going to continue to ramp the business, and I want to move to the next page and just walk through quickly how we're doing on that ramp. You see some pictures of the new subassembly first station that's been installed. We will have two of those stations up and running and producing with the target of having all stations up and running as we get into the fourth quarter. That speeds up the production of this product, but not only speeds up cycle time. So one thing is to get more throughput, but the second thing is we're getting better quality off of this equipment. As we were building things on the semi-automated line, you bring in human variation. We take that variation out. What we're seeing on the parts that are coming off that line is a higher process capability than what we had before and a 64% improvement in the overall part flatness. Part flatness is important because that gets performance out of the battery because you get consistency in how we operate. We're seeing almost more than 3% improvement in energy efficiency just by getting that consistency in the parts coming off the line. It's something we've been very thoughtful about as we've brought it online because you don't want to introduce a bunch of parts that don't achieve the quality goals and wind up having a lot of scrap and rework, but we're very happy with how the equipment is performing, and we're ramping up that production as we go through, and we'll keep everybody updated as we go through the summer here to bringing that online and getting to full capacity and delivering on our revenue range for 2025. With that, I'll turn it over to Nathan to walk through a couple pages, then come back on Q&A. Thanks for listening.