Eos Energy Enterprises, Inc. Class A Common Stock 2026 Q2 Earnings Call

Good morning. Welcome to Eos' second quarter 2026 conference call. Today, I'm joined by Eos CEO, Joe Mastrangelo, COO, John Maez, and CFO, Alessandro Laghi. Today's call may include forward-looking statements, including our expectations regarding future results and the outlook for our company. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. For more information on these risks and uncertainties, please refer to our SEC filings. These forward-looking statements speak only as of today, and we undertake no obligation to update them except as required by law. Today's remarks will also include references to non-GAAP financial measures. A reconciliation of these measures to the most directly comparable US GAAP measure is included in our earnings release.

Non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. In addition, these measures may not be comparable to similarly titled measures used by other companies. This conference call will be available for replay via webcast through Eos's investor relations website at investors.eose.com. Joe, John, and Alessandro 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. Good morning. Thanks everyone for joining us. This quarter comes down to three simple things. We shipped more product than we have in any prior quarter, we grew our backlog, and we committed to consolidating our manufacturing footprint. A strategic decision that trades near-term revenue to lower our cost base as we exit 2026. Now, let me walk through all three of these. We're tightening our 2026 revenue outlook range to $300 million-$350 million. This is a business decision, not an operating surprise. Let me address this change directly. We are accelerating the consolidation of operations into our modern Thorn Hill facility because of what it has begun to deliver. Line 1 will be down during the move and upgraded to the operational improvements we've implemented on Line 2. The volume it would have produced is the difference in the upper end of our guidance range.

We're doing this so that 2027 is not only a volume growth year, but also a margin expansion year. John and Alessandro will take you through the operational and financial expression of decision in a few moments. The low end of this range is roughly two and a half times our 2025 revenue and more than 19 times to 2024. We delivered just under $126 million in the first half, which already exceeds all of last year's revenue. Let's frame the range itself. While we are still finalizing a detailed schedule, the shape is very clear. The second half exceeds the first half, the fourth quarter is higher than the third. The bottom of the range takes roughly $50 million of second half growth over the first half. That is just maintaining the run rate that we exited June with on revenue already secured through backlog and Frontier Power USA.

The top end of the range is achievable. It comes down to how quickly we scale Thorn Hill operations in a 24/7 production facility like we have today in Turtle Creek. We're planning for that, and we'll report against it every quarter. Moving to slide five, our second quarter operating highlights. We achieved record backlog, record revenue, record cube shipments, and a significant improvement in adjusted EBITDA margin. We're starting to see the operating leverage we've been talking about. As volume increases, fixed costs are spread across more cubes, and that's what drives margin improvement and closes the profitability gap. John and Alessandro will take you through the details behind those numbers and our path forward. Before they do, I'd like to spend a moment on fleet performance and cash. First, discharge energy. The number we're looking at at the page is up nearly a half a gigawatt hour since our last call.

The fleet now cumulatively has discharged 6.5 gigawatt hours of energy. The Z3 fleet continues to perform, operating at an average round trip efficiency of 78%. Let me be precise about that number, because precision is what matters here. 78% is the average across a 2,120 state of charge window. It includes units running on DawnOS and the units that have not yet been upgraded to DawnOS. The performance of what we've developed, but we're continuing to count that performance of where we still have to improve to show the true number of what customers are experiencing out in the field. It's a fleet average under real duty cycles, not a laboratory result on a single unit. We're starting to scale here.

We have more work to do. There is a clear path to continue to improve performance. Turning to cash. We ended the quarter with $364 million in total cash. What's important is what sits behind that number. Our operational cash use this quarter closely matched our adjusted EBITDA loss. Cash on cash, there was very little gap between the P&L and cash flow. That burn rate needs to continue to come down and turn positive. The initiatives that John and Alessandro will walk you through are designed to drive that improvement. Now let's move on to slide six. Let's focus on what wins our next order. Reference hours. This page shows the hours the fleet has already delivered and the continued growth ahead with more than 200 additional megawatt hours expected to come online over the next six months based on current customer project schedules.

Let's start on the top left of the page. The fleet has now run over 3.9 million cycles and discharged 6.5 GWh I talked about earlier. On Z3 specifically, over 1.1 million cycles, we are moving towards 1 GWh of discharge energy. Every hour of cycling makes the next project easier to finance, because customers can now evaluate a track record, not a promise. Round trip efficiency tells a more interesting story. Note how the performance range is narrowing. The bottom is rising towards the fleet average. That is variation coming out of the system, and reducing variation is what makes performance bankable. At the same time, the top of the range has crossed above 90%. In manufacturing terms, that is entitlement. It is what this technology delivers when everything runs designed. It is not a ceiling we hope to reach.

It is a level the fleet has already demonstrated, and now our work is to deliver it consistently across every cycle, every cube in the field runs. The duration tile shows the range our systems are operating in the field. From two and a half hours to 14. One product, one SKU dispatched however the market needs it. The photo on the right is a project that was added into our backlog in November of 2024. I want to use it to show you how a pipeline opportunity becomes an asset operating in the field. The units were built and shipped by November 2025. They went on foundations in May or June of this year, and the project is expected to come online by year-end. Order to operations, roughly 2 years, and notice where the time went. The product was ready in 12 months.

The second year was everything else, from site readiness to third-party equipment delivery outside of our scope and the site construction schedule. That is one of the industry's key bottlenecks, and it is exactly why Frontier Power USA was built, to simplify the process and streamline the customer experience. The next page highlights how that strategy is translating into results. On page seven, the U.S. storage market is changing in ways that favors our technology. Load growth from data centers and electrification is pulling capacity needs forward faster than new generation can interconnect. In PJM, the grid operator for 65 million people and the largest power market in the country, prices have hit the ceiling in three consecutive capacity auctions, and the way the market now counts a resource towards capacity favors those that hold outputs to the system, full system need rather than the first 2 hours of it.

Virginia has written the same logic into law this spring. The statute carves out 4.5 GW for resources that run 10 hours or more inside a total state storage target above 20 GW. At the minimum duration, that carve-out alone is 45 GWh of energy. Buyers are no longer procuring just a storage system; they are procuring hours. Inside of this, we see four customer types. Energy providers and regulated utilities who generate revenue from assets. Energy consumers and assurance buyers who carry them as a cost of operations. The largest energy providers are independent power producers who need to deliver multi-hour and multi-cycles day after day because those capacity payments reward duration and energy margin rewards throughput. Utilities need assets that regulators will allow them to earn a return on over a 20-year life. Think about that for a moment.

An energy provider, an IPP, uses that discharge window I talked about earlier, when we've always talked about the degradation of our product over time and having a 25-year life helps a utility with its regulator and its rate base. If you move over to the largest energy consumer, that's high-speed computing, where power is just a cost of goods sold. Think of a data center as a factory and think of energy storage or energy coming in as an input for them to produce. Storage is judged on delivered costs, how fast the site can energize, and how reliably it will operate. The assurance segment is made up of defense or critical infrastructure customers, where storage is priced against the cost of failure and the rapidness of being able to perform.

Two book it as revenue, one books it as cost of goods sold, one books it as insurance. All four buy hours, all four screen for supply chain origin. We manufacture in Pennsylvania with a domestic supply chain. That is a commercial advantage today, not a future one that we're planning on. The pipeline on this slide is built from all four of these customer types, the composition is where we are focused. I talked about backlog earlier, what's important to note is that six customers placed orders this quarter, four new and two repeat. Our pipeline of $24.6 billion, nearly 112 GWh, is up 31% year-over-year. 51% of the pipeline is eight hours or longer. That is the duration band where our economics separate from incumbent technologies. 32% is data center related, which two years ago was a de minimis amount.