Prepared remarks
Good morning, and welcome to Eos Energy Enterprises' Second Quarter 2025 Conference Call. This call is being recorded, and your participation indicates your consent to the recording. 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' Second Quarter 2025 Conference Call. Today, I'm joined by Eos CEO, Joseph Mastrangelo; and CCO and Interim CFO, Nathan Kroeker. This call, including the Q&A portion, 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 expectations 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 of the date such 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, 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 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 through Eos' 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, Joseph 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 discuss a couple of themes. Last month, I attended the Pennsylvania Energy and Innovation Summit hosted by Senator McCormick, which was also attended by the President. It was a great two days. What it proved to me is that energy is at the forefront of everything we want to do as a country to grow, and Eos plays a very important role in positioning the United States for its energy future. A modern grid requires bulk stationary storage. It eases congestion. The easiest way to think about congestion is when there are too many electrons trying to get onto the grid and not enough being released. We can take those electrons, park them in our system, and put them back on the grid to better match supply and demand curves.
One of the most important things I've learned in my 35-year career in the energy industry is that every electron counts, and any efficiency you can bring to the system makes it more robust while avoiding costly new investments. That's what curtailment is about; it's when you take existing generating assets and stop them from operating because you can't put them on the grid. An Eos solution—stand-alone energy storage—allows you to keep running those assets, put the electrons in our storage system, and then reintroduce them to the grid to ensure a cost-effective delivery to end users. Think of the grid like a highway where there's a lot of traffic. When you can't get on the on-ramp, you can park in your Eos energy storage system. Once it frees up on an exit ramp that needs power, we will deliver it cost-effectively. The Summit highlighted the company's strength in Pittsburgh. You see an ecosystem of technology and manufacturing infrastructure around universities, allowing us to build a great company.
In Q2, we had record revenue—122% higher quarter-over-quarter shipments—thanks to the operating team's great performance. I'll go into more details later, but I'm really proud of our ability to scale the enterprise. Despite the increased shipments, we maintained processes and labor from the first quarter due to our team's efficiency improvements. We're continuing to scale operations. I will talk about the ramp-up in bringing subassemblies online, which unlocks the full capacity of our state-of-the-art manufacturing line. We also announced signing and ordering our second production line to position the company for growth in our pipeline. Before I move to the next page, I'd like to mention that concerning the pipeline and orders backlog, things are progressing. There was a slight pause as the One Big Beautiful Bill was approved, but we're now seeing an acceleration. This was evident at the Energy and Innovation Summit.
Nathan will walk through our progress, but projects are evolving and large developers are turning to Eos due to our seven years of work developing an American supply chain and providing a cost-effective, reliable, and safe solution. Moving on to our solutions—we build for resiliency. I've spent half of my career in the oil and gas sector and the other half in traditional fossil generation. I've learned that the grid requires robust solutions that can withstand the harshest environments. This process starts at our Edison proving ground, where we test our technology beyond field operation conditions. Over the past months, we have tested the Z3, increasing our product's energy output by 40% since launch, with a clear roadmap for better efficiency and software development. We've also conducted abuse testing on our product and had an incident at Edison where we overcharged a testing cube. We took over 1,000 air quality measurements during this event and found no hazardous readings, confirming that our product is safe and non-toxic for neighborhoods.
We collaborated with the local fire department to safely handle the incident without halting operations. In another incident, a cube fell onto a highway during delivery, but nothing happened—the cube was extracted and tested, functioning as if it were new. This durability showcases our ability to produce a safe, recyclable solution and demonstrates the length of our product lifecycle. As for our Z3 installations, we are consistently achieving between 87% and 89% round-trip efficiency on sub-4-hour discharge cycles. We've always promoted Eos as a long-duration technology; however, through our experience with the Z3 and software enhancements, we are witnessing superior performance metrics, aligning with other technologies in the market. We are building an American-made battery, with our resilience and safety measures in place. As we assess Q2 results with the previous six months, we see a 3x revenue growth and 4x factory shipments.
Nathan will explain the revenue and shipment disconnect. We did ship a strategically important project at a lower price point, causing our sales to top $20 million only when including average pricing from our backlog. Gross margins clearly improve as team throughput increases. We aim for CM positive cubes in Q4 and positive gross margins by Q1 next year. With our facility built to handle 2 gigawatt hours of production, our planned subassembly automation will facilitate that capacity. The operating improvement in our gross margins and adjusted EBITDA surpasses gross margin improvements due to the scaling of our business. We are ramping with strategic investments in core functions like sales and engineering to promote efficiency and growth. I'll talk about ramp impacts next. You can see photos of our newly installed first subassembly station. We intend to have two stations operational by Q4, enhancing production speeds and overall quality controller to achieve better battery performance.
The parts produced have improved with 64% better flatness, and this contributes to energy efficiency improvements. As we continue, we anticipate an ideal day coming to fruition by year-end and revealing our 2025 revenue range.
Thanks, Joe, and good morning, everyone. Echoing Joe's sentiment, we're gaining momentum in the second quarter with much to look forward to for the back half of the year. First, I wanted to address the One Big Beautiful Bill and its effects on Eos and the broader long-duration energy storage market. The bill is extremely positive for us—it preserves the Section 45X production tax credits with full stackability and transferability through 2029. Reminder: we can generate over $90 million annually from each of our manufacturing lines when running at capacity. Continued stackability means we qualify for the full $45 per kilowatt hour for our batteries and the 10% credit for electrode active materials. Ongoing transferability means we can monetize credits as they are created. We have generated $14.3 million in credits since implementation, with $6.3 million collected in cash to date, with expectations to sell first half 2025 credits later this year.
Moving to our ITC customers—while customers with wind and solar projects experienced eligibility date pull forwards compared to previous legislation, energy storage was explicitly excluded from these changes. We'll cover pipelines in more detail later, but I want to highlight that most of our renewables projects scheduled to come online in the next 30 months have not faced significant adverse impacts from this change. Additionally, the new FIAC legislation creates the demand for our American-made product as we localize over 90% of our materials domestically. Overall, we view the bill's passage as a strong endorsement of the need for American-made energy storage systems to meet the growing demand for energy. Now, regarding our commercial pipeline, we've seen notable advancements since our last update. A key emerging theme is the growing scale and sophistication of our opportunities, particularly with larger counterparties.
In Q2, we concluded the quarter with opportunities valued at $18.8 billion, representing 77 gigawatt hours—a 37% year-over-year increase and a 21% improvement quarter-over-quarter as we added $3.2 billion. Notably, we've seen a 15% quarter-over-quarter growth in 8-plus hour projects, validating our previous statements regarding changing market fundamentals and a rising demand for longer-duration solutions. Whereas many early projects were generation-co-located, 50% of our pipeline now consists of standalone storage projects, supporting the need for storage across existing electricity grid infrastructures. Our flexible technology sees rapid advancement in data centers, contributing over 20% of our pipeline today. Direct demand from developers for fully integrated data center campuses combines multiple energy sources with our storage solutions for reliable power, reducing revenue generation risk and overall energy costs.
Last quarter, we announced a 750-megawatt-hour MOU with a developer—an indirect project that's advanced further as we finalize contract terms for the first 10-hour project supporting a well-known hyperscaler in the PJM service territory. We’ve also progressed with the 5 gigawatt-hour MOU with Frontier Power for U.K. projects, now totaling over 10 gigawatt hours, reflecting strong confidence in our technology. The U.K.’s cap and floor scheme aligns with our capabilities, as its regulations require a minimum of 8-hour discharge. We’re also growing our partnerships in Puerto Rico and have identified additional storage projects alongside local developers, targeting an increase from the current 400 megawatt hours under MOU. Transitioning to backlog—we ended Q2 with a backlog of $672 million, representing 2.6 gigawatt hours of storage. During the quarter, we booked $15 million in revenue and secured two pivotal orders—one for a microgrid project supporting two schools in Florida, and another for renewable energy microgrid development on California tribal land.
Given the industry's focus on the One Big Beautiful Bill's outcome, we've observed several months of customer uncertainty awaiting final language. With uncertainty now resolved, we feel confident in the heightened activity surrounding large projects, enabling customers to navigate new requirements effectively. While we experienced a slight backlog decrease given these dynamics, we see strong demand signals ahead. Our enhanced factory tours to showcase manufacturing expansions and Z3 field data have improved customer confidence and should yield larger orders soon. Strategically, we are positioning Eos as the preferred solution for global grid resiliency and sustainability by collaborating with a major developer to design an indoor racking solution leveraging our safety features, raising site density—achieving over 1 gigawatt-hour per acre, making us competitive in constricted areas. Specifically, regarding Q2 financials—revenue is increasing through greater volume.
However, delivered volumes exceeded revenue due to decreased pricing on a specific project. In Q2, we generated record revenue of $15.2 million, a 46% increase from Q1, accompanied by a 122% shipment increase. This revenue equaled what we produced for the entire year of 2024, indicating our scalability. As previously predicted, Q2 revenue was impacted by reduced prices attributed to a single strategic customer. We collaborated closely with this customer to create a design for simplified field installation and commissioning, reducing truck-to-pad and cube-to-cube connection timing metrics on subsequent projects. Gross loss was $31 million, largely supported by increased production volumes, while operating expenses came in at $32.9 million, with approximately $5.4 million due to isolated items. Excluding those nonrecurring items, operating expenses declined quarter-over-quarter. While year-over-year OpEx increased, 28% stems from noncash items like stock-based compensation.
The remainder associates with strategic hiring for scaling. We are prioritizing investments in software enhancements and an expanded sales force to support anticipated growth. Our net loss totaled $222.9 million, including noncash fair value adjustments tied to the 35% stock price increase as of June 30. Adjusted EBITDA loss was $51.6 million, reflecting a 75-point margin improvement due to increased volume but partially offset by lower pricing. While pricing on specific projects affected Q2 results, we see a clear pathway to healthier unit economics by delivering projects aligned with our backlog pricing, alongside continued labor and overhead efficiencies driven by heightened throughput. With these improvements, we expect to achieve a positive contribution margin in Q4 and positive gross margins by Q1 2026. Booked revenue for the first half of 2025 totals $26 million, establishing a clear path to full-year revenue of $150 million to $190 million.
We recognize that this necessitates a substantial hike in production for the second half, yet we anticipate substantial production capacity increases as subassembly automation fully comes online, as Joe previously remarked. Lastly, concerning our capital structure and our urgent capital securing journey since 2023—it culminated in two highly successful transactions during Q2, effectively lowering our capital cost and simplifying our balance sheet, significantly enhancing our cash situation. In June, we raised $336 million backed by tremendous institutional participation in two oversubscribed offerings. Collaborating with existing lenders enabled us to complete an efficient transaction where proceeds were used, firstly, to refinance an out-of-the-money convertible due in June next year. You may have noticed a $5 million rebate post-closing per agreement terms. Secondly, we prepaid $50 million on the Cerberus term loan—this reduced the interest rate from 15% to 7%, deferred financial covenants to March 2027, and extended the lockup period by an additional year, enhancing long-term shareholder and strategic interests.
Additionally, we added $139 million in cash to our balance, ending the quarter with $183 million. Overall, this transaction is poised to yield approximately $400 million in interest savings over our debt's lifespan. Furthermore, after Q2, we announced our second loan advance of $22.7 million from the Department of Energy. This advance signifies we have drawn the maximum amount associated with our first manufacturing line, and we expect to request an additional draw before year-end as we enhance manufacturing capacity and build out Line 2. We also amended our 26.5% convertible notes, extending their maturity to September 30, 2034, while reducing the interest rate to 7% effective June 2026. These amendments will allow for optional pro-rata conversions excluding affiliated holders, and we anticipate redeeming roughly 85% of these notes in the third quarter. The strategic equity and debt refinancings, paralleled with continued DOE support, have significantly bolstered our balance sheet to accommodate the increasing scale of domestic battery manufacturing.
Personally, I feel this is mission accomplished. Before transitioning to Q&A, I want to revisit yesterday's announcement regarding our milestone cash performance tied to the Cerberus loan. Given Cerberus' confidence in our prospects, along with the efficiencies witnessed in project execution, they have granted us an additional no-penalty extension through October 31, 2025, allowing us to realize this growth. Thank you for joining us; I will turn it back for questions.
Thanks, Nathan. Before we turn it over to our sell-side analysts for questions, Nathan and I will address the top four questions submitted via Say Technologies from our retail base. To start with, when is Line 2 expected to be fully operational? Will this include the subassembly line? We are forecasting Line 2 to come online in the first half of next year. It will share subassembly capacity from Line 1, and eventually will have added subassembly capacity as we ramp up Line 2. Regarding lessons learned from Line 1—are those results yielding meaningful changes to line design, throughput, or costs? When we designed Line 1, we used a U-shape based on the building dimensions. For Line 2, it's designed as a straight line, where raw materials will enter one end and cubes exit the other, enhancing throughput and efficiency. We've learned a lot from operating Line 1 over the past year to ensure improved quality, reliability, and overall throughput—actions will be taken where single-point maintenance issues were identified, introducing backup systems to safeguard against slowdowns.
Importantly, we're delivering the cost of Line 2 similar to Line 1. We are excited about putting the line in dedicated straight-flow format to optimize efficiency and reduce material movements. The response to multiple state bids for Factory 2.0 has been tremendous. We are not rushing negotiations, working for a long-term partnership with the right landlord, coordinating with government levels for the most strategic site setup. We will provide updates once we have news to share. The second question I would like to address: last quarter, tax uncertainty delayed customer deals. How have customer timelines shifted since the BBB law, and what major barriers remain? I appreciate you pointing that out. We've seen a degree of delay. However, with the bill's final language adopted, some customers want to move quickly to ensure timely service for their projects. There's a shift in customer urgency and clarity, with projects starting to progress faster, furthering our optimism for the future.
To the next question: post-BBB, how is Eos building a partner ecosystem across integrators, developers, and channels? We've focused on developing strategic relationships, emphasizing the commissioning process for projects in the field. It's crucial to collaborate with the right partners and validate their technology. We've focused on identifying preferred partners and emphasizing a meticulous project execution strategy to ensure seamless deployments. These partnerships are equally vital for commissioning and project execution as they are for sales channels. Concluding with customer inquiries, we will see more details on this as we further progress in our commercial pipeline.
Questions and answers
Our first question comes from Stephen Gengaro from Stifel.
Two things for me. First, can you add color on bridging revenue? You’ve been clear on Q2, but any detail regarding Q3 would help as well?
Yes, quarterly growth has seen doubling production quarter-over-quarter consistently for the last nine months. Double it again, and you're in the middle of our guidance range. Moving forward, we need to keep doubling production with the same processes and headcount to realize this revenue projection. The recent doubling did not benefit from automation, which is now beginning to feed parts into the line. We're optimistic about the increased production when the automation kicks in.
And regarding the incremental production lines, can you explain how to balance order flow and visibility?
We’ve had great customer response, and we built Line 2 with the expected demand. Each project’s size requires us to be ready as orders come in. That's the timing for Line 2's order placement, reflecting customer demand accurately. While flexibility is crucial, we aim for efficient, direct flow reducing material movements, ultimately improving throughput.
Congrats on accomplishments! Can you quantify improvements in terms of LCOE or IRR for customers due to your advancements?
While we're still analyzing, efficiency improvements should enhance project IRR by a few percentage points. Every project's unique, but the lower commissioning and performance expenses will lead to advantageous upfront CapEx cycles, fostering better customer economics.
We aim for clarity in communication, but each project has distinct operating curves, and we tailor estimates accordingly. We're focused on driving costs and software improvements to ensure convenience and support for our clients.
Could you comment on ramp-up time to the second line?
We're committed to ramping Line 2 in the first half of next year while allocating capital according to customer demand. We'll provide timely updates on further developments.
What potential external factors could affect second-half sales?
We've eliminated tax uncertainties, with customers displaying urgency to move forward with their projects. We're optimistic about order pacing, without any major hindrance identified. Our team continually communicates with clients to assist in placing firm orders.
Service revenue increased to over $1 million in Q2. How should we assess this piece of the business?
Currently, service revenue is primarily linked to our commissioning efforts. As our asset base expands, service revenues will naturally increase, growing as a percentage of total revenues over time.
On the strategic project, can you clarify how much revenue was from 2Q? Is it lingering into Q3?
The majority occurred in Q2. Revenue recognition transpires largely upon delivery; most was already recognized—I advise you to assess our delivery setup.
How do we assess lag from order to delivery? What is typical?
Customer delivery windows vary; we've agreed on those timelines during order signing. We aim for flexibility, providing both manufacturing capacity and timely delivery, aligning customer needs.
We’ve optimized manufacturing by creating a straightforward design improving line production speed and reducing bottlenecks, leading to timely deliveries across projects.
No further questions in the queue. I'd like to turn the call back over to Joe for closing remarks.
Thank you for joining us today. Reflecting on our nine months of performance, our operational team has successfully doubled factory output over previous quarters. We're firmly aligned with our revenue guidance moving forward. Nathan has outlined pipeline movements; we are committed to updating capacity expansions and ensuring product quality while enhancing performance through software iteration. We hope for continued delivery in 2025. Thank you for listening.
Thank you. This concludes today's conference call. Thank you for attending. You may all disconnect.