Eos Energy Enterprises - Earnings Call - Q2 2025

Executive Summary

• Record Q2 revenue of $15.2M (+46% q/q; ~17x y/y), driven by 122% q/q shipment growth, though pricing on a single strategic project tempered revenue and margins.
• Gross loss of $31.0M improved by 32 margin points vs Q1 on higher volumes and efficiencies; adjusted EBITDA loss improved 75 points vs Q1 to $51.6M.
• Reaffirmed FY2025 revenue guidance of $150–$190M; management targets positive contribution margin in Q4 2025 and positive gross margin exiting Q1 2026, citing sub-assembly automation ramp and backlog pricing normalization.
• Strengthened balance sheet: $336M concurrent offerings and DOE $22.7M advance; convertible notes maturity extended to 2034 and rate cut to 7% from 26.5% starting June 2026—reducing interest burden and adding liquidity.

What Went Well and What Went Wrong

What Went Well

• “The team delivered our strongest operational quarter to date—production scaled rapidly… revenue nearly surpassed all of 2024, and Z3 customer field data has been outperforming its initial product specifications for round trip efficiency” — CEO Joe Mastrangelo.
• Z3 performance: 87–89% RTE on sub-4-hour cycles; 89.5% peak, demonstrating compelling efficiency and durability vs alternatives without parasitic HVAC loads.
• Commercial momentum: pipeline up $3.2B q/q to $18.8B (77 GWh); 15% q/q growth in 8+ hour projects; >20% tied to data centers; backlog $672.5M.

What Went Wrong

• Pricing on a single strategic customer project (50% of Q2 volume) lowered near-term revenue/margins despite shipment surge; gross loss still $31.0M in Q2.
• Net loss of $222.9M driven by non-cash fair value changes (warrants/derivatives) tied to stock price increase; volatility below-the-line remains a risk signal for investors.
• Backlog dipped slightly q/q amidst customer delays driven by policy uncertainty earlier in the year (now resolved post OBBBA), with longer sales cycles across larger multi-stakeholder projects.

Transcript

Operator (participant)

Morning and welcome to Eos Energy Enterprises' second quarter 2025 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, Head of Investor Relations. Thank you, you may begin.

Elizabeth Higley (Head of Investor Relations)

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 Kroeker. 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 of the date of such statements.

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 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 on 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 CEO Joe Mastrangelo.

Joseph Mastrangelo (CEO)

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 Energy Enterprises 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. 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. 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 Energy Enterprises solution, a standalone energy storage.

Nathan will talk about how 50% of what's in our pipeline today is standalone energy storage. It allows you to keep running those assets, put the electrons in a parking lot, if you will, then put them back on the grid. 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 Enterprises energy storage system. 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, 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 allows us, 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. I'm really proud of our ability to scale the enterprise. When you think about that 122% increased shipments, it was with the same processes and labor that we had in the first quarter. 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. 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. At the same time, we announced signing and 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 we work through with customers to get to an order are progressing. There was a little bit of a pause here as the OBB was approved. I think we're seeing now an acceleration. That acceleration was no more evident than what we saw here in Pittsburgh back at Senator McCormick's Energy and Innovation Summit. I think Nathan will walk through the progress that he's making.

We see projects evolving, we see big hyperscalers and developers coming to Eos Energy Enterprises 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. If we move to the next page, I want to talk about that solution for a second. Our systems are built for resiliency. We've talked about the leadership team that we have in this company and my background, I spent half of my career in the oil and gas industry and the other half in traditional fossil generation. 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.

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, better energy efficiency out of the product and also developing the software. 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. We found no hazardous readings in any of the measurements that we took. These thousand 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. 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. 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, 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. 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. They performed as if they were new modules, once again proving that we have a durable solution that's safe. 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%-89% round-trip efficiency on sub four hour discharge cycles. You know 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.

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 market. 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. You wind up where, as we talk and Nathan and the team are out selling, you hear that 89, you know, 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.

We really look at this and say if you want something that's America's battery, made in the U.S.A. with the U.S. 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. 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 to customers every day. That's why you see the pipeline growing the way it is.

That's why you see things like our partner in the United Kingdom bidding twice the amount of our MoU into the Cap and Floor scheme in the United Kingdom 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. 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 on our backlog on those shipments, our sales would have topped out over $20 million for the quarter. 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 on the prior page work out in the field with a blue chip operator.

You look at gross margins, you know 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 2 GWh of production. As we bring online our sub assembly automation, we're starting to, we'll start to approach that as we get to 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.

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. We've done some scaling in different areas to be able to manage the business. 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. 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, on the EBITDA, adjusted EBITDA versus gross margins. We're going to continue to ramp the business. 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 sub assembly.

Of the new sub assembly 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. One thing is to get more throughput. 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 is 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 a three, 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 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. We're very happy with how the equipment is performing, and we're ramping up that production as we go through. We'll keep everybody updated as we go through the summer here to bringing that online and getting the full capacity and delivering on our revenue range for 2025. With that, I'll turn it over to Nathan to walk through a couple of pages, then come back on Q&A. Thanks for listening.

Nathan Kroeker (CCO and Interim CFO)

Thanks, Joe and good morning everyone. Echoing what Joe said, we're gaining momentum in the second quarter with a lot more to look forward to in the back half of the year. First, I wanted to touch on the One Big Beautiful Bill Act and its impact to Eos and the broader long duration energy storage market as we see it at a high level. The bill was extremely positive for us. It completely preserves the Section 45X production tax credits with full stackability and transferability through 2029. Just to remind you, we can generate over $90 million on each one of our manufacturing lines annually when we run them at capacity. This is a direct result of all of the hard work that we've done over the past seven years to localize our supply chain and build an American manufacturing company.

Continued stackability means we qualify for the full $45 per kWh for our batteries as well as the 10% credit for the electrode active materials. Ongoing transferability means that we can continue to monetize these credits as they are generated. The good news is that we're seeing higher bids on larger volumes of credits, which means we should get smaller discounts than the 10% we've done on initial transactions. We've generated $14.3 million in credits since they came into effect, of which we've collected $6.3 million in cash to date, and we expect to sell first half 2025 credits later this year. Now shifting our focus to our customers on the ITC side of the page. While customers with wind and solar projects saw eligibility dates pulled forward compared to prior legislation, energy storage was explicitly excluded from these changes.

We'll cover pipeline in more detail later, but I want to highlight that with most of our renewable coupled projects scheduled to come online in the next 30 months, we have not seen a meaningful impact from this change to date. Additionally, the FIAC language in the bill is yet another tailwind as it creates new demand for our American made product as we source, manufacture and procure more than 90% of our materials domestically. Overall, we view the bill's passage as an important referendum on the need for American made energy storage systems to meet the country's growing demand for energy. Moving to our commercial pipeline since our last update, we've continued to see important advancements across our commercial business. An emerging theme is the increasing scale and sophistication of opportunities, particularly with large counterparties. Q2 marked a strong growth period.

We ended the quarter with opportunities valued at $18.8 billion representing 77 GWh, a 37% year-over-year increase and a 21% improvement quarter-over-quarter as we added $3.2 billion. Notably, we saw a 15% quarter-over-quarter increase in 8+ hour projects, validating what we have been saying for the past few quarters. Market fundamentals are changing, and there is growing demand for longer duration solutions. While many of our early projects were co-located with generation, 50% of our pipeline now consists of standalone storage projects, reinforcing the need for storage on existing electricity grid infrastructure. As Joe mentioned earlier, the market is increasingly leveraging battery technology to maximize grid efficiency, which includes standalone storage near highly congested load zones where wholesale prices are more volatile and energy arbitrage is a real opportunity regardless of the generation source.

One of the more exciting developments we are seeing for our flexible technology is the rapid emergence of data centers. They are one of the fastest growing opportunities in front of us, representing over 20% of our pipeline today. Now, how you really need to think about this is in two main ways. The first is direct demand from developers building fully integrated data center campuses. These projects combine multiple generation sources with our storage solutions to deliver reliable power. This approach reduces the time to power and can serve as a bridge to interconnection, accelerating revenue generation, reducing peak demand charges, and de-risking the long term reliance on traditional grid infrastructure. The second is indirect demand where developers are building generation plus storage projects in utility regions serving data centers.

In this case, data center operators are supporting the addition of incremental capacity to the grid to offset their energy consumption, reducing their total energy costs, and maximizing renewable credit capture. Last quarter, we announced a 750 MWh MoU with a developer, which is a very good example of an indirect project. We have advanced this initiative and are currently finalizing contract terms for our first 10 hour project, supporting a well known hyperscaler in the PJM Service territory. We've also made significant progress on several other MoUs discussed last quarter. In April we signed a 5 GWh MoU with Frontier Power to deliver projects across the United Kingdom through submissions in OFGEM's Cap and Floor program. Frontier has now submitted over 10 GWh of storage projects utilizing Eos technology, more than double the original MoU, highlighting their strong confidence in our technology.

Importantly, Cap and Floor requires eligible technologies to deliver a minimum of 8 hour discharge, which is a strong fit with our capabilities. Additionally, we are actively co-developing a broader pipeline with Frontier targeting data center growth in Europe and long duration storage needs in the Asia Pacific region. We continue to expand our presence in Puerto Rico and have identified several other storage projects that we are pursuing on the island with the local developer. The list of projects should significantly increase the 400 MWh currently under MoU. Transitioning to backlog, we ended Q2 with a backlog of $672 million representing 2.6 GWh of storage. During the quarter, we delivered over $15 million in revenue and booked two strategically important orders.

The first was with a large regulated utility in the Southeast for a microgrid project supporting two schools in Florida, and the second was a repeat order with an existing customer for a renewable energy microgrid on California tribal land. As many of you know, the industry has been highly focused on the final outcome of The Big Beautiful Bill over the first half of this year. We saw several months of customer uncertainty as customers were waiting to see what was going to happen with the final language. With that uncertainty behind us, we feel really good about the increased activity we are seeing on a number of large projects as customers are reaching out to us as they try to navigate these new requirements. This shift towards larger project opportunities means we work with more stakeholders.

This includes developers, off takers, project finance investors, lenders, technical experts, which sometimes increases time to order. While we saw a slight decrease in backlog from the prior quarter as a result of the things we've just talked about, there are strong demand signals ahead of us as we bring customers to the factory to give them an up close view of our manufacturing expansion. Sharing our latest Z3 field data, we have enhanced our ability to demonstrate that we can deliver. With the recent positive momentum, I'm confident that we'll be announcing some larger orders soon. Strategically, we're working to make Eos Energy Enterprises the preferred solution for grid resiliency and sustainability on a global scale.

Along these lines, we've significantly enhanced our competitive positioning by teaming up with a major developer and engineering firm to design an indoor racking solution that takes advantage of our safety and non-flammability, enabling us to significantly reduce the spacing requirements of indoor systems. As a result, this configuration can achieve over 1 GWh per acre in site density, which is three to four times greater than traditional industry layouts, making us more competitive in space-constrained environments. This is a big step forward in delivering high-density storage. Turning to our financials for the quarter, before getting into the numbers, a couple of key themes I want to highlight from last quarter. Number one, revenue is up on greater volume. Number two, delivered volumes outpaced revenue driven by lower pricing on a single project.

Number three, margins improved as we continue to get more volume through the factory, covering our fixed costs. In Q2, we generated record quarterly revenue of $15.2 million, a 46% increase from Q1, accompanied by a 122% increase in shipments. This was the same amount of revenue we generated for the full year of 2024, demonstrating the continued scalability of our operations as forecasted on our last call. Q2 revenue was impacted by lower selling price as 50% of the production volume was delivered to a single strategic customer. While this project affected near-term revenue and margins, we see it as a significant growth catalyst. For everybody to know, we've been working hand in hand with this customer to design a cube with simplified field installation and commissioning.

Our first installation of this improved design saw truck-to-pad times of 25 minutes and cube-to-cube connection times of 30 minutes, and we have seen those metrics improve on each subsequent project. If you take a step back and think of this from a customer's perspective, we're able to reduce the time and cost associated with getting projects online out in the field. Gross loss came in at $31 million, a 32-point margin improvement from the prior quarter. This improvement was largely supported by the increased production volumes we are getting through the factory. We spent $32.9 million on operating expenses, but when you exclude $5.4 million in isolated one-time items, operating expenses declined quarter over quarter while OpEx has increased year over year. Approximately 28% of the increase stems largely from non-cash items such as stock-based compensation. The balance of the increase was tied to strategic headcount.

As we build the muscle that we need to scale this business, we continue to invest in building our software capabilities to position ourselves as a leading software business and expand our sales force to support the significant growth that we see in front of us. Net loss for the quarter was $222.9 million, but this includes non-cash fair value adjustments tied to mark-to-market associated with the 35% increase in our stock price as of June 30th, 2023. The mark-to-market adjustments will continue to create volatility below the line that is largely driven by changes in our stock price. Adjusted EBITDA loss came in at $51.6 million, showing a 75-point margin increase driven by the improvements I've already discussed regarding volume, partially offset by lower selling prices.

Although pricing on a single project weighed on Q2 results, we have clear visibility toward healthier unit economics as we, first of all, deliver projects more in line with our average backlog pricing and, secondly, continue to drive labor and overhead efficiencies with higher manufacturing throughput. With these two improvements, we expect to achieve positive contribution margin in the fourth quarter of this year and achieve positive gross margin as we exit the first quarter of 2026. With $26 million in revenue booked for the first half of 2025, we see a clear path to our full-year revenue range of $150million-$190 million. We recognize this requires significant increase in the second half, but we expect to see meaningful increases in our production capacity as sub-assembly automation fully comes online, as Joe has already discussed. Now moving on to our capital structure.

Since I joined the company in 2023, I've been working relentlessly on securing the capital needed to expand our manufacturing operations and get this business to profitability. This culminated with the execution of two highly successful transactions in the second quarter that lowered our cost of capital, simplified our balance sheet, and strengthened our cash position. In June we raised $336 million with tremendous institutional participation on two offerings that were both oversubscribed. Working together with our existing lenders, we were able to complete a highly effective transaction and we've used the proceeds to, first of all, refinance a significant out-of-the-money convert that was coming due next June. You may have noticed that we've also received a $5 million rebate post-closing in accordance with the terms of the agreement.

Secondly, to prepay $50 million on the Cerberus term loan, allowing us to reduce the interest rate from 15%-7%, defer the financial covenants to March of 2027, and extend their lockup period by another year, further aligning long-term shareholder and strategic partner interests. Finally, we've added $139 million of cash to our balance sheet, net of discounts and expenses, ending the quarter with $183 million in total cash. The overall transaction is expected to result in approximately $400 million in total interest savings over the terms of the company's debt. In addition to these transactions, we also made advancements in other areas of the cap stack. Post quarter end, we announced we received our second loan advance of $22.7 million from the Department of Energy.

With this advance, we have drawn the maximum amount under the first tranche in connection with our first manufacturing line and we expect to request an additional draw on the second tranche before year end as we continue to expand our manufacturing capacity and build out line two. Yesterday we also announced an amendment of our 26.5% convertible notes. The maturities on these notes have been extended to September 30th, 2034, while the interest rate is reduced to 7% effective June of 2026. The amended notes have redemption terms allowing for optional pro rata conversions excluding the affiliated holders. With this, we expect to redeem approximately 85% of these notes in the third quarter. The combination of strategic equity and debt refinancing, along with continued DOE support, has significantly strengthened our balance sheet to support the growing scale of domestic battery manufacturing.

For me personally, I feel like this is mission accomplished. Before we move into Q&A, I'd like to revisit what we announced yesterday regarding our final cash performance milestone under the Cerberus term loan. Given Cerberus's confidence in the opportunities in front of us, along with the efficiencies we are seeing with project execution, they have granted us an additional no penalty extension through October 31st, 2025, allowing time to see this growth come to fruition. With that, I want to thank everybody for joining us today, and I'll now turn the call over for questions.

Joseph Mastrangelo (CEO)

Thanks, Nathan. Before we turn it over to our sell-side analysts for questions, Nathan and I are going to answer the top four questions that came in through SEI Technologies from our retail base. I'm going to start off with two and then Nathan will wrap up with two and then we'll go over to questions from sell side. First question, when is line two expected to be fully operational? Will this include the sub assembly line? Yeah, we're forecasting line two coming online in the first half of next year. Line two will share some of the sub assembly capacity that we have for line one. Eventually we'll add to that sub assembly capacity as we ramp up capacity on line two. What lessons from line one are being applied to line two and are those improvements resulting in meaningful changes to line design, throughput, or cost?

We're planning on when we did line one. Line one is designed in a 'U' because that's what fit into the building that we had. As we look to line two, it'll be a straight line where material will come in one side, raw materials will come in one side and a cube will go out the back end of the other side. We're really designing the line two for total throughput efficiency of the facility. As we think about what we've done, we've learned a lot about operating line one over the last year and designs are being incorporated to get better quality, better reliability, availability of the line, and improve throughput.

We have some things that we've learned about where we had some single point areas that when we do maintenance, we have to slow the line down, that we're going to put in backup capacity in specific stations and at the same time, we're going to deliver that cost of that, the cost of that line in line with what we did on line one. We're pretty happy with how we've wound up there given the environment that we're in from an inflationary standpoint and also from the changes that we're making. What we're really excited about is doing this line in a straight line so that we get the full efficiencies and fewer material moves than what we're seeing right now in Turtle Creek.

Second question for me is in the Q4 2024 earnings call in March 2025 was mentioned that eight states were bidding for Factory 2.0. What is the current status of finalizing the site for Factory 2.0? We're still in negotiations with multiple states. We're not going to negotiate that in public. The response to people wanting to have a facility like Eos has been tremendous. We're working through to get the right facility with the right long-term landlord that we can partner with over time. As we get through those discussions, you gotta remember you're doing this not just on a state level but on a county level and in some instances the town or city level to really get the best position, factory workforce cost for Eos and long-term partnership that we want to have. Not something that you do rushing through.

We're happy with the progress that we're having and we'll update people when we have news to share. Thanks and I'll turn it over to Nathan.

Nathan Kroeker (CCO and Interim CFO)

For the next question. Last quarter tax uncertainty was cited as delaying deals post BBB law. How have customer timelines or urgency shifted and are there any major barriers still preventing deal commitments? All right, we'll break that down one piece at a time. I think we spent quite a bit of time earlier in the call talking through the impacts of The Big Beautiful Bill. Just to recap, I think we did see some delay as customers were working through the uncertainty before the final language was adopted. Now that we have the final language adopted, I think, with some of the accelerated timelines around solar and renewable credits on the customer side, we are seeing some of those customers wanting to move very quickly to make sure that their projects get placed in service.

To the extent that we have co-located storage associated with those projects, that can accelerate things for us. Overall, I think getting rid of some of that uncertainty is really, really good for the industry. Projects are starting to move forward and we're very excited about that. The second thing that we talk about is as we work through some of the larger deals, we're getting a lot of inbound calls from folks that say, hey, I was thinking of using a different technology but because of the FIAC restrictions or some other challenge, they're reaching out to us asking if they can change their interconnection, change their permits and go with the non-lithium technology. We're working through some of those. As we talked about, those take time because there are always multiple stakeholders and we've got to work through with all of the stakeholders.

As we bring customers in for factory tours, show them that we are scaling up the business as Joe has talked about in detail and then also walk them through some of the latest Z3 data that we're getting from field installations, as Joe highlighted, I think we're building a lot of confidence with these customers and I'm confident that this is going to move these deals forward quickly. For our final question this morning, as Eos scales, how is it building a partner ecosystem across integrators, developers and channels to support broader adoption? We talked a lot about this in the commercial section earlier on the call, giving more details on some of the MoUs and the expanding relationships that we're seeing out in the marketplace.

I want to focus a little bit more here on the second half of the commercial process, which is getting projects fully commissioned up and running out in the field. I think this is where we're really focusing on developing these strategic relationships, making sure that we find the right partners, whether those be integrators or other equipment suppliers, particularly in some of these project sites that have complex site integrations with multiple components to them. Make sure that we've identified the preferred technology and the preferred partners, go through simulations before we agree to work with a certain technology.

Whether that's balance of plant equipment like inverters, EMS providers, working through some of those and make sure that we can go out to a customer with those partners and say, look, we've done projects with this technology in the past, we know it works and execute a flawless project for those customers going forward. I think as we think about strategic partnerships, it's as much on the commissioning and the projects out in the field as it is on sales channels. With that, I think we're going to wrap up and take questions from the sell side analysts.

Operator (participant)

Thank you, sir. At this time, we will conduct a question-and-answer session. Please stand by while we compile the Q&A roster. Our first question comes from the line of Stephen Gengaro from Stifel. Please go ahead.

Stephen Gengaro (Managing Director of Equity Research)

Thanks and good morning everybody. Two things for me. The first you touched on a bit in the prepared remarks. When we think about the bridge to the second half revenue, you did a good job, I think, talking about production growth versus revenue growth in the second quarter. That's clearly a topic that's come up pretty frequently. Can you add some color to how we sort of bridge the revenue? I don't know if you'll go into this much detail, but I thought you guys were pretty clear about what the second quarter was going to look like. I think some people may have been a bit higher than that. If there's anything you talk about in the third quarter, that would be helpful today.

Nathan Kroeker (CCO and Interim CFO)

Thanks for the question. Yeah, you know, when you look 4Q-1Q, 1Q-2Q. If you look at the page that we had in there where we tried to mute out the 13-week quarterly movements, you know, we're doubling production quarter over quarter for the last nine months. Double it again, double it again, and you're firmly in the middle of our guidance range, and that's what makes us feel like we'll get there. Now, inside of that doubling, I think there's a couple of things everybody has to realize. We doubled that production with the same production processes, the same supply chain, and the same headcount. We've been talking about this for quite some time, that as you double production, get more throughput through the factory, you start to see margin rates improving. You see the margin rates improving. We're going to continue that trend as we get through the year. I think that that's really we have to do is we have to just keep doing what we've been doing, which is a doubling effect of production out of the factory.

Now what gets you from, like, I think, you know, you can get intimidated by the bump up of saying wow, doubling from where you are is not going to be tough. We've been doing it without the benefit of the automation of our sub assemblies and that is starting to produce and feed the line. As we look at the capacity of the line, the capacity of the line has always been limited by the flow of parts that have come from our semi-automated sub assembly process. I'm very encouraged by the results that we're seeing off of those sub assemblies. As we talked about, parts are flatter, throughput's faster, that's resulting in better output out of the batteries that we build.

We build batteries and then test them before we make sure everything works. You start looking at that, you're saying wow, better output battery, higher quality, higher throughput. Run the line at its capacity. We've doubled, double, doubled, double and double again. You're in guidance and that's what we're shooting for.

Stephen Gengaro (Managing Director of Equity Research)

Okay, great, that's helpful. The other thing I want to ask about is when you talk about incremental production lines and you addressed this I think on one of the questions from the retail side, how do you balance, and I know the opportunity pipeline looks very good, how do you balance sort of order flow and visibility on order flow with expansion?

Joseph Mastrangelo (CEO)

Yeah, we discussed this on the last call and I think I want to reiterate this. The customers that Nathan has talked about in his remarks come in and they like what they see, but they want to see more. Line two, it is built with what we think is going to be happening here over the next few months from the demand side that we're seeing as we move through our production capacity. What I said in the beginning was I myself was very conservative on how we made those investments of wanting backlog in place. When you start looking at the size of the projects we're talking about, you've got to build it and have it ready to go when those projects come in. That's why we started and placed the order for line two. We're timing that.

I know people say, you know, when is line two coming in? You said before that it was going to be late this year. Now you're saying first half next year.

It's all times to when we think orders are going to come in and when we need the ramp and how we utilize capital as effectively as we can. That's when we need that capacity and what we really want to do. I mean, you've personally been here to see the factory, you know it's inefficient because it's on multiple floors. Getting everything running on a straight line reduces the material moves, reduces the overall cycle time from raw material in to cube out the door. That's what gets us really excited about how we can ramp the business going forward.

Stephen Gengaro (Managing Director of Equity Research)

Great. Thank you for the color, Joe.

Joseph Mastrangelo (CEO)

Thanks Stephen.

Thank you.

Operator (participant)

Our next question comes from the line of Martin Malloy from Johnson Rice & Company. Please go ahead.

Martin Malloy (Director of Equity Research)

Good morning. Congratulations on all your accomplishments. I wanted to ask, you know, you've got significant improvement in the round-trip efficiency. You know, sounds like the lower cost and time to install. Is there any way to quantify the improvements that are going on in terms of an LCOE or IRR for the customer?

Nathan Kroeker (CCO and Interim CFO)

Yeah, I mean I think those efficiency, we're still working through that with customers on individual projects. What we're seeing here between the reduced cost on the commissioning and the improvements in the performance should translate into a couple percentage points on IRR on a typical project. You know, every project's going to be different, but it's a meaningful difference in the amount of upfront CapEx both from the installation side as well as the cost of the equipment. I think that's going to translate into better economics for customers. We will provide more detail on that as we go forward and have more granularity on that.

Joseph Mastrangelo (CEO)

Martin, the one thing I just would put on top of Nathan's comments is, when we talk about anything that has to do, and I've seen it throughout my career, many different technologies, we try to simplify the way we talk about things to give people that headline. It's only gotten worse, as we start living in a society where we have 30 second attention spans at best. We try to come up with headlines that make people understand. Every project has its own calculus to it, and every project has its own operating, and every project has its own cost curve. We work through project by project. When we see what we're seeing on the performance on the field, how we're driving down the cost curve of the product, how we're putting software on top of the battery itself to get better performance, that absolutely improves cost.

There is no headline number that we can give somebody. There's no TikTok answer to this. It's a project by project basis that you work with customers to make sure that you give them an advantage. By the way, I've said this many times, I'd love to say 100% of the time Eos has the advantage over other technologies. We don't 100% of the time. We prioritize around where we do and giving the customer the benefit of an asset that delivers them higher returns.

Martin Malloy (Director of Equity Research)

Okay, thank you. For my second question, I just wanted to ask about the second line and the ramp up time. You did share that the second line is going to share some assembly, some of the sub-assembly automation. You've got multiple suppliers on the containerization side. Could you maybe talk a little bit about the time, the ramp to that full 2 GWh of annual capacity with the second line?

Joseph Mastrangelo (CEO)

Martin, what we said was we're going to bring the line, we're going to bring the line in. I would assume that we were going to have lessons learned from bringing in the sub-assemblies. As I said in the prepared comments, we're going to share sub-assemblies to start and then bring on from there. It is also going to be dependent upon what we need to do and the capital we need to allocate for customer demand. We will update everybody on when that's going to happen, but it depends on when the orders come in. As the orders come in, it may accelerate or we may slow it down depending on what's happening. I do not have a very specific date. I am not going to give a date or commit to a date here, Martin, on the call, but we have a plan to be able to do this, that it will ramp into production in the first half of next year.

Martin Malloy (Director of Equity Research)

Okay, great. Thank you. I'll turn it back.

Operator (participant)

Thank you, and I saw next question comes from the line of Ryan Pfingst from B. Riley Securities. Go ahead.

Ryan Pfingst (Senior Equity Research Analyst)

Hey guys, thanks for taking my question. You gave good insight into what it'll take on the Eos end to achieve guidance for the year. Wondering if there are items on the customer side or otherwise that are somewhat out of your control that we should be aware of, that could impact second half sales here.

Nathan Kroeker (CCO and Interim CFO)

Yeah, Ryan, thanks. We talked about some of them on the call, right? I mean, I think some of the uncertainty around the bill has been alleviated. There are some customers that are trying to accelerate, other customers are trying to raise financing. I think we're, you know, like Joe said earlier, every customer, every project is different. We're working through them. We talked about a number of different large opportunities that we are working on, that we're progressing, that we've got confidence on. We just have to work through those project by project. I don't know that there's one single thing that's holding back orders at this point. I think we're delivering on everything that customers need and they're working through their timelines and their financing in order to be able to place firm orders. We're excited about what the future holds on that front.

Ryan Pfingst (Senior Equity Research Analyst)

Great, appreciate that. Service revenue increased to over $1 million in the second quarter. How should we be thinking about that piece of the business, maybe both near term and then longer term as installation scale?

Nathan Kroeker (CCO and Interim CFO)

Service revenue. If you think about it, it's really tied today. It's really tied to our commissioning efforts and balance of plant equipment as we grow a portfolio of assets in the field that will have more long term service revenue coming from legacy projects. That should grow as a percentage of the total revenue mix over time as we get a larger installed base out in the field.

Ryan Pfingst (Senior Equity Research Analyst)

Great. Appreciate the call, and I'll turn it back.

Operator (participant)

Thank you. I show our next question comes from the line of Jeff Osborne from TD Cowen, please go ahead.

Jeffrey Osborne (Senior Equity Research Analyst)

Hey, good morning. Just a couple questions on my side. I might have missed this, but the strategic customer was the majority of the revenue for that project attributed to 2Q, or is that going to linger into the third quarter?

Joseph Mastrangelo (CEO)

No, the majority of it was in Q2. We've talked about this on previous calls. If you think about our revenue recognition, a large portion of the revenue is recognized at the time of delivery. There's a portion related to final commissioning, the vast majority of it occurs at the time of delivery, which is the shipments are behind us on that project. It's out in the field. It's a beautiful sight to see all the cubes lined up and getting ready and going through hot commissioning to start operating. From a shipment standpoint, we've delivered that project.

Jeffrey Osborne (Senior Equity Research Analyst)

Got it. Now that the capacity in Pittsburgh is ramped up or ramping, how do we think about the typical lag from order to delivery? What are you quoting, Nathan, as it relates to that? How does that relay for investors thinking about the backlog?

Nathan Kroeker (CCO and Interim CFO)

We work with the customer and their delivery windows, and customers in some cases have some flexibility, and we can deliver to a storage yard while they get their final site preparations ready. We work together with the factory to figure out what capacity we have, what the delivery window is for the customer, and how we bring those together. Every customer has got an agreed upon delivery window at the time that we sign the order.

Jeffrey Osborne (Senior Equity Research Analyst)

Is it fair to say that those are within.

Nathan Kroeker (CCO and Interim CFO)

From a quoting standpoint? I would also say this is somewhat slots in a factory selling seats on an airplane.

We work with customers. Going back to the earlier question around what's out of our control, the good thing with Eos is we're a single SKU company. We've designed the product so that we build to a single spec to meet the requirements of every customer, and we can move things around. We have a lot of flexibility around that, and depending on customer needs, we could do trade offs as we go.

Jeffrey Osborne (Senior Equity Research Analyst)

Got it. That's all I have. Thank you.

Nathan Kroeker (CCO and Interim CFO)

Yeah.

Operator (participant)

Thank you. I'm showing no further questions in the queue at this time. I'd like to turn the call back over to Joe for closing remarks.

Joseph Mastrangelo (CEO)

Thanks, everyone. Thanks for listening. Thanks for the questions from both retail side and sell side. Again, you know, when I, if you take a look back over the past nine months, operational team deliver doubling output in the factory over the prior three quarters, continue to double. We're solidly into our revenue guidance, that's the path forward for the company and what we're focused on.

I think Nathan's been clear on the movement as we move things through the pipeline and continue to work with customers to pull together the alchemy to get orders closed and then turn that into subsequent revenue. We'll keep everyone updated as we go through on the capacity expansion and again from an overall ability to deliver. Excited about seeing good product come off the automated sub-assembly. That's higher quality, that delivers better performance, which we will continue to iterate are not only the physical product, but the software around the product to give people, to give customers the performance that they need to power America's energy future.

Thanks for listening, everyone.

Operator (participant)

Thank you. This concludes today's conference call. Thank you for attending, you may all disconnect.