EOSE

Good morning, and welcome to Eos Energy Enterprises first quarter 2026 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 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 Elizabeth Higley, Head of Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to Eos's first quarter 2026 conference call. Today, I'm joined by Eos CEO, Joe Mastrangelo, COO John Mahaz, and CCO and interim CFO, Nathan Kroeker. This 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, or 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 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 recurrence 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 through Eos's investor relations website at investors.eose.com.

Joe, John, 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. Good morning, everyone. We got a lot to cover today, including Frontier Power USA., which we just announced. Before going into the quarter, I want to start with our current market dynamics. What we are announcing today is built for that. America is rebuilding its industrial base. It is happening in semiconductors and defense, in critical minerals and advanced manufacturing. In the data centers that will power the next generation of AI.

In every one of those things, every factory, every fab, every facility runs on electricity. Energy demand today is multifaceted. This is the largest reindustrialization effort the United States has undertaken in the last 75 years, and it is happening at exactly the moment when the global energy system is being rebuilt around new technologies, new fuels, and new supply chains. The grid we have was built for a different economy.

The grid we need has to handle load that ramps faster, swings harder, and concentrates in ways the system was never engineered to absorb. That is the opportunity in front of us. The timeline for adding new capacity does not match the speed at which advanced manufacturing, electrified industry, and AI are being built. The architecture must change. That's where storage comes in. Deploying long-duration, dispatchable storage that brings capacity online quickly using existing infrastructure. That storage layer improves system reliability at the speed the market requires. That shift from waiting on transmission to building closer to demand load is one of the most consequential changes in the U.S. power market in a generation. Layer on top of that the current policy environment.

Tariffs, FEOC rules under investment tax credit and Section 45X tax credits, along with the 2026 National Defense Authorization Act, all point in one direction. The energy infrastructure that powers the American reindustrialization needs to be and should be built in America. This is the market Eos was built to serve. Long duration, American-made, manufactured at scale, designed to power the industries that will define the next 25 years. An example of this is the work we are doing with Talen Energy. Talen has been at the leading edge in shaping how hyperscale power will get delivered in PJM. Earlier this month, Talen submitted more than 3 GWh of new long-duration energy storage projects into the PJM interconnection queue. Capacity that can be powered by American-made batteries built in Pennsylvania.

Opportunities like this are one of many we are pursuing and why we are expanding our manufacturing footprint in the same Pennsylvania industrial corridor. John Mahaz will walk through our plan to start initial production at our new Thornhill facility. As we speak, the robots are moving, and we are debugging the line to start building non-production battery modules. Let's focus on our results. In the first quarter, we delivered $57 million in revenue, more than five times the same quarter last year. Combined with the fourth quarter, we delivered $115 million across the last two quarters, more revenue than we delivered in all of 2025. Doing what took a year in just six months. Underlying that, the operating signals are moving in the right direction. Cube output is up 17% sequentially. Gross loss improved by $10 million on that higher output.

We finished the quarter with $472 million in cash. Our first quarter was the shape of a company in build mode, and this was the expected cash profile that tied to our capacity expansion investments. We expect approximately $60 million of that Q1 cash to convert back onto the balance sheet with the expected next DOE loan drawdown, the PTC tax credit monetization, and customer invoicing. We ended Q1 with a $645 million backlog. That number increases meaningfully with the 2 GWh capacity reservation agreement we announced this morning with Frontier Power USA. That increase is not on a one-for-one basis with the reservation's gross value, as a portion of the agreement is expected to execute a project that is already reflected in backlog that will be financed by Frontier Power USA.

The commercial pipeline we are addressing now stands at over 100GWh. Nathan will walk you through the details later. First, there's one number I'd like to focus on. 55% of that pipeline is at eight-hour-plus duration. That is the market segment where Eos competes both on physics and on the economics. With that as a backdrop, there are three things I'd like to highlight. First, the demand is structural and is moving towards us. The Talen Energy relationship is one expression of that. The shift in pipeline duration is the other. Customers are asking for flexible, multi-hour storage paired with firm generation, siting where the grid can absorb it. That is exactly what we build. Second, our execution is becoming more consistent. Record output, sequential improvements in gross margin and adjusted EBITDA.

The manufacturing line is converting our input dollars into output at a rate that's improving every quarter. We are not yet near our entitlement. The progress is the trajectory you want to see from a company at this stage of scaling. Lastly, I'm very excited to talk about Frontier Power USA. Let's move to the next slide. The single biggest barrier to long-duration storage adoption today is not technology, it's not demand, it is bankability. The technology is ready, the demand is structural. For every project, it still has to stitch together the same four components: capital, insurance, project construction, and an offtake agreement. Usually, this is done sequentially one at a time. On one side of this page, there's Eos's vertically integrated technology stack.

The Z3 battery module, DawnOS advanced controls, and Indensity system configuration, and the industrial service model that underpins all three as a differentiator. Fast field service with predictable maintenance and overhaul capability borrowed from the aviation and traditional power industries. We have engineered Indensity to hold nameplate performance across the full life of the asset. There's no more augmentation. Working as one from the cell to the system for the life of the project, we are the only American manufacturer at scale with this technology stack. On the other side stands Frontier's project execution capability. Project development, including site origination, permitting, interconnect and offtake, insurance-backed financing, and asset operations across full system life. Standing behind all of it, an independent leadership team drawn from the operators and developers who built 100s of deployments, closed gigawatts of project finance with the institutional discipline to execute this at scale.

Frontier closes that gap by bringing those two stacks together into one platform. In the middle, what do our customers actually get? They get accelerated deployment, guaranteed performance, and a lower total cost of ownership. This is an expected self-reinforcing growth engine. Cash flow generated by Frontier's operating projects is designed to be reinvested back into the platform, which will fund new project origination, accelerate Eos equipment deployment, and compound the value of the integrated tech stack. Each project that's completed strengthens the next. DawnOS performance data sharpens our technology underwriting, project returns fund expansion, and the operating track record builds the basis for the next financing round. The equity recycles, debt capacity grows, and the platform continues to scale. Let me walk you through how we plan to structure the capital on our next page.

Frontier Power USA is expected to be capitalized in three layers, each addressing a distinct risk and a distinct cost of capital. The first layer is equity. Cerberus is contributing $100 million in institutional capital paired with operating expertise that strengthens our governance, our underwriting, and our access to the project finance market. Eos is targeting a $150 million contribution funded through a pro rata rights offering subject to traditional closing conditions. That structure is deliberate. We believe it allows our existing shareholders to participate in the upside of this platform directly through their ownership in Eos. You can see on the slide the structure of Frontier Power USA on day one. That contribution includes an originated pipeline, an exclusive insurance offering, a structured debt financing path, and an experienced management team. Every dollar of that accrues back to the platform.

The second layer, and this is the structural innovation, a technology performance insurance wrap written by Ariel Green at Lloyd's of London. Ariel Green wraps each project with a performance guarantee that converts what the market has historically treated as a technology risk into an insurance-rated obligation. That wrap is the unlock of this offering. Because of it, the third layer is senior project debt, targeting more than $1 billion and positioned to be marketed with investment-grade characteristics. Equity from Cerberus and Eos, an insurance wrap from Ariel Green, senior debt with investment-grade characteristics. Together, this three-layer structure is designed to expand the availability of capital and accelerate the deployment of Eos solutions. That is the innovation. That is what compresses the project timelines. That is what closes the bankability gap. Moving to the next page, let me spend a moment on the rights offering.

It's structured intentionally for the shareholders who have built this company alongside us. To fund our planned equity participation in Frontier, we intend to launch a pro rata rights offering targeting $150 million. The structure is designed to do one thing, let the Eos shareholders who have stayed with this company through the buildup of our technology, our manufacturing, and our pipeline participate in what comes next. In this rights offering, existing shareholders, including retail, would receive transferable subscription rights to participate on a pro rata basis. The rights are intended to be transferable to broaden access and preserve flexibility for shareholders. When we think about dilution, the framework is the following: shareholders who participate increase their ownership relative to the new share count, and those who choose not to participate experience some dilution.

If you look at the transition in aggregate at today's share price with a full subscription, the overall impact is accretive for shareholders who will participate. We believe that's a very disciplined outcome, particularly given how the capital is being deployed into assets to increase the long-term value per share. We could have raised this capital from a single institutional sponsor. We chose not to. The shareholders who have backed this company through Z3, Indensity, DawnOS, and the Thornhill expansion should have the option to participate in what comes next. This is by design. Everything we've just talked about, the partners, the capital structure, the insurance wrap, only works because the technology underneath it performs. Now, let's drill down a little further on that. We recently crossed 6 GWh of discharge energy on Eos technology, spanning roughly 3.9 million cycles.

That figure includes every electron our technology has discharged from our earliest deployments and now through Z3, which accounts for a half a gigawatt hour of energy and over 1 million cycles. The right side of the slide shows the architectural shift that sits behind these numbers. We moved from string-level battery management to modern module-level battery management under DawnOS. What do I mean behind that? Before, a single-performing module could pull down the performance of a string or 1/12 of a cube. Today, every module is now individually monitored, individually managed, and individually dispatched. The bottom left table is where the operational story turns into a commercial one, and it deserves a little bit more attention. Taking a specific site as an example, if you look on the left, you see performance before DawnOS.

Average round-trip efficiency sat between 34% and 42%, with standard deviations above 17 points. The fleet was capable of cycles above 70% on a balanced cycle and 30% on an unbalanced one. I want to be precise about what changed because this is important. The energy was always there. The battery module design did not change. What changed was our ability to get the energy out of our systems efficiently. The variance you see in the before column was driven by batteries becoming unbalanced, translating into lower string performance. Energy that was physically present in the batteries could not be discharged because the control architecture could not isolate and route around batteries discharging at different rates. This was not a chemistry limit, not a product limit. It was a limit in our control system. DawnOS, paired with a module-level BMS, solved this challenge.

The system now balances itself dynamically, maximizes discharge across every module in a system. This result is the after column, the average round-trip efficiency in the low-to-mid 70s, with standard deviations now reduced to 5 to 8 points, with a maximum performance of 88%. There's three implications behind those numbers. First, on the install base, DawnOS is being deployed across systems already in the field. It is the architecture that allows us to meet performance commitments consistently and at scale. This work carries a cost and is a manageable headwind that is more than outweighed by the performance improvement unlocked for our customers. The after column on this slide is what bankable Z3 performance look like, and it applies to the fleet, not just new shipments. Second, our field fleet now shows a pattern that's worth discussing.

Across every discharge band, zero to three hours, three to six hours, and six-plus hours, the round-trip efficiency in an operating dispatch window holds in the high 70s on average and can push up into the 90s at its peak. It does not degrade as duration extends. For other chemistries in the market, long duration is either a tax on efficiency, meaning it comes in lower, or a decrease in the product's useful life, which means faster augmentation. For Eos, it isn't. The gap between average and peak at each duration band is the dispatch headroom, the efficiency that's already inside the asset waiting to be captured by the DawnOS architecture. Third, the variance reduction is what makes that performance financeable. The gap between an average cycle and a max cycle compressed from roughly 30 points to around roughly 10.

Project finance and tax equity counterparties underwrite to consistency, not to peaks. We are now delivering both, and we expect further improvements with increased DawnOS operating hours. As we learn, the system will get better. Let me close with this. The market we are operating in today is the market this company was built for. American-made, long duration, bankable, deployable at scale. We have developed the technology and are scaling manufacturing and proving the product in the field. With Frontier Power USA, we are announcing the platform that we believe lets us deliver everything we have built.

To customers at the speed the market requires, at the scale that converts an industry tailwind into shareholder returns. With that, I'll turn over to John to walk through our operational performance.

Thanks, Joe. It's great to be back with everyone. Today, I want to focus on where we are operationally and how that progress is positioning us for what's ahead. The teams in Turtle Creek and now at our new Thornhill facility have made tremendous progress advancing our operations. We're beginning to see the returns on the investments we made over the last year to drive productivity, and importantly, we're doing more with less. In Turtle Creek, we've achieved quarterly records across several key operating metrics and delivered meaningful improvement compared to the fourth quarter. Cube output increased 467% versus Q1 2025 and was up 17% sequentially from Q4. Direct labor per cube is down 47% year-over-year and 25% quarter-over-quarter. The year-over-year step reflects a 16% reduction in man-hours per cube from bipolar automation.

The sequential step reflects a 6% reduction as yield and efficiency improvements reduced overtime and temp labor. This level of production translated into financial performance, with margins improving by approximately $10 million quarter-over-quarter as material costs came down and output scaled. This is the headline. It is the clearest signal yet that the manufacturing system we have been building is beginning to deliver. Two metrics moved against that trend this quarter. I want to address both directly because they are deliberate. Material cost is up 4% year-over-year. That is the cost of transitioning from the prior BMS to DawnOS in the middle of last year. As Joe just discussed, we're seeing the results of the operability of the system. We are working a program to simplify the design, reduce part count, and optimize manufacturing.

You can see it in the sequential number. Material cost is down 5% quarter-over-quarter as supplier optimization and design improvements take hold. The trajectory is right, and the year-over-year line will follow. How we drive that trajectory matters. At the supplier level, we are running disciplined commercial performance through structured negotiations, clean sheet should cost models, and volume leverage. We are resetting legacy cost positions where needed and aligning pricing with market realities, building partnerships meant to hold up over time. We are also pursuing new suppliers where it creates structural advantage. Qualifying new suppliers in competitive locations, reducing single source dependence, and ensuring competition in every category of spend. At the material level, we are identifying alternative opportunities across resins, electronic components, and metals, where form, fit, and function can be maintained or improved at a lower cost point.

The second metric, manufacturing overhead per cube, is down 43% year-over-year and up 10% sequentially. We made that choice. We invested in equipment spares and maintenance capability to increase battery line uptime, which lets us run the factory with less labor and more output per shift. The 54% reduction in indirect labor man-hours per cube tells you the math is working. We will continue to invest in areas where that investment takes variable cost out of every cube that follows. To Thornhill, because this is the program that scales what we have proven at Turtle Creek. Building readiness is complete. Line two power on is in process. Initial production is on track for the end of Q2, we expect full production to occur in Q4. Thornhill matters for three reasons. First, it is purpose-built around the lessons we have learned.

Every automation step, every layout decision, every piece of equipment builds on the progress we have made at Turtle Creek. Spending time at Thornhill, I see the energy and pride of what the team is creating, a world-class operation that will deliver for our customers and shareholders. As we've been saying, the volume step changes the cost equation. As output ramps, fixed costs spread across more cubes, supplier pricing improves with committed volume, and the labor and overhead efficiencies we are already showing on a per cube basis compound. Thornhill positions us to compete on cost in a market that is moving fast. Our customers are sizing projects in GWh, not megawatt hours. The asset base we are bringing online is what allows us to meet that demand at a price point that wins.

Stepping back, none of this is the result of a single quarter of effort. It is the output of an organization that has made lean methodology and continuous improvement the way we work, not a program we run. Every cube coming off the line is an opportunity to take cost out, take time out, and put quality in. While we have made strides in all aspects of our operations, there remains plenty of additional opportunities to drive cost out. We have a comprehensive plan and actions to continue addressing these. That is our focus. That is how we are building this company, and that is how we drive towards gross margin profitability. Thanks, everyone. With that, I'll turn it over to Nathan.

Thanks, John. Good morning, everybody. Starting on the commercial front, we ended the quarter with $645 million in backlog, representing 2.6 GWh of storage after converting $57 million to revenue in the quarter. There have been two important updates since quarter end that will further increase these figures. First, we entered a 2 GWh firm capacity reservation agreement with Frontier Power USA to deliver several projects in its initial pipeline. As Joe talked about, one of the key components of any project is bankability, and we have several late-stage opportunities that are at the financing stage.

Frontier USA provides an attractive alternative, allowing these customers to not just move forward, but to move forward at a lower cost of capital, giving our customers an advantage while generating returns for Frontier. Second, we are expanding an existing project with a southeast utility from four hours to 10 hours in duration, along with a full system upgrade to DawnOS. The customer chose to scale with Eos rather than diversify, and to do so by adding additional capacity and duration. Both signals matter as more regions move toward longer duration solutions to absorb load growth and data center demand. Turning to our pipeline, total opportunities increased to $24 billion, representing 107 GWh, which is up 3% sequentially and up 56% year-over-year.

Average pricing in the pipeline reflects the project mix, with an increased percentage of large-scale and Indensity deployments where unit economics improve with project size and where we remain competitive on a delivered cost basis. Demand remains strong in both PJM and NYISO. Working with Talen Energy, we are developing several large storage projects at their existing sites ahead of PJM's reliability backstop procurement process later this year, as Joe discussed earlier. In addition, we have a few customer projects that are progressing through permitting ahead of upcoming NYSERDA submissions. Each of these projects are progressing based on their standalone economics with the bulk energy storage program as additional upside. We continue to see increased engagement from utilities and utility-backed developers who are looking to own assets that support rising demand and grid reliability. At the same time, interest from hyperscalers and AI-driven projects continues to accelerate.

These customers need reliable, dispatchable power and behind-the-meter solutions that respond in milliseconds to the duty cycles that AI inferencing imposes. What does that mean? Continuous, rapid charging and discharging through deep, erratic swings that are sustained over hours or even days. Eos is engineered for this profile. We have fully validated it at our Edison facility from the Z3 module through a full Indensity Core system using real data center load profiles. We've demonstrated consistent responses and stable performance across every transition. That performance is why speed to power matters, and it is the foundation of our joint development agreement with TURBINE-X. Combining their access to additional gas-fired generation with our Indensity solution, we deliver fully integrated power systems for data centers and other applications. This agreement targets 2 GWh of storage over the next several years, with initial deployments in 2027.

TURBINE-X's newly announced Texas manufacturing facility strengthens that execution as projects move from development to deployment. Now shifting to our financials, we delivered a strong first quarter, generating $57 million in revenue, up 445% year-over-year, on more than five and a half times the production output of a year ago. In the last two quarters combined, we delivered $115 million in revenue, more than all of last year. Revenue was roughly flat quarter-over-quarter as project mix shifted with more cubes being delivered, while AC scope, including things like transformers and inverters, has decreased. We expected to recognize a few million dollars of AC scope and commissioning revenue in the first quarter, but customer site readiness delayed some of this revenue into future periods.

On the cost side, our automated manufacturing strategy is producing real gains across productivity, capacity, quality, and unit cost. Gross loss for the quarter was $44.4 million, a 157 percentage point margin improvement year-over-year, driven by higher production volumes and continued product cost out. On a dollar basis, gross loss improved 18% sequentially as production volume increased 17%, reinforcing the trajectory in unit economics and operating leverage. Excluding non-cash stock-based compensation and depreciation and amortization, adjusted gross loss for the quarter was $39 million, a 133 percentage point margin improvement from the prior year. Operating expenses increased 23% year-over-year, reflecting targeted investments in supply chain, new product introduction, and additional engineering talent to support scaling and product cost out initiatives. About 17% of total OpEx was non-cash related.

We reported positive net income of $509 million. Due to our capital structure, net income is heavily impacted by changes in our share price and the non-cash fair value accounting adjustments, primarily mark-to-market revaluations of our warrants and our derivatives. Adjusted EBITDA is the real operating measure to focus on here, where we ended the quarter with a loss of $68 million, a 294 percentage point margin improvement from the prior year. As we look to the rest of the year, we remain focused on disciplined growth and continued cost reductions. Three quick things in closing. First, we are reaffirming our 2026 revenue outlook range of $300 million-$400 million. Second, our upcoming shareholder meeting is on June 3rd. Five proposals require shareholder support, and one carries a 67% approval threshold.

Among the proposals is an increase in our authorized share count, which is required to support the frontier investment. More broadly, maintaining an appropriate balance of authorized but unissued shares is standard corporate housekeeping and allows us to take advantage of strategic opportunities in the market. We are asking all shareholders to vote. Finally, I am pleased to welcome Alessandro Lagi as Eos's incoming Chief Financial Officer. Alessandro brings deep public company finance leadership and track record of scaling industrial businesses through commercial inflection. He officially joins us in June, and his arrival allows me to return my full focus to commercial growth. Thank you for your time today, and I'll pass it back to Joe.

Thanks, John. Thanks, Nathan. Thanks, everyone, for listening. I'm really excited to work again with Alessandro. We worked together earlier in our careers. I'm excited about his background in the energy industry and also very excited about his experience that he has in Johnson Controls across a multitude of global positions. I think Alessandro brings the right industrial background as a CFO to help us continue to scale the company. I'd also like to take a moment just to thank Nathan for him holding down both seats here for extended period of time, and look forward to Nathan moving back over to focus exclusively on the commercial part of the business and continuing to grow Eos. With that, we'll wrap up our prepared comments and turn over to the operator for any questions. Let's open up for Q&A.

To ask questions please press star one one on your telephone and wait for your name to be announced. To withdrawal your question please press star one one again. Please stand-by while we compile the Q&A roster. Our first question comes from Mark Strouse with JPMorgan. Your line is open.

Yes, good morning. Thank you very much for taking our questions. I just wanna start with Frontier Power. Maybe I just wanna make sure I'm thinking about this right. The initial investment from Eos and from Cerberus, can you talk about how many GWh that would finance? Then to the extent that this does indeed grow like you envision, can you just talk about kind of the capital stack for future projects? What the equity check would look like, and what Eos' potential contribution to that equity check would be? Would you continue to participate or would the ownership % kind of dwindle down over time?

Hey, Mark. Thanks. Look, I think the initial, as we've discussed, like, the initial capital stack, what we're thinking about is leveraging that with debt. We're targeting around a 5x leverage. You know, that's why we have that's gonna depend on where we come in on the right offer. I think on the incremental questions of future investment and equity, where we go from there, like, look, the program is designed to recycle capital in from the returns on projects to continue to grow. You know, it's the classic flywheel that I talked about in my prepared comments. I think it's a little bit too early to talk about what we would do as we're launching the platform, what we would do in the future here. We'll take that as it comes.

We're very excited about being able to pull everything together because it's gonna speed up discussions as we go through the pipeline and opportunities that we have in getting to faster order closure.

Okay. Okay, thank you. Then just a quick kind of accounting follow-up, I guess. Given the 49% equity, yeah, 49% stake, can you just talk about the rev rec as you're delivering products? Will you recognize that fully in the income statement? Is there any kind of below the line adjustments we should be thinking about?

Yeah, I think, this would be typical equity investment. The revenue would come through the income statement, just like it would if it was a direct sale to a third-party customer. The only difference would be we will break it out as a related party line up at the top of the income statement. Otherwise, you will see the full impact of the revenue in the income statement.

Yeah, Mark, I think it's important just to note, like, it's arm's length. You know, Frontier will have their own Board of Directors. They'll have their own management team, which we'll be announcing here shortly. I'm pretty excited about the people that we're talking to come in and run this. Everything will be fully negotiated, as was the capacity reservation agreement for the 2 GWh from a pricing standpoint, down payment, and terms on that contract. It's all done as an independent company, independent third party with our minority stake in that. The minority stake will be treated from a Frontier standpoint below the line.

Thank you.

Thank you. Our next question comes from Martin Malloy with Johnson Rice & Company. Your line is open.

Thank you. Congratulations on all the progress. My first question's on Frontier Power. Just wanted to try to maybe get a sense of customer conversations that you've had around this and how soon we should anticipate offtake agreements or project announcements utilizing this structure.

Yeah, look, I think this is, as Joe talked about in his prepared remarks, we have a number of customer opportunities in our pipeline that are working on financing as one of the critical components of a successful project. This creates an attractive alternative for financing, a lower cost to capital, given the way we're structuring this. We're gonna make the introductions to a number of customers. You see in the initial pipeline, there's a handful of projects that we're in active discussions on right now. I think there's a good chance we will be delivering on volume associated with some of those initial projects in 2026, this really builds momentum going into 2027 and beyond as well.

Martin, I think the big thing here I'd like to talk about the advantage that it gives us is, you know, we were doing the lion's share of this work on a lot of the opportunities in the pipeline, but doing that transactionally on a project-by-project basis. This now gives us a structured platform with the insurance wrap, raise the debt, get investment-grade characteristics, have an equity stake, allow our shareholders to participate in the returns on financing, and really accelerate the conversations.

You're not going through the process of let me apply, let me then pick my technology, then let me go through and understand my revenue stack, then let me go get my financing, then let me go and do how I'm gonna construct and build and go through that process to get to the first discharge cycle off the system. We think with this setup, we're gonna be able to accelerate all that because we'll bring a pre-structured solution to customers as they come with projects for us to be able to sell our technology into.

Okay. That's very helpful. For a follow-up question, just wanted to ask about reaching adjusted gross profit margin positive. I believe previously you'd said second half 2026, and with the operational improvements that you cited, can you give us an update there and degree of confidence in reaching that?

Martin, I mean, we're still targeting gross margin, adjusted gross margin positive later this year, really driven by a lot of the things that John talked about in his remarks. He's making great progress on cost out both on materials, direct labor, then as we get the Thornhill facility up and running, continue to see improvements in indirect labor and overhead and throughput as well. That's really the driver of it, we believe we will achieve positive adjusted EBITDA before the end of this year.

Great. Thank you. I'll turn it back.

Thank you. Our next question comes from Julien Dumoulin-Smith with Jefferies. Your line is open.

Hey, thank you. Good morning. This is Hannah Velasquez on for Julien. Congrats on the quarter and congrats on the Frontier Power announcement. Similar to my other peers, I had a question on that one. Just to give us a sense of the backlog impact, I realize the 2.6 GWh that you announced is as of quarter end, but what would your backlog be if we included the Frontier Power addition? Is it as simple as adding the 2 GWh, or is it on a project-by-project basis? I'm really trying to get a sense of what 2Q could look like from a backlog expansion perspective.

Yeah, look, I think, it's too early to give where the backlog's gonna be because there's other things in motion. What we said was, you know, you don't do it on a one-for-one basis because there's a project in backlog that will probably be converted and financed through Frontier, as I said in my prepared remarks, but we're not prepared today to give a midpoint or a forecast on backlog at the end of the quarter.

Okay. Thank you. Just as a follow-up question separately on ASPs, I know you talked a bit about the downward trend line being attributed to mix, but is a portion of that downward or that deflation related to the competitiveness of lithium iron phosphate? Any detail there would be helpful, especially to get a sense of where ASPs could trend longer term.

I think looking at the pipeline is the best indication of where we see longer-term trends, and it's really driven by larger scale projects that we're currently quoting within Indensity Core and the associated, you know, efficiencies gained with those larger scale projects. I think the best view of longer term ASPs from our perspective is what you see in the pipeline. I mean, those are active projects that we're actively bidding on, that's how we're looking at it.

Thank you.

Thank you. Our next question comes from Patrick Ouellette with Stifel. Your line is open.

Hey, it's Pat, on for Stephen Gengaro. Thanks for taking the questions. You reiterated the initial production for the second line for the end of 2Q. Just curious if you could touch on any key steps between now and then, whether that's yields, throughputs, things like that, then how you're thinking about the ramp of the second line through-

Well-

The second half of the year.

Yeah. I think, Pat, before John jumps in and goes through where we are on that, what I would say is, you know, when we go for our weekly review of progress up there, the team is making phenomenal progress in bringing the line up. You know, every week it looks like a totally different facility from the week before. In fact, you know, this week we had a candidate come in to interview for a position at Eos who was a customer, and they had been in Turtle Creek. The interview started off with, "I'm really impressed by what I saw because I was here two years ago. When can I start?" I think those are the types of things you like to hear where people have reference points.

I think John and the team has done a great job positioning us to be able to deliver, and you see it in the numbers. I'll turn it over to John to talk through where he's at with the program of really implementing lean manufacturing as the way we work.

Yeah. The line's completely installed. We're powering up all sections and doing debug currently. We're on track to basically start production in June.

Okay. Thank you. With the second line coming online, and the rollout of Frontier USA, is there a way you're thinking about production and deployment off the two lines together and how that gets allocated, just say, to existing backlogs and to the Frontier USA?

Yeah. I think, look, a little bit early to comment on that one. You know, like, we've got a range in the revenue, that ties to how the lines ramp. What we're being very careful of is how the lines ramp up before making a commitment, really seeing what's happening. We feel really good about it, we wanna see where we're at, we have a lot of optionality that we're going through and looking at as far as running two lines in two facilities, running one line in one facility, potentially future consolidation into one facility. Those are things we're gonna be working on here over the next couple of months, we'll come back with news on that as we solidify our plans around what we're gonna do.

Understood. Thanks a lot.

Yep.

Thank you. Our next question comes from Jeffrey Osborne with TD Cowen. Your line is open.

Thank you. Just two from my side. Nathan, or Joe, I am trying to understand, since you brought up project financing, that seems to be a big topic on the call. Can you just walk through what the historical challenges were around traditional project finance with traditional banks, and then what led you to this structure? I am just trying to understand what those obstacles were, and then if that is ever an avenue for future growth beyond the Frontier USA.

Jeff, we would continue. I wouldn't call it obstacles. What I would say is we're coming at this with a pre-engineered solution. The same banks that we're talking about will be the same people that provide debt into Frontier Power. What we've structured around this is instead of You have to think about this, like, instead of doing this on a transaction-by-transaction basis, we're doing it on a platform basis, where you have the debt there wrapped by the insurance. Rather than going in, understanding, talking to the bank, bringing in Ariel Green, we had all the elements there before. We're putting it in a structure now where we can offer it faster and in an offering that allows the customers to get to closing and start an NTP, notice to proceed, faster.

I think, like, when you look at this, like, we're excited about where we are because near term, the Frontier pipeline, you know, far exceeds, like, any implied, going back to the earlier question, any implied capital raise in the platform. Like, we've got a pipeline of opportunities that allow us to move faster and bring in expertise to help us close the job, close projects. At the same time, you know, it allows us on the Eos technical stack to really focus on running the company, executing, delivering, taking cost out, building and improving around our controls architecture and DawnOS, and having alongside of us a financial team and financial experts that can help us accelerate those conversations with customers.

Got it. Then, just switching gears, you mentioned the southeast utility. I think there was a large project last summer in 2025 that went live earlier this year. Can you just walk through what's specifically involved to move an existing project that's already installed and, you know, producing electrons at a four-hour pace, moving to 10 and then installing DawnOS? Is that, you know, a complete overhaul of the power electronics, but the battery array and systems themselves are in place and not changed? It's just unclear what led to that change.

Yeah. Jeff, it depends. Like, there's a couple things in the question, so I'll try to take them one by one. A four- to 10-hour system with Eos, there's nothing to change other than the way you operate the system. That's the beauty of the technology. The upgrade to DawnOS, that's a change-out of the software, obviously. We need the new printed circuit boards installed on the equipment. There are, depending on the generation of technology, like we've talked about, like, we've evolved our BMS over time for the Z3. There's three configurations out there. Depending on what configuration you have, like configuration one and two, you've got to change the wiring plus the boards. Configuration three, it's boards, you run the BMS.

We do this on a project-by-project basis, but the performance that it unlocks and delivers to the customer warrants us doing this. Like, as an example, we ran a one-hour cycle yesterday, one hour, at 84% round-trip efficiency. That's the type of performance we wanna deliver in the market, and it's gonna open up new revenue stacks for our customers and also allow us to put more product out in the field.

Perfect. Very quickly, one last follow-up on Frontier. You know, I think Bloom did something similar years ago with Southern Company and, you know, had challenges around field performance. Can you just acknowledge what the reliability requirements are as part of Frontier Power as it relates to, you know, how your units have been running the last year or so relative to the expectations of that financial structuring? Is there any material changes that need to play out as it relates to field reliability over time?

No, Jeff. None at all. I think, like, we've just gotta be careful here. You know, the technology, the underlying technology and the batteries work. As I talked about in my prepared comments, this is unlocking the performance that were in the batteries with the software that we need. What's interesting is we've brought some people in to work inside the company that have many years of experience owning and operating lithium-ion systems. Lithium-ion has the same thing that we're talking about. What our new project lead says is that she remembers moving lithium-ion battery packs around to balance. You don't need to do that with our system. This is something that's there, and we think our software controls and unlocks performance that isn't there for other technologies.

One of the challenges that we had in our first generation that we put out on the Z3 is for speed to market, we installed an underlying printed circuit boards and a core BMS that was used in lithium-ion, and it just doesn't match up and give us the level of granularity you need to maximize performance. Getting a system, Jeff, that can go from a one-hour at 83% round-trip efficiency up to a 10-hour, 12-hour discharge that then gets up approaching the 90s. To be able to do that on one system, as far as we know, there aren't any other products out there that can do that. You know, you're talking about, like, if you look at a flow battery, like a vanadium flow battery, you know, very low footprint power density, you know.

What we do, 6.4 MWh a vanadium battery probably does under a half a megawatt at 50% round-trip efficiency. We're in the mid-80s on regular cycles. We like the performance that we have. We like what the team is developing, and we like having Frontier Power alongside of us to accelerate decisions. Yes, as in any product, we're always gonna work on improving the reliability. What Frontier Power unlocks, Jeff, and kind of the thing for us that opened the door was like, when you look at how we designed Indensity, right? You take this flexible battery module, this low ability to control each module with a controlled platform.

With Indensity, a light bulb went off where I was sitting there talking to Jeff Bornstein, who's on our board, and saying, "You know, Indensity is like an aircraft engine. Indensity is like an aeroderivative gas turbine." We could swap out modules as you have to and maintain nameplate performance. What we're gonna change with energy storage with Indensity is we'll guarantee nameplate for the life of the project. There's no more talking about augmentation. It's running it like an industrial asset, like you see with a gas turbine or with an aircraft engine, that you don't do the service while it's on the wing of the plane. You swap it out and keep going. That's what we've designed, and we're excited to bring that to market.

Perfect. Appreciate the thorough response. Yep.

Thank you. Our next question comes from Ryan Pfingst with B. Riley Securities. Your line is open.

Hey, good morning, guys. Thanks for taking my questions.

Hey, Joe. First, can you talk more broadly about the competitive landscape and maybe any additional color on what customers have been indicating in terms of duration preferences?

I think, consistent with what we've said historically, and we see it increasing, is customers continue to need longer duration solutions. Market fundamentals have shifted in many of the markets. You're seeing programs like the NYSERDA bulk storage procurement. You're seeing PJM come out with the reliability backstop, Ofgem's Cap and Floor program in the U.K. that we've talked about previously. I mean markets are recognizing that they need longer duration for grid reliability, as well as to service the demanding load profiles that the increase in data centers is having on the grid. Long duration is the perfect solution for that. Joe already talked about the ability to run, you know, one-hour cycles, 12-hour cycles from the same asset.

When we look at the erratic use cases of the hyperscalers being able to ramp up and ramp down within milliseconds and do that many, many times a day, I mean, it's an abusive use case, and our battery is specifically engineered to handle that. We're very excited about the technology and how it's designed to handle that. All of that lends itself to increasing durations and flexible assets, which we've got in the Z3 technology. Ryan, what I would just add on top of Nathan's comments is to simplify conversations, we make it sound like you're running one cycle a day every day, you multiply it by day. That's not how the grid works. That's not how these assets will be utilized.

I don't view, you know, Nathan used to use some words about like a, you know, you know, a harsh and. That's just the way AI's gonna work. Like an inference, like if we all go on our phone right now and type something into an AI engine, you're creating an inference session. You're creating a spike in power demand. You're gonna have to do that in milliseconds. The product does that. When you do a large learning on AI, you need power for long periods of time. We're the buffer and the asset that can do both of those things successfully. With the way Indensity is set up, we can do both of those things on the same installation. Why? Because DawnOS can be parsed out into different parts of the system.

You can run an inference system on one part of it and a large learning system or long duration on another part of it. It's about flexibility and giving the grid the shock absorber it needs as the power demand changes over time. It protects core fossil assets from that variability. It's not just about, "Hey, we're doing solar plus storage or wind plus storage." It's anything plus storage that gives you frequency regulation, and we've got a product that can do it, that's proving itself every day out in the field, that customers are coming to us, and with Frontier Power, we now have the ability to accelerate those conversations.

Appreciate that. Maybe a follow-up on that last comment. You know, it sounds like Frontier Power will be key for order conversion. Are there any other gating items that you feel like you've addressed with customers in recent months that should benefit order conversion this year?

Look, I think some of the biggest things that are gonna help order conversion are gonna be the need for power and doing things faster than we've ever done before. I think, again, showing the operating performance of the product out in the field and then taking use cases from customers and running those use cases and showing that we can meet those use cases, that gets you to those decisions that are gonna convert orders. We feel good about the pipeline we have, the relationships we're building. You know, Nathan talked about TURBINE-X. I think it's great to be with somebody like TURBINE-X that comes at this market with the philosophy of bringing aeroderivative type technologies to different load cases and partnering with them.

You gotta remember, like, this isn't building a Lego set, right? You don't just plug things together and there's your power plant. You gotta have a controls architecture underneath it, a controls architecture on top of it. The reason why we're working with people like TURBINE-X, people like a FlexGen, which we've already talked about, is we can align those controls beforehand and get to power faster. Getting to power faster is what the market and our customers need. That's what we're building.

Great. I appreciate it, guys.

Yep.

Thank you. This concludes the question. I would now like to turn it back to Joe Mastrangelo for closing remarks.

Well, you know, thanks, everyone, for listening today, the questions. You know, we look forward to continuing to build a great company. The one thing I'll tell you that won't change about Eos is the dedication of this team to building a great company. We're really excited obviously about the Frontier Power partnership that we're building. The ability for our shareholders to participate in that makes me very excited personally because they've stood by us through trials and tribulations. We've continued to grow the company, continue to improve performance, and continue to build something that we'll all can be proud of. Thanks again, everybody.

This concludes today's conference call. Thank you for participating. You may now disconnect.