• Revenue: $6.6 million, derived 100% from Z3 production.

• Cost of Goods Sold (COGS): $28.2 million, a 5% increase from the previous year.

• Gross Margin: Saw a 9% improvement quarter-over-quarter.

• Operating Expenses: $19.5 million, slightly down by 3% from the previous year.

• Operating Loss: $41.1 million for the quarter.

• Net Loss: $46.7 million, showing a 35% improvement compared to the previous year.

• Cash on Hand: $31.8 million, excluding $14.5 million of restricted cash.

• Booked Orders: $125 million last quarter, mainly from the Pine Gate MSA extension.

• Orders Backlog: Stands above $600 million, equivalent to 2.4 gigawatt hours.

• Commercial Pipeline: Valued at over $13 billion, representing 49 gigawatt hours of opportunities.

• 2024 Revenue Outlook: Expected to be between $60 million and $90 million.

• Warning! GuruFocus has detected 9 Warning Signs with EOSE.

Release Date: May 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Successfully completed the factory acceptance test for the state-of-the-art production line, demonstrating significant progress in manufacturing capabilities.

• Secured 55% of the direct material cost reduction target, enhancing product affordability and competitiveness.

• Achieved a substantial commercial pipeline with $13 billion and 49 gigawatt hours of opportunities, indicating strong market demand.

• Reported a booked orders backlog of $600 million, equivalent to 2.4 gigawatt hours, providing a solid foundation for future revenue.

• Advanced the Z3 battery module, improving power density and reducing costs, which supports the company's path to profitability.

Negative Points

• Acknowledged the need to further optimize certain production line stations to achieve the target 10-second cycle time, indicating ongoing challenges in manufacturing efficiency.

• Reported a cash position of $32 million, which may necessitate careful financial management to sustain operations and growth.

• The transition to a new automated production line is expected to temporarily impact production volumes, potentially affecting short-term revenue.

• Faced challenges in converting late-stage opportunities into firm orders, highlighting difficulties in market penetration and sales conversion.

• Dependent on securing final approval for a Department of Energy loan, which introduces uncertainty in funding and operational scaling.

Q & A Highlights

Q: What are the areas still needing work to achieve the 10-second cycle times on the production line? A: Joe Mastrangelo, CEO, mentioned that two stations at the backend of the production line need to be sped up. These are not complex issues but require adjustments in control logic and battery movement through the stations. The front end of the line is already achieving the 10-second target per station.

Q: What steps are necessary from an operational or financial perspective to close the DOE facility following state acceptance testing? A: Joe Mastrangelo explained that the equipment for the new production line is currently being installed, and the team is focused on a successful test to meet the schedule. They are also working closely with the LPO to meet all conditions for loan closure after the site acceptance test.

Q: Can you expand on what was learned during the factory acceptance testing process? A: Joe Mastrangelo shared that the process involved iterative testing and adjustments, significantly improving the consistency and efficiency of the production line. The team learned about component quality and optimized the movement of materials and operation of stations.

Q: How does the $20 million incremental CapEx spend to expand line one to 2 gigawatt hours fit into funding plans, and is it necessary for achieving positive contribution margins later this year? A: Joe Mastrangelo clarified that achieving positive contribution margins is not contingent on this funding. The DOE loan mechanism allows for an 80% reimbursement of invested capital, which supports this expansion.

Q: What impact do you foresee from the new tariffs announced on the energy storage industry, and how might this benefit Eos? A: Joe Mastrangelo sees the tariffs as beneficial for domestic manufacturing and investment in U.S. companies like Eos. He believes these conditions favor the growth of companies that meet the criteria for energy security and domestic production.

Q: Are there any updates on the potential for expanding production capacity beyond the current plans for line one? A: Joe Mastrangelo indicated that expansion would be driven by backlog demand and market conditions. The strategy involves scaling production in line with secured orders to ensure efficient capital utilization and avoid overcapacity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.