Eos Energy Enterprises, Inc. (EOSE) Earnings

Management highlights

### Production and Manufacturing Performance - Achieved record Q2 revenue, record cube shipments, and record backlog. Sequential cube output increased 20% to an annualized production rate of 1.5 gigawatt hours in June, with flat labor costs. - Material costs improved 10% sequentially (1% excluding tariff rebates from prior periods); material costs have fallen 12.5% since the Q3 2025 launch of Don OS, despite product enhancement investments that would have otherwise delivered a 14.5% reduction. - Direct labor costs per cube fell 20% sequentially; manufacturing overhead per cube improved 4% sequentially, with a 16% improvement at the standalone Turtle Creek facility. Scrap volume was down 63% year-to-date 2026 vs full year 2025, confirming manufacturing scaling success. - The new Thornhill purpose-built facility's Line 2 contributed only 1% of Q2 production during initial ramp, but already delivers 10% faster battery cycle times and 11% faster bipolar cycle times than the legacy Turtle Creek Line 1, with built-in redundancies for improved line availability. ### Strategic Manufacturing Consolidation - Management approved accelerating consolidation of all manufacturing operations into the modern Thornhill facility. Turtle Creek Line 1 will be relocated, upgraded to Thornhill's single-piece flow design, and integrated into the consolidated facility. - Consolidation is expected to deliver an additional 10-15% reduction in conversion costs on top of current planned improvements, with a 9-month payback period for the modest required relocation investment. The move creates a single overhead structure and lays the foundation for 2027 margin expansion. ### Fleet Performance and Market Progress - The installed fleet has cumulatively discharged 6.5 gigawatt hours of energy, with an average round trip efficiency of 78% across all units (including non-upgraded legacy units), and top fleet performance already exceeding 90% efficiency (the technology's proven entitlement level). Performance variation is decreasing, making product performance more bankable for customers. - Total pipeline value is $24.6 billion (112 gigawatt hours), up 31% year-over-year. 51% of the pipeline is for 8+ hour duration projects, where EOS' technology has a distinct economic advantage over incumbents, and 32% of the pipeline is data center related, up from a de minimis share two years ago. - Recent strategic wins include a U.S. Department of War strategic partnership under the Golden Dome for America program, a 750 megawatt hour master supply agreement covering Germany, Austria, and Switzerland, and a new $100 million purchase order for phase one of the Blanquilla project in ERCOT. ### Frontier Power USA Joint Venture - Frontier Power USA was launched to address industry-wide project financing delays that prevent qualified projects from breaking ground. EOS holds a minority stake in the joint venture, which has raised $263 million in initial gross proceeds to support up to $1 billion in project deployment. - The joint venture has a 16 gigawatt hour opportunity pipeline, 5 gigawatt hours of selected/accredited projects under active due diligence, and 1.8 gigawatt hours approaching full notice to proceed; first projects are expected online by Q3 2027. - One pre-JV Frontier Power-aligned project accounted for ~80% of Q2 2026 revenue, and is expected to deliver mid-teen returns that accrete to the joint venture's value. EOS captures value from Frontier Power via long-term service contracts, minority equity participation in cash flows and asset sales, and added reference hours that accelerate third-party pipeline conversion. ### Path to Adjusted Gross Margin Improvement - Management outlines a clear 4-driver plan to deliver over 72 percentage points of adjusted gross margin improvement over the next 12 months: 25 percentage points from material cost reductions via long-term supply agreements and 90+ active design/simplification cost reduction initiatives; 20 percentage points from conversion cost reductions via consolidated single-facility overhead and automated material handling at Thornhill; 20 percentage points from field/project cost improvements as Don OS upgrade work completes and internal teams replace higher-cost third-party field labor; 8 percentage points from improved first-pass yield and reduced scrap in subassembly production.

Guidance

- Management tightened its 2026 full-year revenue guidance range to $300 million to $350 million, down from the prior upper range, due to the planned consolidation of Line 1 into Thornhill, which will take the line offline temporarily during relocation. The lower end of the range represents maintaining the June 2026 production run rate through the second half of the year, while the upper end depends on how quickly full 24-7 production scaling is achieved at the consolidated Thornhill facility by Q4 2026. - 2026 second half revenue is expected to exceed first half revenue, which reached just under $126 million (already exceeding full-year 2025 revenue). Q4 2026 revenue is expected to be higher than Q3 2026. - Management expects the temporary cost pressures from underutilized Thornhill capacity and expanded field deployment/upgrade work to diminish significantly by Q4 2026, with clear operating leverage driving margin expansion throughout 2027. - The firm expects to close on the second Department of Energy loan tranche by the end of Q3 2026, subject to pre-existing closing conditions.

Segment performance

EOS Energy Enterprises is a single-segment energy storage technology manufacturer, so no separate product segment performance is reported. Q2 2026 total revenue reached $68.8 million, an increase of 351% year-over-year and 21% sequentially. Cube deliveries increased 207% year-over-year and 20% sequentially. Gross loss totaled $48.8 million, with adjusted gross loss of $42.9 million and an adjusted gross margin of -62%. Net loss for the quarter was $276 million, driven by non-cash fair value adjustments for warrant and derivative liabilities; adjusted EBITDA loss was $71.4 million, a margin of -104%, improving 235 points year-over-year and 16 points sequentially. Total operating expenses were $35 million, up 6% year-over-year and flat sequentially, with SG&A down 4% and R&D up 46% as the firm invests in future product and software development. End-of-quarter cash totaled $364 million.

Risks & headwinds

- Planned manufacturing consolidation carries execution risk, including potential disruptions to production and customer delivery timelines during the Line 1 relocation and integration process. - Pipeline conversion to firm backlog depends on multiple external factors, including third-party project financing availability, customer project development timelines, grid interconnection delays, and third-party equipment delivery schedules that are outside of EOS' control. - While cost reduction initiatives have a clear roadmap, achieving targeted margin improvements depends on successful execution of production scaling at Thornhill, supplier cost reduction negotiations, and the pace of backlog conversion to hit targeted production volumes that absorb fixed overhead costs. - Non-cash fair value adjustments for warrant and derivative liabilities create ongoing volatility in reported GAAP net income that does not reflect core operating performance.

Analyst Q&A

• Q: What do the low and high ends of the revised 2026 revenue guidance imply for Line 1 ramp at Thornhill, and what is current Thornhill throughput? /

  A: The $300 million low end reflects continuing June 2026's production run rate for the rest of the year. The $350 million high end depends on ramping Thornhill to full 24-7 operation by the end of Q4 2026, not on getting relocated Line 1 back online this year. Line 1 continues operating at full nameplate capacity at Turtle Creek during preparation for relocation; Thornhill is currently in staged ramp with ongoing staff training, adding shifts incrementally rather than trying to scale all at once.

• Q: With ~50% of current backlog tied to Frontier Power USA, how will customer diversification progress over the next 12 months? /

  A: Management's core goal is to grow the total size of the backlog pie rather than just reduce the Frontier Power share. A 50/50 split between Frontier Power projects and third-party projects 12 months from now would be a positive outcome, as it would mean Frontier Power is successfully executing on its strategy of delivering returning-bearing projects while the third-party pipeline also grows. Recent wins like the European master supply agreement and U.S. Department of War partnership confirm growing non-Frontier Power demand that will expand the third-party share of the growing total backlog.

• Q: Why move forward with manufacturing consolidation now instead of waiting? /

  A: Consolidation is being done now to simplify operations and hit the ground running in January 2027, removing operational complexity and noise from the 2027 plan. Turtle Creek Line 1 is operating well, but Thornhill's purpose-built layout delivers meaningful efficiency gains: it eliminates material handling steps required in the retrofitted Turtle Creek building, leverages lessons learned to add critical production redundancies, and enables a single lower-cost overhead structure, all of which accelerate 2027 margin expansion.

• Q: Can you provide an update on the fast-growing data center storage opportunity, including requested durations? /

  A: Data center projects now represent 32% of EOS' total pipeline, with activity in both on-site power support and grid-level storage to serve data center load. Both segments are progressing well. Data center customers often request multiple short daily cycles that add up to longer total daily discharge, which plays to EOS' technology strength of reliable high-frequency cycling without the thermal runaway risk of incumbent technologies, and the firm's long-duration platform can accommodate the full range of requested duration needs.