Eos Energy Enterprises, Inc. (EOSE) Earnings

Management highlights

- Market Opportunity & Strategic Positioning - The U.S. is undergoing the largest re-industrialization effort in 75 years, driven by semiconductor manufacturing, defense, critical minerals, advanced manufacturing, and AI data centers, all of which require significant new electricity capacity. The existing grid is not engineered for the faster, more volatile, concentrated load growth from these new sectors, creating large demand for long-duration energy storage to add capacity quickly using existing infrastructure. - Current policy (ITC, Section 45X tax credits, 2026 NDAA) prioritizes U.S.-built energy infrastructure, which aligns with Eos' core value proposition of American-made, utility-scale long-duration storage. - 55% of Eos' 107 GWh total commercial pipeline is 8+ hour duration, which matches Eos' competitive advantage in both technical performance and economics for this market segment. - Frontier Power USA Joint Platform Launch - Eos announced the formation of Frontier Power USA, a joint platform with institutional investor Cerberus designed to close the long-duration storage bankability gap by combining Eos' vertically integrated technology stack with Frontier's project development and financing capabilities. - Frontier's three-layer capital structure: 1) $100 million in equity from Cerberus paired with a $150 million pro rata rights offering for Eos existing shareholders to fund Eos' equity contribution; 2) technology performance insurance wrap from Ariel Green at Lloyd's of London that converts technology risk into an insurance-rated obligation; 3) over $1 billion in planned senior project debt targeting investment-grade characteristics. The platform is designed to create a self-reinforcing flywheel, where cash flow from operating projects is reinvested into new development, accelerating Eos equipment deployment. - Eos holds a 49% minority stake in Frontier, which will operate with an independent board and management team. All transactions are arm's length, including the signed 2 GWh firm capacity reservation agreement between Eos and Frontier. - Technology Performance Improvements - Eos has now surpassed 6 GWh of total cumulative discharge energy across 3.9 million total operating cycles, with 0.5 GWh and 1 million cycles from the current Z3 product line. - The shift from string-level to module-level battery management under the new Dawn OS control system unlocked major performance improvements: at a reference customer site, average round-trip efficiency increased from 34-42% (with 17+ point standard deviation) to the low-to-mid 70% (with 5-8 point standard deviation), with peak efficiency reaching 88%. This improvement came from fixing dynamic battery balancing issues, not changing the underlying battery module chemistry or design. - Eos maintains consistent high efficiency (average high 70s, peak up to 90%) across all discharge durations from 0-3 hours to 6+ hours, with no efficiency penalty or faster degradation for longer durations that plagues competing chemistries. Dawn OS upgrades are being rolled out to all existing installed capacity, not just new systems. - Manufacturing Operations Progress - At the existing Turtle Creek facility, Q1 cube output increased 467% year-over-year and 17% sequentially from Q4 2025. Direct labor per cube is down 47% year-over-year and 25% quarter-over-quarter, driven by bipolar automation, yield improvements, and reduced overtime and temp labor. Material cost per cube is down 5% sequentially, as supplier optimization and design improvements take hold, following a 4% year-over-year increase tied to the BMS transition. Manufacturing overhead per cube is down 43% year-over-year, with a 10% sequential increase driven by planned investments in equipment maintenance and spares to increase line uptime. - The new Thornhill manufacturing facility is fully constructed, with line power-on and debugging in process. Initial production is on track for the end of Q2 2026, with full production ramping by Q4 2026. Thornhill is purpose-built to scale the manufacturing improvements proven at Turtle Creek, will lower per-unit costs via volume leverage, and positions Eos to meet gigawatt-scale customer demand.

Guidance

- Management reaffirmed its full-year 2026 revenue guidance range of $300 million to $400 million, with no upward or downward revision from prior guidance. - Management maintained its prior target of achieving positive adjusted gross margin in the second half of 2026, and expects to reach positive adjusted EBITDA before the end of 2026, driven by ongoing cost reduction and manufacturing scale improvements. - Initial production at the new Thornhill facility remains on track for the end of Q2 2026, with full production expected in Q4 2026. - Eos expects to deliver volume from initial Frontier Power USA projects in 2026, with significant growth in Frontier-driven deployments starting in 2027 and beyond.

Segment performance

Eos Energy Enterprises is a single-segment manufacturer of long-duration energy storage systems, so no separate product segment financial breakdown is provided. Q1 2026 total revenue was $57 million, up 445% year-over-year, and more than 5x the revenue in Q1 2025. Combined Q4 2025 and Q1 2026 revenue totaled $115 million, exceeding full-year 2025 total revenue. Gross loss for Q1 2026 was $44.4 million, an 18% sequential improvement, representing a 157 percentage point margin improvement year-over-year. Adjusted EBITDA loss was $68 million, a 294 percentage point margin improvement from the prior year. Operating expenses increased 23% year-over-year, driven by targeted scaling investments, with 17% of total OPEX being non-cash. End-of-Q1 2026 cash on hand was $472 million, with an expected $60 million in additional cash inflows from a DOE loan drawdown, PTC tax credit monetization, and customer invoicing. End-of-quarter backlog was $645 million, representing 2.6 gigawatt hours of storage capacity. Total commercial pipeline stands at over 107 gigawatt hours ($24 billion), with 55% of the pipeline consisting of 8+ hour duration projects, Eos' core market.

Risks & headwinds

- The pro rata $150 million rights offering to fund Eos' equity contribution to Frontier Power USA requires shareholder approval of an increase in authorized share count. Shareholders who do not participate in the offering will experience ownership dilution, even as participating shareholders see an accretive impact on their holdings at current share prices with full subscription. - Manufacturing ramp at the new Thornhill facility carries execution risk; management has retained optionality around production allocation between the two facilities and potential future consolidation, and will not commit to full ramp plans until operational performance is validated. - While Frontier's platform structure addresses the historic bankability challenge for long-duration storage projects, successful project conversion depends on multiple external factors including customer financing closing, permitting, and interconnection approvals, which can delay expected revenue recognition. - Revenue recognition in Q1 2026 was negatively impacted by customer site readiness delays that pushed $millions in AC scope and commissioning revenue into future quarters, highlighting ongoing project execution timing risk.

Analyst Q&A

• Q: How many gigawatt hours can the initial Frontier Power capitalization finance, and what will EOS's future equity participation look like as the platform grows? /

  A: The initial capital structure targets approximately 5x leverage on the combined equity from Cerberus and EOS. The platform is designed to recycle capital from project returns to fund future growth as part of the planned flywheel model. It is too early to specify future equity contribution amounts or ownership trajectories, but management emphasized the platform will accelerate order closure for EOS's existing pipeline of opportunities. All transactions are arm's length, with Frontier operating as an independent company, so revenue from sales to Frontier will be recognized fully on EOS's income statement, only broken out as a related party line item.

• Q: Can you update the timeline and confidence for reaching positive adjusted gross margin, which was previously targeted for the second half of 2026? /

  A: Management reaffirmed the prior target of positive adjusted gross margin in the second half of 2026, and also expects to reach positive adjusted EBITDA before the end of the year. This guidance is supported by ongoing operational progress reducing material and direct labor costs, and expected overhead and throughput improvements once the Thornhill facility ramps up production in the second half of the year.

• Q: What were the historical challenges with traditional project financing for long-duration storage, and how does the Frontier structure solve these? Will traditional project finance remain an option beyond the Frontier platform? /

  A: The main challenge was not access to banks, but the slow, transaction-by-transaction process of structuring financing for each individual project. The Frontier platform creates a pre-structured solution with the insurance performance wrap and pre-arranged debt capacity, which allows customers to reach notice to proceed much faster. Traditional banks will actually provide the senior debt for the Frontier platform, so the structure does not replace traditional project finance, it just accelerates and standardizes the process. This allows EOS to focus on manufacturing and technology improvement, while Frontier's financial experts handle project development and financing.

• Q: How does expanding an existing Southeast utility project from 4 hours to 10 hours and adding Dawn OS work, and does it require replacing the underlying battery modules? /

  A: No changes to the existing battery array are required, because the technology can support any duration up to 10+ hours just through changes in operating logic. The Dawn OS upgrade only requires replacing printed circuit boards and updating software; depending on the BMS generation of the existing system, it may also require minor wiring changes. The performance improvement unlocked by the upgrade justifies the cost, and allows the customer to capture new revenue streams from longer duration operations.