Good morning and welcome to EOS Energy Enterprises' third 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 Liz Higley, Vice President of Investor Relations. Thank you. You may begin.

Good morning and welcome to EOS's third quarter 2026 conference call. Today I'm joined by EOS CEO Joe Mastrangelo, COO John Mahaz, and CFO Alessandro Lagi. Today's calls may include forward-looking statements including our expectations regarding future results and the outlook for our company. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. For more information on these risks and uncertainties, please refer to our SEC filings. Forward-looking statements speak only as of today, and we undertake no obligation to update them, except as required by law. Today's remarks will also include references to non-GAAP financial measures. A reconciliation of these measures to the most directly comparable U.S. GAAP measures is included in our earnings release. Non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. Further, these measures may not be comparable to similarly titled measures used by other companies. This conference call will be available for replay via webcast through EOS Investor Relations website at investors.eosb.com. Joe, John, and Alessandro 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 EO CEO Joe Mastrangelo.

Thanks, Liz. Good morning, everyone, and thanks for joining us today. Our team delivered a strong operating quarter. We delivered the most cubes in our history while continuing to drive product cost out. At the same time, our backlog came down from last quarter, and I'll come back to that on a later slide. There are three critical industry shifts that are shaping our performance. The power of business has gone from managing retirements to adding capacity as fast as it can. For 15 years, U.S. electricity demand barely grew. Today, grid planners expect 166 gigawatts of new demand by 2030. While data centers are more than half of it, manufacturers and commercial customers have the same challenge. They need power faster than the grid can deliver. Storage helps close that gap. Every grid connection at a gas plant, a solar farm, a substation, A steel mill or a factory has hours when it runs below its capacity. Storage puts that power to work faster than waiting for new generation or transmission. Second, where a battery is made is now part of a project financing model. Under the foreign entity rules that took effect in January, a project's tax credit depends on how much of its cost traces back to prohibited foreign suppliers, and the cell is about half of that requirement. Every system we shipped this quarter used EOS-made batteries and cells with more than 90% American materials. That's what we mean when we say America's battery. Third, reliable performance decides who wins, and it has two key parts. First is delivery. A system delivered late can push a project past its tax credit deadline or delay system revenue. That's why we're consolidating operations into Thornhill. One factory running at scale at lower cost. And it's already working. Cost per cube came down again and margins improved for the eighth consecutive quarter. The second is performance in the field. Our system is a 20 plus year asset and owners are using its flexibility to do more and meet new demand requirements. The same system might run a short cycle in the morning and a long discharge at night. Other systems today are built for two to four hours. Longer, more flexible duty cycles need a different design, and that's where EOS competes. Our installed fleet runs from two hours to 14. We now have 12 sites operating or in commissioning, up from seven a year ago. More than half of our pipeline is eight hours or longer, and recent deals include a new 10-hour project in West Virginia for Google. I've worked through several booms and busts in this industry. The winners were never the companies with the best technology on paper. They were the ones whose equipment showed up on schedule, resolved issues, and then ran year after year, day after day. Customers and shareholders are asking us for the same. Be reliable. Now, let's look at fleet performance on the next page. Across our install base, EOSystems has discharged 6.9 gigawatt hours over 4 million cycles, nearly a gigawatt hour of that from the Z3 fleet. Z3 roundtrip efficiency averaged 79% on a full cycle, up from 78% last quarter, and that includes systems not yet operating on Dawn OS. We didn't get here in a straight line, and the biggest lesson is at the bottom of this page. In our early systems, we controlled each cube as one unit. So a weak module set the performance of the whole cube. We changed how we control the system from one control point per cube to three to six to 168. Don OS manages each of the 672 modules on its own. tracking its state of charge and state of health in real time. No single module holds back system performance, and with the improvements that John will talk about in operations, modules going out have a much smaller deviation or distribution of how they perform. The industry standard is to plan for capacity losses and add batteries over time to recover. We manage every module so the system holds performance, and we see a module that needs service before it impacts a system's output. And because we know exactly what's installed at every site, down to the module, down to the software version, down to the firmware, an improvement implemented in one site can be rolled out everywhere else it applies. The steepest learning curve for the company wasn't the battery itself. It was the system. The battery plus power electronics, the controls, and the grid working as one. Our early Z3 projects took longer to commission than we planned, and we learned from each project and improved our fleet performance. Now let's go and look at a specific customer use case. Here on slide 6, we are showing what the Dawn OS architecture makes possible. New loads coming onto the grid aren't just large, they're dynamic. An AI training cluster can swing tens of megawatts in under a second, over and over and over again. And arc furnaces and large industrial processes do the same. I spent much of my career around turbines, and I know the risk. Swings like that wear on turbine generator shafts over time. Regulators are seeing it too. FERC has directed NERC to write mandatory standards for these loads by year end, and grid operators are proposing ramp rate limits. Here, we are showing how an indensity core absorbs the swing within milliseconds, and the grid sees a fraction of those swings, and the utility sees a steady customer, not a volatile one. The questions that customers ask is what does that do to the battery itself? Fast swings create heat and heat is what wears traditional batteries out. We ran two Indensity cores available for customers today, charging and discharging into each other on a fast fluctuation profile for 147 straight cycles for over 735 hours. We saw no added temperature rise and the round trip efficiency held at 81%. Indensity runs the same module level controls we just covered on the previous slide. We're continuing to test and are using this data to show customers our operating flexibility. One asset can do both jobs, smooth the load in milliseconds and shift energy over hours. For the customer, that's a faster path to power. For the utility, that becomes system reliability. For the community, that's growth without higher electricity bills. That's what we mean by assets that meet today's grid requirements. Turning to slide seven, let's go into some details on the backlog. We ended the quarter at $765 million, about 3.2 gigawatt hours. That's up 19% from a year ago and down from $807 million in Q2. We shipped more than we booked last quarter. This is project timing, not a fundamental change in demand. We're currently working 3.5 gigawatt hours of late stage opportunity, more than today's entire backlog. More than half is waiting on financing, the rest is in contract negotiations. Our pipeline reflects where the market is moving, longer duration storage, growth across multiple end markets, and standalone projects that will make existing energy infrastructure more efficient. While Frontier Power USA is now about 43% of the backlog, we're also widening the customer base. We closed orders with six customers, four of them new last quarter. We don't expect every late-stage opportunity to close, and the NYSERDA bulk storage program is a good example, one of several state programs we are pursuing. No EOS projects were selected in the first round that awarded less than a third of the program's 3-gigawatt target. Those projects can reapply for the next round, which is expected by the end of this year. Focusing now on the middle of this slide, you see why the capabilities on the previous page are so important. The biggest driver of storage economics isn't round-trip efficiency. It's how many cycles a day can you run to generate revenue. Adding just half a cycle per day reduces lifetime storage costs by approximately 10 times more than a five-point round-trip efficiency improvement. On top of that, the intrinsically lower operating cost of an EOS density system further increases project returns. Policy at the state and federal level is making long duration a critical requirement with a growing number of states setting procurement targets with defined duration mandates. California is soliciting up to 2 gigawatts of 12-hour and multi-day storage. while Massachusetts has launched a 5,000-megawatt energy storage program for projects with durations of four hours or longer, including dedicated longer-duration storage tranches. And in PJM, Virginia passed one of the largest storage mandates in the country this spring, calling for approximately 21 gigawatts by 2045. The market is requiring American-made long-duration energy storage. We must turn more of our pipeline into backlog, and that's where Michelle and the team are focused. With that, I'd like to turn it over to John to walk through operations, including our progress at consolidating into Thornhill.

Thanks, Joe. The team delivered a strong quarter, and everything we did operationally in Q3 moved us closer to profitability. We increased output, reduced unit costs, and improved productivity across both Turtle Creek and Thornhill. That execution continues to strengthen our manufacturing platform and positions us well to add future capacity. A couple of key highlights. Shipments were up 23% from the second quarter, battery production was up 25%, and subassembly was up 26%. Now, line two contributes a big part to that. Q3 was our first quarter with both lines running commercially. Line two went from about 1% of our battery output in Q2 to 17% in Q3, and it did that on a partial shift schedule. Line one increased 6% as well. That's productivity coming from the same asset base. Now here's a number I really like. On average, Thornhill is producing about 20% more batteries per shift than Turtle Creek. That comes from faster cycle times and less equipment downtime, and it's structural. It is the facility layout and the equipment enhancements designed into Line 2. Same shift, more batteries, more efficiency. Yield tells a similar story. Line 2 reached the same first pass yield as Line 1 in just three months. At Turtle Creek, it took 13 months for the bipolar line and 26 months for the battery line to reach that level. There are further opportunities to improve, and the accelerated ramp to those levels highlight the benefits of the improvements we've made and provides a blueprint for scaling future lines more efficiently. This is where the economics show up. Higher output and better yields drive lower costs, and we saw improvement across every major cost line in the quarter. On materials, cost per cube came down 9% from Q2. That's several supply chain initiatives taking hold, and those savings are structural, not one time. On labor, direct labor cost per cube declined 17%. That's our teams getting more productive at both sites with additional volume. and on overhead. We reduced manufacturing overhead per cube by 8% through higher facility utilization and better fixed cost absorption. That's the operating leverage built into our manufacturing model. The more we build, the less each cube costs us. Now, the next big lever is consolidation. That move is already underway and on an accelerated timeline. We began disassembly early in the quarter and equipment is moving now. Running one site instead of two means lower overhead, lower conversion costs, and simpler operations. Our manufacturing process is simple, but precision matters. While we don't need clean rooms, Stonehill's infrastructure provides much tighter control over air pressure, humidity, and temperature, all critical to process control. That means more consistent output, better yields, and all of that contributes to our profitability roadmap. We are using the relocation to incorporate Line 2 enhancements into Line 1. Regarding timeline, the first bipolar lines from Turtle Creek are targeted to begin production in the fourth quarter. On the battery line, we're completing the upgrades we're seeing from Line 2 performance and targeting a full line returning to production near the end of the first quarter. Until then, Line 2 will carry production. In mid-October, we transitioned four shifts of Turtle Creek personnel to Thornhill and began 24-hour operations. We feel really good about the progress we've made. We expect another step up in shipments in Q4, remain on track to deliver the revenue outlook, and remain focused on delivering profitable growth. With that, I'll turn it over to Alessandro.

Thanks, John, and great to be back with you all this morning. Three key points from Q3. Revenue hit the record, margin posted its biggest improvement of the year, and we observed that sequential growth with less operating cash flow usage. Revenue closed at $82.7 million. That's up 171% year-over-year and 20% sequentially. Volume drove it. Cube shipment rose 23% sequentially. Pricing was lower this quarter, and that was a project mix, not a market trend. As mix normalizes, we expect average selling prices to return to the first half of 2026 level in Q4. We delivered to 10 projects across a diverse set of end markets and use cases. Related party revenue represented 83% of the quarterly volume. That includes two projects that were originated by independent third party developers and subsequently acquired by FPUSA. This number moves with delivery shadow and project size and we expect this percentage to more closely align with a backlog mix over time, declining already in Q4. Importantly, we're beginning to see that revenue growth is translating into better operating performance. Gross loss was $44.2 million, with margin improving 58 points year-over-year and 18 points sequentially. On an adjusted basis, gross loss was $36.8 million, with 18 points of improvement in margin percentage. This marks eight consecutive quarters of gross margin improvement, and we expect that trend to continue. Below the gross profit line, we continue to demonstrate cost management discipline. Sequentially, operating expenses were flat with SG&A and R&D overall at $34.7 million, of which about 20% is non-cash. So overall, revenue up 20%, 18 points improvement in adjusted gross margin, and OPEX flat. That's the EOS operating model working. Now, turning to the bottom line, net income was $125 million. That's driven by non-cash fair value adjustments related to a capital structure. These market-to-market revaluation of warrants and debt are driven by changes in our stock price, not operating performance. The line we track here is adjusted EBITDA, which was negative $63.8 million, with margin improving to negative 77%. That's 27 points of improvement sequentially and a 96 points improvement year over year. Two drivers there. Volume growth contributed approximately 16 points and 12 net of price. This shows how our business model can quickly create strong operating leverage as volume expands to the plant. Over the past several quarters, we have invested ahead of expected growth by building the team and capabilities required to support a significantly larger revenue base. As revenue continues to grow, We expect a greater portion of each incremental dollar of gross profit to flow through the adjusted EBITDA and cash flow. We also expect SG&A to become a smaller percentage of revenue over time, creating meaningful operating leverage throughout the organization. Second, operational improvements contributed another 15 percentage points, including 12 points from product cost reduction and three points related to project execution. As John discussed earlier, cube costs improved again this quarter, and we expect that progress to continue in the coming quarters. The project execution benefit reflected the timing and mix of activity during the quarter, including our continued work to transition installed systems to down OS and simplify operations for our customer, as Joe already discussed earlier. We expect to see those benefits flow not only through profitability, but also through cash flow and liquidity. Now, turning to liquidity, we ended up the quarter with $344 million of total cash, including $271 million of unrestricted cash. That's down $20 million sequentially. We used $106 million of net cash offset in part by $87 million of DOE reimbursement received during the quarter. There are two key points here. First, we supported a meaningful increase in production and shipment without increasing quarterly operating cash consumption. Operating cash flow tracked closely with an adjusted EBITDA loss again this quarter. Working capital was essentially flat, supported by customer deposit and project milestone payments. And we collected another $11 million of cash by monetizing our remaining 2025 production tax credits. Given the pace of our revenue growth, maintaining neutral working capital reflects disciplined execution and effective cash management across the business. We are nearing completion of the major investment associated with Line 2 and the Thornhill facility. As those projects are completed, we expect CapEx to begin moderating. The way to think about cash is that a lot of the heavy lifting on Line 2 and the Thornhill facility build-out is already behind us, and we still have meaningful sources of liquidity available to us. $20 million under the DOE Tranche 2, approximately $24 million of Pennsylvania grant reimbursement, and roughly $39 million of net production tax credits. Those resources provide additional liquidity as we complete Line 2. Quarterly cash flow will continue to be influenced by production volumes, working capital, and customer payment timing. But as Line 2 ramps, margins improve, and capital spending moderates, we expect a stronger cash flow profile over time. Now, turning to our margin improvements. Since Q1, we have made steady progress. Adjusted gross margin improved 25 points and adjusted EBITDA improving by 42 points. We expect that momentum to accelerate in the fourth quarter with adjusted gross margin improving another 19 to 24 points to between negative 25 and negative 20%. The execution for the improvement is what we discussed already. A couple of key drivers support that outlook. First, we're seeing average selling prices move back toward first half of 2026 levels. That's a function of what's in backlog today. savings from bundled material purchases as volume continues to grow. Third, automation on Line 2 continues to reduce labor costs per cube. Fourth, the optimized turn-heel layout improving through output and material flow. And finally, relocation of Line 1, eliminating overhead costs from Turtle Creek. That puts product margin in the range of negative 15% to negative 10% in Q4. and the profitability roadmap doesn't stop at year end. There are additional initiatives to execute in the first part of 2027 along with the volume leverage and two lines in production at Turnhill. Now on full year outlook, we are reaffirming 2026 revenue of $300 to $325 million. As John discussed, accelerating the Line 1 transition cost us some revenue in the near term, but it also sets us a leaner, more productive footprint for 2027. Currently, Line 2's performance gives us confidence in that call. We are encouraged by the progress we are seeing. Margins are improving, operating leverage is showing through, and much of the heavy lifting on Line 2 is behind us. Thanks, everyone, for joining us, and I'll turn the call back to the operators for questions.

Thank you. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question is from Christopher Salter with Truist. Christopher, your line is open.

Hey, guys. Thanks for taking my question and congrats on the progress, particularly on the margin front here. Can you, you know, I think we can kind of do the math around, you know, with that nice continued sequential improvement in 4Q for margins and kind of the OPEX, you know, like implied EBITDA and a 50 to 60 million loss for 4Q. Can you talk through any kind of cash deviation from those levels that we should think into 4Q and 1Q as we're continuing to ramp and then shifting the production over to Thornhill and starting to ramp that one up? Just anything from a CapEx perspective. or Working Capital Perspective that we should be watching over the next like two quarters. Thanks.

Hey Chris, it's Alessandro here and good morning. Thanks for the question. So a couple of points here. First of all, I'm really pleased with the progress that we've done on margin, as you said. Great third quarter, we see the continuation of margin expansion in the fourth quarter. When it comes to cash, it's pretty much the same story, right? We are pleased with the fact that our cash performance Today I've been tracking on the operating side the EBITDA so we have basically no absorption in the working capital and we see for the future this trend to continue, right? If you think about our cash profile, it will go align with the EBITDA improvement and it will improve over time with the EBITDA until we get profitable. We feel pretty comfortable around the position in cash that we have on our balance sheet. And you heard that we also have a few other sources of cash between grants and the DOE reimbursement. So we feel good about it until we get profitable.

And I would think, Chris, I would just add, on the CapEx side, I think John and the team are running to a predetermined plan of how we get there. So the only thing that would change any CapEx profile in the short term is going to be the timing of those near-term projects coming in and how that relates to how we lay out the volume for 2027 as we're working through here over the next five or six weeks.

Got it. Okay. That's super helpful. And then maybe just on the Frontier Power USA team now kind of getting assembled, can you talk through we're starting to see Some of the stuff that's been in the backlog flow through there, obviously, but like, you know, where are they in starting to kind of set up their, you know, development process, you know, kind of parallel to your pipeline or within your pipeline? Can you just speak to their process in starting to kind of get out into the market and look for opportunities that, you know, maybe incremental or, you know, closing within kind of a pipeline would be great.

Chris, Jay Bellows has been announced as the CEO of Frontier Power USA, which I think is a great addition to the team, not only from the standpoint of he brings his own contact list of customers that he can go out and has started to build pipeline and opportunities that we're working on closing, but at the same time, he's got decades of experience operating systems. things we're talking about around software and Don OS and having somebody that's been a real time asset operator is helping us improve ourselves. But like from the pipeline itself, you know, we've got projects that we've put in the pipeline from our opportunity set that they're looking at. They've got their own pipeline. It's a nice list of opportunities and at the same time working through and securing the debt financing. And that's been progressing really well as far as as as packaging up the aerial green insurance and going out and looking both at specific project financing and also broader portfolio of financing to be able to pursue projects. But, you know, we'll keep everyone updated as it progresses. But I really like the team that Jay's assembling underneath them. I think it's going to make us stronger in the market and stronger as EOS.

Thank you, Christopher. Our next question comes from the line of Steven Gengaro with Stifel. Steven, your line is open.

Thank you. Good morning, everybody. A couple for me, and just maybe back to the cash burn and balance sheet question. When you think about the guidance you've laid out for, I think, 10% cash gross margins in the second quarter of next year, if you get there, can you just talk about what would a cash burn, a quarterly cash burn look I know it's not the easiest question to answer, but it's clearly on top of investors' minds. I'm just kind of curious your views on that and your views on current liquidity and sort of the runway you currently have before more capital might be needed.

Yeah, so Stephen, I'll start off and then Alessandro can talk the second half of your question. The first thing I would say is I think Alessandro coming in here for the last couple of months, you've seen two quarters in a row of where operating cash is tracking to the operating results that we have in the company. Actually, the growth rate we saw last quarter along with the cash burns being slower than that growth, I think that's the impact of him as our CFO and the experience that he brings to the job. And I would expect that model to continue. And then I think as we get into laying out 2027, John has his CapEx plan. We've built all those things together to have the runway to get there. But Alessandro can talk more details. But what I would say on operating cash, you've seen the impact of having an operating CFO, and I expect that to continue.

Thanks, Joe. And Steve, just to compliment you, when you think about our cash users today, there is an operating part that tracks with EBITDA, as Joe said. and we expect that to actually improve quarter over quarter in the next few quarters until we get profitable. From a Catholic standpoint, we start to see in the fourth quarter the Catholic spend moderating down versus the earlier part of the year and then in the coming quarters we will have like even a lower run rate from the plant. Overall, we feel comfortable with the cash that we have in our balance sheet and, again, the other sources of cash that we can tap in until we're going to get profitable. And in regards of what the guide for next year, obviously, we're going to use next quarter call in order to provide more clarity around those numbers.

Can you give us a sense of what a quarterly half X number would look like next year?

Steven, let us come back on 4Q and lay that out. Again, as I said to Chris's question, some of that quarterly, I don't want us to get ahead of ourselves on a number as we go through. We've got near-term deals here that we'll know a lot more on here in the next four to five weeks that are going to determine what that looks like. But I don't want to say anything and then have to come back and change that from there and wind up coming off a number on what we see today.

Okay, thanks. And then just one thought. When you think about the current assets that are deployed and you think about your gross margin profitability, are there any costs that you're incurring related to assets in the field that need work from a warranty perspective or anything of that nature that has kind of weighed down the gross margin?

No, so not warranties, Stephen. I think like the page when I walk through the Dawn OS upgrades, there's costs associated with doing those upgrades that'll come in over time, like we talked about. And when you look at, and Alessandro mentioned this in his comments, you know, there's product margin, which is approaching break-even. There's projects that there is a spend that's occurring that is the upgrade of of the two Don OS that is going to be occurring over the next two to three quarters as we implement those systems out in the field.

Thank you, Steven. Our next question is with Sean Milligan from NIDA MNCO. Sean, your line is open.

Hey, good morning, Jo. Thanks for taking the questions. I guess around NYSERDA, You know, not being included in that first bulk storage solicitation. I was just curious if you had any feedback there. And then kind of can you revisit the timing of the second solicitation and maybe, you know, project sizes that you might have in play in NYSERDA?

Yeah, not ready to talk specific projects with NYSERDA. We're working through with the customers that submitted before and other opportunities. Look, from a selection, you know, they're the customer. They picked on where they wanted to start. it's less than a third of the of the announced amounts we feel like the projects that we submitted last time were good projects that met the overall goals of the of the of the program from what we understand the next round is going to happen by year end but obviously that's subject to timing when you look at how the timing fell on round one there was a lot of work that i sort of did to get to the projects that they selected and we'll just continue to work with them as we move forward

Okay, and then you mentioned the state level mandate.

The other thing I would just add is like, you know, we talk about NYSERDA because, you know, we submitted and it was public information, but there's other states with programs that are larger than what NYSERDA has that are progressing with multiple customers that are in that number that we talked about of the late stage opportunities. And we feel really good about where others, how other states, how multiple states are looking at long duration storage and the role it plays Thank you for joining us. every one of them right they all they all are adding in a duration mix of wanting to have you know the the 12 hour to 24 hour and then beyond multiple you know beyond multiple days which which would not be for our technology would be for other technologies but everybody's looking at and understanding that to get the market to shift you got to have the incentives and and not just incentives from a price standpoint but incentives from from being able to derive revenue from the assets and that's what a lot of these programs are building into this so that there's a return on the investment to the owner. We feel really good about working with the states as they start shaping the policy and explaining to them that there is a battery that can perform and a system that can perform to those duties and it's made in America with 90 plus percent raw materials coming from the U.S. and we feel like we meet those requirements. Now, there's nothing in there that says specific EOS or specific zinc bromine, but when you have a program that targets a discharge time and how they want the system to operate, we feel like our technology meets up with that. We just got to work through the process that each state and each customer has to get to an order.

Thank you, Sean. Our final question comes from the line of Julian Dumoulin-Smith with Jefferies. Julian, your line is open.

Hey, guys. It's Carter on for Julian. Thank you for taking our questions. You provide a lot of color here, but wanted to try to unpack the margin progression a little bit more. You saw some nice progression here in third quarter and expected to get in fourth quarter. I guess I'm thinking about 27 a little bit. It sounds like you need some clarity on where some of the deals in the pipeline land to get the exact cadence there. But if I think back to your 72 points laid out in the last call, I'm wondering, across the four major buckets you laid out of that 72 points, if anything has materially changed or the margin progression is really just contingent upon where some of these large deals land into the first half of next year.

So thanks for the question. So the so far are very encouraging. Again, third quarter was very strong. If you look at the fourth quarter combined with the third quarter, we are well over the 50% of to get to the 72 points. So we feel very good about it. And when you think about, when you double click on the margin expansion, John talked about it before, the progress that they've done on tubes cost, right? So material went down in the third quarter. We expect the same trend coming in the fourth quarter. And then obviously you have the conversion cost there with the increased volume that we're going to have in Thornhill. We expect that conversion cost to go down significantly because of the better layout of the plant, the better efficiency, the better information that we have versus start to creek. So these are going to be the key buckets and obviously we're going to, Joe talked about it before as we finished to upgrade the control in the field. We're also going to see the field costs coming down. So it's pretty much the same buckets that we talked about in the last call, and we see the same trend in the third quarter coming in the fourth quarter in 2027.

Yeah, and Carter, the only thing I would add to Alessandro's comments to just kind of clarity around your question, like, It's not we need volume to get the cost out. There's structural cost out that we're getting. And I think John's comments, and I want to make sure we double click on a portion of this, is just the building infrastructure that we have in Thornhill allows the equipment to run better. And we're seeing a 10% improvement on cycle time of producing a battery module. And a lot of that just has to do with the stability of the operating environment that we have. That takes cost out in and of itself. And downtime and a bunch of other things, right? I think volume on top of that, volume is a big lever for us and we are going to work through on where that comes out and how that structurally changes the cost profile of the project. But what I would say again, what Alessandro and John have built is a good old fashioned cost out pipeline that they're executing on with Francis on engineering to just simplify the product, remove parts from the system, make the system more robust and take cost out. The one other thing kind of echoing Stephen's question before and what Alessandro talked about, you know, I know Stephen asked about warranty costs. I think the one clarifying thing I would give here is like our warranty reserve goes up with volume doesn't mean there's warranty costs underneath it. Just as volume goes up, you reserve for the event of the warranty. But if you look at the usage of that reserve, it hasn't changed over time.

Right. Thank you for the call there. That's definitely helpful. Just the last one for me. If you could provide some more color on just the Emanate Google announcement in West Virginia. Seems like an exciting transaction for you guys. Curious how you would characterize just general interest from Google or other hyperscalers. Could we see similar kinds of transactions going forward here?

Yeah, Carter, you know, the Google M&A, you know, this is something we worked on for a while to get through, you know, the tech validations of multiple parties, both M&A and Google. We feel, you know, that having long duration is going to help the project and help the returns to Google. I think as we talk to more and more people, and I think this comment I made when I talked about, like, The impact of these dynamic loads and we like to talk about AI, but if I take an AI load and I put that up against the load that comes from a steel mill, the load that comes from any industrial factory and the spikes and peaks and valleys that it derives, they kind of all look the same. So you need something that's going to be able to buffer those loads against the traditional the traditional power generation equipment. I think that's where we come in. And I think what's important and this is where this is where the pipeline gets excited. And I know we've been talking about this and the proof is going to be with orders closing. I think out of that three point five gigawatt of near term opportunities, we're going to see we're going to see orders closing that meet this use case. But we go in to people and we talk about the fact that we can handle those short term spikes and give you long duration discharge with the same asset and the same technology and people like that. The part that we need to do is get the reliability where it needs to be out in the field and operate day by day by day and get to like five nines capability on the reliability of the product. And that's another big piece of what John and Francis and Alessandro are doing that drives not only performance to the customer, but cost out and profitability for EOS.

Thank you, Carter. This concludes the question and answer session. I'd now like to turn it back to Joe for any closing remarks.

Thanks, and thanks everyone for listening. I'm really proud of the work that John and his team and Francis have been doing to really get the throughput, get Thornhill up and running. The moving of the lines out of Thornhill, it's a somewhat emotional moment where I went to Turtle Creek about a week ago and where we had started Z3 production with a semi-automated line is now nothing is there because that equipment is now up in Thornhill installed and being commissioned to start operating here. So the speed at which they're working and the efficiency of which they're doing this is impressive and I really look forward to just one roof in a state-of-the-art building to start producing because what we see out of the Thornhill line, it's not that the line is better, it's just that line is operating in an environment that is conducive to better performance. And having Alessandro here as an operating CFO, you're seeing the results in how our cash is tracking the probability. And I think that's going to continue and improve over time. And with Michelle being in her job here for the past couple of months and bringing a lot of what you're seeing on those state mandates tied to the work that she was doing before, I feel really good about what her and the team are doing to position us to win deals. And we just got to put our nose to the grindstone and close and grow that backlog to show and continue to show that the technology is what the market needs for the future. So we'll keep everyone updated on that and look forward to the 4Q call where we'll also lay out guidance for 2027 and how everything lands here as we get through year end.

Thank you, Joe. We appreciate you participating in today's conference call with EOS. This concludes our presentation. You may now disconnect. Thank you.