Eos Energy Enterprises Inc.

05/13/2026 | Press release | Distributed by Public on 05/13/2026 04:44

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying Unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2026 and 2025 and the Company's Annual Report on Form 10-K for the year ended December 31, 2025, including the financial statements and notes thereto.
Overview
The Company offers an innovative Znyth™ technology battery energy storage system ("BESS") designed to provide the operating flexibility to manage increased grid complexity and price volatility resulting from an overall increase in renewable energy generation and a congested grid coming from an increase in electricity demand growth. The Company's BESS is a validated chemistry with accessible non-precious earth components in a durable design that is intended to deliver results in even the most extreme temperatures and conditions. The system is designed to be safe, flexible, scalable, sustainable and manufactured in the United States, using raw materials primarily sourced in the United States. We believe the Company's Z3 battery module is the core of its innovative systems. The Z3 battery module is the only US designed and manufactured battery module that today provide utilities, independent power producers, renewables developers and C&I customers with an alternative to lithium-ion and lead-acid monopolar batteries for critical 3- to 12-hour discharge duration applications. We believe the Z3 battery will transform how utility, industrial and commercial customers store power.
In addition to its BESS, the Company currently offers: (a) a BMS which provides a remote asset monitoring capability and service to track the performance and health of the Company's BESS and to proactively identify future system performance issues through predictive analytics; (b) project management services to ensure the process of implementing the Company's BESS are coordinated in conjunction with the customer's overall project plans; (c) commissioning services that ensure the customer's installation of the BESS meets the performance expected by the customer; and (d) long-term maintenance plans to maintain optimal operating performance of the Company's systems.
The Company's growth strategy contemplates increasing sales of battery energy storage systems and related software and services through a direct sales team and sales channel partners. The Company's current and target customers include utilities, project developers, independent power producers and C&I companies.
Strategy
The Company continues to invest in the design, development and production of its next-generation product, the Eos Z3 battery. The Z3 builds upon the same underlying electrochemistry the Company has utilized for nearly a decade. The Eos Z3 is engineered to reduce cost and weight while improving manufacturability and overall system performance. Compared to the Company's prior Gen 2.3 product, the Z3 incorporates a more cost-effective design, including a simplified tub structure, approximately 50% fewer cells and approximately 98% fewer welds per battery module. The Company believes the Eos Z3 will provide customers with approximately twice the energy density per square foot while maintaining the safety and reliability characteristics of the previous generation.
The Company has successfully transitioned to the Eos Z3 platform, enabled by the commissioning and commercial operation of its first fully automated battery manufacturing line. The Z3 leverages the same proven underlying chemistry, which has demonstrated durability over more than 3 million cycles, while incorporating a redesigned mechanical architecture that enhances performance, reduces costs and improves manufacturability. Z3 battery modules have been shipped since the third quarter of 2023, and the transition reflects over fifteen years of accumulated insights and operational experience. The Company believes this experience will continue to drive manufacturing efficiencies as production scales and its state-of-the-art operations expand.
In 2025, the Company introduced DawnOS, a software platform designed to enhance the value, reliability and safety of the Company's BESS. DawnOS builds upon the Z3 battery architecture through a fully integrated hardware and software solution. It serves as the system's intelligence layer and is designed to manage large numbers of battery modules in real time. The platform provides precise balancing, dynamic switching and continuous system operation, including in situations where individual modules within a string become imbalanced. DawnOS is intended to increase usable energy per cycle, reduce field service requirements and operate with embedded security and automation features. Through its advanced control capabilities, the Company expects DawnOS to be an integral component of its product portfolio going forward, reflecting its role in improving system resilience, efficiency and overall operational performance.
In 2026, the Company introduced Eos Indensity, an energy storage architecture that uses a spatial intelligence design framework to provide high density storage with flexibility and safety in constrained as well as traditional sites. The system targets up to 1 GWh per acre, roughly four times most incumbent footprints, through stackable Indensity Core units that integrate Eos Z3 battery modules with the Eos DawnOS controls platform. The modular self contained form factor enables efficient transport, simplified installation and long term serviceability. Eos Indensity can be deployed indoors or outdoors, including inside existing buildings. It addresses long duration, response driven use cases across data centers, military bases, manufacturing facilities and critical infrastructure, supported by a domestic FEOC compliant supply chain. The Company expects Indensity to be an integral component of its product portfolio going forward.
The Company believes that the simplicity, flexibility and safety characteristics of its products represent important attributes valued by the market. In addition, the Company benefits from legislative incentives, including the Inflation Reduction Act and the One Big Beautiful Bill Act ("OBBBA"), which provide production tax credits ("PTC") for domestically manufactured battery components, as well as tax credits available to customers for projects that satisfy domestic content requirements. The Company also intends to continue working with a consortium of community organizations, universities and supply chain partners to pursue available funding opportunities under the Bipartisan Infrastructure Law of 2021.
Company Highlights
•In January 2026, the Company introduced Eos Indensity, an energy storage architecture that uses a spatial intelligence design framework to provide high density storage with flexibility and safety in constrained as well as traditional sites. The system targets up to 1 GWh per acre, roughly four times most incumbent footprints, through stackable Indensity Core units that integrate Eos Z3 battery modules with the Eos DawnOS controls platform. The modular self contained form factor enables efficient transport, simplified installation and long term serviceability. Eos Indensity can be deployed indoors or outdoors, including inside existing buildings. It addresses long duration, response driven use cases across data centers, military bases, manufacturing facilities and critical infrastructure, supported by a domestic FEOC compliant supply chain.
•In March 2026, the Company announced the appointment of Nathaniel Fick to its Board of Directors as an independent Common Class III director.
•In April 2026, the Company announced a joint development agreement with TURBINE-X Energy, Inc. to develop and deploy private power infrastructure for AI, a new model designed to deliver firm, dispatchable energy for hyperscale data centers and other mission-critical loads on accelerated timelines.
Results of Operations
Revenue
Three Months Ended March 31,
($ in thousands)
2026
2025
$ Change % Change
Revenue $ 56,963 $ 10,457 $ 46,506 445 %
The Company generates revenues from the delivery of its BESS and service-related solutions. The Company expects revenues to increase as it scales production to meet customer demand.
For the three months ended March 31, 2026, Revenue increased by $46.5 million or 445% from $10.5 million. The increase was primarily drive by an increase in deliveries, an increase in the average selling price and higher revenue from third-party materials. These increases were partially offset by a decline in service revenue.
Cost of goods sold
Three Months Ended March 31,
($ in thousands)
2026
2025
$ Change % Change
Cost of goods sold $ 101,390 $ 34,996 $ 66,394 190 %
Cost of goods sold primarily consists of direct costs relating to labor, material and overhead directly tied to product assembly, procurement and construction ("EPC"), project delivery, commissioning and start-up test procedures. Indirect costs included in cost of goods sold are manufacturing overhead such as equipment maintenance, environmental health and safety, quality and production control procurement, transportation, logistics, depreciation and facility-related costs. As a nascent technology with a new manufacturing process that is early in its product lifecycle, the Company still faces significant costs associated with production start-up, commissioning of various components, modules and subsystems and other related costs. For the three
months ended March 31, 2026 and 2025, the Company recognized $10.3 million and $1.8 million, respectively, reduction of cost of goods sold related to the IRA PTC. The Company expects its cost of goods sold to exceed revenues in the near term as it continues to scale production and prepares battery energy storage systems delivered to customers to go-live.
Cost of goods sold increased by $66.4 million or 190% from $35.0 million. The increase in Cost of goods sold was driven by significantly higher cube deliveries, higher direct and indirect labor, higher field service costs associated with increased deliveries and higher volume-driven warranty accruals.
Research and development expenses
Three Months Ended March 31,
($ in thousands)
2026
2025
$ Change % Change
R&D expenses $ 10,719 $ 6,837 $ 3,882 57 %
Research and development expenses consist primarily of salaries and other personnel-related costs, materials, third-party services, depreciation and amortization of intangible assets.
Research and development expenses increased $3.9 million or 57% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase was primarily attributable to higher facility, materials and supplies, outside services and payroll-related costs partially offset by lower stock-based compensation costs.
Selling, general and administrative expenses
Three Months Ended March 31,
($ in thousands)
2026
2025
$ Change % Change
SG&A expenses $ 24,095 $ 20,995 $ 3,100 15 %
Selling, general and administrative expenses primarily consist of payroll and personnel-related, outside professional services, facilities, depreciation, travel, marketing and public company costs.
Selling, general and administrative expenses increased $3.1 million or 15% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily attributable to higher facility, marketing, insurance and payroll-related costs, partially offset by lower legal fees and stock-based compensation costs.
Loss from write-down of property, plant and equipment
Three Months Ended March 31,
($ in thousands)
2026
2025
Loss from write-down of property, plant and equipment $ 71 $ 561
The Company incurred a loss of $0.1 million and $0.6 million from write-down of property, plant and equipment for the three months ended March 31, 2026 and 2025, respectively. The write-downs were mainly due to design changes from the Z3-Phase 1 to Z3-Phase 2 production in which the Phase 1 production assets could not be utilized or repurposed for Phase 2 production. Additionally, the loss from write-down of property, plant and equipment contains costs for disposal of miscellaneous equipment and tooling that cannot be repurposed for more automated processes.
Interest expense
Three Months Ended March 31,
($ in thousands) 2026 2025
Interest expense $ (12,242) $ (978)
Interest expense includes expenses for contractual interest, amortization of debt issuance costs and debt discounts, partially offset by capitalized interest costs on CIP assets and interest income.
Interest expense increased $11.3 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to an increased principal balance under the DOE Loan Facility and interest associated with the May 2025 Convertible Notes and November 2025 Convertible Notes, which were not outstanding as of March 31, 2025.
Interest expense - related party
Three Months Ended March 31,
($ in thousands) 2026 2025
2021 Convertible Note Payable interest and amortization
$ - $ (3,942)
AFG Convertible Note interest and amortization
- (1,839)
Interest expense, related party
$ - $ (5,781)
Interest expense - related party decreased $5.8 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, due to the fact that the 2021 Convertible Note Payable and the AFG Convertible Note were no longer outstanding during the three months ended March 31, 2026. See Note 11, Borrowings to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further discussion.
Change in fair value of debt - related party
Three Months Ended March 31,
($ in thousands) 2026 2025
Change in fair value of debt - related party $ (4,232) $ (5,933)
The Change in fair value of debt - related party is related to the DDTL. The Change in fair value of debt - related party of $4.2 million and $5.9 million for the three months ended March 31, 2026 and March 31, 2025, respectively, primarily reflects the accretion of the DDTL resulting from the passage of time.
Change in fair value of warrants
For the three months ended March 31, 2026 and 2025, the change in fair value of warrants was composed of the items below:
Three Months Ended March 31,
($ in thousands) 2026 2025
IPO warrants $ - $ 138
April 2023 warrants
95,200 16,239
May 2023 warrants
21,864 3,725
December 2023 warrants
51,661 25,823
Change in fair value of warrants
$ 168,725 $ 45,925
The change for the three months ended March 31, 2026 and March 31, 2025 is largely driven by the Company's common stock price decrease quarter over quarter.
Change in fair value of derivatives
Three Months Ended March 31,
($ in thousands) 2026 2025
Change in fair value of derivatives $ 165,935 $ -
For the three months ended March 31, 2026, the Change in fair value of derivatives of $165.9 million related to the change in fair value of the embedded derivative associated with the November 2025 Convertible Notes. The change is largely driven by the Company's common stock price decrease quarter over quarter. The November 2025 Convertible Notes were not outstanding for the comparable period for the three months ended March 31, 2025.
Change in fair value of derivatives - related parties
Three Months Ended March 31,
($ in thousands)
2026
2025
Change in fair value of embedded derivatives - related parties
$ - $ 16,934
Change in fair value of warrants - related parties
267,230 17,652
Change in fair value of derivatives - related parties
$ 267,230 $ 34,586
The Change in the fair value of derivatives - related parties, was due to the 2021 Convertible Note Payable and AFG Convertible Notes (See Note 11, Borrowings) and the Change in fair value of warrants - related parties was due to changes in fair value of our SPA Warrant and Contingent warrants (See Note 12, Warrants Liability). The change is largely driven by the Company's common stock price decrease quarter over quarter. The 2021 Convertible Note Payable and AFG Convertible Notes were not outstanding for the comparable period for the three months ended March 31, 2026.
Other expense
Three Months Ended March 31,
($ in thousands)
2026
2025
Other expense
$ (3) $ (560)
For the three months ended March 31, 2025, Other expense of $0.6 million, was primarily due to the recognition of financing issuance costs from the Credit and Securities Purchase Transaction.
Income tax expense (benefit)
Three Months Ended March 31,
($ in thousands)
2026
2025
Income tax expense (benefit)
$ 5 $ 5
The Company incurred income tax expense for the three months ended March 31, 2026 and 2025, attributable to taxable earnings from the Company's foreign operations which were insignificant for the periods presented.
Liquidity and Capital Resources
During the three months ended March 31, 2026, the Company incurred Net income of $508.9 million. Adjustments to reconcile the net income to cash used in operations are primarily from non-cash items on the Unaudited Condensed Consolidated Statements of Cash Flows. The non-cash items totaled $577.0 million. The Company incurred negative cash flows from operations of $119.7 million and had an accumulated deficit of $2,026.9 million as of March 31, 2026.
As of March 31, 2026, the Company had $410.7 million of unrestricted cash and cash equivalents available to fund the Company's operations, and working capital of $464.7 million on the Unaudited Condensed Consolidated Balance Sheets. Additionally, the Company had $61.7 million of restricted cash, refer to Note 4, Cash, Cash Equivalents and Restricted Cash for further discussion.
Financing Arrangements
The Company has historically relied on outside capital to fund its cost structure and expects this reliance to continue for the foreseeable future until the Company reaches profitability through its planned revenue generating activities. During the three months ended March 31, 2026, the Company did not have any significant capital transactions.
Through March 31, 2026, under the DOE Loan Facility, the Company drew down $90.9 million for the eligible project costs that the Company had incurred through June 4, 2025. These costs represent Tranche 1 of the DOE Loan Facility for eligible costs in connection with the design, construction, installation, startup and shakedown of a battery automation line and related tools. The Company has approximately $186.6 million of availability under the DOE Loan Facility. In the event the Company does not achieve certain funding conditions and the DOE chooses not to continue funding, the Company may need to seek alternative sources of capital, which may not be available on favorable terms or at all.
Capital Expenditures
The Company expects capital expenditures and working capital requirements to increase as it seeks to execute its growth strategy. Total capital expenditures for the three months ended March 31, 2026 and March 31, 2025 were $35.1 million and $4.9 million, respectively. See Note 6, Property, Plant and Equipment and Note 7, Intangible Assets for further discussion.
Discussion and Analysis of Cash Flows
The Company relies heavily on private placement of convertible notes, term loans, equipment financing and issuance of common stock and warrants. Our short-term working capital needs are primarily related to funding of debt interest payments, product manufacturing, research and development and general corporate expenses. The Company's long-term working capital needs are primarily related to repayment of long-term debt obligations and capital expenses for capacity expansion and maintenance, equipment upgrades and repair of equipment.
The following table summarizes the Company's cash flows from operating, investing and financing activities for the periods presented.
Three Months Ended March 31,
($ in thousands) 2026 2025 $ Change % Change
Net cash used in operating activities $ (119,735) $ (28,924) $ (90,811) 314 %
Net cash used in investing activities $ (35,138) $ (4,918) $ (30,220) 614 %
Net cash provided by financing activities $ 2,673 $ 42,162 $ (39,489) (94) %
Cash flows from operating activities:
Cash flows used in operating activities primarily comprise of costs related to research and development, manufacturing of products, project commissioning and other general and administrative activities.
Net cash used in operating activities was $119.7 million for the three months ended March 31, 2026, adjusted for non-cash items of $577.0 million, primarily related to changes in fair value of warrants and derivatives, with offsets of stock compensation expense, depreciation and amortization, non-cash interest expense, and change in fair value of debt - related party. The net cash outflows from changes in operating assets and liabilities was $51.6 million, primarily driven by an increase in grant receivable of $10.3 million due to increased volumes of production, increase in contract assets of $25.5 million and decrease in contract liabilities of $8.5 million driven by revenue recognition and production, decrease in accounts payable of $14.8 million from payments made during the period, partially offset by an increase of accrued expenses of $7.2 million which was attributable to timing of payroll and various accruals at period end.
Net cash used in operating activities of $28.9 million for the three months ended March 31, 2025, adjusted for non-cash items of $60.9 million, primarily related to changes in fair value of warrants and derivatives and partially offset by stock compensation expense relating to expanded headcount in engineering, sales, manufacturing engineering and R&D. Additionally, offsets included depreciation and amortization, non-cash interest expense and the change in fair value of debt. The net cash inflows from changes in operating assets and liabilities was $16.8 million, primarily driven by an increase in contract liabilities of $17.1 million due to customer cash receipts and increase in accounts payable of $8.1 million, partially offset by an increase in inventory of $6.1 million for future production and increased 2025 volumes, increase in accounts receivable of $4.1 million due to customer invoicing and increase in grant receivable of $1.8 million.
Cash flows from investing activities:
Net cash flows used in investing activities for the three months ended March 31, 2026 were primarily composed of payments made for purchases of property, plant and equipment of $35.1 million and minor investments in internally developed software. The increase in cash flows used in investing activities are primarily to support the growth of manufacturing facilities at our Warrendale location.
Net cash flows used in investing activities for the three months ended March 31, 2025 were primarily composed of payments made for purchases of property, plant and equipment of $4.9 million.
Cash flows from financing activities:
Net cash provided by financing activities was $2.7 million for the three months ended March 31, 2026, primarily due to the proceeds received from the exercise of warrants during the period of $3.3 million. The proceeds were partially offset by debt issuance costs of $0.5 million and payments on the equipment financing facility of $0.1 million.
Net cash provided by financing activities was $42.2 million for the three months ended March 31, 2025, primarily due to the proceeds received from the Credit and Securities Purchase Transaction of $38.5 million and from the exercise of warrants of $7.0 million. The proceeds were partially offset by payments on the equipment financing facility of $0.9 million and share repurchases from employees for tax withholding of $0.5 million.
Contractual Obligations
The Company has certain obligations and commitments to make future payments under contracts. As of March 31, 2026, this is composed of the following:
•Future lease payments, including interest, under non-cancellable operating and financing leases of $60.2 million. The leases expire at various dates prior to 2030.
•Principal and Interest payments related to the following debt obligations (see Note 11, Borrowings to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report):
Future Debt Payments
Delayed Draw Term Loan - due June 2034 (1) (2)
$ 348,386
DOE Loan Facility - due June 2034 (1) (2)
120,284
May 2025 Convertible Notes - due June 2030 65,187
November 2025 Convertible Notes - due December 2031 663,204
Total $ 1,197,061
(1) As of March 31, 2026, the Company is obligated to repay future contractual interest payments for these borrowings in-kind.
(2) The DDTL and DOE Loan Facility contain Springing Maturity dates that could make the debt due March 14, 2030.
Critical Accounting Estimates ("CAE")
The Company's Unaudited Condensed Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP). In preparing the Company's Unaudited Condensed Consolidated Financial Statements, management makes assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates. The Company's significant accounting policies are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and could have a material impact on our financial condition or results of operations.
There have been no material changes in the CAE's in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
Eos Energy Enterprises Inc. published this content on May 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 13, 2026 at 10:44 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]