Greetings and welcome to Eos Energy Enterprises Second Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jared Ehm, Investor Relations for Eos Energy. Thank you, Jared. You may begin..

Thank you. Good morning, everyone and thank you for joining us for Eos’ financial results conference call for the second quarter ending June 30, 2021. On the call today we have Eos CEO, Joe Mastrangelo and CFO, Sagar Kurada. Before we begin, allow me to provide a disclaimer regarding forward-looking statements.

This call, including the Q&A portion of the call, may include forward-looking statements related to the expected future results for our company, which are subject to certain risks, uncertainties and assumptions.

Should any of these risks materialize or should our assumptions prove to be incorrect, our actual results may differ materially from our projections or those implied by these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings.

Our remarks during today’s discussion should be considered to incorporate this information by reference. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made.

We undertake no obligation to update any forward-looking statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law. Today’s remarks will also include references to non-GAAP financial measures.

Additional information including reconciliation between non-GAAP financial information to the GAAP financial information is provided in the press release.

Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.

This conference call will be available for replay via webcast through Eos’ Investor Relations website at investors.eose.com. Joe and Sagar will walk you through the company’s highlights, financial results and business priorities before we proceed to Q&A. With that, I will now turn the call over to Joe..

Thanks, Jared and thanks everybody for joining us here this morning. We want to start off with our normal operating highlight page. The top half of the page talks about the progress that we are making commercially.

You can see our pipeline is now approaching $4 billion with 18 gigawatt hours of opportunities in the pipeline and reminding everybody as Sagar talks about this moving forward. To get into the pipeline, we need to have a use case to be able to model.

Our orders backlog is above $95 million, getting close to $100 million and getting close to 400 megawatt hours of orders and backlog. The commercial team is doing a great job of going out finding opportunities for us to win in the marketplace and adding to our backlog. And you can see year-to-date, we are approaching $80 million in orders and backlog.

So really, we are seeing a great uptick commercially and how the team is executing what we are delivering. On the bottom, this is operational highlights where we are approaching 300 megawatt hours of discharge energy either out in the field or in our test facility.

We have shipped $2 million of shipments year-to-date to Greece, Nigeria, India and California. And right now, we have $175 million of cash on hand. That includes the recent $100 million investment from Koch, which I will talk about in a moment.

But as you can see another quarter where we continue to build momentum and improve the company and deliver out in the marketplace. We go to the next page on today’s agenda just up against our six priorities for 2021. I talked about where we are versus the $300 million in booked orders.

What I would say is we are starting to see some great conversion on our Letters of Intent on our commercial model, which we will talk about later on.

$55 million of the orders we booked have come from those LOIs and at the same time as we look at the remaining amount that we need to close to hit the target for this year, we have got $455 million in core opportunities that we believe can help us fulfill the 220 orders that we have to go which is 2x the opportunity pipeline versus the orders that we need to deliver with deliveries in the second half of next year and into 2023.

On our revenue target, our backlog today and when you look at the projects, when we close these opportunities, we covered 100% of our 2021 revenue targets.

But as many in the industry have seen and as the world opens up coming out of the COVID pandemic, we are starting to see some of our delivery shift to the right and move out of the year, whether that be for permitting and grid connections and us closing our UL certification, we are looking at a revenue target that will be more around in the range of $5 million for 2021, basically because we have seen the projects go out into 2022 as far as shipments are concerned.

On UL, our full UL certification, we have achieved both the 9540A and the UL1973 systems certification we are now going through a certification of our manufacturing sites which will allow us to start shipping UL certified product here in the third quarter.

Building our capacity, we are optimizing our Gen 2.3 capacity to deliver on our current backlog.

I will talk later on in the presentation about how we are seeing the Gen 2.3 product continue that demand on the marketplace and how we are focusing our factory in Pittsburgh to deliver on that demand and then also focusing on how we spend money on CapEx to automate and increase production, how we are investing in the facility and also in our people that are leading our supply chain and working on the factory floor.

On our new product launch, we continue to learn on the Gen 2.3 and are implementing those learnings into the Gen 3 product and how we develop that, industrialize that. We are finalizing the system design and the prototypes that we have on test are performing as we discussed on our last quarterly call.

And then lastly on the people and culture, which is last on the list, but first, in our importance of our success.

I am going to talk at the end of the presentation about how we are aligning the goals and objectives and the compensation of everyone in the company to shareholder’s success, which has been a key goal of us of the team and the board as we thought about how we want to position this company for the future.

So we will go through each one of these a little bit more detail and then talk about what we are going to deliver in the third quarter.

Just quickly two big things that happened on the next page, two big things that happened last quarter, we were – we did get an investment from Koch Strategic Platforms, which is a great validation of our company and how we want to deliver into the marketplace. This is on top of a $50 million equity investment that they made previously.

We really like partnering with the team there and like what they bring not only from an investment standpoint, but also opportunity to grow the company and leverage the entire Koch network to help us improve the company on many facets, so more to come here, but something that we are proud of being able to close here in June.

And at the same time right after that, we are very proud to host the second Earthshot of the Secretary of Energy, Jennifer Granholm at our facility in Edison, New Jersey. It was a great day for us along with Congressman Frank Pallone. To host them and walk them through and show them the great work that our team is doing.

When you look at these two things together, a strategic investment in the future and then looking at what the DOE is looking for as they think about North America, which is the largest storage market, we love how we fit into the overall vision of what they are trying to drive.

That’s low cost, high durability, the long duration storage, which is exactly what Eos delivers to the market. So with that, I will turn it over to Sagar who will walk through the financials..

Thank you, Joe. Good morning, everyone. In the next few pages, I will talk you through the second quarter financials. Let’s start here with Page 6. We delivered $600,000 in revenue from the quarter. As you know, Motor Oil was one of our first commercial orders.

This revenue accounts for the partial shipment with the second shipment recognizable here in the third quarter. Our cost of sales in the quarter, were $12.4 million.

They included $5 million of expense due to fair market value adjustments on future booked orders, $3 million in costs related to improved current manufacturing yields, $1.7 million in base cost as we bring the factory up to capacity and entitlement, $0.7 million in one-time transportation costs. Our R&D expenses were $2.2 million lower versus Q1.

As we finalized our UL testing, which were partially offset by our continued investment in new technology specifically our Z3 product. General and administrative expenses included $0.6 million in one-time transaction fees and $3 million in stock compensation expenses.

$22.5 million loss on preexisting agreement reflects fair market value of acquisition of the remaining 51% in HI-POWER partnership we described at the last quarter earnings call. We also recorded $2.2 million from the sale of New Jersey state tax credits and $0.6 million gain on fair market value of our private warrants.

The latter reflects the mark-to-market valuation, which we will continue to have on our warrants from the improved guidance recently issued by the SEC earlier this year. I would like to move on to the next page and talk you through our current cash balance. As of 6/30, on a pro forma basis, we have $175 million in cash balance.

As Joe mentioned earlier, we finalized a strategic investment from Koch Industries, resulting in $100 million of cash inflow. We also received $17 million from warrants that came due in May and were exercised by select investors.

From business operations specifically, we have expanded $43 million this quarter, which included two one-time transaction items less of the business operations. The transaction items are $15 million of one-time spend on the HI-POWER acquisition and $2 million additional in-transaction expenses.

Minus of these $17 million, our business operations were about $26 million.

The $26 million constituted of $15 million in cost of sales and working capital both for current and future manufacturing needs, $3 million in capital expenditure, $4 million in R&D related to Z3, $2 million in commercial operations, and $3 million for general, administrative expenses. Let’s move on to the next section.

We will review our progress on the commercial pipeline and booked orders for deliveries both in 2021 and beyond from a financial commitment perspective. Page 9 is a reflection of our commercial activity as of July. This is a page we are now familiar with from previous presentation. Let’s start with lead generation.

We work with our customers to materialize ideas and assess for feasibility, regulation, project plans and economics. We today have $2.9 billion or 17 gigawatt hours in review within lead generation. Our commercial pipeline is $3.9 billion or 23 gigawatt hours.

This constitutes two key segments really active proposal of $3.4 billion and customers with whom we have firm commitments or LOIs of another $0.5 billion.

Like we have discussed previously, only a customer or a project with a clear mandate on project requirements, technical specification, and only a use case that satisfies Eos specifications will be included in our pipeline. In this stage, we actively present our commercial and technical proposals to customers.

Our experience indicates that about 30% of our pipeline over the long run will translate into booked orders.

In specific circumstances, where we have reached an agreement on commercial terms with select customers and have an agreement on a Letter of Intent supported by clearly defined next steps that require actions on behalf of the customer we categorize as LOIs or firm commitments.

Our experience indicates that on average 60% within this category translates into a booked order. In 2021, we have converted about $55 million, or 194 megawatt hours from 13 projects to booked orders from this bucket. We have more details on this in the upcoming pages. So as of July 2021, we have $79 million in booked orders year-to-date.

We consider a project of booked order when there is an agreement for yields to procure material manufacturer and deliver our storage solution. We see strong momentum for the rest of the year and booked orders have increased $46 million since 1Q earnings call.

Moving on to Page 10, let me review a few financing strategies that enable our ability to partner with customers. Firstly, we are engaged in development financing with select customers, where we currently already have an LOI or a firm commitment.

We have committed to $5 million in capital to partner and determine site, scale and market potential for select projects. Once the project potential is determined, Eos will have the exclusive right to deliver storage solutions. We to-date have funded $1.1 million of such commitments.

As a result, we have successfully helped secure land rights and interconnections for projects that are in consideration. Second, we have partnered to deliver project financing for an additional select set of customers and projects. Here, we have committed to approximately $17 million in capital and funded $3.4 million of such commitments.

Lastly, we have strategically agreed to participate in asset leasing agreements with select customers on a lease-to-own basis. This financing is offered at competitive rates and secured in collateral from the storage assets commissioned on ground. We have $52 million in asset leasing commitment.

And this particular segment is included in our booked orders. In our $3.9 billion pipeline that we discussed on the previous page, we have more than $500 million in additional opportunities with select customers ranging from development financing to project financing and asset leasing.

We are currently working on multiple opportunities to expand our project financing partnerships in the second half of 2021 and more to come over the course of this year. On Page 11, discussing booked orders for the year let me give you a few more specific details on the $79 million in year-to-date booked orders.

Our current booked orders constitute 18 projects, with 9 customers and 329 megawatt hours. $20 million are cash sales of used equipment representing about 104 megawatt hours. An additional $49.9 million of asset leasing represent 225 megawatt hours. These two projects deliver approximately $17 million in equipment orders.

Additionally, our booked orders constitute about $9.3 million in recurring service from monitoring and maintenance obligations that typically begins in year 3 and range from 5 to 18 years. We expect the momentum on our booked orders to continue into the second half of 2021.

Development financing and project financing as you know from previous pages are not included in our booked orders. Let’s now move on to Page 12. Here is a snapshot of our orders backlog, which is now a reflection of our 2021 year-to-date booked orders plus 2020 year-end backlog, minus shipments we have made to meet customer commitments.

This backlog comprises of 32 projects with 18 customers and 389 megawatt hours. At our first quarter earnings presentation, we reported orders and backlog of $50.5 million. Since then, we have recorded an additional $46.2 million new booked orders, we have also successfully shipped $1.1 million, resulting in a total backlog of $95.6 million.

Deliveries on these commitments, is expected to be both in 2021 and 2022. Equipment sales constitute about $84 million of this backlog and an additional $11 million in long-term service revenue. Now I will hand the conversation back to Joe on Page 30..

Thanks, Sagar.

Just a quick drilldown on something that we have talked about since we have gone public and that is taking projects, proving the value proposition of Eos technology, getting our customers to commit to the technology, selective technology and then signing a Letter of Intent, which allows us to close out projects and bring them to commercial success for ourselves and for our customers.

And we are starting to see a lot of traction over the last couple months in that bucket of opportunities that we have been working on here for the last 9 months and really the last 3 months an acceleration of those projects starting to close.

Starting off with IT, projects in ERCOT, we are very proud of getting two projects that are about 100 megawatt hours of opportunities with IT having to fully finance and starting to work with them now through the permitting process to really start looking at deliveries probably in 2022. On EnerSmart, we have closed 8 projects.

This has become a really strong strategic partnership for us and we love working with that team. And this is working in the case of California markets across various different operating sites where we are delivering some projects at the end of next year and the majority of the projects into 2022.

Z-Global, another operator in the CAISO, California market, where we have won two projects with them for 80 megawatt hours and starting to work with them on execution and implementation and grid connection to start looking at delivering those projects.

And then Hecate, which we have a large LOI with them and we closed our first project in the ERCOT market. It’s a small projects for 4-megawatt hours, but really allows us to start working together on execution and delivering – and getting the grid connection and getting the power onto the grid.

So we are starting to see this strategy that we have worked in delivering orders and very proud of what the team has been able to do here and how our partners have worked with us to bring these projects to successful closure.

Now, if we jump to the next page and really start thinking about how our pipeline mix looks like and what our current order backlog looks like.

So, when you think about where we are selling, 335 megawatt hours, our front of the meter projects, projects that move faster with customers that are able and willing to work with us on creating value propositions were behind the meters, 54 megawatts, but there is a large opportunity pipeline that we need to continue to work as we think about the future.

From a use case standpoint, a lot of people talk about the technology being for solar integration, we do have a large chunk of our backlog in solar.

But at the same time, we are doing a lot of grid deferral locational capacity, where a 4 plus hour duration discharge becomes very important to the customer and the flexibility and safety that we offer in our technology allows these customers to secure a return on their investment over the next 15 to 20 years.

And you are starting to see our project size grow as we work through these projects and going from 1 megawatt, less than 1 megawatt projects into larger projects that we are now starting to work with customers and develop and really starting to get the operating capability of the company to be able to deliver these projects under Dave Leligdon’s leadership in our project operations organization.

We go to the next page on Page 15, you are starting to see that we are concentrated – while we are concentrated in the U.S., we are starting to plant seeds around the world, because there is a demand for this type of product in many markets. And we have talked about this before.

I talked about the CAISO market in California and our ability to safely deliver nonflammable technology to that marketplace to Texas ERCOT, where you need operating flexibility to go from a couple of hours up to more than 10 hours depending on your use case.

And in the Northeast, the United States, which really integrates solar plus storage in co-ops up and down the East Coast. And then around the world, we are starting to look at industrial applications. We talked about Motor Oil.

For an oil refinery we have done around the clock electricity with a couple of developers with Azure Power and ReNew which we are proud to partner with them on for 4-megawatt hours in India. And then in Africa, we are working with the Shell Foundation to be able to deliver two projects to 1 customer for 3-megawatt hours.

So we are starting to not only build up our ability to execute in the United States, but also building up the network to be able to execute around the world. Because when you look at our technology, the benefit of this technology is while it’s safe to use in urban areas, it’s also easy to use where you can use it in remote areas.

So, when we look at how the technology works and the flexibility that it brings, it’s the technology that works in multiple use cases and allows us to deliver for the marketplace. With that, we will move to the next section and talk about manufacturing capacity and delivering our product.

So moving to Page 17, I want to walk through the construction of our current revenue profile for 2021 and 2022 from the perspective of orders and backlog. So, start on page – on start on the left hand side of this page, where we look at the backlog of orders that we have today. We had $50 million of revenue secured in the backlog.

You see there was $48 million to go, we have already shipped $2 million, which brings us to the $50 million target that we had with an additional $36 million that was to be shipped in 2022. And those dates that I am giving there tied to the original purchase order signed with the customer.

Now, as we have opened backup across the United States, you started to see some delays in transportation, delays in getting permits, delays in getting the site ready and doing construction, which have caused us to shift out deliveries from 2021 into 2022.

At the same time, we have worked through some challenges in our controllable actions, the first one being our UL certification coming in 2 months delayed versus our initial schedule, which caused some of the applications for permits to be delayed on the customer side and then ramping up of our manufacturing, which I will talk about on the next page, which really has been a challenge for us, but things that we are working through, we see improvement everyday out of the team that we have in Pittsburgh.

But when you look at where we started the year, $45 million of those $50 million that had original contractual delivery dates in 2021 are now shifting into 2022.

So, when you look at the far right hand side of this page, you see that we are forecasting $3 million in revenue for $5 million total for ‘21 with the remaining amount of our shipments going out into 2022 for the Gen 2.3 product. Beyond this $53 million, we continue to see demand for the Gen 2.3 product.

So, this will be something that we will have to keep focusing on. There is not going to be as fast of a drop off in that product is what we initially anticipated. So we will continue to build that product out of our facility in Pittsburgh.

And at the same time, we are growing backlog on our new product Z3 product, which we thought we would have some initial shipments potentially going out at the end of this year, which now looks to be happening more towards the first second quarter of next year as far as being able to test the product and start shipping the product.

And a lot of that has to do with the lessons learned on the ramp up of the Gen 2.3 product to allow us to do a more seamless supply chain ramp as we look to 2022 and beyond.

If we go to Page 18 and talk about this Gen 2.3 product optimization, when you look at our yields by – we have always talked about having really four main manufacturing processes, that being welding and assembling our electrode, welding our battery together, assembling the battery both on filling it with electrolyte, closing it and testing it and then into the container and testing.

We have had – when you look at this, our yields have not lived up to the targets that we have had. We have worked through multiple items to be able to improve those and believe we will close in on our targeted yields here over the next 4 months.

But our current yields are below what expectations are, with the biggest challenge being around infrared frame welding, which is 10 points lower than what we initially anticipated and that has been multiple challenges with the site and the facility that we are working in and the power quality that we had with working through the design in the molds of our frames and how we welded those, but the team has come up with the formula to be able to deliver on that 90%.

And we are seeing good product come off of the factory, the line when we have the new production frames for our manufacturing processes, where when I look and think about this as we are moving forward, we have gone through this learning curve, it’s been exacerbated by not being able to get people in one place because of COVID and really solve problems, but the team has done a great job in working through these and having a path to being successful.

And everything we learned on Gen 2.3 will be applied to the Gen 3.0 product as we move into production on that product next year. Now, when I move to the next section on the people and culture section and really want to focus on one page, where two things I bring out here. We have grown the company.

Headcount is up 147% in total this year, bringing in a lot of great people into the organization. We have done our first employee survey, with an 86% highly favorable employee engagement. We have got a team that comes in everyday wanting to change the way the world powers itself.

And that is very exciting to lead this team and to work through the challenges and also the opportunities that we have to building a great company. On the right hand side of this page, I just want to spend a moment to talk about how we thought about the compensation for the entire company.

And really what we have done is we have gotten two peer groups, we have looked at peer groups of companies that are around the same market cap as we are today and high growth company, peer group to think about how we want to position the company for the long-term.

And when you think about how we compensate everyone from me down to the factory floor, we talk about base salary, we are looking to be at the median or lower as far as how we compensate on core cash out the door.

Our bonus, which are tied to the six objectives, that you have seen we talked about in every earnings call, if we hit those 6 our bonus goes to above average.

And then the biggest thing for me is making sure that equity is outsized from cash, so that if you are successful as a shareholder, the entire company is successful and everybody is rewarded for that success. So, every employee in our company has equity and that will be the case as we move forward. And we are going to reward the top performers.

And as we deliver and grow the company, they will be rewarded as you are rewarded. So we want to have a one-to-one alignment for when you are successful and how we are successful as employees. If we go to Page 21, last page, we are going to continue to grow our pipeline.

We have to increase our front of the meter orders and develop a clear behind the meter strategy of getting qualified with large customers. And also, we will come back and talk about our project financing strategy and what we are going to do going forward to be able to grow our order book and hit our $300 million target.

On revenue, we need to hit the deliveries that we have laid out today. We are going to work through on site readiness with customers and focus on building our 2022 plus orders backlog, which become – which then be converted into sales. We are going to close out our UL product testing.

We are beginning our CE Mark testing for Europe and getting full ISO certification for our facility and getting total system UL9540 certification, which is very important for projects for the future.

On the 800 megawatt hours of capacity, we have got to reduce the ways to continue to work on and optimize our material sourcing, stabilize operations and we will come back with our capital investment plan and how we are going to finance our equipment and where we are going to locate that capacity as we move forward.

And we will come back with a more detailed production plan launch on the Z3 product. And we are going to continue to expand and grow our engineering software and systems development team. And we are going to really look at how we continue to keep the people and the culture tied to how you win in the marketplace.

I think we have learned a lot this past quarter. We have delivered and continue to deliver strong results and the team will continue to be focusing on building a great company and delivering returns to you as our shareholders. With that, I will turn it back over to the operator and we will open up for questions..

Thank you. Thank you. Our first question comes from Chris Souther with B. Riley. Please proceed with your question..

Hey, guys. Thanks for taking my question here.

Maybe just on the project delays from 2021 to 2022, last call you seem fairly confident in about $10 million expected over through the end of the third quarter, maybe you could talk about those projects in particular, what the delays were you have now? So, it seems like its more customer end at this point or delays that were resulting in the UL delay, are there permitting issues, other components in the supply chain that they need for the projects that are pushing things back into 2022 now and what’s the cadence of these delayed projects, the timing now or the bulk of them going to be first quarter of ‘22, some push up further in that? Thanks..

Hey, Chris. Thanks. Good morning. Yes, so a couple of components there in your question. So, we are seeing on the project delays, we had out of the $45 million, you could directly link about $5 million of it to the delay in UL certification. The good news on UL is, late last night we got approval for our manufacturing facilities.

So as of today, product that comes out of the factory will be marked with UL. So, it’s a big milestone for the team.

When you look at other delays that are happening, these are not that the project will move forward delays, these are more just getting approval for permits on construction, getting the actual civil works done so that we can install equipment on-site. We have got now containers in Pittsburgh waiting to ship out.

And finally, you got to work through the grid interconnections and getting everything lined up to do that. And we have seen some – we have seen I think these are systemic across the industry that you have heard from other companies that they have gone through their earnings estimates.

On the – when they are going to fall, I will let Sagar give some more color here. But what I would say is that you are really looking at them falling out in the first half of next year shipping some of it. You will see all of them go in first quarter, but I think you will see them go over the first six months of 2022.

I don’t know Sagar, if you have anything you want to add to that?.

Yes. Thanks Joe. Hi, Chris. Yes, I would agree with everything you said. As we get more clarity, we will be sure to come back to you. But we are actively working with our customers to match their expectations and our timelines in the first half of next year..

Okay. And so more than half the backlog here is in T&D deferral/locational capacity, do you get a sense projects, they are going to wait for standalone ITC. And it seems like you have had good dialogue going with some folks in the Federal government here, Congress people and Secretary Granholm.

How are you and customers handicapping some kind of standalone ITC, by the year-end? And what is the dialogue right there? I would love to hear about that..

Yes. Because I think there is a lot of progress being made, particularly over the last couple of days here around the infrastructure building, and where the ITC for standalone storage resides. So, we are pretty hopeful here. As you know, everybody in Washington works through this that will have something.

I do think you have some people, I think there is some people waiting to see ITC come through before making decisions on projects. And as we see that, we just see the opportunity pipeline to continue to grow for us, as people look at wanting to have safe, reliable power with longer duration – longer duration and flexible discharge times.

We just have more and more people coming to us with their project opportunities, which in this kind of timeframe of waiting to see what’s happening on the ITC, it gives us a lot of time to be able to sell the value proposition.

And that’s why you see the backlog growing the way that you do and also why you see the opportunity pipeline going up way you do..

Got it.

And then looking at kind of the targeted backlog of $300 million by year-end, what’s the expected split there between 2022 projects, 2023 projects or even beyond that? And I am just kind of curious how you guys think that’s looking to shape out at this point?.

Sagar, do you want to start off and then I can jump in?.

Yes, absolutely. Look, our focus right now is continuing to deliver. We have about $455 million in core opportunities that we are working on with expectations currently from our customers of second half ‘22 and ‘23. That’s about the pipeline that we would like to focus on to meet the $300 million target in the short-term..

Okay. Got it. Thanks a lot. And I will hop in the queue..

Thank you. Our next question comes from Subash Chandra with Northland Securities. Please proceed with your question..

Hey, Joe. Good morning.

Just wanted to – get an understanding of so $5 million was the UL certification? And then how does the rest of it sort of link to Slide 18, where you have those manufacturing objectives that you are working towards? Is there a number you can kind of put to the sales deferral that was related to your manufacturing issues?.

Yes. So going – so Subash, going back to Chris’s question, when you look at the $45 million, $5 million of it was directly related to the timing on the UL, the remaining amount was all tied to permitting delays and grid connections, so things out of our control.

So, I wouldn’t say that any of the – that when you look at how we are profiling revenue, we didn’t push out revenue because of challenges we are having on the manufacturing side, it was more systemic. With that being said, we need to work on Page 18 and really get the yield up, particularly in infrared welding.

And we are using this time period here to take what we have learned and improve upon what we have. And we will be able to come back and show everybody what we have done to make the factory better and get better output as we move forward..

Okay. Got it.

And then on Slide 15, can you discuss maybe some of the new names on this list from what you might have talked about in the prior LOI slides? Seems to be a couple of new ones and maybe on our new customer engagement, any other color there?.

Sure.

Sagar, do you want to start and I can jump in?.

Yes, for sure.

Subash, just to be clear, you are talking about Slide 15, correct?.

Correct..

Yes. On this page, this is more than just LOIs. This is all our booked orders plus some of our customers that we have delivered to. So as you know, as far as LOIs are concerned Hecate and IEP are two prominent names along with EnerSmart, but you would have seen us talk about as LOIs.

The rest of them are booked orders that just match organically came out of our pipeline directly into booked orders..

Okay, got it. And then….

Yes.

And Subash, what I would say just on names you see here, winning the projects and which were announced this morning with Enel in Spain was a big one for us just working through that and working through and getting the technology qualified, walking through the use case, showing them the revenue stack we can gain with the flexibility was a big one, Charge Bliss, Z-Global, working in the CAISO region.

I think this was a big area for us when you look at what’s in our pipeline. So, to prove out, again, the use case with those customers is very important.

And ReNew and Azure Power, that’s just been working with them as they develop their business plans and building off of really what we did on our first pilot project in India, 2 years ago, showing those operating results on the field, showing the improvements we made to the product, and now having launch projects with them, which will lead to future larger projects as we move forward here in the future.

We are pretty excited about the names that we have on this page and the work that we are doing with them..

So, Enel was also refinery-related use case..

No, Enel is a straight storage project in Spain. But it’s our second big project, our second big project in Europe along with Motor Oil..

Got it. Okay. And then the final one, for me the $5.3 million fair market value adjustment, I assume that has nothing to do with the Hi-Power reversal.

But if that’s true and then can you characterize that charge further?.

Yes, Sagar, do you want to start off there?.

Yes. Thanks Joe. Subash, the $5.3 million, you are correct. It has less to do with Hi-Power from an accounting treatment perspective, or the way I would think about it is, it’s an accounting treatment on loss contracts for the expected value of what we are purchasing as inventory and vice versa, the expected selling price on it.

As you know, we continued to work towards having a breakeven on our financials by the end of next year on a pro forma basis, because Hi-Power was an acquisition that is more recent in our history.

This fair market value adjustment is now recorded in our books versus the joint venture books, which you would not have had – we would not have had transparency to because we only previously owned 49%..

Okay, I think I got it. Okay. And one final accounting issue as well.

So, what do you think cash run rate G&A is at this point and what do you think it will be give or take in ‘22?.

Yes, the business is built towards having a minimal structural cost. So, the fixed structural costs for the company are round about $10 million, a quarter. The rest is variable. So, what we manage in volume and how that volume ramps up with our customer deliveries.

So, that’s we have $175 million of cash today on the balance sheet and we expect to manage it very prudently on both the fixed and the variable cost due to – on a cash flow..

Okay. Thanks everybody..

Thanks Subash..

Thank you. Our next question comes from Tom Curran with Seaport Research Partners. Please proceed with your question..

Good morning..

Good morning Tom..

So since the 1Q call the $41.7 million of orders you have booked under asset leasing agreements have taken asset leasings portion of backlog from 20% at the last call to 54% today.

Could you speak to why asset leasing surged to 90% of this period’s orders and tell us what percentages should represent of this year’s remaining expected bookings of $200 million?.

Look – Joe I will take that and…?.

Yes, go ahead Sagar..

Yes. Look on that Tom, what I would expect is in the long run that number should be about 25% on a recurring basis of our total backlog. From period-to-period that number may vary plus or minus. In this particular case, we have a larger transaction that is currently in our asset leasing.

And as we finalize our financing strategies in the second half of the year, you will see that number transferred from a risk perspective and hover – continue to hover as 25% for ongoing future bookings..

Okay.

And then, within that balance of $200 million orders you expect to book over the rest of the year, what is the single largest project as measured in megawatt hours and the nature of that project?.

Yes, happy to. Look, we have today projects that range from less than 1 megawatt hour to 10 megawatt hour projects. I would refer you to Page 14 and say off for the 389 megawatt hours we have in booked orders.

340 megawatt hours of it is 10 plus megawatt hours as we continue to evolve as a business that’s segmentation will steer more towards the 10 plus megawatt hours. The 455 megawatt hours of core opportunities we are working on have a wide variety in range, but the median would be somewhere between 10 megawatt hours and 50 megawatt hours..

Yes. Tom, we are working – there are larger projects in the pipeline. But I don’t anticipate those closing here and in over the course of this year. And we will be looking at larger projects happening probably beginning into 2022.

So, I think you will see a mix of continued mix like we have today with a mix-up to getting towards the 50 megawatt hours that Sagar discussed..

Would you expect, say the average project size for the remaining $200 million to be closer to that 10 megawatt hour size or just a bigger average project within the $200 million than the $95 million to-date?.

Yes. Tom, I think we see in the opportunity pipeline is the size of the projects that we are working with customers on skewing up probably I don’t know exactly where the number gets, where the number winds up.

But if you were to plot out quarter-by-quarter, it is growing as we continue to show and prove out the technology and people becoming comfortable with using us as their partner..

Great. And then last one for me. Turning to the supply chain and labor pool, could you speak – just update us on how you are positioned for sourcing your five main battery inputs and then hiring.

Have you encountered or do you anticipate any bottlenecks, inflationary spikes or other challenges?.

Yes. So, inflationary spikes, what I would say we are working through now as a team is we are not getting the cost out as fast as we anticipated. So, part of that is due to the ramp. And part of that is just due to the inflationary pressure that you see in the marketplace from constraints on the supply chain to getting material.

I don’t anticipate any concerns there. I mean, we have worked through and have secured the ability to source product from our suppliers. And we have – and we are adding sources of supply as we ramp up and the organization matures. And then from a labor pool standpoint, we have designed the factory right now in Turtle Creek.

The team has designed, where it’s a flexible workforce that we can shift people around between different operations. And then at the same time, hiring and bringing in the right level of operators to be able to operate the equipment.

It’s in – the environment that we are in right now, there are challenges, you have to work through just what we are seeing happening with the Delta varriant. But the team has managed through this over the last year and we will just have to continue to manage that as we move forward. I don’t know Sagar, if you want to add anything..

Yes. It sounds good..

Great. Thanks for taking my questions..

Thanks Tom..

Thank you. There are no further questions at this time. I would like to turn the floor back over to Joe Mastrangelo for any closing comments..

Thanks. Just to close out today, the team is continuing to work through the challenges of growing and building the company. Proud of the work that everyone is doing. Particularly, pleased with how the traction we see commercially. We have got our work cut out for us and I think we are prepared to deliver on the execution side as we move forward.

And just look forward to keeping everybody updated on how we progress and where the company continues to grow for the future. So, thanks for the time this morning and look forward to talking to everybody in the future..

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day..