Earnings Call: Q2 2021

Aug 11, 2021

Greetings, and welcome to the 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 Aime, 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 Q2 ending June 30, 2021. On the call today, we have EO's CEO, Joe Mastrangelo and CFO, Sagar Khurrada. Before we begin, allow me to provide a disclaimer regarding forward looking statements. This call, including the Q and 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 to Eos' Investor Relations website at investors. Eose .com. Joe and Sagar will walk you through the company highlights, financial results and business priorities before we proceed to Q and A. With that, I'll 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 The top half of the page talks about the progress that we're making commercially. You can see our pipeline is now approaching $4,000,000,000 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 $95,000,000 getting close to $100,000,000 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're approaching $80,000,000 in orders and backlog. So really, we're seeing a great uptick commercially and how the team is executing what we're delivering. On the bottom, this is operational highlights where we're approaching 300 megawatt hours Discharge energy either out in the field or in our test facility. We've shipped $2,000,000 of shipments year to date to Greece, Nigeria, India and California. And right now, we have $175,000,000 of cash on hand That includes the recent $100,000,000 investment from Coke, which I'll 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 $300,000,000 in booked orders. What I would say is, we're starting to see some great conversion on our letters of intent On our commercial model, which we'll talk about later on, dollars 55,000,000 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've got $455,000,000 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 closed these opportunities, we covered 100% of our 2021 revenue target. But as many in the industry have seen and as the world opens up coming out of the COVID pandemic, we're 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're looking at a revenue target that will be more around in the range of $5,000,000 for 2021, basically because we've seen the projects go out in 2022 as far as shipments are concerned. On UL, our full UL certification, we've achieved both the 9540A And the UL-nineteen seventy three system certification, we're now going through a certification of our manufacturing sites, which will allow us to start shipping you all certified products here in the Q3. Building our capacity, we're optimizing our Gen 2.3 capacity to deliver On our current backlog, I'll talk later on in the presentation about how we're seeing the Gen 2.3 product continue to have demand out in the marketplace and how we're 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're 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 and industrialize that. We're 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 Last on the list, but first, in our importance of our success. I'm going to talk at the end of the presentation about how we're aligning the goals and objectives and the compensation of everyone in the company to shareholder 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 for the future. So we'll go through each one of these in a little bit more detail and then talk about what we're going to deliver in the Q3. Just quickly, 2 big things that happened on the next page, 2 big things that happened last quarter. We did get an investment from Coke's strategic platform, which is a great validation of our company and how we want to deliver into the marketplace. This is on top of a $50,000,000 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 Coke network to help us improve the company on many facets. So More to come here, but something that we're 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, 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're trying to drive. That's low cost, high durability, long duration storage, which is exactly what Eos delivers to the market. So with that, I'll turn it over to Saira, who will walk through the financials. Thanks, Jill. Good morning, everyone. In the next few pages, I'll talk you through the Q2 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 2nd shipment recognizable here in the 3rd quarter. Our cost of sales in the quarter were $12,400,000 They included $5,000,000 of expense due to fair market value adjustments on future booked orders, $3,000,000 in costs related to improved current manufacturing yields, dollars 1,700,000 in base costs as we bring the factory up to capacity and entitlement $700,000 in onetime transportation costs. Our R and D expenses were $2,200,000 lower versus Q1 as we finalized our dual testing, which were partially offset by our continued investment in new technology, specifically our V3 product. General and administrative expenses included $600,000 in one time transaction fees and $3,000,000 in stock compensation expenses, $22,500,000 loss on pre existing agreement reflects fair market value of acquisition Of the remaining 51% in high power partnership we described at the last quarter earnings call, We also recorded $2,200,000 from the sale of New Jersey state tax credits and $600,000 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'd like to move on to the next page and talk you through our current cash balance. As of six thirty, on a pro form a basis, we have $175,000,000 in cash balance. As Joe mentioned earlier, We finalized the strategic investments from Koch Industries, resulting in $100,000,000 of cash inflow. We also received $17,000,000 from warrants that came due in May and were exercised by select investors. From business operations specifically, we have expended $43,000,000 this quarter, which included 2 One time transaction items less of the business operations. The transaction items are $15,000,000 of Onetime spend on the Highpower acquisition and $2,000,000 additional in transaction expenses, Minus of these $17,000,000 our business operations were about $26,000,000 The $26,000,000 constituted of $15,000,000 in cost of sales and working capital, both for current and future manufacturing needs $3,000,000 in capital expenditure $4,000,000 in R and D related to Z3, dollars 2,000,000 in commercial operations and $3,000,000 for general administrative expenses. Let's move on to the next section. We'll review our progress on the commercial pipeline and booked orders for deliveries both in 2021 and beyond from Page 9 is a reflection of our commercial activity as of July. This is a page you are now familiar with from previous presentation. Let's start with lead generation. We work with our customers to materialize ideas and except for feasibility, regulation, project plans and economics. We today have 2,900,000,000 or 17 gigawatt hours in review within lead generation. Our commercial pipeline is 3,900,000,000 or 23 gigawatt hours. This constitutes 2 key segments really: active proposals of $3,400,000,000 and customers with whom we have firm commitments or LOIs of another $500,000,000 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 EO's 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 categorized as LOIs or firm commitments. Our experience indicates that On average, 60% within this category translates into a book tour. In 2021, we have converted about $55,000,000 or 94 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 $79,000,000 in booked orders year to date. We consider a project a booked order when there is an agreement for HEELS to procure material, manufacture and deliver our storage solution. We see strong momentum for the rest of the year and booked orders have increased $46,000,000 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 $5,000,000 in capital to partner and determine size, scale and market potential for select projects. Once the project potential is determined, EOS will have the exclusive rights to deliver storage solutions. We to date have funded $1,100,000 of such commitments. As a result, we have successfully helped secure land rights and inter Connections for projects that are in consideration. 2nd, we have partnered to deliver project financing for an additional select set of customers and projects. Here, we have committed to approximately $17,000,000 in capital and funded 3 point $4,000,000 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 We have $52,000,000 in asset leasing commitments and this particular segment is included in our booked orders. In our $3,900,000,000 pipeline that we discussed on the previous stage, we have more than $500,000,000 in additional opportunities with select customers ranging from development financing to project financing and asset leasing. We are currently working opportunities to expand our project financing partnerships in the second half of twenty twenty one 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 $79,000,000 in year to date booked orders. Our current booked orders constitute 18 projects with 9 customers and 329 Megawatt hours. $20,000,000 are cash sales of Yost equipment, representing about 104 Megawatt Hours, An additional $49,900,000 of asset leasing represent 2 25 Megawatt Hours. These two projects deliver approximately $70,000,000 in equipment orders. Additionally, Our booked orders constitute about $9,300,000 in recurring service from monitoring and maintenance obligations that typically begin 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 twenty twenty one. 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's 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 Q1 earnings presentation, we reported orders and backlog of $50,500,000 Since then, We have recorded an additional 46,200,000 new booked orders. We have also successfully shipped 1,100,000 resulting in a total backlog of $95,600,000 Deliveries on these commitments is expected to be both in Equipment sales constitute about $84,000,000 of this backlog and an additional $11,000,000 in long term service revenue. Now I'll hand the conversation back to Joe on Page 13. Thanks, Sagar. Just a quick drill down on something that we've talked about since we've gone public and that is, taking projects, proving the value proposition of the EOS technology, Getting our customers to commit to the technology, select the technology and then signing a letter of intent, which allows us to close out A project can bring them to commercial success for ourselves and for our customers. And we're starting to see a lot of traction over the last couple of months In that bucket of opportunities that we've been working on here for the last 9 months and nearly the last 3 months, an acceleration of those Projects starting to close. Starting off with IEP, projects in ERCOT, we're very proud of getting 2 projects that are about 100 megawatt hours of opportunities with IEP having them fully financed and starting to work with them now through the permitting process to really start looking at deliveries probably in 2022. On EnerSmart, we've closed 8 projects. This has become a really strong strategic partnership for us and we love working with that team. This is working in the Queso, California market across various different operating sites where we're delivering some projects at the end of next year and the majority of the projects into 2022. ZGlobal, another operator in the Queso, California market where we've won 2 projects with them for 18 megawatt hours and starting to work with them on execution and implementation in grid connection to start looking at delivering those projects. And then Hecate, which we have a large LOI with them, we closed our first project in the Aerotem market. It's a small project for 4 megawatt hours, but really allows us to start working together on And getting the grid connection and getting the power onto the grid. So we're starting to see this strategy that we have Work in delivering orders. I'm very proud of what the teams have 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 So when you think about where we're selling, 335 Megawatt hours are front of the meter projects, 5% move faster with customers that are able and willing to work with us on creating value propositions where Behind the meter is 54 megawatts, but there's 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're 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. You're starting to see our project size grow as we work through these projects and going from 1 megawatt, less than 1 megawatt project It's a larger project that we're 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 Lilligens Leadership in our project operations organization. If we go to the next page on Page 15, You're starting to see that, we're concentrated while we're 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've talked about this before. I talked about the queso market in California and our ability to safely deliver non flammable technology to that marketplace to Texas Aircot 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 of the United States, which really integrates solar plus storage and co ops up and down the East Coast. And then around the world, we're starting to look at industrial applications. We talked about motor oil, for an oil refinery. We've done around the clock Electricity, with a couple of developers with Azure Power and Renew, which we're proud to partner with them on for 4 megawatt hours in India. And then in Africa, we're working with the Shell Foundation, to be able to deliver 2 projects to 1 customer for 3 megawatt hours. So we're 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 As 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 a technology that works in multiple use cases and allows us to deliver for the marketplace. With that, we'll move to the next section and talk about manufacturing capacity delivering our product. So moving to Page 17, I want to walk through the construction of our current Revenue profile for 2021 2022 from the perspective of orders and backlog. So start on page start on the left hand side of this page where we look at the backlog of orders that we have Today, we had $50,000,000 of revenue secured in the backlog. You see there was $48,000,000 to go. We've already shipped $2,000,000 which brings us to the $50,000,000 target that we had with an additional $36,000,000 that was to be shipped in 2022. And these those dates that I'm giving there tie to the original purchase order signed with the customer. Now as We've opened back up across the United States. You're starting 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've 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'll talk about on the next page, which really has been a Challenge for us, but things that we're working through and we see improvement every day out of the team that we have in Pittsburgh. But when you look at where we started the year, $45,000,000 of the $50,000,000 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 dollars 3,000,000 in revenue for $5,000,000 total for 2021 with the remaining amount of our shipments going out into 2022 for the Gen 2 Beyond this $53,000,000 we continue to see demand for the Gen 2.3 products. So this will be something that we'll have Keep focusing on, there's not going to be as fast of a drop off in that product as what we initially anticipated. So we'll continue to build that product out of our facility in Pittsburgh and at the same time, we're growing backlog on our new product, the 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, Q2 of next year as far as being able to test the 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've 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've had when you look at this, Our yields have not lived up to the targets that we've had. We've worked through multiple items 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're working in and the power quality that we had with working through the design and 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're 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're moving forward, we've gone through this learning curve. It's been exacerbated by 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 learn 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, I really want to focus on one page where, two things I bring out here. We've grown the company. Height count is up 147% total this year, bringing in a lot of great people into the organization. We've done our first employee survey with an 86% highly favorable employee engagement. We've got a team that comes in every day 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 the page, I just want to spend a moment to talk about how we've thought about the compensation for the entire company. And really what we've done is we've gotten 2 peer groups. We've 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 And when you think about how we compensate everyone from me down to the factory 4, when we talk about base salary, We're 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 6 objectives that you've seen, we talk 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're 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're going to reward the top performers and as we deliver and grow the company, they'll be rewarded as you're rewarded. We want to have a one to one alignment for when you're successful and how we're 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'll come back and talk about our project financing strategy and what we're going to do going forward to be able to grow our order book and hit our $300,000,000 target. On revenue, we need to hit the deliveries that we've laid out today. We're 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. Facility and getting total system UL 9,540 certification, which is very important, for projects for the future. On the 800 megawatt hours of capacity, we've got to reduce the waste, continue to work on and optimize our material sourcing, stabilize operations and we'll come back with our capital investment plan and how we're going to finance our equipment and where we're going to locate that capacity as we move forward. And we'll come back with a more detailed production plan launch on the Z3 product and we're going to continue to expand and grow our engineering software Systems development team and we're 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've learned a lot this past quarter. We're delivering 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'll turn it back over to the operator, and we'll open up for questions. Thank you. We'll now be conducting a question and answer session. One moment please as we poll for questions. Our first question comes from Chris Souther with B. Riley. Please proceed with your question. Hi, guys. Thanks for taking my question here. Maybe just on the project delays from 2021 to 2022. Last call, you seemed fairly confident in about $10,000,000 expected over through the end of Q3. Maybe you could talk about Those projects in particular, what the delays were, you have now. So it seems like it's more customer end at this point or delays Yes, 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, are the bulk of them going to be Q1 of 'twenty two, some pushed out further than that? Thanks. Hey, Chris. Thanks. Good morning. Yes, so a couple of components there in your question. We're seeing on the project delays, we had out of the 45, You could directly link about $5,000,000 of it to the delay in UL certification. The good news on UL is Late last night, we got approval for our manufacturing facility. 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 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've got now containers in Pittsburgh waiting to ship out. And finally, you've got to work through the grid interconnection Getting everything lined up to do that. And we've seen some we've seen and I think these are systemic across the industry that you've heard from other companies that they've gone through their earnings estimate. On the when they're going to fall, I'll let Sagar give some more color here. But what I would say is that You're really looking at them falling out in the first half of next year shipments. I don't think you'll see all of them go in Q1, but I think you'll see them go over the 6 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'd agree with everything you said. As we get more clarity, we'll 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 and D deferral, locational capacity. Do you get a sense Projects there are going to wait for standalone ITC and it seems like you've 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 like there? I'd love to hear about that. Yes. Chris, 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 reside. So we're pretty hopeful here as everybody in Washington works through this that we'll have something. I do think Yes, 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 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 And also why you see the opportunity pipeline going up the way you do. Got it. And then looking at kind of the targeted backlog $300,000,000 by year end, What's the expected split there between 2022 projects, 2023 projects or even beyond that? I'm just kind of curious how you guys think that's Looking to shape out at this point. Sankar, 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 $455,000,000 in More opportunities that we're working on with expectations currently from our customers of second half twenty twenty two and twenty twenty three, that's about The pipeline that we'd like to focus on to meet the $300,000,000 target In the short term. Okay. Okay, got it. Thanks. I'll hop in the queue here. Thank you. Our next question comes from Subash Chandra with Northland Securities. Please proceed with your question. Hey, Joe. Good morning. Good morning. I wanted to get an understanding of So $5,000,000 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're 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 back to Chris' question, when you look at the $45,000,000 $5,000,000 of it Was directly related to the timing on the UL. The remaining amount was all tied to permitting delays and grid connection, so things out of our control. So I wouldn't say that any of the Yes, that when you look at how we're profiling revenue, we didn't push out revenue because of Challenges we're 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 on infrared We're using this time period here to take what we've learned and improve upon what we have and we'll be able to come back and show everybody What we've 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, there seems to be a couple of new ones. And maybe on Are new customer engagement, any other color there? Sure. Sakar, you want to start and I can jump in? Yes, for sure. Subash, just to be clear, you're 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, Hekate and IEP are 2 Common in names, along with EnerSmart that you would have seen us talk about as LOIs. The rest of them are booked orders that just organically came out of our Pipeline directly into booked orders. Okay, got you. Yes. And Subash, what I would say just on names you see here, winning the project and which were announced this 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, The revenue stack that you can gain with the flexibility was a big one. Charge Bliss, the global, working in the Queso Region, I think this is 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 The field showing the improvements we made to the product and now having launch projects with them, which will lead to future larger projects We move forward here in the future. We're pretty excited about the names that we have on this page and the work that we're doing with them. So Enel was also a refinery related use case? No. Enel Is a straight storage project in Spain. But it's our 2nd big project in Europe along with Motorola. Got you. Okay. And then just final one for me. The 5.3% fair market value adjustment, I assume that It has nothing to do with the high power reversal, but if that's true and then if you can characterize that Charge further? Yes. Sagar, you want to start off there? Yes. Thanks, Drew. Subash, the 5.3%, you are correct. It has Less to do with Highpower from an accounting treatment perspective. 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 Continue to work towards having a breakeven on our financials by the end of next year On a pro form a basis, because Highpower 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 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 and A is at this point? And what do you think it will be, give or take in 'twenty two? Yes. The business is built towards having a minimal structural cost. So the fixed structural costs for the company Are around about $10,000,000 a quarter. The rest is variable to what we manage in volume and how that volume ramps up with our customer deliveries. So that's we have $175,000,000 of cash today on the balance sheet, and we expect to manage it Very prudently on both the fixed and the variable cost to on a cash front. Okay. Thanks, everybody. Thanks, Subash. Thank you. Our next Good morning, Tom. So since the 1Q call, the $41,700,000 of orders you've booked under asset leasing agreements have taken Asset Leasing's 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 percentage it should represent of this year's remaining expected bookings of 200,000,000 Look, Joe, I'll take that and happy to take that. Yes, go ahead, Sajid. Right. Yes. Look, 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 you will see that number transferred from a risk perspective and continue to hover as 25 And for ongoing future bookings. Okay. And then within that balance of $200,000,000 in 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'd refer you to Page 14 and say of the 389 megawatt hours we have in booked orders, 3.40 of it is 10 plus megawatt hours. As we continue to evolve as a business, that segmentation will Steer more towards the 10 plus megawatt hours. The 455 of core opportunities we are working on Have a wide variety in range, but the median would be somewhere between 10 50. Yes. Tom, we are working there are Larger projects in the pipeline, but I don't anticipate those closing here in over the course of this year and We'll be looking at larger projects happening probably beginning into 2022. So I think you'll see a mix of Continued mix like we have today with a mix up to getting towards the 50 megawatt hours as Sager discussed. But would you expect, Say the average project size for the remaining $200,000,000 to be closer to that 10 megawatt hour size Or just a bigger average project within the $200,000,000 than $95,000,000 to date? Yes. Yes, Tom, I think what you see in the opportunity pipeline is the size of the projects that we're working with customers on skewing up probably. I don't know exactly where the number get 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're positioned for sourcing your 5 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're working through now as a team is, We're 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've worked through and have secured The ability to source product from our suppliers and we have and we're adding sources of supply As we wrap up and the organization matures. And then from a labor pool standpoint, We've designed the factory right now in Turtle Creek. The team has designed where it's a flexible workforce, so we can shift people around between different operations and then at Same time hiring and bringing in the right level of operators to be able to operate the equipment. In the environment that we're in right now, there are challenges you have to work through just with what we're seeing happening with the Delta variant, but the team has managed through this Over the last year, we'll just have to continue to manage that as we move forward. I don't know, Sargraph, if you want to add anything. Yes. All 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 Mistrangelo 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 I'm pleased with how the traction we see commercially. We've got our work cut out for us, and I think we're 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.