Earnings Call Transcript - EOSE Q3 2023

Operator, Operator

Good day and thank you for standing by. Welcome to Eos Energy Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Liz Higley, Director of Investor Relations. Please go ahead.

Liz Higley, Director of Investor Relations

Thank you. Good morning, everyone, and thank you for joining us for Eos's financial results and conference call for the third quarter 2023. On the call today, we have Eos CEO, Joe Mastrangelo, and CFO, Nathan Kroeker. 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, including but not limited to current expectations with respect to future results for our company, as well as statements regarding our ability to secure final approval of a loan from the DOE or our anticipated use of proceeds from any such loan, all of 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 expectations or those implied by these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to are described in our SEC filings. 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. This conference call will be available for replay via webcast through Eos's Investor Relations website at investors.eose.com. Joe and Nathan will walk you through the company highlights, financial results, and business priorities, before we proceed to Q&A. With that, I'll now turn the call over to Eos CEO, Joe Mastrangelo.

Joe Mastrangelo, CEO

Thanks, Liz, and welcome, everyone, to our third-quarter earnings call. It's great to be back here with everybody. Let's just move to our first page, which is really a milestone page of our first Z3 cubes being shipped out to the customers. We announced this when it happened back in September, but this, to me, really is the culmination of a lot of hard work, not just internally to EOS, but also externally with our customers and our supply base. There's so much work that goes into this picture of being able to get parts qualified, suppliers qualified parts in the factory, product off the lines this is just a tremendous achievement when you really think about the timeline that we've been operating on. And we've been very deliberate about the speed at which we do this because the speed at which you're manufacturing determines the speed at which you're spending capital. And we're doing that per customer requirements and then also doing that in our learning curve to optimize the capital that we have on hand. What we've seen when you go through and look at this and move to the next page is our pipeline continues to strengthen, and we're building a credible path to strong orders growth that Nathan will walk through here in a moment. But really, what I'd like that the team has been doing is we're seeing more and more customers come with use cases that fit in with the technology. When the company was founded 15 years ago, it was founded for four-hour storage, and what we're going to talk about today is how use cases are moving to longer duration. As they become longer duration, you're going to continue to see this pipeline grow. The booked orders grow and the backlog grow over time. Down to the bottom, we continue to discharge energy. We're at 1.6 gigawatts. This really shows that the technology performs. There's a lot of hard work going into being able to do that and a lot of lessons learned, both internally and with third parties, including energy management system, SCADA system suppliers, AC scope suppliers, and the customers themselves. At the same time, when you look at our cash on hand, we ended the quarter with $58 million of cash. Again, what I would say here is a capital strategy is not just the capital we raise, but also the capital that you spend, and we're going to talk about both sides of that building into when we come into December and talk about the strategic outlook and ultimately, what is the company's path to profitability over time. So if we go to the following page, as I said, on the first page, one of the key aspects of how you grow any company is the partnerships and the people that you work with. We are building strong government support, the Department of Energy with the initial commitment that we announced in the beginning of September. We were the first title 17 non-lithium ion battery Company. I think that's a testament to the hard work that's been done in the labs, at suppliers, in the factories, and out in the field to really get a technology that the government saw as being eligible for a potential loan as we work through the closing conditions. At the same time, we've been working in one of our core markets in California with the California Energy Commission that goes all the way back to 2014 and is now accelerating into many use cases where that region of the country is looking for longer-duration, flexible, and safe energy storage technologies. These things don't happen overnight when you really think about it. This has been a nine-year journey to prove out the technology and grow into commercial scale, but we feel like we've got a technology that provides for the use cases that the markets demand. And Nathan will also go through in a moment what we're also doing in ERCOT as that grows. At the same time, our customer base is shifting and continues to grow as we get into more and more U.S. utility customers. That picture that we had earlier is the first unit is going to Duke. Duke is a customer that we've been working with since the 2015-2016 timeframe and are now getting where we're putting the Z3 product out into a small commercial project, which I think we're all proud of, and we'll be able to prove out the flexibility and operability of the Z3 technology. We also have a project that we've talked about with a large U.S. utility. That project will start shipping 47 megawatt-hours in the latter part of the first half of next year. Also, that customer has applied for DOE grants and underlying these projects that we're executing with them is a very large conditional framework agreement or offtake agreement, which will help us drive future growth as they look at longer-duration energy storage. And we've announced an order in the last quarter with Dominion Energy. Again, Dominion, announcing when you look at this, you would say 60 megawatt-hours and the size of the market that we're in, seems relatively small, but Dominion was again, another journey. Nathan will talk about what that journey looks like, and to have 60 megawatt-hours out in commercial operation on a commercial product project then leads you to be able to develop and execute on larger projects with these customers as we move forward. So, really starting to put together pipeline growing, building, and proving out the technology over time out in the field and then working with robust customers and at the same time, you're not going to scale into this growth without great suppliers and great partners to bring the raw materials and the parts into the manufacturing process. We're really happy, and I'll give a quick update on the work that we're doing with ACRO on our automated line and how we're moving forward on our first state-of-the-art manufacturing line, how that implementation is going. But at the same time, we're really scaling up the supply chain of the company. When you think about what we've been doing over the past couple of years, we're truly moving from an R&D supply chain on proof of concept to a supply chain with multiple suppliers in global scale at a cost position that allows us to communicate in December our path to profitability. We're working on three core components: resin supply and to make that resin supply U.S.-based, U.S.-sourced product; Electrolytes, simplifying our formula and finding a large-scale mixer to scale; and Graphite-felt, which is a complex supply chain and we're working at multiple angles to take this part, which is one of our last parts in the battery that's not U.S. sourced, and over time, develop a U.S. supply chain for this critical component to both increase our ability to grow, scale up the Company, and do that with U.S. manufactured material at a cost position that will keep us competitive in the marketplace. If we then go through and talk about where we are and how we're positioning the Company for the long term, we're at the stage where we're balancing multiple priorities while continuing to meet key customer commitments. Our first priority is always to deliver for the customers and balance your priorities around how you do that. When you think about where we are from a financing standpoint, orders growth has been slower than what we forecasted. Therefore, we haven't seen deposits come in at the same rate that we originally forecasted. But we've gotten through the DOE process and are now working on the closing requirements from the DOE loan, which will allow us to scale the company. At the same time, you're balancing the amount of working capital that you're bringing into the Company, therefore, the amount of product that goes out the door. So as we're launching the Z3 product, we're looking at where the customer is in their project readiness, and where we are in our product cost-out timeline. So if you look at our timeline, one of the decisions we've made this quarter, which Nathan will walk through in more detail, is to focus on getting a key project delivered in ERCOT over the course of Q4 and the first six weeks of 2024, and then cut in lower-cost products so that everything we ship from the end of February, beginning of March, will ship at a lower cost. Rushing to ship things into the field that are not going to be utilized or not going to go online in a timely manner isn't smart for customers and isn't smart for EOS from the standpoint of the capital that it takes to build and put product out in the field. While we're doing that, this also allows leadership focus on delivery of the state-of-the-art manufacturing line. So we say state-of-the-art manufacturing line. Many people just think about the equipment coming in from Wisconsin, from ACRO, installing the line, turning the line on, and then ramping production. Well, inside of that, it's not just that manufacturability or that line itself. There's also developing a workforce. We've been doing this over the course of the three-plus years that we've been here in Turtle Creek, but really, what we're doing now is as we're changing the way that we build the product, we've got to change the skill set of the employees on the shop floor. Overloading production early on is going to detract from our ability to prepare the workforce for the new line coming on and starting to operate. We want to be able to manage and continue to build and put product out in the field for critical projects while training the workforce for the new way we're going to have to work when our new line comes in and is installed. At the same time, our engineering, R&D, and manufacturing team is looking at every core process of how we build our products and finding ways to simplify that, improve yield, and enhance quality. The biggest thing we've learned from going through the semi-automated line, and Nathan will also mention this in his section, is that the number one driver of defects on the semi-automated line is operator error. Operator error meaning the way that we flow material through the line and the manual operations we have creates variability that goes away when the state-of-the-art line comes in. We've proven out that we can manufacture. We've dialed in, if you will, the technology that we're using to build the batteries, but at the same time, we've got to acknowledge that in most cases, a human versus a state-of-the-art operation, the state-of-the-art operation operates at higher quality as you optimize material movement in some of the actual manufacturing processes. We want to make sure that we lower the scrap rates we have by getting to the automated line faster and producing, if you will, less on the semi-automated line to deliver for key customers. At the same time, I talked earlier about supply chain development and the partnerships we're building. Inside of that are things like critical part qualification and wanting to ensure that the parts that hit the factory floor are of the specifications we need and can go into production. When you combine these three factors, you really look at this and say, given the capital we have and the investment we want to make in expanding the workforce, we need to take the people that we have and focus them on those core and critical projects: delivering a commercial project - a larger-scale commercial project installed in ERCOT, fulfilling utility customers' 47 megawatt-hour project while developing the new line and training the workforce to bring up suppliers. We're trying to balance multiple priorities here to scale the company faster in the long term for profitable growth. So rather than focus on individual quarterly metrics as we go into 2024, we're looking at 2024 as a ramp year. We'll discuss this more in December, but we will ramp into production and ramp into the line and do that in a way that's prudent and effectively utilizes capital. So let's go into a little bit more detail on operational scale and building capacity for manufacturing. If we go to the next page, we developed a strategy with three phases for scaling manufacturing. We wanted to first develop discrete manufacturing operations; second, implement a semi-automated line to learn how material flows and understand our bottlenecks; and then install and ramp up state-of-the-art manufacturing capacity. As we progress through each phase, we've learned lessons that will make us better for the third phase of scaling manufacturing. The discrete operations started with hand-built prototype products in our Edison facility that were tested and proven out. We have changed many core manufacturing technologies in that manufacturing line. Under the first number, that's how we integrate the bipolar single-piece stiffeners into the top or into the frame we use to build the battery. We switched to a lower surface technology, but one that produced higher quality. We took 50% of the parts out of the design, found 25% savings on injection molded parts, and mitigated our automation risk by understanding how parts flow from suppliers to battery production. On the semi-automated line, the way we’re running it allows you to observe bottlenecks and challenges in material flow and human resources. Consequently, we’ve reduced initial cycle time from nine minutes to an average of two and a half minutes. The scaling of production we are seeing in October has increased our output five and a half times compared to September. We’re executing on the state-of-the-art manufacturing line in the ACRO facility in Wisconsin. Notably, there are 30 discrete processes that make up this line, which requires precision to ensure quality off the line. We’re currently in the factory acceptance phase of the line and assembling the necessary components there. The main rationale behind having factory acceptance in Wisconsin is to leverage ACRO's technical expertise. As we finalize the line, we're finding ways to accelerate our schedule and reduce overall capital spend. We feel strongly about the partnership with ACRO and the preparations that have been made to bring the Z3 product to sellable scale. With that, I'll turn the discussion over to Nathan to walk us through some core topics and the Q3 financial results. Thanks for listening and I look forward to Q&A.

Nathan Kroeker, CFO

Thanks, Joe, and good morning, everyone. As many of you already know, on August 31, we announced that we had received a $399 million conditional commitment for a loan guarantee from the Department of Energy. Since that announcement, we have been working through the steps required to get to loan closing and ensuring that all necessary conditions are met. Today, we want to spend a little bit of time discussing the DOE conditional commitment in the context of Project AMAZE, which is a $500 million expansion program to scale production of our Z3 storage systems to eight gigawatt hours of storage annually by 2026. This DOE guaranteed loan would fund 80% of eligible project costs, which is the maximum amount available for the statute. Draw-downs on the loan would be based on reimbursement of CapEx and OpEx eligible costs incurred as we build and scale up our capacity. Given our progress on Line 1, we believe overall capital costs may come in below our initial expectations. Performance metrics we are seeing on the semi-automated line suggest that less material will be required to optimize the new line than originally anticipated. While the scope of the project remains the same, we believe it has the potential to cost us less than initially forecasted. The conditional commitment is structured as senior secured financing and carries an attractive cost of capital for a company like EOS, with the interest rate being a small margin above U.S. treasury rates. Closing and funding of the loan is contingent upon meeting several conditions precedent, and we expect this to occur sometime in the second quarter of next year. While we work on designing and building out the first state-of-the-art line, we are also addressing the capital plan required to get us to the first advance. This conditional commitment was a critical milestone for the business and will support our scaling of Z3 as well as our broader growth plans. We have been in the DOE application process for well over two years, which has included a rigorous due diligence process surrounding our technical, market, financial, and legal standards and expectations. Simultaneously, we have been executing a transition from our Gen 2.3 product and implementing an entirely new manufacturing process as we approach the launch of Z3. We're proud of the team's hard work to reach this point, and this commitment is a significant endorsement of both the V3 technology and the role EOS will play in the broader energy storage and transition landscape. Now moving to Page 12, I want to provide more details on the expansion program. This capacity expansion consists of four state-of-the-art manufacturing lines that will be added over time as supported by customer demand and forecasts. We're currently building out the first line, which we expect to come online in the second quarter of 2024, with additional lines to follow thereafter. Each of these lines are expected to produce over 2 gigawatt hours of storage annually at capacity, but we plan to run the first line at 1.25 gigawatt hours annually, until we implement subassembly automation in the future. The cost of a line that should produce over 2 gigawatt hours annually is estimated to be between $40 million and $50 million, but to get our initial lineup to 1.25 gigawatt hours, we're aiming to spend closer to $30 million. The total cost consists of direct costs paid to our automation partner, ACRO, and CapEx costs related to injection molding suppliers. The manufacturing process is capital efficient compared to other technologies in the market. Once we scale production, a significant source of cash will be the production tax credits expected to return up to 125% of the capital investment within a year of full production. Moving into the next few pages, I want to discuss the market and provide an update on our commercial pipeline and backlog. We are seeing strong interest in deploying energy storage for over four hours of capacity in various U.S. regions, especially in the Southeast and ERCOT. This shift has resulted in a growing demand for longer-duration storage solutions as these macro trends continue in the market. As such, EOS has a unique competitive advantage, as our systems are designed to operate between three to 12 hours in duration while remaining efficient beyond four hours, thus enhancing our competitive edge. Transitioning to Page 15, we've mentioned that our pipeline and backlog represent a mix of different customers and projects. What we generally see with independent developers and utility-backed projects is the project life cycle goes through project development, execution, and operations. Recently, we signed a 1 gigawatt-hour letter of intent with a Texas developer, which shows the progress we're making. While independent developers often engage larger financing resources to execute projects, utility-backed projects navigate through more extensive qualifications and due diligence, which also takes time. As Joe mentioned, we are focused on several critical customer orders for early 2024, including a 47 megawatt-hour pilot order that allows us to showcase our technology to one of the largest U.S. utilities, leading to significant future opportunities. Now turning to our commercial pipeline and order backlog, the numbers reflect growing market demand and a 30% rise in average sales prices from prior quarters. Our lead generation ended at $13 billion, representing 44 gigawatt-hours of storage, up from the prior quarter. Our current pipeline stands at $11.6 billion, up $1.9 billion from the previous quarter, representing over 43 gigawatt-hours. The backlog is at $539 million, reflecting the orders booked this quarter, including one with Dominion Energy. As we continue into Q4, we remain focused on a successful implementation of the state-of-the-art manufacturing line and the identified path to profitability with a revenue forecast of $30 million to $50 million being adjusted downwards. Lastly, I want to touch on our funding strategy. We appreciate receiving conditional approval for the DOE loan, but we need to raise capital between now and the first reimbursements expected in 2024. We are encouraged by our financing discussions and anticipate a mix of both debt and equity to meet our capital needs while balancing customer outputs and managing working capital. Thank you for your time, and I’ll turn it back to the operator for questions.

Operator, Operator

All right. For your first question, it comes from the line of Vincent Anderson from Stifel. Please go ahead.

Vincent Anderson, Analyst

Yeah, thanks. Good morning, so this may seem a little too optimistic of a spin, but I'm curious if there's almost just a little bit too much demand relative to your near-term capacity plans to get commitments to convert to orders, and particularly, if I'm like a small or medium-sized project that I'm worried about a utility-scale customer coming in and locking up a couple of years' worth of your capacity. And then maybe just more broadly speaking, how are you managing these relationships between customers that could provide more immediate orders and deposit cash flows and still keeping those large-scale customers happy by not committing too much of your initial capacity?

Joe Mastrangelo, CEO

Vincent, I wouldn't say optimistic; it's realistic. I think that's the balancing act we're doing to put together the pieces of the puzzle. We do capacity planning of projects based on when the customer anticipates they will go live. The conversations we have with customers emphasize a mix—we can't rely solely on small projects or just large projects because the latter can be lumpy. We're trying to highlight the best use cases for our technology and define the optimal average selling price on our path to profitability. If demand surges after we have the first line up and running, we can accelerate lines two, three, and four as necessary. That's how we've designed our company. The key is balancing our production and capacity to ensure we meet delivery promises. We’ve managed this over the past 12 to 18 months by coordinating with customers about their project timelines to align our supply.

Vincent Anderson, Analyst

Okay. All right. That's helpful, thanks. Then just following on that, if you're willing to discuss a bit more specifically which of the factors you listed on the new order guidance change, maybe which of those changed most meaningfully over the course of the third quarter that impacted your expectations on new orders for this year?

Joe Mastrangelo, CEO

What I would say we've seen is increased opportunities in the pipeline. One of the big things is the amount of new opportunities we’re receiving earlier in the process, moving through permitting and financing. It’s also important to communicate capacity timelines back to customers to encourage timely decisions. We’re also observing that longer-duration storage is becoming increasingly attractive for projects, as our five-hour storage aligns well with customer needs due to increased interest in our technology.

Operator, Operator

And to your next question, it comes from the line of Martin Malloy from Johnson Rice & Company.

Martin Malloy, Analyst

Congratulations on all the accomplishments you've had recently. My first question was just how we should think about reimbursement under the DOE loan program and that first advance? And maybe could you talk about what would be covered in that? Would it be past not just CapEx, but also worker training, R&D? How should we think about getting once you get to that first advance?

Nathan Kroeker, CFO

Sure, Marty, it's Nathan. Good to hear from you. As we think about the reimbursement mechanism that's built into this loan structure, it's reimbursement of eligible costs defined as a combination of CapEx and project-related OpEx. Hiring someone to manage the ACRO relationship would be OpEx and considered an eligible cost. Other operating expenses are not covered. Ramp-up and shakedown costs incurred as we get the line up and running would also be eligible. Essentially, there are ongoing eligible costs even after the line is built.

Martin Malloy, Analyst

For my follow-up, I wanted to ask about Slide 12 and the tax credit you point out, the PTC. Could you maybe talk about Section 45 tax credits and domestic content you mentioned?

Nathan Kroeker, CFO

The tax credits fall into two buckets. The first is the production tax credit, which is $35, plus $10 per kilowatt hour for projects built after January 1, 2023. We are comfortable starting to look for opportunities to monetize these credits. The second piece involves the 10% domestic content bonus credit, which we are still working through. We're engaging with customers now on quantifying these credits for projects placed in service in 2023. Our high level of domestic content makes us confident in meeting and exceeding these thresholds.

Joe Mastrangelo, CEO

The staff has been focusing on the supply chain to maintain domestic content while evolving our relationships with long-term suppliers. Our plan includes diversifying the supply base for raw materials while maximizing domestic sourcing to minimize supply chain risks.

Operator, Operator

And for your next question, it comes from the line of Christopher Souther from B. Riley.

Christopher Souther, Analyst

It seems we will keep production quite low from the semi-automated lines to save cash, which is understandable. However, we expect a similar run rate in the third and fourth quarters, with a minimal revenue burn of about $10 million per month. I'm just curious if we should anticipate any increases as we begin to develop and test the line from that perspective.

Joe Mastrangelo, CEO

When you look at the production in October, it increased 5.5 times compared to September. We're focused on optimizing our project delivery schedule, particularly for the ERCOT project as it is critical for showcasing our technology. So, over the next three months, our priority is to ensure that this project is completed accurately and effectively.

Christopher Souther, Analyst

Okay, thanks for clarifying. I thought you were potentially pushing those projects into the fully automated environment, but that makes more sense. And then just the remaining CapEx amount and timing on Line 1. I think you previously talked about $40 million to $50 million of CapEx for that, but Slide 9 mentions $30 million. Is that just coming in under previous cost assumptions? Or was that prior $40 to $50 million, including some of the subassembly automation? And then just where are we in the CapEx for Line 1?

Nathan Kroeker, CFO

We've previously said $40 million to $50 million to build a fully automated line that has a nameplate capacity of over two gigawatt hours. The first automated line has an output of 1.25 gigawatt hours; thus, we estimate around $30 million to reach that production level. Of that, approximately 40% of the way through paying for the line, which includes design and systems by ACRO as well as tooling costs.

Christopher Souther, Analyst

Perfect. And then maybe just a last one here. On the current pipeline, can you give us a sense of the mix overall from a percentage of gigawatt hours between utilities, smaller customers, and IPPs? What does the overall mix look like? It seems like it's shifting more towards kind of the blue-chip utility type customers, but I wanted to get a sense of where we are in that shift, just given the size of some of those potential customers?

Nathan Kroeker, CFO

We are comfortable with the current mix, aiming to maintain a diverse portfolio across independent developers and utility-backed projects. We intend to manage both types of projects while ensuring that the risks are balanced. The emphasis on large, utility-backed projects positions us well to capture the ongoing market shift towards longer-duration storage as compared to independent developers.

Operator, Operator

And for your next question, it comes from the line of Joseph Osha from Guggenheim.

Joseph Osha, Analyst

A couple of questions. First, as we think about meeting these LPO conditions precedent; I know there's a lot that's complicated, but can you characterize for me what you think the real challenges are and what we should be focused on as you move through that process?

Nathan Kroeker, CFO

I don't think there's anything that we can't accomplish. Different challenges require varying amounts of effort and time, but we are moving forward on all fronts. It involves steps concerning real estate, capital requirements, and permitting. Nothing is insurmountable; we are just diligently working through each process.

Joseph Mastrangelo, CEO

The big gating item is the first line.

Joseph Osha, Analyst

Okay. I'm just trying to understand as investors, how we should think about this other than just waiting for a press release. Is there some way you have that you might be able to communicate with us on progress towards meeting those CPs?

Nathan Kroeker, CFO

The key element is Line 1, and we'll keep giving updates on where we stand with it. That’s critical to watch.

Joseph Osha, Analyst

Between now and then, you're delivering products that are more costly from the semi-automated line. When you consider the production costs alongside the $45 that offsets it, does that result in a positive gross margin?

Nathan Kroeker, CFO

We've been consistent in saying that getting to full automation is critical for achieving positive gross margins. The scale and efficiency gained from full automation are vital.

Joseph Osha, Analyst

Do you have plans to monetize those transferable credits as they become available on the 45x guide?

Nathan Kroeker, CFO

Yes. We are in discussions with several counterparties to monetize those as we earn them in 2024.

Vincent Anderson, Analyst

I wanted to touch on a couple of the supply chain comments you made earlier, Joe. I assume the DOE loan includes the budget for bringing some of this stuff in-house, like I think you mentioned electrolyte mixing and maybe injection molding as well. But is the Westinghouse property permitted for these activities?

Joe Mastrangelo, CEO

We have multiple pieces that we're looking at, Vincent. There is the ability to do it at our current facility, which is part of our plan. The permitting required is already in place. So, we're looking at logistics and the best site for scaling our operations over the long term.

Vincent Anderson, Analyst

The electrolyte mixing benefit is more about flexibility on the working capital side, or is there a bigger cost savings involved?

Joe Mastrangelo, CEO

The primary advantage is simplifying the electrolyte formula over time. We've learned that with conductive plastics, we can optimize zinc plating. Reducing dependencies on titanium helps in mitigating costs while establishing a reliable supply chain will further enhance our scalability and security.

Vincent Anderson, Analyst

Sure. Yes. Okay. And then last one. Injection molding— I assume it's a bit outside of the current team's expertise, so I'm curious about strategy here?

Joe Mastrangelo, CEO

We're not in-sourcing injection molding. Our strategy involves diversifying our suppliers instead. We've built many relationships over time and are focusing on suppliers that remain consistent as we scale up production.

Operator, Operator

And for your last question, it comes from the line of Thomas Curran from Seaport Research Partners.

Thomas Curran, Analyst

Nathan, could you just tell us how much of Z3 did you ship in September, in megawatt-hours? And for as long as you remain on the semi-automated line, what would be the maximum you would ship in a given month?

Nathan Kroeker, CFO

In September, we shipped a total of X megawatt-hours, with the ramping capacities serving dual purposes of improving product manufacturability and delivering to key customer shipments. The focus is on getting products into the field to collect submission data. Our goal is to align with the schedules of ERCOT and provide valuable data for validating our technology.

Thomas Curran, Analyst

Got it. Okay. And then among the strategic partnerships you're working on, do you expect to continue it or maybe renegotiate the zinc bromide supply agreement you have with TETRA?

Nathan Kroeker, CFO

We are actively negotiating throughout the supply chain, and our partnership with TETRA has been strong, with ongoing discussions about our future relationship.

Joe Mastrangelo, CEO

Thanks, everybody, for listening in. A lot of things going on, a lot of stitching together to highlight the underlying work leading to the results. We feel confident about our orders pipeline and the shift towards longer-duration storage validates our approach. We will return in December with more information concerning our roadmap to profitability and the factors influencing our scaling efforts. Thank you again for your time.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.