On Wednesday, NeoVolta (NASDAQ:NEOV) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

NeoVolta completed a strategic transformation in fiscal year 2026, expanding from residential battery storage to a multi-market energy storage platform serving residential, commercial and industrial, and utility-scale markets.

The opening of the Pendergrass, Georgia manufacturing facility marks a significant milestone, with production ramp-up expected over the coming months.

Fiscal year 2026 revenue increased by 58% to $13.3 million, despite a sharp decline in Q4 revenue due to reduced residential market demand.

NeoVolta reported a GAAP net loss of $21.5 million for fiscal year 2026, reflecting strategic investments and expansion efforts.

The company secured a strategic supply agreement with SK ON for 9 gigawatt-hours of U.S.-manufactured LFP battery cells, with potential for an additional 9 gigawatt-hours.

NeoVolta raised nearly $50 million through equity financing and secured a $20 million senior secured term loan facility.

The company is focused on operational execution, converting pipeline demand into binding orders, and advancing production capacity in the Pendergrass facility.

NeoVolta's future outlook includes leveraging strategic partnerships, expanding product offerings, and scaling up its U.S.-based manufacturing.

Full Transcript

OPERATOR

Greetings and welcome to the NeoVolta fourth quarter 2026 financial results. This time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operating assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Artis Johnson, Chief Executive Officer and Director. Thank you. You may begin.

Artis Johnson, Chief Executive Officer

Thank you, operator, and good afternoon, everyone. Welcome to NeoVolta's fourth quarter and fiscal year 2026 earnings conference call. I'm Artis Johnson, Chief Executive Officer of NeoVolta, and I'm joined today by our Chief Financial Officer, Gene Nealis. Before we begin, I would like to remind everyone that our remarks today will include forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from what we discuss today.

Please refer to the safe harbor statement on slide 2 of our investor presentation, as well as the risk factors included in our most recent annual report on Form 10-K and other filings with the SEC. We undertake no obligation to update forward-looking statements except as required by law. Before turning to the year, I want to welcome Gene to her first earnings call as NeoVolta's Chief Financial Officer. Gene joined the company in May and brings more than 20 years of experience across the energy transition, manufacturing technology, capital formation, and operational scale-up.

She joined NeoVolta at an important point in our evolution, and I'm pleased to have her with us today. Gene will review our financial results, balance sheet position, and capital allocation priorities shortly. Last week we marked an important milestone with the official opening of our Pendergrass, Georgia manufacturing facility. That event reflected the culmination of progress we have made in building a state-of-the-art battery energy storage factory.

We are now transitioning from commissioning, completing final certifications, and we'll be moving to the execution of production and ramp-up over the coming months. Fiscal year 2026 was a defining year for NeoVolta. We completed the strategic transformation of the company from a residential battery storage business into a multi-market energy storage platform serving residential, commercial and industrial, and utility-scale markets. That transformation was built through deliberate execution.

We launched NeoVolta Power, our domestic BESS manufacturing platform in Pendergrass, Georgia. We expanded our commercial and industrial route to market, and we continued developing the NV Wave modular residential product. We established a multi–gigawatt-hour, long-term U.S.-manufactured lithium iron phosphate cell supply relationship with SK ON, and we added key leadership and financing capabilities to support the company's next phase of growth. At the same time, the fourth quarter was difficult for the residential storage market. Revenue reflected a sharp decline in traditional installer channel demand following changes in the federal incentive environment beginning in January of 2026. This was a market-wide headwind, and it reinforced why it was strategically important for NeoVolta to diversify beyond a solely residential market model. We remain optimistic on the long-term growth potential for the residential market.

We now launched the NV Wave with its modular architecture and sub–30-minute installation design, as well as our third-party ownership financing offering. We firmly believe this positions us to improve installer economics, reduce upfront customer cost, and support a sequential recovery in residential volumes as fiscal year 2027 progresses. In fact, we have just received both the confirmation on the NV Wave's FIAC compliance and domestic content certification, and have also received our first PO and expect delivery in the coming days.

But the central message is that NeoVolta is now much more than a residential energy storage company. We've built a broader platform positioned to participate in the growing market for domestic energy storage across residential, C&I, and utility-scale markets. Over the past 12 months we've built the necessary pieces of the platform, we strengthened the leadership team, we developed and launched the NV Wave product, we established a commercial and industrial route to market, we launched NeoVolta Power, we announced early utility-scale demand through the non-binding letter of intent with Infinite Grid Capital, we received an independent opinion supporting the Pendergrass facility FIAC compliance position, and subsequent to fiscal year-end we announced the strategic supply and manufacturing collaboration with SK ON. That is meaningful progress in a relatively short period of time. The question now is not whether the strategic building blocks are in place—they are. The focus now is on execution: moving Pendergrass through the operational ramp, converting qualified demand into binding customer orders, and scaling the platform in a disciplined manner.

Let me spend a few minutes on the factory because it's rightly the area investors are focused on most closely. Following last week's grand opening event, the NeoVolta Power facility in Pendergrass is officially open. The 210,600-square-foot facility is a purpose-built domestic battery energy storage systems manufacturing platform designed to manufacture commercial, industrial, and utility-scale BESS products. The facility is now moving from physical build-out to operational execution.

The initial production line is advancing through commissioning and site acceptance test, and initial production remains on track. Our immediate focus is on completing the remaining validation and quality processes, establishing repeatable production workflows, and preparing the line for customer deliveries. The facility is central to our strategy for several reasons. First, it gives NeoVolta a controlled U.S.-based manufacturing platform in Georgia's battery manufacturing ecosystem, with access to the I-85 logistics corridor, the Port of Savannah, and a skilled regional workforce.

Second, it is designed to support customers that increasingly prioritize domestic supply chains and BESS solutions positioned to meet applicable domestic content and FIAC-sensitive procurement requirements. And third, the facility provides a scalable base from which we can serve opportunities across C&I and utility-scale markets. As we execute the production ramp, our priorities are straightforward: qualify the production processes, meet customers' quality standards, convert the opportunities we have developed into binding orders, deliver products to customers, and ultimately revenue to NeoVolta.

Our collaboration with SK ON is an important part of our strategy. The collaboration includes a signed five-year agreement for SK ON to supply 9 gigawatt-hours of U.S.-manufactured LFP battery cells to NeoVolta Power from 2027 to 2031. It is also tied to a framework for broader collaboration under which SK ON would supply an additional 9 gigawatt-hours of cells and purchase energy storage packs manufactured by NeoVolta Power, subject to finalization of commercial terms and order documents.

Together, the signed agreement and broader framework are expected to support up to 18 gigawatt-hours of combined activity between the companies. This relationship is strategically important for three reasons. First, it provides a multi-year manufactured LFP cell supply as we advance the factory in Pendergrass. Secondly, it establishes SK ON as both a key supply chain partner and future customer for packs manufactured at the facility. And third, the scale of the relationship supports our decision to accelerate our investment to build the second production line designed around pouch LFP cells.

That second line could expand our Pendergrass manufacturing facility towards its target of 8 GWh of annual BESS production capacity in 2028. On the demand side, we have approximately 1.1 GWh of early demand visibility through a non-binding letter of intent with Infinite Grid Capital representing approximately $200 million in potential deployments; approximately $53 million has now been secured in a binding capacity reservation agreement. More broadly, the strategic relationships around our platform matter.

LONGi, Potus Edge, Infinite Grid Capital, and SK ON provide manufacturing expertise, supply chain depth, channel access, and early demand visibility. Together this ecosystem provides important support as NeoVolta moves from commissioning into production. Let me close before I turn the call over to Gene. Fiscal year 2026 was a year of meaningful transformation and progress. We built a broader platform—the 80%-owned domestic BESS manufacturing business, an expanded product portfolio, growing commercial and utility-scale channels, strategic supply and manufacturing relationships, and a leadership team built for the next phase.

Fiscal year 2027 is about operational execution. The factory in Pendergrass is officially open. The production ramp remains on track. Our priorities are clear: execute the ramp, convert commercial opportunities into binding orders, advance the SK ON collaboration, and manage capital prudently as we grow. We are proud of the progress the team has made, and we remain focused on disciplined execution. With that, I'll turn it over to Gene.

Jing Nealis, Chief Financial Officer

Thank you, Ardis, and good afternoon, everyone. I am pleased to be joining you for my first earnings call as NeoVolta's Chief Financial Officer. I'll begin with a brief review of our fiscal year 2026 financial results, then discuss our balance sheet, capital allocation priorities, and financing strategy as we advance the Pendergrass production ramp. For fiscal year 2026, revenue increased 58% to 13.3 million compared with 8.4 million in fiscal year 2025.

The performance reflects continued expansion of NeoVolta beyond its historical residential base. Fourth quarter revenue was approximately 13,000 compared with 4.8 million in the prior year fourth quarter. The decline primarily reflected the sharp slowdown in residential and traditional installer channel demand following changes in the federal incentive environment earlier in calendar year 2026. While the fourth quarter result is clearly not representative of the scale of business we intend to build, it provides important context for the investments and the strategic decisions we made during fiscal year 2026.

We responded to the changing residential market by advancing the NVV modular residential product design and our third-party ownership financing offering while also accelerating our expansion into CNI and utility-scale energy storage markets. For fiscal year 2026, our GAAP net loss was 21.5 million, or $0.55 loss per share, compared with a net loss of 5 million, or $0.15 loss per share, in fiscal year 2025. Fourth quarter GAAP net loss was 11.7 million compared with 1.6 million in the same period prior year.

Fourth quarter GAAP net loss increase was primarily driven by 3.9 million provision for credit losses and bad debt expenses and 1.1 million of residential inventory reserves. The increased loss also reflects the investment phase of the company: the build-out and the ramp preparation for the Pendergrass manufacturing facility, and growth in personnel and operating capabilities associated with building a broader multi-market energy storage business.

Beginning this quarter, we are introducing adjusted EBITDA as a supplemental non-GAAP measure to provide investors with additional visibility into our underlying operating performance as our business grows. For fiscal year 2026, adjusted EBITDA was negative $12.8 million compared with negative $2.6 million in fiscal year 2025. Fourth quarter adjusted EBITDA was negative $8 million compared with negative $0.7 million in the prior year. We believe adjusted EBITDA is useful because it helps investors evaluate operating performance across periods by excluding items such as interest, taxes, depreciation and amortization, stock-based compensation, and certain non-recurring or non-operating items. A full reconciliation to the most directly comparable GAAP measure is included in today's earnings release. We ended fiscal year 2026 with cash and cash equivalents of 22.2 million and restricted cash of 3.2 million, for total cash, restricted cash, and cash equivalents of 25.4 million. During fiscal year 2026, NeoVolta successfully raised nearly 50 million through equity financing. Those financings were central to funding the initial construction phase of the Pendergrass BESS manufacturing facility and supporting the operating investments required to transition NeoVolta into a multi-market energy storage company serving residential, CNI, and utility-scale customers. Subsequent to year end, we further expanded our financing capabilities by entering into a 20 million senior secured term loan facility, which was funded net of original issue discount at closing. The facility also includes the potential for up to an additional 10 million subject to mutual agreement and specified conditions. This financing is important not only because it provides additional funding for working capital and general corporate purposes, but because it reflects an evolution in our capital formation strategy.

Fiscal year 2026 was primarily about financing the transformation, funding the manufacturing facility, building the organization, and establishing the commercial and supply chain relationships required to support our growth. As we move from construction and commissioning into production execution, we expect a broader range of growth financing alternatives to become available to us. The recent senior secured term loan facility is an important example of that progression.

Our current funding toolkit includes cash on hand, the senior secured term loan facility, customer prepayments, and equity financing. We intend to use these tools thoughtfully as we grow, balancing the needs of the business with emphasis on cost of capital, shareholder dilution, financing flexibility, and execution certainty. Looking ahead, our capital allocation priorities are clear. We will support the disciplined ramp of the Pendergrass facility, including the working capital needs associated with production and customer deliveries.

We will prioritize investments that help convert our CNI and utility-scale opportunities into binding customer orders and revenue. We will accelerate our investment in Line 2, which is designed to use pouch LFP cells from SK On. We believe NeoVolta enters fiscal year 2027 with a stronger-than-ever balance sheet and a capital formation strategy designed to support our revenue growth. With that, I'll turn the call to the operator to open up for questions.

OPERATOR

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing these star keys. One moment, please, while we poll for questions. And our first question comes from the line of Shawn Milligan with Needham.

Please proceed with your question.

Shawn Milligan, Analyst at Needham

Hey, Ardis and Jing, thanks for taking the questions. I guess kind of off the bat, you filed a $200 million shelf after the close also, and it looks like the stock's down on that. I guess could you talk through liquidity at year end, plus the debt raise, and just, like, how much you think you need through the initial kind of startup of the factory, and just the rationale behind the shelf and willingness to maybe use equity at current prices or not, or seek alternatives to equity down here.

Jing Nealis, Chief Financial Officer

Hi, Sean, thank you for the question. I'll answer that. We filed S-3 as administrative filing. It's not intended to be used right away because our current S-3 is running out of balance; it's getting pretty low. So the new filing is for a few years to really provide that flexibility for us to use equity. But with the recent financing through ROW hold, we are good for working capital for a period of time, and then we're getting customer POs in that process.

So I would take that as administrative filing.

Shawn Milligan, Analyst at Needham

Okay, great. Thank you. And then the SK On agreements seem particularly interesting. I guess, Ardis, from your perspective, what do you think the SK On agreements say about your ability to manufacture the packs and then also maybe more specifically the controls layer you have, because for SK On to sign a partnership with someone of your size seems to speak volumes to, I think, your process. And then just is that attracting attention or, like, a halo effect from other potential customers?

Artis Johnson, Chief Executive Officer

Yeah, thanks, John, for that question. I would say that the experience that we have in our team in terms of taking a battery cell and turning it into a pack is something that we can say is, in our opinion, one of the best in the world. Right. And it's kind of a testament to a company like SK and their size. It's not merely acquiring tools and moving from a battery cell manufacturer into a pack manufacturer and ultimately the BESS manufacturing business.

They recognize that we have that capability, too, and we're one of the few companies in the world that have that capability to the extent that we do have. And I would say that the SK movement started over a year ago prior to the joint venture with us and Longi, ultimately, and recognizing that this isn't just something that was spur of the moment. This is something we've been working on since day one of the JV, and ultimately we knew that this was going to be where it went.

The fact that they are looking to us for packs is reflective of our capability and some of the IP and the trade secrets, so to speak, with capability of the people that we have on the NeoVolta Power team. Right now we're going through a design phase with them, but ultimately we'll be doing that manufacturing right here in the U.S. in the Pendergrass facility. In terms of what it's done in the marketplace, it has definitely created a large interest in what we can do.

There's a lot of customers now that are reaching out to us, are particularly interested in once we start manufacturing those. We're working with many people now in terms of qualifying the facility. As we had our grand opening last week, we received a lot of interest from that. The combination of the two have created a lot of opportunity now that we're working through, and we're thinking strategically how not only do we launch into that, but also how we carry forward until that line is up and running second half of next year.

But it most definitely has created a lot of buzz, so to speak. But beyond that, there's a lot of opportunity for us because, yes, we are new to the game, relatively speaking. We are a smaller company at this point in our trajectory, so to speak. But ultimately, we have that capability and that wherewithal with our, particularly not only the pack manufacturing but our battery management capability that we have, that we think is very attractive to customers.

And so we're leaning into that as we start to develop a lot of these opportunities, both short and long term.

Shawn Milligan, Analyst at Needham

Great. And then just to kind of build on the SK announcement, I guess, what are the gating items to getting the formal, you know, purchase agreement, I guess, signed for the 9 gigawatt on the pack side. I'm assuming you would try to have that in hand before you accelerate Line 2.

Artis Johnson, Chief Executive Officer

Yeah. Yeah, for sure. In fact, it's designed to be done here in the coming weeks. To be honest with you, from a commercial perspective we've already kind of come to those high-level agreements. Now we're really working through more the technical portion of it and getting through all the process it is to kind of come to that final agreement. But from commercial perspective, in terms of timing and pricing and things of that nature, we've already come to those arrangements.

From that perspective, it's just a process piece of it that we need to get done from a technical side, and we want to ensure that we do that in a proper form and not rush to getting it done. But time is of the essence, so to speak, as they say in legal terms. But relative to where we look at it, we think that we'll have this done in the next coming weeks, in, you know, six to eight weeks.

Shawn Milligan, Analyst at Needham

Great, thank you. I'll turn it over and then get back in the queue.

OPERATOR

Thank you. Our next question comes from the line of Rob Brown with Lake Street Capital Markets. Please proceed with your question.

Rob Brown, Analyst at Lake Street Capital Markets

Hi, Ardis and Ching. First question is on the sales pipeline. I think you talked a little bit about it. Could you kind of characterize the sales pipeline at this point and the next steps in getting that converted to POs and what the dependencies are?

Artis Johnson, Chief Executive Officer

Yeah, Rob, thank you for the question. We have a very robust pipeline and we are starting to move those things into conversion now as we stated, and it might not have been very clear, but as we stated with the Infinite Grid Capital LOI that we had, we're already beginning to execute on that. We've come to a high-level commitment agreement, a reservation, so to speak, on the first 300 megawatt-hours on a project that we're working with them to deliver for edge data center applications that will be up in Canada, but that'll be coming out of the U.S. factory as needed and will, as we start to produce, that'll be in 2027. So that's the high level starting to convert that; it would become purchase orders over time as we start to do that. But it's a reservation agreement that they placed with us with, you know, financial commitment tied to that. So we're starting to see that execution now. For us, it's really coming down to we've got all the compliance required in order to move forward. And now we're starting to go through what I'd call the qualification QA/QC process, which could take, you know, a few weeks, maybe a month or two.

We had a lot of potential customers that were at the factory last week. They were able to put their hands, so to speak, on the tools and see them and see that the factory is real. Now we're starting to move through that process and things are starting to accelerate. So we feel very comfortable in terms of our projections coming into this year and really being able to fill the factory as we start that ramp-up process over the coming months into the middle of next calendar year.

But definitely we knew that we had a pipeline, we knew we had a lot of interest. But now it's starting to become real and we expect to start receiving orders between now and into this year, calendar year so to speak, as we start to continue to move forward in ramping up, and we're even starting to have long-term conversations with those in terms of capacity going into 2027, 2028 and beyond. Recognizing particularly when we start to launch the pouch cells, being the domestic content capability they provide, how they can get in line to take longer, larger opportunities with us on more of a master supply agreement perspective.

So we are starting to get orders now. We've set up we're going to build our first 10 units. We've already procured all the materials to do that and we feel like we've already got a home for those. We'll be turning those into purchase orders and start delivering that product this year and then moving into next year on the ramp-up phase. We really think that we're going to be stepping into some pretty large opportunities and more to come on that, but we feel very confident about where we're at.

In fact, I feel better every week as the factory becomes real, as customers start to come to the factory, as we start to move down this pathway of becoming a producer of the large-scale BESS; the C&I side as well, it's got a lot of pickup, a lot of opportunity there. As we start to deliver that product in Q1 of next year, we think that there's a real robust pipeline on that side as well. So definitely going to be looking for us to start converting things into POs and making those announcements and start delivering product very, very soon.

Rob Brown, Analyst at Lake Street Capital Markets

Okay, great. Thank you. And then on the decision to accelerate the second line, give us a sense of when you would start ordering equipment there and installing online, and I guess how that line would ramp to be—I think you said the 2028 deliveries.

Artis Johnson, Chief Executive Officer

Yeah. So we look at it like this. We're still working through some final designs and the design portion of the process, but that will start moving very rapidly. It is not something that takes a few weeks; it definitely takes months to get everything done, get it over here and get it delivered, get it installed, get it started up. But for us we look to be moving into that at the beginning of next fiscal year for us, but then to the middle of next calendar year is when we feel like we'll start producing off of that line.

And we'll have both lines producing at the pack level, supporting that on the back end with the BESS— with the final BESS piece that we already have—then ultimately building both of those full lines out. But for those that were in our factory last week, at the very beginning of the process, that's the pack design and the pack line. We'll ultimately put that second pack line in that will support the pouch cell. So we'll be able to deliver both pouch and prismatic BESS and deliver that into the phase of the BESS line itself.

And then we will ultimately build that out as needed as we continue to ramp up, but expect to really have that in the second half of next calendar year.

Rob Brown, Analyst at Lake Street Capital Markets

Okay, thank you. I'll turn it over. Congratulations on all the progress.

OPERATOR

Thank you. Our next question comes from the line of Ted Jackson with Northland Securities. Please proceed with your question.

Ted Jackson, Analyst at Northland Securities

Thanks very much. Just a little clarification, just to make sure I understood it. So you expect to actually have the second line kind of up and running in the second half of calendar '27, and would it be fair for us then to be adjusting our models towards that end, that you would have the first line up and then the second line, and then will you be at that point running two shifts on the first line and then starting at the second line? Or is there some kind of, like, you just say, like, will it be—you know, is there some kind of shift where it might be one production line?

Right. You know, you see I'm saying running a shift, another running a shift. You know, just maybe a little more clarity around that. That'd be my first question.

Artis Johnson, Chief Executive Officer

Yeah. In the beginning, I wouldn't necessarily characterize it as a second line and changing the final BESS numbers in particular. We do, and are working through, an agreement arrangement on the pack manufacturing, which would bring revenue with SK On towards the second half of next year. That's still in discussion, depending on the demand that's coming to us on the final BESS. But think of it more as just the front end where we can produce whether it's a pack that's made with prismatic or a pack that's made with the pouch cells going into the final BESS solution.

We expect to maintain the pace of the final BESS that's coming out, so I wouldn't necessarily say that we are necessarily ramping that up. We can, as needed. And somewhat when we talk about the ramp-up of our plant going from 2 to 4 to 6 to 8, typically we've been articulating as such that we would be two, then two shifts getting to four, second line getting to six and then two shifts there getting to eight. But really think of it more of we're going to have flexibility on the front end but not necessarily needing to produce final BESS product—doubling that up.

So I don't think that from the perspective of how you've looked at it, Ted, and how you've articulated, would necessarily change. There could be an adjustment as we move forward on the pack delivery to SK On. But in terms of the BESS products that we'll be delivering, the containerized 5 megawatt-hour DC blocks that we'll be delivering off the line, right now we're kind of looking at it as it's going to be the same as needed. And like I said, if demand increases, we'll be able to move up rapidly.

So we may be doing one to two shifts at the BESS on the back end to start and then two pack lines coming in. So that's how I would look at it. It's more flexibility in the beginning with a quicker ramp as needed if we need to reach more demand in the future, but not at this time. This is more of giving us flexibility on the front end with the SK solution and/or the prismatic solution. And there will be an additional additive potential portion coming into the end of calendar year '27, but moving into '28 on the pack delivery to SK On.

Ted Jackson, Analyst at Northland Securities

Okay, that makes sense. Thank you. My next question is just asking for an update with regards to the commercial product line coming out of Pendergrass. I know the expectation is initially that the utility product is kind of tried and true and tested and in the market already, but the commercial product will come in behind it. What's the timeline for that?

Artis Johnson, Chief Executive Officer

Yeah, we're looking towards second quarter of next calendar year, so kind of getting into our final quarter of next calendar year. We had a product and design; we've updated that design slightly. We have a current solution that we can sell. It's based on a 233 kilowatt-hour solution. We're moving up to a 313 kilowatt-hour solution, a little bit bigger, from a 125 to a 150 kilowatt PCS. And what's taking a little bit of time there obviously is transitioning that product here to the U.S. with more domestic content capability in it from the PCS design and everything from that capability, moving it here, qualifying vendors, finalizing that design. We're going through first beta production of that right now and then it'll be more about certification starting in, say, November. And we know that that could take us two, three months of getting it done. So that's why we're kind of looking at the second quarter. Obviously we have internal expectations where we try to pull things up as soon as possible, but right now we're looking at it more towards the second quarter of next calendar year that we'll be delivering that product.

But that's not stopping us now to start to sell that, prepare people, educate them on the solutions. We know that the C&I market, those products and those solutions sometimes can take six months or so or plus. So we're already starting to market that. You'll see it at the trade shows in November that we attend. And so customers are already aware of it. Our sales teams are already out trying to sell it, but we expect first deliveries, you know, February, March, April time next year.

Ted Jackson, Analyst at Northland Securities

And then how important of a channel is Luminia for that product? You know, is that what's really going to allow you to leverage that relationship, or is there another arrow in your quiver?

Artis Johnson, Chief Executive Officer

Yeah, no, it's a good question. So Luminia is definitely a very strategic partner of ours. I know we've talked, you know, that we put out there that we currently have a non-binding LOI to look at some M&A activity with them. But, you know, they bring a portfolio and a pipeline of opportunities with them already that they're continually developing. They're already starting to develop them based on our product portfolio. So they're going to be a very strong partner for us.

They've also supported us on the TPO, the third-party ownership platform that we've developed not only for the C&I that we will be using for our product, but also on the residential side. And we kind of mentioned that early in the call about that. We've launched that TPO platform and so that allows us to push product through, but we are getting a huge amount of demand outside of them. Think about them as a development arm of NeoVolta. So they're out there developing a portion of that opportunity in that business, and they will be bringing a lot of pull-through in that C&I. We're already building out that pipeline. There are several, dozens and dozens of megawatts of both solar-plus-storage and storage-only opportunities that they're focused on and working on. All behind-the-meter opportunities they're working on kind of programmatically, mostly in the state of California, but other places.

But our sales team, just naturally out there in that channel portion of the business, sees a lot of opportunity and demand. Many of these channel installers and developers both do residential and C&I. When I think of Luminia, I think it more programmatically: several units, several opportunities over time, working at the utility level, developing programs with them to help them deploy storage onto the grid to support the utilities. But also we're seeing a lot of that in solar-plus as well as storage-only opportunities all across the U.S. right now. We feel that there's a demand, a huge demand, for an IRA-compliant, domestic-content product, and we feel that we'll be one of the few that actually have that product available for customers going into next year.

OPERATOR

Thank you. And as a reminder, if anyone has any questions, you may press star one on your telephone keypad to join the question-and-answer queue. Our next question comes from the line of Steve Ferrazzani with Sidoti and Company. Please proceed with your question.

Steve Ferrazzani, Analyst at Sidoti & Company

Evening, Artis, Jing. Appreciate all the color on the call. I know you had an awful lot to cover. Congratulations on securing the term loan. I'm trying to figure out, in terms of how you're thinking about cash burn rate ahead of purchase orders, how you're thinking about being able to secure prepayments—just what the path is from A to B in managing costs ahead of revenue and how you get there.

Jing Nealis, Chief Financial Officer

Hi, Steve. Yeah, thank you for the question. I'll cover this. The way we think about our capital formation strategy and how to fund the significant growth that we're looking to deliver in the coming quarters and years: the term loan would give us the time to hit a few major milestones that Artis addressed during the call, including signing the SK On pack deal and turning pipeline to initial POs, and so on and so forth. We are working on a potential ABL-type facility to fund working capital as we get customer POs and prepayment and turn into AR and inventory.

That would allow us to have some sort of asset-based working capital revolver. So that's another channel that we are actively working on. And there is always the customer prepayment for sure. The IGC reservation agreement that we signed is a good example that we're seeing—customers want to lock in our capacity, especially with the SK On deal, domestic-content product going into 2028 and forward. We are looking to get capacity reservation fees also.

So there are different channels to get paid in front from the customer. However, we still need to fund working capital to procure materials. And then, of course, equity is a way to fund it, and we'll evaluate based on cost of capital and certainty and the demand to make sure we do it in a very thoughtful way.

Steve Ferrazzani, Analyst at Sidoti & Company

Could that financing have any impact on trying to establish the second line? I know you've already proven you can do this at very low cost and you've shown it on the first line. But how does the financing side affect the second line?

Jing Nealis, Chief Financial Officer

The second line, relative to the first line—the capex cost for the line itself is around 15 million. The total capex for building the facility was 20 million. The line itself is 15 for the equipment. So the second line—we're expecting somewhere below that number. And then, as Artis mentioned a little bit, we are taking a phases approach that we really just need to have the pipeline installed. So there will be some capex to really accelerate. But to make it clear, the capex investment for line two has always been in our plan. We need to find a way to fund it. With the SK On deal, it's really an acceleration. Instead of making that decision later next year, we are making that decision later this year to accelerate line two, which will bring our capacity to hit the total 8 GWh a lot earlier than the original plan.

Steve Ferrazzani, Analyst at Sidoti & Company

Got it. That's really helpful. If I could pull back for a second—in terms of, we know hopefully the resi market downturn is temporary, but given all you have going on in Pendergrass and all the efforts you're making there, is that a bit of a distraction for you right now? Do you really still believe in resi as being that third piece? You've gone through with the IRA compliance with NV Wave, but really going forward, how important is that market for you?

It seems like you remain very committed to it.

Artis Johnson, Chief Executive Officer

Yeah, I can jump in on this one. The truth of the matter is the market has definitely suffered, and we see fallout now with many manufacturers and their inability to get to the compliance solution that needs to work in order to make the residential market flow, which is the TPO market—the third-party ownership platform. We invested into that, and a lot of our cash burn is tied to that residential business. We are always evaluating what makes the most sense strategically.

We still believe in that market. We think that we're on the back end of that investment now. We had, and it was reflected, some delays on completing the NV Wave, but that's done. We're starting to ship product now, and we feel very bullish about how it's going to position itself in the marketplace based on its capabilities. We've also launched the TPO model—the platform—that has also been launched, and we're executing on that as we speak today. So we think that we have not only the product but the financing solution that we can also share with our customers—not exclusively. We can work our product into other third-party ownership platforms as well. And we think there's going to continue to be fallout of product in those platforms in terms of their compliance or the inability to be compliant. So we definitely feel that that marketplace is going to, A, continue to grow and, B, become more limited in who the suppliers are going to be into that marketplace.

So we definitely are continuing to move forward with that. We feel that it supports us in terms of our brand and our capability. We feel now that we're going to turn that corner in terms of operating expense versus revenue and profitability over the coming months, and we're definitely going to see how that continues to play out. But having an IRA-compliant, domestic-content platform product that has its own TPO we think is also very valuable. So it's something that we are always looking at as to how we position it going forward.

We definitely are aware—we have the self-awareness to say, hey, look, we've got a big thing going on in Georgia with this factory. It is definitely a vertical that is separate. You don't see this very often. In fact, in terms of actually delivering product, I don't know of anybody that really does all three anymore. Most people are—even the big guys of the world—focusing maybe on residential and utility scale. We're going to be in all three verticals, and we think that they're all very critical.

But we're always evaluating where we're going to be positioned, right? It's how we need to be as we continue to grow. And the expectation is it continues to be a meaningful share, ultimately, of our revenue, and then, you know, we'll see where that takes us. But we've made that investment. We're on the back end of that investment now, and we're trying to get some gains from that investment, and we feel like we're going to really be in a good position over the coming months to show that the Wave and the TPO platform that we created are valuable.

Steve Ferrazzani, Analyst at Sidoti & Company

Appreciate the thoughtful answer. Thanks, Artis. Thanks, Jing.

OPERATOR

Thank you. Our next question comes from the line of Shawn Milligan with Needham and Company. Please proceed with your question.

Shawn Milligan, Analyst at Needham

Hey, Artis, one question about, as you brought up line one and you've installed that—anything you found in that line that's better than expected or different than expectations? And then the second piece of the question is around the container supply. I guess that's the one piece that you're going to be requiring a third party on. Just curious about your visibility into container supply and that supplier's ability to ramp up with you.

Artis Johnson, Chief Executive Officer

Yeah. To answer the first question, I would say that I've got to find a piece of wood to knock on. But I think the reality is everything came together a lot smoother than we expected it to. To be honest with you, as you start to put a factory together, you know things are going to happen. But everything's been moving very well for us. Like I said, the team that we have is a very experienced team. It's not their first rodeo, so to speak, even though it is for us.

As NeoVolta, we have teams in the Volta Power and people there that are very experienced and very knowledgeable. And so things have been moving very, very well for us. And quite frankly, we feel that now we're going to be able to bring customers in, pinpoint them to areas in our line and facility that shows a differentiation and what they can even go look at if they're in another factory, to some differentiations that we have and our capabilities that we can reflect to show our experience in that.

But that being said, yes, we're always looking out there for the raw materials, and how do we make sure that we've got good quality suppliers and partners in there? The container happens to be one of those. And we have several people that we're talking to and working with to support us, whether it's just purely the container or even the options to go from a full skid build-out with the container, with the HVAC and the fire suppression. We'll be doing that in our own factory at some point here in the very near future.

But we have that capability and flexibility, depending on how we ramp or size up, that we can work with partners who have a bigger capability. What I will tell you is, relatively speaking, people who are in that kind of container business have been looking across the platform and portfolio of opportunities that they can supply and they've really been almost project-based, right? They build out a project, but now everything's becoming more productized.

So we think that we're going to have more focus. Our vendors are telling us that they're going to get out of that kind of project-based business and really get into the product side of the business, which is rinse and repeat, deliver over and over and over the same thing, which is going to get their cost down, their quality is going to continue to rise. But also we look at it from something that we can consider to be something of flexibility for us, particularly when we get the cells from SK.

In our world, what we care about is a percentage of domestic content, right? There needs to be a certain percentage of that. And the reflectivity of a US cell really skews our percentage towards domestic content very, very high at that percentage evaluation. So what that allows us to do is open up the aperture, so to speak, on who we and where we can get certain other raw materials, including the container. So at that same viewpoint, we feel that once we have the SK portion of the line in, it'll allow us to grant ourselves more flexibility to look at other suppliers.

Not necessarily cost out, but definitely looking at cost is a piece of it, but ensure that we've got the highest quality that not only we have for ourselves, what we can then pass on to our customers and partners. So we feel very good about where that is. We always have hard conversations and high expectations of our partners and our vendors. But at the same time we feel that those who are in this business recognize the future in terms of energy storage and these DC block batteries that are being built and see that this is something they want to latch themselves onto.

So there are several facilities in the US that we have opportunities with. There's facilities outside of the US that we have opportunities to work with and we've actually had vendors come to us and other people that are in that industry, particularly on the container side of the business, saying, hey, would it make sense to put our container manufacturing nearer to your factory? Which I think is great news. But just to let you know, there's tons of opportunity there and we're going to have a pretty, you know, hardened QA/QC process moving forward to ensure that we hold the standards that we need in order for these things to be put into an application that has 5, 10 to 15 years of longevity.

Shawn Milligan, Analyst at Needham

Great. Thank you. And congrats on all the progress.

Artis Johnson, Chief Executive Officer

Thanks, Shawn.

OPERATOR

Thank you. And we have reached the end of the question and answer session, and we also have reached the end of today's conference. And we'd like to thank you for your participation. You may now disconnect your lines at this time. Thank you, and have a great day.

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