ERock (EROC) Q3 2026 Earnings Call Transcript

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DATE

Thu, Nov 12, 2026

CALL PARTICIPANTS

• SVP of Finance - Theodore Durbin
• Chief Executive Officer - John Carrington
• Chief Financial Officer - R. Ian Blakely
• President - Corey Amthor

TAKEAWAYS

• Revenue -- $152.8 million, representing a sequential increase from $39.9 million in the second quarter.
• Adjusted EBITDA -- $12.6 million, compared to a loss of $14 million in the prior quarter.
• Net Income -- $8.9 million, marking the company's first profitable quarter as a public entity.
• Adjusted Gross Margin -- 24.1%, expanding from 22.2% in the second quarter due to higher product margins.
• Contracted Backlog -- approximately $1.6 billion as of September 30, reflecting generator production converting to revenue.
• Post-Quarter Bookings -- over $300 million, which established a new record backlog for the company.
• Cash Position -- $549 million in unrestricted cash and zero outstanding debt as of quarter end.
• Full-Year Revenue Guidance -- $435 million to $465 million, affirmed by management for fiscal 2026.
• Full-Year Adjusted EBITDA Guidance -- $3 million to $9 million, implying a fourth-quarter range of $17 million to $23 million.
• Hyperion Capacity -- 1.2 gigawatts of annual capacity, with the facility expected to reach this exit rate by the end of 2026.
• Atlas Expansion -- $20 million to $30 million in anticipated capital expenditures for a new Houston facility adding 900 megawatts of annual capacity.
• Total Production Capacity -- 2.1 gigawatts per year expected by the first half of 2028 through the combined Hyperion and Atlas facilities.
• El Paso Electric Project -- 366 megawatts of power for Meta's data center complex, with installation scheduled for completion by mid-2027.
• Bridge Power Revenue -- threefold the level of ongoing services revenue compared to backup and dispatchable power periods.
• Bridge Power Duration -- five to seven years, as periods trend longer due to grid interconnection delays.
• Service Revenue -- $8.6 million, excluding pass-through reimbursable variable revenue, up 23% from the second quarter.
• Annualized Recurring Service Revenue -- $24.7 million as of September 30, up from $23.6 million at the end of the second quarter.
• Hyundai Supply Agreement -- a multiyear fixed price contract for engine long blocks covering 2027 to 2028 production.
• Capital Expenditures -- $30 million year to date, including a $10 million purchase of equipment from a customer.
• Liquidity -- a $250 million credit facility that remained undrawn at the end of the quarter.

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RISKS

• Carrington stated, "There has clearly been a fair amount of volatility across AI infrastructure recently," regarding market dynamics.
• Blakely stated that fourth-quarter results will be "partially offset by slightly lower installation margins and slightly lower seasonal service revenues," despite continued growth.

SUMMARY

ERock, Inc. (NYSE:EROC) reported its first profitable quarter as a public company, which management attributed to the operational ramp of generator production and installation activity. The company reaffirmed its full-year guidance for 2026 and announced the development of the Atlas facility to meet sustained demand for onsite power solutions. Management noted that the company's capital-light assembly model and high cash balances allow for capacity expansion without additional financing from capital markets.

• CEO Carrington stated that bridge power periods are lengthening to five to seven years because of "the time required to secure full grid interconnection in certain markets."
• Management reported that production capacity is sold out through 2027 and into early 2028, leading customers to focus on 2028 and 2029 deliveries.
• The company secured a multiyear fixed price supply agreement for engine long blocks with Hyundai, which CFO Blakely indicated provides "clarity and visibility into generator costs through 2028."
• President Amthor noted that the company's low emissions and water-free technology allowed the El Paso project to receive an air permit in under 45 days.
• The company appointed Jason Altobelli as Chief Revenue Officer, citing his previous experience leading energy and infrastructure partnerships at Google Cloud.
• Management stated that commercial and industrial growth is driven by manufacturing reshoring, specifically in sectors such as robotics, AI rack production, and pharmaceutical manufacturing.

INDUSTRY GLOSSARY

• RockBlock: The company's proprietary natural gas-fired generator designed for fast start and low local emissions.
• Bridge Power: Temporary onsite power generation provided while a customer awaits permanent grid interconnection.
• Long Block: An engine assembly including the engine block, crankshaft, pistons, and cylinder head.
• NOC: Network Operations Center used for remote monitoring and data capture.
• Hyperion: The 400,000 square foot facility currently serving as the company's primary production and assembly hub.
• Atlas: The planned 650,000 square foot Houston facility intended to expand annual production capacity.

Full Conference Call Transcript

Operator: Greetings, and welcome to the ERock Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to Ted Durbin, SVP of Finance. Thank you, Ted. You may begin.

Theodore Durbin: Thank you, operator. Hello, and thanks for joining ERock's Third Quarter 2026 Earnings Call. I'm joined by John Carrington, CEO; Ian Blakely, CFO; and Corey Amthor, President. In a minute, I will turn the call over to John and Ian for their opening comments, after which we will have a question-and-answer session. Please note that we have also published a supplemental earnings presentation on our Investor Relations website. Later today, a replay of this call will be available on our IR site. As a reminder, we will provide forward-looking statements during this conference call. These statements reflect our current expectations and are not guarantees of future performance and involve a number of risks and assumptions.

Please review our SEC filings for a list of actual risk factors that may cause our results to differ materially from those presented during this conference call. We will also discuss non-GAAP measures during this conference call. Reconciliations of adjusted EBITDA and certain other non-GAAP measures to their closest GAAP counterparts can be found in our earnings release and presentation available on our website. With that, let me turn the call over to John.

John Carrington: Thank you, Ted. Good morning, and welcome to ERock's Third Quarter 2026 Earnings Call. Our team is executing well, and the demand for our solutions is robust. There has clearly been a fair amount of volatility across AI infrastructure recently. However, our focus has been on controlling what we can control and delivering what we said we would. And in 3Q, we delivered. Revenue grew roughly fourfold sequentially to $153 million, and we achieved positive EBITDA of $13 million, which represents a $27 million increase in EBITDA since last quarter. These results are in line with the outlook we've provided since our IPO, and we are affirming our full year 2026 outlook.

Ian will provide more details on our results and guidance later in the call. Operationally, we made progress across several aspects of the business this quarter. Production at our Hyperion facility ramped through the quarter, and we remain on track to exit the year at approximately 1.2 gigawatts of annual capacity. Our El Paso Electric project moved from mobilization into active construction. We contracted for a multiyear fixed price supply of engine long blocks from Hyundai. We secured an additional production location in Houston called Atlas, which we expect to add roughly 900 megawatts of annual capacity by the first half of 2028, with the ability to expand to up to 1.2 gigawatts over time.

And finally, we added over $300 million of bookings after the close of the quarter that brought our backlog to a new record. Before I walk through each of these in greater detail, I want to briefly comment on why our business model is structurally different from many companies in the AI infrastructure space. First, we're capital light. We don't own assets and don't intend to become an asset owner. As of the quarter end, we had over $500 million in cash and no debt, and we can expand our production capacity at relatively low cost. Atlas, which I will come back to later in the call, is a prime example. Second, our cash conversion is strong.

We receive a deposit contract signing and further payments as we hit operational milestones. And we match those collections with payments to our suppliers. That keeps us working capital neutral and less exposed to project delays. Third, we work with high-quality counterparties such as El Paso Electric and Meta, Anthropic, Entergy and Microsoft. Fourth, we are building long-term recurring revenue streams with our O&M service agreements. The result is that we control our own destiny. These advantages mean that we don't depend on capital markets to fund our growth. Now turning back to our results. Operationally, we made solid progress across several parts of the business since our last call. Starting with production. Our Hyperion facility ramped through the quarter.

In July, we moved generation production from our original Titan facility into Hyperion, expanding from 100,000 to 400,000 square feet. After a short planned pause during the transition, output improved steadily month-over-month. We remain on track to exit 2026 at 1.2 gigawatts per year. Moving to our El Paso project. We are partnering with El Paso Electric to support Meta's data center complex with 366 megawatts of power. We are compressing what would otherwise be an estimated five-year grid interconnection wait into roughly 15 months. During the bridge period, El Paso collects payments from Meta under a power purchase agreement.

Once interconnection is complete, this highly depreciated asset can move into El Paso Electric's rate base, giving ratepayers a meaningfully lower cost source of peak capacity. The execution is on track. Most of our civil work is complete and gen sets began arriving on site earlier this month. We expect to complete installation by mid-2027. On the regulatory front, EPE received its air permit in under 45 days in late 2025. In September 2026, EPE also received a favorable proposal for decision from the administrative law judge regarding this project. We are aware of the recent discussions in Texas around how large loads connect to the grid. We have seen no impact on this project.

Meta has engaged directly with the community, including establishing a local fund in El Paso, and we believe the project is well positioned and will benefit both Meta and EPE ratepayers over the long term. While we continue to execute in El Paso, we are also strengthening our supply chain. In early October, we announced a multiyear fixed price agreement for engine long blocks, a core component of our RockBlock generator. The agreement covers 2027 through 2028 and secure supply for our production commitments already in our backlog. Locking in this long lead component early protects both our delivery schedules and our margins. It gives us a strong foundation with Hyundai as our needs grow beyond 2028.

Turning to capacity expansion. Our production is sold out through 2027 and into early 2028. Given that demand and our Hyundai agreement, we have secured a location for a new assembly facility in Northeast Houston, which we're calling Atlas. At 650,000 square feet, Atlas will be 60% larger than Hyperion. The location is close to natural gas supply for quality testing and has good proximity to the Houston Ship Channel for logistics. We expect Atlas to begin ramping production in late 2027 and reach roughly 900 megawatts of annual capacity by the first half of 2028, with the ability to expand to 1.2 gigawatts over time.

We expect Atlas CapEx of just $20 million to $30 million, depending on the final configuration. That's the capital-light model in practice, roughly a gigawatt of new annual capacity for a fraction of what it would cost a traditional OEM. Together, Hyperion and Atlas will give us about 2.1 gigawatts of annual capacity by the first half of 2028 and up to 2.4 gigawatts with the expansion. We will apply what we have learned building Titan and Hyperion as we build Atlas and shared overhead should lower our per unit cost over time.

But before discussing the commercial side of the business, I want to spend a few minutes on the installation and ongoing service aspect of our model, which we believe are a competitive differentiator for the business. On our August call, we spent time on RockBlock, our proprietary natural gas generator and its technology differentiation. RockBlock was purpose-built for fast start and dynamic transient response, with up to 99% lower emissions than diesel, quieter operation, a small footprint ,and no water requirement. But the generator is only one part of what we offer. We deliver a complete turnkey power system. This vertical integration allows customers to work with one accountable partner from installation through ongoing operations.

On the front end, we help customers with engineering and design, technical specifications and grid certification. Our dedicated program managers work hand in glove with our customers to optimize time and resources to ensure they receive a quality project. We also lead negotiations with suppliers for transformers, switchgear and other balance of plant items to minimize cost and maximize efficiency of the site. We help manage permitting, natural gas supply and environmental studies to ensure on-time and on-budget power system delivery. El Paso is a great example. With our support, the customer received their air permit in less than 45 days. Our vertical integration drives deployment efficiency.

Our pre-kitted modular systems require less specialized labor and heavy equipment on site than most competing technologies, which means faster deployment. For the California Department of Water Resources, we set 50 megawatts of generation in just two days and repeated that at two additional 50-megawatt sites. These advantages are particularly relevant in today's constrained labor market where skilled labor availability can affect both project costs and schedules. Our installation model helps mitigate those constraints while supporting faster, safer and more repeatable deployments. Once the installation and commissioning are complete, we operate and maintain the system over the life of the asset. In the field, we provide rapid outage response, preventive maintenance and inventory management to deliver five nines of reliability.

Because our equipment and processes are standardized, we do not require specialized engineers. Trained technicians can perform routine operations and maintenance, supported by centralized engineering and technical specialists. This expands our addressable technical hiring pool and allows us shared specialized expertise across the fleet. Those standards also simplify spare parts inventory needs. We also provide centralized optimization and insights, including reliability and economic dispatch, natural gas procurement, hedging and reporting. Our network operations center monitors every system and captures data over each genset's life cycle. And that data helps us improve performance and drive more efficient maintenance over time.

Field findings also feed back into engineering, supplier quality and production, allowing operating experience to inform improvements to both our equipment and maintenance practices. Another good example of our approach comes from H-E-B, the largest grocery store chain in Texas, which has effectively standardized on ERock for backup and dispatchable power. We provide critical backup support during storms to help maintain power to critical operations during utility outages. And we help H-E-B monetize those same assets during grid events or when power market prices provide an attractive return. Our technology also helps customers address the environmental and community considerations associated with adding significant power capacity.

RockBlock's low emissions, quiet operation, and lack of water requirements can support deployment closer to load centers and help differentiate our systems in the permitting process depending on the jurisdiction. We are already seeing customers value these attributes in competitive situations, and we believe they will remain increasingly important as data center developers balance the need for power with their environmental footprint and relationships with local communities. As you know, the need for computing power continues to increase and data centers will be built to meet that need. We believe the power industry is in a structural shortage, and our solution meets that demand for power while enabling data center operators to remain good stewards of their communities.

Another component of our offering is the multiple use case for a single asset. On our bridge-to-grid model, we are seeing bridge power periods trend somewhat longer than previously discussed, starting at three years, but increasingly pushing to five to seven years. This largely reflects the time required to secure full grid interconnection in certain markets. We view this as constructive to our model. We generate roughly 3x the amount of ongoing services revenue during bridge periods versus backup and dispatchable periods. We are monitoring developments in Texas, where regulators and policymakers continue to discuss how large loads connect to the grid. We view the focus on responsible development, grid reliability and community considerations as consistent with our approach.

Whether customers are awaiting grid interconnection or evaluating other power arrangements, we offer a critical service and believe our ability to deploy reliable capacity quickly, operate it efficiently and serve multiple use cases positions us well. Now pivoting to some commercial updates. On our last call, we talked a lot about data centers. So I want to spend a moment on our commercial and industrial business. Large headline agreements with hyperscalers and data center customers remain a long-term growth driver, but they can also be lumpy from quarter-to-quarter. Underneath that, the C&I business continues to grow steadily.

One of the key drivers of the growth in C&I is the movement to reshore manufacturing, whether it's AI rack production and testing, drone and robotics manufacturing or pharma production, the growth in demand from this segment often needs bridge to backup power. Legacy verticals like hospitals, universities, grocery, EV charging and logistics continue to expand. These loads can range in size from 5 megawatts to 100 megawatts. C&I customers face many of the same challenges as utility scale and data center customers, including long interconnection queues and limited equipment availability. We're continuing to win share from diesel in this segment as customers increasingly move from pure backup-only use cases towards the flexible multi-use model we built our business around.

A good example of the growth in demand and the value of our multiple use cases comes from Wistron, a Fortune 500 manufacturer. Our deployment with them in Texas began as a bridge power use case to solve the speed to power challenge. Once they receive grid connection, our generator shifted to backup mode. Now they are contemplating increasing the size of their facility, driving higher power needs and additional bridge power for ERock. Their familiarity with our team, execution to date and the multiple use cases from a single asset has differentiated the company at Wistron. We also recently closed a bridge power deal with a large health care system for 2028 delivery.

This customer was facing a four-year interconnection wait for a major new facility they're building. We will provide them with bridge power for a couple of years, then transition into backup service. Finally, on the commercial front, in late October, Jason Altobelli joined us as Chief Revenue Officer. Most recently, Jason served as Global Head of Energy and Infrastructure Partnerships for Google Cloud, building strong relationships with Google's key utility, IPP and developer partners. Those are exactly the relationships we are scaling. His experience on the buyer side of hyperscaler power will be invaluable as we grow our pipeline with data center and utility customers.

Taken together, Q3 was another quarter of delivering on what we said we would, and we are building the backlog, the capacity and people to continue this momentum and execution. With that, I'll turn it over to Ian to walk through the financials.

R. Ian Blakely: Thanks, John, and hello, everyone. I'll walk through our third quarter results, our backlog, our balance sheet and our outlook for the balance of the year. I wanted to give a quick reminder that we generate revenue in two ways. The first is power system sales, which covers the generators themselves along with the design, construction and installation work to get them commissioned as a fully functional power system. The second is ongoing services, which reflects the operations, maintenance and asset management work we perform once the system is running, typically under contracts of 5 to 15 years. Total revenue for the third quarter was $153 million compared with $40 million in the second quarter.

This represents a nearly quadrupling of revenue sequentially, primarily reflecting ramp-up on our El Paso Meta project. Growth at this pace reflects the execution John spoke to earlier, delivering on time and at the scale our backlog requires. Q3 Power Systems sales revenue was $136 million, up 5x sequentially from $27 million in Q2 on the ramp-up in genset deliveries and installations for El Paso. Ongoing services revenue, excluding pass-through reimbursable variable revenue was $8.6 million, up 23% from the second quarter, reflecting higher seasonal revenue. As we noted on our last call, some quarters will have service revenue increases due to higher activity levels during certain periods of the year.

And the service revenue from our large projects will begin to kick in late next year and in 2028. Gross profit was $34.9 million in the quarter, representing an adjusted gross margin of 24.1%. For comparison, second quarter adjusted gross margin was 22.2%. This overall margin expansion resulted from higher product margins, partially offset by lower installation and ongoing services margins. I want to note that we run the business on an annual and multiyear basis, but our quarterly margin will fluctuate based on which projects we are delivering and the mix between generator sales and installation work. The projects we are delivering on in 2026 and 2027 generally have margins in the high teens to low 20s.

However, we have seen a structural shift to margins in the mid-20s or higher for deals that we have priced more recently. That's a meaningful signal of our market position, but with so much near-term production already contracted, it's largely a 2028 and beyond story. Continuing down the income statement, net income was $8.9 million, our first positive quarter as a public company. Adjusted EBITDA was $12.6 million compared with negative $14 million in the second quarter, representing an improvement of almost $27 million. The improvement reflects the material ramp in revenues and gross profit, partially offset by a slight increase in G&A.

Contracted Power System sales backlog was approximately $1.6 billion at September 30 compared with $1.7 billion at June 30. As John mentioned, this reflects generator production and installation activity converting into revenue on schedule, partially offset by new bookings in the quarter, including the commercial and industrial signings John referenced. We'd remind everyone that these large contracts can be lumpy quarter-to-quarter, and we wouldn't read this single data point as a change in the underlying trajectory of the business. And as mentioned, we signed significant contracts after quarter close, which will be reflected in backlog when we report Q4 results. We only include firm contracts in backlog. For certain large customers, backlog reflects the generator purchase only.

Installation and services agreements are typically negotiated separately, and they are added to the backlog when signed. We expect the majority of backlog to convert to revenue by the end of 2027, and our production capacity remains sold out through early 2028, even after contemplating modest volumes during the ramp-up from our new Atlas facility. We are actively working to sell out the remainder of our capacity for 2028 and are continuing to see very strong demand. Turning to the balance sheet and cash flows. As of September 30, we had $549 million in unrestricted cash and no outstanding debt. Our $250 million credit facility remains undrawn. Year-to-date capital expenditures were $30 million.

This quarter, our capital expenditures reflected an approximate $10 million purchase of certain equipment from a customer due to a change in the use case for that site. Excluding that purchase, year-to-date CapEx was approximately $20 million. As John mentioned, because we're fundamentally an assembly operation rather than heavy manufacturing, the decision to move forward with Atlas will not require extensive capital spending. And as John also mentioned, we expect capital spending in the range of $20 million to $30 million for Atlas, depending on the ultimate scope of the facility. Given our margins, we expect a strong return on this investment, and we expect to fund the Atlas expansion from existing liquidity.

Our cash flow continues to benefit from upfront payments and contract signing and milestone payments as we purchase long lead time equipment and deliver finished generators and balance of plant. On guidance, we are reaffirming our full year 2026 guidance of $435 million to $465 million in revenue and adjusted EBITDA of $3 million to $9 million. That implies fourth quarter revenue of $211 million to $240 million, which would be a new record for ERock and adjusted EBITDA of $17 million to $23 million, reflecting continued strong execution for the business.

In the fourth quarter, we expect continued growth in product and installation revenue and gross profit, largely driven by the El Paso project, partially offset by slightly lower installation margins and slightly lower seasonal service revenues. We remain focused on G&A cost discipline as well. With that, let's turn it over to the operator to begin Q&A.

Operator: [Operator Instructions] Our first question comes from the line of Nick Amicucci with Evercore.

Nicholas Amicucci: So John, just wanted to touch a little bit on the demand profile and what you guys are kind of seeing going forward. Obviously, trying to fill out the balance of the capacity that you guys are expanding on. But just any kind of conversations, whether it's -- I mean, is it primarily data center customers? Or are you starting to see a lot more on the utility side, just given that they're really in a bind?

John Carrington: Yes. Thanks, Nick. I would say a few things. I think we are seeing strength across all three segments. I mentioned in the prepared remarks, the C&I piece. But overall, demand very strong. We're really not seeing any softness. I would say the larger deals are lumpy from quarter-to-quarter, and I know that Ian and I have discussed this with many of you. So I think the way to think about it, single quarter's bookings really won't capture the trend. I would say that since the midterms, customers have actually come back to the table with additional interest.

We think that's in large part because post midterms, there's more clarity, and I think there's a lot of constrained projects that still need power but have the permitting. So we're monitoring that closely. And I think as I've discussed with many of you over the last couple of months, the other thing to highlight is that we really expected customers trying to contract in the second half of 2026 would find little capacity remaining for the 2027 deliveries. And that's exactly what's going on. In fact, we are predicting now that -- and we've said this before that the 2027 constraint will further exacerbate 2028. And I think there's going to be another significant supply-demand imbalance in 2028.

As a result, I would say the pipeline is now focused squarely on 2028, Nick, and increasingly in 2029 deliveries. We've also passed on a lot of '26 and '27 simply because we didn't have the capacity, which I think really tells you where the demand is relative to supply.

Nicholas Amicucci: Great. That makes perfect sense. And then actually, just kind of piggybacking on that, if I could, because I know you guys expanded the supply agreement with Hyundai for the engine blocks. How far -- I mean, I guess, at what point -- how firm do you -- how strong do you feel on that supply agreement that they'll be able and willing to scale alongside the capacity growth and just given the strong demand profile?

John Carrington: Yes. A couple of things on that. I'd say, the Hyundai relationship is very strong. It's one of our long-standing partnerships in the business. We've worked together for over 10 years. We recently hosted their leadership team at Hyperion. And I think they came away very impressed with our model and how we're executing. On pricing and the contract, the contract is fixed price. I think it gives us great clarity and visibility into generator costs through 2028. Again, this was a 2027 and 2028 contract. And I think it also supports our margins and really lets us have more clarity around quoting customers with confidence. Beyond that, we're talking with Hyundai about 2029 and later.

Those talks are driven primarily by the demand that we're seeing and quite frankly, growing interest in the larger, longer-term framework agreements from some of the data center hyperscaler customers.

Operator: Our next questions come from the line of Mark Strouse with JPMorgan.

Unknown Analyst: This is Bhairav Manawat on behalf of Mark Strouse. My first question is regarding customer activity following the midterm elections. Have you seen any change in pipeline conversations or deployment timing for the existing backlog? I think you mentioned El Paso remains on track. But are you seeing any shifts across the other projects?

John Carrington: Not really. I can let Corey jump in. But I think if you think about the midterms, I would bucket it really into three themes that we're seeing. First, there's a big community fit. And data centers have to be built in a way that will really support the communities they operate in. I think ERock checks the boxes communities care about. We don't use water. We have a very small footprint, quiet operation, low profile and low local emissions, all of which seem to be very much in focus amongst the new governors. The new governors also want growth in economic development, and they want communities treated fairly. I think we squarely align around that initiative.

On the second one, kind of some proof points related to that. El Paso is probably the clearest example. And as I noted in the prepared remarks, we really are turning power systems into grid assets that will benefit ratepayers. We think this story will unfold very nicely. EPE and Meta that project is on schedule, and we believe it's a very strong validation. And finally, our turnkey offering will matter more and more as we go forward. We really help our customers navigate uncertainty from design through operations. So we feel good about the El Paso projects, and Corey can talk a little bit more about that.

But I would also add just kind of around the momentum, which you touched on. I would say since the election, we have seen inbound interest picked up, as I mentioned to Nick, both for new deals and for customers looking to really speed up existing conversations, and we expect to see more of that over the next few weeks. I think the market will certainly select higher-quality projects and the ones that -- and those are the ones that will get built.

And I think the proof point we have in El Paso is going to resonate with every developer and hyperscaler out there to say, okay, here's someone that's built a prime project that will be in prime for at least four years. And by the way, it's 15 -- it's five years ahead of schedule, and we're going to put this in the ground in 15 months. Finally, I just don't think there's a lot of data centers with permits with no power solution, and that will give us even more momentum as we see that coming forward, and we already are. So anything you'd add, Corey?

Corey Amthor: I think you covered a lot. The only thing I would say is that I think it's becoming pretty clear after the election that both parties are pro-business. And so as long as you're covering those things for the local community and meeting those things that John talked about, that's going to be very important for moving forward on these projects. We're seeing states coming out now saying that they would take any extra data centers that they could find if other states aren't willing to do it. So that's going to create competition also. But it really comes down to execution. I think we're proving that we can execute. I think our customers are hearing that and seeing that.

Unknown Analyst: Awesome. Super helpful. I guess my second question is regarding the $300 million worth of bookings that you added after quarter end. Could you discuss the customer mix there and sort of the timing of those orders as well as if those orders came from existing or new customers?

R. Ian Blakely: Yes. Thanks for the question. So the short answer is it is a mix. We saw some sizable C&I deals for the trends that John was noting in his prepared remarks. And so that's a component of it. There is also a component of it, which reflects actually to your earlier question, customers making financial commitments to preserve schedule on projects where we are still finalizing certain of the contractual details. So I think that actually helps give color that customers are actually looking to keep projects fully on schedule. They're not looking to delay or push out projects. And so I think that's a significant component as well.

So I would say it's a good mix of both on the data center side and on the C&I side of the business for that $300-plus million.

Operator: Our next questions come from the line of Joseph Osha with Guggenheim Partners.

Unknown Analyst: This is Mike Stratoti on for Joe. Just kind of diving into margin drivers for 2027. So Ian, last quarter, you said that higher prices on new orders mostly show up in margins from 2028 since you're sold out through '27. Just kind of curious what drives the 2027 margin gains that we should be looking at for next year?

R. Ian Blakely: Yes. So 2027 margin is largely driven by mix of what we're doing at what given point in time. As noted, everything we're delivering in 2027 was priced in 2025. And then I would say a little bit of economies of scale on the assembly side of the equation. But as you noted, really, the big drivers are for 2028 and beyond. And I think we talked a little bit in the prepared remarks about margins that we're seeing lower in the range in the low 20s. But as we look to 2028 and beyond, we're in the mid-20s or higher in the deals that we're currently pricing.

Operator: Our next questions come from the line of Angel Castillo with Morgan Stanley.

Angel Castillo Malpica: Maybe just to kind of follow up on that. I guess, I wanted to -- to the extent that you have a little bit more color on 2027. I think you mentioned now your backlog covers through '27 into a little bit of '28, but also even with your new capacity additions, I think it still only has that kind of coverage. So are you seeing your 2027 EBITDA versus prior expectations moving higher? Just any preliminary thoughts as to like how we should think about kind of 2027 just total EBITDA and how that's kind of progressing in terms of expectations?

R. Ian Blakely: Yes. So I think in general, what we've said is 2027 is largely locked in. So there's not that much leverage associated with 2027 to take that beyond expectations. Really, the leverage points are in 2028. And there, I think we're seeing upside on pricing and on the cost side of the equation based on the contracts that we're signing and negotiating and also on the -- what we've been able to do on the cost side and keeping costs well under control.

John Carrington: I was just to say, I would add a couple of comments around Atlas, specifically around demand and opportunity side. I think on the demand front, seeing a strong pull across our customer base. And we really wanted to put capacity and plan ahead of it and rather than chasing it. And then on the opportunity front, Atlas really gave us a rare chance to look at a site with access to strong gas and good logistics, as I mentioned in the prepared remarks, which is hard to find and I think very valuable for both assembly and our testing and R&D efforts going forward.

And the thing I'd highlight is we're also considering additional tooling and automation, which would, I think, raise the upfront cost but improve efficiency on margins over time. So either way, it's low CapEx for the capacity it adds, and we're funding it entirely from equity, which is always a positive. And we know -- again, as I've said many times, there's no need to return to the capital markets. So we're very excited about what Atlas can bring.

Angel Castillo Malpica: That you actually read my mind. That was actually what I was going to ask you next is just the strategic thinking. I think in the past, we had talked about Hyperion 2 and perhaps more like a 1.2 gigawatt. So just I was wondering whether there's anything kind of there to read into in terms of the strategic choice of moving forward with 900 megawatts versus 1.2 or also just on that CapEx front, you kind of touched on it, as I mentioned, you kind of read my mind here, but the $30 million in CapEx, I guess, is higher than the $15 million per gigawatt that I think I kind of recall in the past.

So is it just that incremental tooling that you talked about kind of efficiencies? Is it more -- is this kind of the level we should think about? Or is there any changes here in terms of inflation as well or just kind of implications to the type of CapEx per gigawatt that you'd kind of anticipate going forward?

R. Ian Blakely: Yes. No, I appreciate the follow-up. So what I would say is on the 900 megawatts versus 1.2 gigawatts, I think what we've said all along is we're going to be very prudent in how we look at capacity expansions. I think what we've done is moved ourselves forward in a way that allows us to effectively have the ability to do 1.2 or potentially even more. But what we're saying is today, we're committing to 900, and we'll commit to the incremental as we get the incremental contracts fully signed up. So I think we feel like we've preserved the flexibility, and that's all relative to, I think, what we had shared pre-IPO of a 600-megawatt expansion capacity.

So I think, again, it's continued sign of growth in demand. From a CapEx perspective, I would say there's a little bit of general cost inflation. There obviously are some things you do every time you build a facility that you realize investments you can make that can increase efficiency. And then I think probably the biggest swing is what John highlighted around do we do a little bit more automation and tooling that allows you to lower costs over time. And again, we're still finalizing design, et cetera. And that's -- obviously, we're only going to do that to the extent there's a very strong payback period associated with it.

Operator: Our next questions come from the line of Michael Sullivan with Wolfe Research.

Michael Sullivan: John, I wanted to ask a little more if you could expand on your commentary around the Bridge Power periods extending out towards five to seven years. Anything you've done to lock that in thus far, those longer periods?

John Carrington: Yes. Thanks, Michael. And a couple of things on that front. We contract with our customers in a way that regardless of how long they're in Bridge, they can continue to extend that. And from a modeling standpoint, we're 2x from a revenue standpoint, we're 3x in bridge versus outside of Bridge. So it's accretive to our model. And I think we'll probably see more and more of that. Again, we talked in terms of three years. Now we're seeing more like five to six, even. But we're indifferent as far as our -- from a contracting standpoint.

Michael Sullivan: Okay. Great. And then another thing you mentioned I was hoping you could expand on was just maybe permitting issues that others may be having and where you can be opportunistic. Any specifics there you want to expand on?

Corey Amthor: I can answer that. One of the things that our low emissions has really made a big difference in our low water usage at sites. At El Paso, we were able to get an air permit in less than 45 days, and we're looking at a lot of sites that are approximate size of that or even a little bit larger where we can get the same standard air permit. And so I think that's a big advantage that a lot of the people can't do. And so customers are definitely excited about that.

Operator: [Operator Instructions] Our next questions come from the line of Ross Fowler with Bank of America.

Ross Fowler: So just digging in a little bit to the backlog question and sort of following on to the earlier question about the midterms. Can you just kind of update us on a couple of pieces of that? I think you're expecting a CCN for the Meta Site here in December. So the first question is related to that and what happens if that slips into sort of Holland's administration where she kind of wants an EO on a moratorium, where does that sit? And then the second one is sort of on Anthropic.

Where is the air permit for that project that was announced in August because the TCEQ I believe it's still paused, although we may get that open back up in this interim period before Hinojosa takes the governor's match in July, so moves in, in July. So just kind of where we are in the permitting process of that and kind of what the risks around that are given sort of the pauses that we're seeing or moratoriums or whatever you want to call them post the midterms.

Corey Amthor: Sure. On the CCN, right now, we don't see any delay in that. We feel like that's moving forward from everything that we're seeing and don't see really much risk in that at all. If it did move into the next governor's reign, I guess it would be considered the same thing that we've been talking about is low emissions. Meta is working very much with the public. They put a fund together to support local communities. Our emissions, low water usage, our ability to help lower rates after the projects gets connected to the grid are all supportive of that. On the Anthropic bill, we haven't named a site on that yet. We're still working through that.

But we feel like we don't see any issues on the moratorium. We think there's a window of getting projects approved and even after the fact under the new governor that she's pro-business, everything we're hearing and that as long as you're doing these things that you should do for the local community, which all of our customers are doing and also we believe is important to will help get projects approved on time.

Operator: Our final questions will come from the line of Tim Moore with Clear Street.

Unknown Analyst: It was really nice to hear about the added capacity in Houston and Atlas, and it makes sense to really do that and have more demand through 2028 coming. So I just wanted to ask about when you get a big order, let's just maybe say Anthropic, how long does it usually take for them to decide to maybe add the other revenue stream if they do, the design, installation and service because I mean that might be, I don't know, $200 million more to your backlog. I'm just kind of curious if the site hasn't been named yet, does it come shortly after that? Or if you can just add color around something like that? That would be great.

R. Ian Blakely: Yes, absolutely. So in general, what I would say is on all of the deals that we're working on, the expectation is that we will provide the full set of services, including balance of plant installation, selling them a fully functional power system as well as the ongoing services once those systems are commissioned. So that's the nature of the conversations that we're having.

For a number of reasons, what we call the ESI contract, which governs balance of plant and installation can take between, I would say, three to nine months after the equipment purchase agreement is signed, and that largely is because, one, obviously, you need to have the final site selected before you can contract around that side of the work. But the other piece of the equation is you need to have the final design for the site selected because we are doing that on a fixed price basis. given the scope. So you really need to go through that process of design iteration, which we have found with our customers can take a lot of iterations.

You can be 15 or 20 iterations into design before you finally get it locked down. So that really -- all of that becomes exhibits to the ESI agreement and does drive a little bit longer time line associated with it.

Unknown Analyst: No, that's perfect color. If I go with the three to nine months, it completely makes reasonable sense. The other question I had, it was nice the pre-commentary on the strong customer coming back to you. If you can kind of speak about this, maybe not just them because you already did, you start out the bridge power, they could turn on by the grid maybe three or four years later.

But do you have a growing visibility on some of these other customers that you have proven, they're reliable, but now they're building out whatever it is, more needs for electricity and they need more bridge power and they're going to switch from backup power and 3x the revenue to use Bridge power. Do you have kind of a wave of that or a sales team that keeps in touch with those folks to see if they're ready to add more and kind of go back to some more bridge?

John Carrington: Yes, we do, Tim. So we have a specific C&I sales team and a leader for that group. And I would say, yes, we do stay very close to those existing customers. As you know, our NOC monitors every site that we have in place. So there's a constant connectivity with our customers. And yes, we are seeing more expansion. The reshoring that I mentioned in the prepared remarks is a real thing. And as they expand, they're in the same quandary they were when they first launched their facility. So this is not -- Wistron is an example. There are many others that we're working with right now.

And the other thing is the -- when they think they're going to get grid interconnection, we've seen delays, someone will say two years. The two-year mark comes up and actually, there's another two or uncertainty. So they'll need to put additional capacity from ERock in for that alone just to manage their growth that they had expected to have grid interconnection in the two-year time frame that was previously committed. So it's interesting -- similar dynamics that we're seeing, obviously, on the data center side, but very acute at C&I as well. And I would note that it's, as I said, 5G upwards of 100 megawatts.

These are big, big sites, particularly if you're in that drone AI infrastructure space and some of the other large manufacturing components that like Wistron is a good example of in the AI space. But it's a theme that we're seeing more and more, and we're excited about it, quite frankly, and very well resourced around that segment.

Operator: This does now conclude our question-and-answer session. And with that, I would like to turn the floor back over to John Carrington for closing comments.

John Carrington: Great. Thank you again for joining. And in summary, I would say, look, we delivered revenue and adjusted EBITDA came in line with the outlook we've given since our IPO. And importantly, we're affirming our full year guidance. We're building the foundation to keep delivering. That means securing the long block supply with Hyundai, and Hyperion continues to be on track to deliver the 1.2 gigawatts that we've discussed previously. Atlas will take us to over 2 gigawatts of annual capacity in 2028. Demand is extending and not flowing. Customers are planning into 2028 and beyond. Bridge period that we just talked about and throughout the call are lengthening and the C&I is growing alongside the data center segment.

Execution is very much on track. We're making good progress executing on the El Paso project as discussed this morning, to deliver power many years ahead of grid connection and continue to advance our projects in our backlog. And finally, we really continue to control our destiny. We have the balance sheet and cash flow to fund our growth without relying on the capital markets. And before concluding, as always, I want to recognize our team. The execution across every part of this business this quarter was excellent. And I want to thank everyone for the work that's gone into making this quarter what it was.

I'm excited about all the progress I see as we close out the year and move into 2027. Looking forward to speaking with all of you on our next call to discuss the 2026 full year and the 2027 outlook.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines at this time, and enjoy the rest of your day.

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