Q3 2019 Earnings Call
At this time all participants are any listen only mode. Later, we will conduct a question answer session and instructions will follow at that time as a reminder, this conference call is being recorded Oh, No went to turn the conference over to Mr., Mark Metzler, Vice President Finance and Investor Relations at Bloom Energy. Please go ahead.
Good afternoon, all thank you for joining us on synergies third quarter 2019 earnings conference call.
To supplement this conference call, we filed our Q3 2019 earnings release and shareholder letter with the FCC posted it along with supplemental financial information that we will periodically referenced throughout this call to our Investor Relations website.
The matters will be discussing today includes forward looking statements regarding future events in the future financial performance for the company.
These statements are subject to risks and uncertainties that we discussed in detail and our documents filed with the FCC specifically the most recent reports on forms 10-K in 10-Q, which we identify important risk factors that could cause actual results to differ materially from those contained in the forward looking statements.
We assume no obligation to revise any forward looking statements made on today's call.
During this call in our earnings release and in our Q3 2019 shareholder letter.
On a GAAP and non-GAAP financial measures.
These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and all in addition to a nice substitute for GAAP financial measures a reconciliation between GAAP and non gap is included as part of our Q3 2019 shareholder letter.
Joining me on the call today, our K L Street, our principal co founder and Chief Executive Officer, and Randy for Chief Financial Officer.
They are Randy will review, the operating and financial highlights for the quarter and then we'll take questions.
Ill now turn the call over to Randy.
Thanks, Mark throughout my prepared comments I'll be referring to slide and the earnings call presentation that mark referenced earlier.
I'm going to start with financial highlights for the quarter and then talk about our balance sheet first some highlights note that all profit numbers that I referenced will exclude stock based compensation so on to slide three.
In summary, this was another very respectable quarter acceptances were 302 systems up 47% from Q3 2018 206 systems.
Revenue was 233.5 million.
Approximately 23% year over year.
non-GAAP gross margin come in at 25.8%.
5% from Q3, 2018, and up 350 basis points sequentially.
Our non-GAAP operating income was 15.2 million a.
Adjusted EBITDA coming in at 40.8, no again.
Adjusted EPS was one cents.
And we ended the quarter with 357.9 million in consolidated cash and short term investments, which includes 23.8 million a P. P. Eight cash so excluding the P.P.A. cash we have 334.1 million cash and short term and best.
Much.
Now onto some color for the quarter.
And on to slide four.
The 300 to acceptances and 233.5 million in revenue for both Q3 records for born.
Acceptances were up 46.6% year over year and ended up 11.4% sequentially.
Revenue was up 22.8% year over year, and essentially flat quarter over quarter.
The mix of Acceptances, where we had no. It virtually no installed revenue is what drove revenues be and the flat range on the acceptance volume growth.
A lot more color to this and my E. S. P discussion.
Included in Q3's mix of acceptances were both new and existing customers.
And in a wide range of verticals to include health care.
Data centers pharmaceutical universities utility scale projects and food and beverage retail.
In total the 302 systems were spread over eight different end customers in four different geographic markets. The majority of the installations were in the United States.
On to slide five.
So I just discussed we do provide specific quarterly estimates and in our Q2 shareholder letter. We provided you with a range of Q3 average sales price estimates as well as a range of total installed system cost estimates.
For Q3, 19, our average selling price or a SP come in at 6600 at $18 per kilowatt, a number at a higher and of our estimated range.
Total installed system cost or T. I M. A C came in at $3730, a number better and below the bottom end of our estimated range.
As I mentioned in the past, both S&P and T. I M. A C are impacted by a number of factors to include site location and App Bull utility tariffs for that location, whether the site includes grid outage protection and or his mission critical.
The size of the site being installed generally the larger the installation the lower the cost on a per kilowatt basis, and whether or not the scope of the work includes installation typically our international business does not include installation.
So once again I want to stress.
But the important element, it's not the trend of the ASP or the T.I.S.C., but the trend in the delta between the two the Delta represents our unit level profit of the acceptances during the quarter.
The midpoint of the estimated SP and P.I.S.C. yielded a delta or margin estimate of 20 175 for $2175 per kilowatt.
As you can see on slide five our actual margin Delta was $2888 per kilowatt, a number exceeding the higher end of our estimates.
Now driving this performance was a combination of unusually favorable mix upside acceptances as well as continued reductions in our product and installation cost.
Turning to slide six gross profit excluding stock based compensation was up almost 53%.
From 39.5 million in Q3 of 18 to 60.3 million in Q3 of this year.
On a sequential basis gross profit increased 15.7%.
Gross margin came in at 25.8% a number nicely above last years, 20.8% and Q2 Nineteens, 22.3%.
Operating expenses for Q3, well at the lower end of our estimates.
non-GAAP operating income in Q3 was 15.2 million again this number excludes stock based compensation again was up significantly both on a year over year and sequential basis.
Our reported adjusted EBITDA was 40.8 million for the quarter.
Non operating expenses were per plan and adjusted EPS come in at one cents.
Now I want to talk about the balance sheet on slide seven.
We ended the quarter with 357.9 million of consolidated cash and short term investments. This includes a total of 23.9 million a PPA cash so excluding P.P.A. cash we ended with 334.1 million total cash and short term.
Investments.
This is essentially flat down about 300 Kaye from Q2.
However included in the 334.1 million a boom cash is 112.6 million of restricted cash. This is up by about 68 million from Q2.
The driver of this increase in restricted cash just a cash reserve committed to our financing partner in exchange for their commitment to increase their financing limit.
This will reduce overtime starting July 2020, with the full amount of this increase expected to roll off by June of 2025.
Keeping on the balance sheet, but turning to debt I'd like to make a couple of comments.
The 664 million in total debt 261 million is fully non recourse to bloom.
This represents step from our P. P. Eight companies were boom is a minority investor and once again dead, we are not responsible for.
At least 403 million in total bloom recourse debt of which 312 million of that.
Representing approximately 330 million in total principal balance is due in December up next year.
Vast majority of the remaining balance roughly 91 million is not due until 2024.
So clearly the focus is on the approximate 330 million due in December of next year.
So what are our plans with respect to this.
First off we're presently in discussions with our existing note holders and we have selected inspired as Pfizer the investment banking firm of Jefferies to help us with our options.
At a high level, we will either use a portion of our existing cash to pay down a portion of the notes.
Sure.
Refinance all for a portion of our existing notes think of this as an extension, but likely under new terms.
Before we will raise new money and pay all all for a portion of our existing notes or do a combination of the three.
Obviously, our goal here will be to refinance or raise new debt no later than the first half of next year.
We are focused on doing so while choosing the best option for our existing shareholders or put another way. Our primary goal here is to accomplish this with the least amount of dilution.
[noise] referencing slide eight days of sales were down 11 days from Q2, the 13 days our days of inventory outstanding is up two days from Q2 to 75 days and our payable days was up from Q2 by six days to 43 days.
I'd like to make a comment relative to our service CNL, especially in light of some of the recent press.
We've consistently said that we do expect near term losses in our service CNL.
This coming from the updating and modernizing our installed fleet.
During our normal service process, where we replaced older fuel cells with our latest technology.
In 2017, we incurred an approximate service loss of 6 million.
Last year that number was about 8 million.
For this year, we expect to see service losses in choose one and three.
And service profits in choose to and poor.
With full year service losses in the three to 6 million range for this year.
Quarterly.
Even annual fluctuations can and may occur.
We did see a relatively higher Q3 service loss. This was driven by accelerating some Q4, you'll sell replacements into Q3 to avoid doing this word.
During the peak winter time and ahead of the holiday season, which is certainly appreciated by our retail and datacenter customers.
With respect to our service piano accounting.
In addition to selling our energy servers installed at the customer site, we sell ongoing operating and maintenance contracts to our customers.
We refer to this as service contracts and the service contracts can and are generally renewed annually by our customers.
In summary, the revenue associated with the service contracts is recognized ratably over that service contract term again generally 12 months.
Treatment of because depends on whether we estimate a profit or loss on the contract.
We estimate a profit on the contract.
Which we do for all contracts that we've signed over the last several years than the costs associated with the contract is expensed as incurred.
Yes. However, the service contract is estimated to have a loss we expensed the loss at the time of the contract signing for renewal.
Again, all service contracts executed since the beginning of 2015 are profitable.
As we've communicated previously based on the 10 years of data that we've been tracking or service costs. The service revenue over the estimated service contract period for our current installed base exceeds the cost that we expect to incur.
Her to support those contracts.
Further details relative to our service cost can be found in the technical note. The K R. We'll be referring to in a couple of minutes now over to pay our core business update.
Good day to all of your from California.
I started this COVID-19 years ago, because I was convinced that electricity is a basic human need that should be generated cleanly.
And Delaware reliably and resilient.
And there were no solutions that could provide that combination do anyone.
Let alone make an affordable and accessible to everyone.
The extended boom family work tirelessly for 17 years of the private company to make that Green reality.
And we have shown good and that really ANSI two better through the many hurdles we had to overcome.
Today 19 years later.
As time has come then to consumers understand the need for reliable and resilient power and its impact on that overall safety.
Yeah, now willing to value it.
Today.
We have a product that is battle proven in the field and ready to scale to the next level.
Did that no compromise solution that is unique and unmatched in the marketplace.
Let me talk to the recent events in our home state of California, and how they relate to our business.
Its mind boggling, how much energy landscape has changed since our last earnings call.
We have witnessed how learnable our state electricity infrastructure is.
And how unprepared we are at the society.
But the consequences of climate change.
This.
As CE Mark a tragic one year anniversary of the campfire in Paradise, California that 85 flights.
The express our deepest sympathy.
Through our fellow citizens.
California, who have suffered significant health.
Safety and economic hardships.
To the fires.
Evacuations and should be prolonged power outage.
The public safety par shut off has not been a satisfactory solution.
Despite the massive shut off.
I still started shipping electric wire and spread quickly.
Without power.
Many people are unable to access essential emergency services, and basic communications, which further jeopardize their safety.
Consumers are increasingly demanding certainty and reliability quality availability.
So what does this mean to bloom energy.
The Bloom energy micro grid.
Is that right product.
Right now to add to the infrastructure.
We haven't always on micro grid.
That is unmatched in the marketplace.
Blue Microgrids provide customers with reliable always on clean electricity.
No matter, how long the utility grid outage.
It might have it is a local but that is specifically installed to allow critical facility businesses and communities to operate without interruption than a surrounding electric grid becomes under liable are unavailable.
Bloom.
At 89 always on micro grids in operation.
26 of those Microthread our into service areas that were subject to the recent California it'll at these public safety box shut off one.
All of them.
Let me repeat.
All of them perform to reliably for our customers. The customers include manufacturing facility.
Corporate campuses.
And data centers.
These micro that our field proven.
Readily available.
And the warmly liable clean alternative to the feeling good for critical facility businesses and consumers that demand reliability and our certainty for extended periods of time.
Two recent examples illustrate how valuable the blue micro that can be to a business during an extended power outage.
The first one.
At Bloom multi megawatt micro that supports a critical load for an industrial facility in California.
In early October during the first emergency utility shut off the month blooms micro grid ensured the facility but operate.
In the recent shut off towards the end of the month, the same customer while internally disconnected from the unstable grid and relied on its bloom, Michael Vick for power.
During the proximity other wildfires management evacuated the facility for the safety Opex employees.
I see evacuated they shut off all power sources, including backups.
It kept the blue micro grid in operation to support that critical load.
Customer had complete confidence in the blue micro grid to operate autonomous tool.
They knew that with real time remote monitoring and control.
Bloom could shut down.
Remote instructions the micro that safely if I need a rose.
Let's shift to the East coast for a second example.
During the heat waves in August .
A large retailer in the northeast had risen related power interruptions, ranging from one to five days in their local areas that impacted five looked at stores.
The blue Microgrids in those stores allows them to stay open and so their communities during a time of real need.
Unlike the multi megawatt first example.
These stores are each about 200 kilowatts of Facebook power.
These examples illustrate what communities and businesses can expect.
From Bloom, 21st century power solutions.
The natural disaster related that's really NC issues are not restricted to just the two pools.
The global issue and loan is well positioned to address this challenge that are all lease on makes a good solutions.
This is a big opportunity.
As I see it.
That is a fundamental shift in thinking from.
What is the cost of power.
To what is the cost.
Not having power.
We expect the recent power disruptions to be a strong and sustain tailwind for our Microgrid solutions and products that even interruptions from natural disasters on the aging and just a good are not aneel normal.
But the beginning with a trend.
That will worsen.
The grid based hardening will not occur in a timely manner.
Hey, timely solution is only possible by valuing resiliency and investing in proven solutions like micro grids to.
The micro grid allows consumers to take their power destiny into their own hence.
Our customers in the northeast experienced a 150% increase in grid disruption in August of 2019.
Pad to the same month in 2018.
In California, just from September to October of this year.
Disruptions to the grid in that area around our micro that customers have more than doubled.
Then mother nature speaks.
We have no choice, but to listen.
State officials and regulators are responding to these affiliate fee crises.
With a new sense of urgency and are sending the REIT market signals.
California, Governor Newsome said last week I code.
You have got to harden our equipment.
Got to modernize our equipment.
Michael Good.
New strategies of distributed networks.
We recognize the need to do something in this space many months ago.
And I will now replied $5 billion up investments as part of the flat.
And coat.
It is important to note that for the first time, there's a willingness to value resiliency.
And invest in it.
Last quarter, we discuss potential headwinds in New York related to the battle over to new natural gas pipeline.
It is clear that political leaders and regulators have shifted their thinking as they realized that the only other reliable near term option oil.
Dirtier.
Less reliable and more expensive.
Since our last earnings call in August .
All of the Democratic Senators, who represent long island have come out in support of the pipeline.
And then just last week Governor Cuomo said.
Note.
You have to coordinate the sequencing.
Moving all gas.
Then you have that annual wants to satisfy the demand.
Otherwise.
Do you go to oil.
And coat.
In other words, you cannot disconnect from the gap.
Compromising.
50, and the environment.
The large scale weather related events are forcing all of us, including policymakers to deal with both the causes.
Consequences of climate change.
We need both decarbonization.
And resilience with optimum balance so we can put back.
For the planet and the safety of our people.
In California, and New York.
Costs related to the transmission and distribution of electricity has risen dramatically over the last 10 years, approximately 20% to 50% depending on the Italy.
Customers have had options to hedge that generation portion of the utility bill to competitive markets, but they have no such option.
For the transmission and distribution portions of their book.
Beginning has requested it took 2021.
Potentially 2.9 cents per kilowatt hour increase.
For commercial and industrial customers.
The corresponding number for southern California Edison.
It's 2.8 cents per kilowatt hour.
Both these cases.
Transmission and distribution costs accounted for over 50% of the potential rate increase.
In contrast.
The Bloom energy server.
By producing electricity onsite.
A wider distribution and transmission costs and allows customers to lock in the fixed and predictable electricity costs.
In sum.
Weve climate change related market forces are driving interest for all the way it's on reliable clean power, that's affordable and predictable.
Developing a product to meet those requirements have been blooms mission for the past 19 years.
The time this right.
And the time is now.
To rapidly expand our product deployment.
Looking forward.
As an innovator progress of technology company.
We understand the importance of reducing global carbon emissions.
Platform.
Uniquely capable of moving from a low carbon do a carbon free solution.
Yeah, moving aggressively to harness biogas at the fuel to Delaware zero carbon electricity.
We recently announced a collaboration with kindred bio to produce renewable electricity from dating based to power electric vehicles. This collaboration creates local jobs.
Generate additional income for dairy farmers and enjoy strong local community support.
As an estimated 320 megawatts of economically viable Beatty bio that in California alone.
I am extremely threw out about our joint effort with energy power.
Deployed commercial scale on site biogas to electricity projects in India.
We plan to install and operate.
Four megawatts of Bloom energy servers in the state of Maharashtra, India next year.
Good cultural and municipal waste will be used at feedstock for producing the biogas.
Just this week NDS capital, New Delhi recorded its worst air quality in three years.
Leading to the city, declaring a public health emergency.
Schools shutdown and banning millions of vehicles from the roads.
Proper if if you use a big contribution to the bad air quality.
In the future it can be used to the feedstock to provide clean renewable electricity using gloom servers, rather than simply burning it.
We're also working to bring our energy platform to the marine shipping industry to reduce the significant greenhouse gas emissions produced by that industry through a partnership with Samsung heavy industries.
This is a very large and new market opportunity.
To put it in perspective is single large cargo ship would require up 200 megawatts of power.
And at the Marine shipping industry very country.
It would be the sixth largest emitter of greenhouse gas emissions in the world.
In the past months.
We are experiencing a strong customer interest from the Korean market, what our energy solution to our partnership with SK of Korea.
And number of questions have been.
And some will express doubts regarding that useful life of our fuel cell module.
We have released it technical data base report today.
The shares our research findings and addresses Phil's question.
Clearly.
Actual field data.
We encourage you to read to support in its totality.
It is found on our website.
In conclusion.
I'm pleased to announce.
Two important additions to the Bloom energy Board effective November 12.
Jeff Immelt.
And Michael Boston.
Professor Boston is an eminent economist at Stanford.
So the chairman of the Council of economic Advisors for President George HW Bush and domains in was in major economic policy issues, both in the U.S. and globally.
Yes, so on several corporate boards, including Exxon Mobil and order form.
And continues to so on the board of Markel Corporation.
Jeff demo.
So thats chairman and CEO of GE for 16 years.
He has deep insights into the global power markets.
And strong connections to customers.
His experience multiple market cycles, and I've had exposure to bloom since its founding.
He knows our company well.
And believed in our mission.
I'm thrilled.
And privileged to welcome both Jeff and Michael to the Bloomberg.
I will now hand, this will work to Randy for his remarks on Q4 2019.
Randy.
Changing the conversation to our outlook in Q4, we expect acceptances to be between 355 and 385.
Speeds to be between 5920 $6220 per kilowatt and our total installed system costs to be between 4250 and $4550 per kilowatt.
Also we expect operating expenses to be between 46 and 49.5 million.
To close today's prepared remarks, I wanted to announce that I will be retiring and transitioning over to my replacement over the next few months.
I turn 65 last July and after a 43 year plus professional career.
With over 33 of those working here in the Silicon Valley all in technology I feel it is time.
And my almost five years at Bloom energy I'm proud of them part of 18 that has advanced the ball significantly when it comes through the fuel cell industry.
From Q1, 2015, which is roughly when I joined the Q3 of this year our product cost on a per kilowatt basis has declined by over 62%.
Quarterly GAAP revenues have grown by almost 270% and we've moved from losses the profitability at the non-GAAP operating income level.
Very nice progress over this period.
However, I believe this is just the early innings for Bloom I firmly believe that the company has great opportunities ahead I say this because late next year. The next generation of the Bloom energy server, which will initially have 50% more power output should begin commercial shipments providing a platform for further color.
And well into the future.
The macro factors such as the weekly public safety power shut off of Vince currently being experienced in California are heightening awareness and providing greater clarity for future demand and finally, the strong case that boom could be the lowest cost solution for 24, seven low to zero.
We will carbon based power.
I only wish I was five years younger.
So thank you pay are for the opportunity I'd like to thank all my fellow Bloom colleagues for their support over my tenure once again I'd like to thank all of you on the call today and I will now turn back to pay our before we take questions.
It's amazing how quickly five years have gone by.
Hi, vividly the number at putting Randy out of in May centric environment and convincing him to join blown.
And help take the company public.
Our goal then wants to take Bloom public in 2016, and Randy promised me a maximum of three years of service many joint.
Andy has done an amazing job of helping build this company over the last five years.
Including taking it public last year.
He will stay with us.
And how could they external search process that you have started.
And through the transition.
Many of you will see him in person at the investment conferences. He will be speaking at this month and next.
I want to thank him for his service.
Ambition and wonderful and well deserved retirement.
Andy.
Thank you from all of Us.
Hello.
In conclusion.
Let me summarize there I see the company going in the next two years.
Yes, thus far created for generations of product.
Each one.
Significantly better performing.
And lower costs and the previous generation.
We are now cranking that flywheel.
For a full time.
With our blown 7.5 platform, whose development is on track.
Ben we successfully execute this product.
We can Delaware under 10 cents per kilowatt hour electricity.
That is reliable.
Resilient.
Clean and that has low to zero carbon footprint.
This combination.
Is unique.
No other product in the market.
And do what our gloom sort of was too.
And for this reason I'm extremely excited about our future.
We will now move to Q any.
Ladies and gentlemen at this time in order to ask your question. Please press star followed by the number one on your telephone keypad to withdraw your questions press the pound key.
We'll now calls for the while we compile the community roster.
And your first question comes from the line Michael Weinstein from Credit Suisse.
Hi, guys Randy congratulations.
And that youre going to be missed.
Hey, Mike.
Thank you for the time.
Yeah.
Hey, can we provide an update perhaps on the 130 megawatt backlog.
As of.
One of 18 that existed, especially as we near the year end heading into you've got fourth quarter guidance out there now so maybe we can talk about that.
I'll repeat that one more time, Michael are you asking about our backlog here.
Yeah, maybe an up an update on the backlog and also.
Can you talk about I'll just throw all my questions on right now talking about California, the shorter PVA product that you had mentioned launching.
That stand.
And what's been the response, so far in California too.
Changes to your approach to sales there.
Ill take the first one of the backlog.
We're going to stick with the policy.
I'm, just I'm announcing backlog once a year, we'll do it on the call. We'll do it ahead of when we file the UK again I want to stress such orders come in very very lumpy.
Often see an example will be a big box to work order all at once.
Global over four or five quarters of.
Shipments of just acceptances, so to keep keep giving any false breach, it's just one way or the other we're just going to stick.
With one annual disclosure of our backlog will do that we'll do that on the next call.
With respect to our.
As you referred to are shorter P.P.A.J.R. take that.
So hi, this is KR, so I think you're asking the question on.
The shorter be bps in the market dynamics, given what's happening at the Dsps since that is that probably like me doing which if your question Jack exactly yes, okay. Great. So so look when you went like what just happened.
Lately unprecedented 2.5 million lost power, almost 6 million less affected by it one way or another it changes the entire discussion.
And what's going on out here and seeing that.
Let me answer your question until parts. Okay. One is a long term and one is what does it mean immediately.
The if I if I just take it from the tactical to the long term first and then bring you back.
The fundamental thing Thats shifted.
That is for the media.
And the long term.
As I down people focusing on not just the cost of power cost of not having.
And the other big pick tonic shift you're seeing is as you know the regulated business for the Io euros and they design that never values isn't Nancy.
What you're hearing from the governor and other policymakers speed is they want to change that and foot and value for resiliency and they do that.
Greenlee goods.
This is exactly what we have been seeing should be done because the product has to be valued or resiliency.
Our its reliability and safety it's extremely.
So that's the long term picture that I want you to think about as well as customers, saying.
Feel wants to take our destiny in our own that you're seeing that so how are we seeing that in a very tactical ways you want to see that is.
And that it's our existing customers.
Over this news, whether it's new prospects, we are seeing it significant inbound inquiries increase roughly about five times, what we have normally seen since these events have started happening.
And.
We think that.
Our existing customers, who typically have been.
Good parallel in some cases are now coming in asking for Microgrid solutions, the always on Microgrid becomes extremely.
The second thing also that we are seeing into dynamic. There is interest today is not just coming from the facilities. It is coming from the C suites.
And if you ask why is it coming from the C suites.
It is about saving the business. It is about keeping the lights on for the business predicting the safety of the people and serving their customers. So we see all this happening in terms of what is coming at how will it translate.
It is.
As Randy said these are tens of millions of dollars' worth of transactions.
After onto a process.
And the C suite is in we'll all be expect the cycle to shrink.
Compared to when it is just a facilities by our electricity.
This is mission critical for their business now it's about saving the business.
Even with that you'll be.
The process of strength, so what we expect.
Is that we will see the impact of all this.
2020 bookings.
And most all that revenue so that normal cycle will be in the country if anyone site.
Gotcha.
One more question about the.
Length of time that the servers.
Lifetime's day last.
Your papers no Kid note that it goes from 1.9 years back in 2011.
Now currently at 4.7 years on average.
Back to see for generation seven five.
It will be greater it will be hoping north of that without a question how much the art I am not going to speculate on that until we get too.
Until we get too.
Having enough of the lifetime and enough data to be able to say that.
So the 4.7 that we mentioned is for the for the.
Servers that be shipped in 2015, and that's extremely important let me take a little bit of time to be able to walk you through that you can look at the white paper.
Technical note that we just put.
It is 4.7 years.
The units that we shipped in 2015 as a median age why are these listening to that.
At 4.7 years, if any 15 roughly most of those units should have seen that life Fytwenty 19, right now anything asked that it's still in the field. So you're seeing you don't have to trust our judgment.
You don't have to delay on some third parties judgment.
Simply rely on field data equipment don't lot.
This is it has been working in the field.
We have the data. This is 4.7 years, you're saying 2016 and onwards, we expect even later life.
Incrementally as you go going to five years to 7.5, I would expect definitely for that to be greater than five years, but how much greater.
State you won't be will be will tell you as soon as we have confidence in that.
And the other point I want to make here is even in that 2014 Penny 15 timeframe.
Yes, I think that the median life to be what they are the field, that's true and Thats correct that that shows credibility to our being able to say why the why the can support a number of these numbers are supported so extensive knowledge base extensive fee.
Year to date of actual working items.
Okay. Thank you very much.
Yes.
And your next question comes from the lineup Stephen Byrd from Morgan Stanley .
Good afternoon.
Yes, Stephen how are you.
Good Randy congratulations on your retirement and thank you.
Very much for all to help you provided.
Thank you Stephen relates refinery.
Really appreciate it.
I wanted to build on Michael's question, just in terms of the the sales outlook broadly.
I guess since the last call.
As you eloquently walk through Okay are you a series of shutdowns of power in California are you kind of announcements.
In the California dairy industry.
In the shipping industry.
I think you mentioned some potential incremental opportunities in Korea, but I guess is I'm thinking about all those opportunities and you mentioned this a little bit on Michael's question just in terms of.
The time it takes to translate these types of dynamics into actual sales, there's a lot of attention in the investment world on 2020, and just in terms of that cycle of translating agreements or dynamics into actual incremental contracts would you might just touching on that a little more detail.
Yes so.
Steven the V. they'll be I see it.
Following.
And you flip a switch.
And electricity Thats not come in.
That dynamic.
And that tailwind.
Add to reality.
Every other headwind that was created.
That does not have debt and doesn't impact because it is about.
CESP that the liability off now.
And.
Nobody can ignore that.
And I can tell you piece I revealed life situations or.
I in my House did not half hour for almost four days.
Okay, our our Chief marketing Officer, who has a medical device did not have power and stuff. So.
So these are.
So things that happen any touches one in six California.
You know from this area.
What this means is essential for agency that Mitch.
Our existing customers and our prospect to customers are engaging with us.
And to levels that winstead engaging with us the C suite is something we've not seen before.
It is new to us.
So.
As I see it.
I would expect that.
These sales cycles become low short.
Can I tell you how much shorter it can become the answer is no I don't know right you distill.
Multimillion dollar investments or whether it is a power purchase agreement that they make their committing to that kind of numbers or whether it is a lease or were they pick up to bridges. So you do go to low prices, but we expect this process to be fast so think of a few months on the bookings.
Think about our normal cycle.
Off 912 months on what that bookings to an acceptance. That's why I mentioned, Pete will see those bookings happening and the impact of it we expected to be significant and 2020 early 2020 .
We expect that as those of that showing up in up you know in 2021 now let me just say that this is not a california phenomena alone.
I think the nor Easter I think the winter.
And we saw that happened in the in the somewhere in the northeast.
She does a global phenomenon.
The heat in India is to.
Tremendous pollution that is making the government things very heavily about biomass conversion to biogas, thereby preventing people from burning the crop.
So this is this is a phenomenon thats I think they're going to see worldwide.
It is definitely a sustained and strong tailwind.
Our back.
I wish I could tell you how quickly and how fast and numbers that it will convert to.
My hope as it's going be a very good one but I cannot give you numbers just makes sense you I just want to remind everyone that that is cable pointed out from the time of booking nine to 12 months for the time, you're going to see the revenue as we refer to as acceptance. So what youre, saying is we think the sales cycle. This is definitely contracted.
Order.
But it still end up you know three to six months' kind of timeframe, maybe maybe seven months.
It's going to put the bookings you know call. It the first half of next year, which you'll probably see early in 2021. So I just want to just want to reemphasize that that point.
Sure.
Our exceptions to that.
For example, our international business, where we don't do the installations that stood by our partners.
Oh, whether it be India, Japan it be.
So for you.
Happens, which means that that order booking to ship month, there's a lot less than nine to 12 months. It can theoretically you could occur in the same quarter, but usually occurs one quarter into ship acceptances and next so there could be I know, we give guidance sooner last call off poor quarter year over year.
Your growth be.
Range, but the point being is that there could be upside to that depending upon the international orders accounted next year, So I'll leave it at that.
Oh, that's that's really helpful color. Thank you and just on the the shipping contractor or agreement that you've reached I guess on the positive side, even a small number of ships from a megawatt point of view can very quickly be.
A pretty big.
Needle mover for Bloom.
I guess I'm thinking, though about the timeframe required.
To secure orders in the shipping industry, just given the relatively long lead times actually.
Construct one of the ships and would you might just talking briefly in terms of sort of the lifecycle of that or even in particular.
Being just specific about anyone project the more just about the sort of the time over which you would.
Be able to sign up agreements there of relative to the time required to to manufacture Ah.
A ship and just sort of where we stand with that.
So so so.
This is the best of our understanding from the ship wasn't Samsung and ill as well as others that we have spoken too.
Demand for.
One thing ships.
That are.
Lot.
Smaller and carbon footprint.
It's extremely high from the end users.
Office shifts to the buyers of the ships and they're seeing this internationally why isn't it.
The UN International Maritime organization that controls and put standards on these things.
Has put a extremely stringent requirement on carbon footprint.
On the ships that has to be.
That has to happen in a very short time period and we have.
Talked about this in our press release on this.
On this particular topic for those of you that want to.
Either more about it that said requirement and most ship operators.
Believed that this is a number they have to meet because unlike local installations in facilities. The ships have to travel globally and they have to be in multiple boards and any country insisting on it is going to set the standard so to speak.
So they're all going very quickly towards us so what we understand from Samsung.
Is there is a significant demand as soon as they have a product ready. So what is happening now is you have already asked the first step that regulators of saying conceptually. This design as they infancy flow is something that can go to the next stage.
Development, we are doing that you're doing the developments the whole development.
And.
Certification.
I would I would imagine what is in the two year timeframe. So to answer your question Steven either they you do they say two years out demand as opposed to something that's going to happen next year in film, so actual acceptances and being able to ship, but I'd say enormous market.
And you say unique market for us in done so being able to capitalize but very few other input alternative options that a ship over with.
Very good thank you very much.
Ladies and gentlemen, and your last question for today's call comes from the line as a powerful mylan cannot from Raymond James.
Thanks for taking my question on another one if I may on on the Samsung agreements. So this is your first kind of entry into the transportation sector are you looking at other options were either end markets beyond.
Todd distributed generation.
Oh and be the answer answer is yes, and the answer is yes, and the following way.
Just think about what happened what happened with.
Distributed computing.
Be then from mainframe computers disputed computers, but the mainframe computers that are not bad debt called cloud computing and these are large mainframe computers, except they're not build as one single model it stared birds with.
How is then saw.
Distributed servers that together.
If you think about our Acordia power tower, you does nothing but a whole bunch of.
Boom distributor generation stack together, both horizontally and vertically to build a huge structure.
Do you feel very good density to give you an idea of what this means in a one acre space Beacon 200 megawatts.
Sophie feet tall, that's an amazing power density and the beauty is out on that one acre you don't need any easements space because there is no noise vibration solutions.
So we believe.
That it is going to be a transition.
You then for places that need significant amount of concentrated power like micro our glass mini power plants, maybe power plants.
You will build them as these hundred megawatt model, that's and if you want to gigawatt, you'll end up them because the beauty is unlike in monolithic power plant you don't have to take down an entire bar plan to service availability will be high.
Our efficiencies will be significantly higher and we are as he continues as flywheel that I talked about about cost reduction going to get to a point that building in a large part black using these servers. This way be cheaper than building a large scale Barclays slip below comfort.
Cycle extremely similar to what the computer industry that so that's that's fair I see us going into future. In addition to serving the distributed needs. So we will be bullet.
On your desktop as well as of the cloud. The same thing we will be next year building nvvault being the Central Park.
Okay.
Let me ask one more question about.
Hi.
See in the solar industry, we're watching demand pull and because of course the tax credit stepped down in 2020 and again in 21, given that we have the same dynamic with fuel cells I'm curious if that may accelerate some of your bookings.
You know either by the end of this year or or next year.
Well.
You know clearly.
The ITC isn't incentive for the end customer and.
Yes.
Yet having his sunset.
Create a similar dynamic in the marketplace assets assets assets, creating elsewhere.
So we would be would expect the same thing and via the company our prepared for the safe Harbor in construction.
Models that the solar and wind industries planning, we are planning for something similar on our site. So that's a good for us and we're leveraging that obviously with their customer base to point out that there is a savings.
On a.
Sooner rather than later exactly.
Thank you.
Thank you.
Ladies and gentlemen. This concludes today's call you may now disconnect.
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Yes.