Q3 2019 Earnings Call
Greetings and welcome to the plug power third quarter earnings call.
At this time, all participants are in I'll listen only mode.
If anyone should require operator or technical assistance during the conference Press Star Zero on your telephone keypad.
As a reminder, this conference is being recorded.
It does not my pleasure to introduce Teal Vivacqua Hoyas director of marketing communications. Thank you you may begin.
Thank you.
Good morning.
Our third.
Third quarter earnings.
It's called for success.
We had before.
However that the safe harbor provision for forward looking.
<unk> section 27.
Sure.
33.
Section 20, Onee other Securities Exchange Act of 1934.
We believe it is important to <unk> joined Dr.. However, investors are cautioned not to unduly rely on forward looking.
They involve risks and uncertainties.
Actual results may differ materially from those.
As a result, the various factor.
But not limited to risks and uncertainties discussed under item one.
Sector and our annual report on Form 10-K for the fiscal year ending December 31st 2008.
It's all in other reports, we filed from time to time with the LTV.
These forward looking statements speak only as of today.
Our main Oh, we do not undertake our time to update any forward looking statements. After the call at this point I'd like to turn the call over to plug power CEO [laughter] good morning, everyone.
We're pleased with the quarter.
A detailed description was provided in our shareholder letter released earlier that day.
I'd like to go over some highlights we achieved over $61 million in gross billing.
Adjusted EBITDA of $2.5 million.
I like to highlight the EBITDA would have been $7.1 billion without the higher than normal warrant charges. I believe this is an indicator or operating performance continues to improve as we scale.
Few highlights for the quarter include.
And this one really excites me our first order for FY <unk> Craig's work for over 240 units another validation of our value proposition for material handling in automotive applications. Today, we have BMW Dibler Honda VW G M and now be a chrysler's customers.
European expansion continues leveraging some of our new channel partners with an order for nearly nearly 100 units at the BMW Leipzig factory in Germany. The steel was part of a German funding activity and plug power product support after programs that were supported in the recent announcement.
Three the sales funnel for non material and only applications for our approach and agency stacks are continuing we have many Oems are they agree risk testing our systems and stacks.
This includes a wide range if activities that were pursuing including a variety of on road in off road applications large scale stationary project an aerial projects.
We also a in the quarter close the supply agreement with United hydrogen for liquid nitrogen, which will positively impact our gross margins in future quarters.
Hydrogen and vertically integrating into generation with partners is a key part of our strategy.
Fourth quarter will be a record for plug power as we're on track to achieve $235 million to $245 million in revenue at Greek at breakeven adjusted EBITDA for the year.
Major accomplishment for the company.
We have announced two of our major for announcements for the year.
First one was the deployment of 500 units with Street Scooter, usually our Progen agent in Germany by DHL Street scooters up 100 per say no by DHL.
Our global partnership with LNG Gen. <unk> AG has a global footprint across 70 nations. We've already closed an order with energy into new regions for plug power worked over $6 million. This is this deal that would have never been identified without Angie we have another deal pending that you closed this quarter and now.
The three which will be for new multi site customer will be announced this year, we're already working with them preparing three sites for early 2020.
And now it's good for which will further extend their hydrogen strategy supporting our five year plan that was rolled out in September at the plug power symposium.
At the symposium plug power outlier plans for the next five year.
Oh, the slides from the presentation can be found at our website to highlight a few items plug rolled out a 1 billion dollar revenue plan by 2024, with a mix of $750 million material and doing $200 million in on road vehicles and $50 million and stationary power.
The company is targeting in 2024 $200 million in EBITDA at $170 million, an operating income.
And aggressive plan, but with our broad offering capability as the only turnkey shop in the fuel cell space. We believe these targets are achievable at the seminar the logic for achieving these goals, we're clearly enunciate.
Paul and I are now pleased to take your questions.
Thank you.
At this time, we will be conducting a question and answer session.
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My first question comes from Chris Van Horn with B. Riley FBR. Please state your question.
Good morning, Thanks for taking my call more encouraged.
I just wanted to you know if you could you probably provide some additional detail on the field Chrysler <unk> a award maybe the timing of the rollout a where we know where from a geography geographical perspective that is and I'm, just maybe a little bit more detail how it came about sure.
I think a positive item is the sales cycle was relatively short.
It was in the range of six to seven months.
The deployment will occur in Detroit, Michigan.
There was a press release yesterday, where Chrysler talked about this activity.
It will be for approximately 240 units and overall it will be over 10 worth over $10 billion to plug power.
Okay got it okay.
And of course, we're looking to expand that relationship.
Okay, Thanks that detail.
You know what I think about you know you set out to 2024 plans.
Oh, I'm going to think about 2020.
Is there any is there anything you can tell us kind of Directionally and on how you see that you're playing out as it is it more back half weighted or.
How do you see 2020 looking right now.
Good question, Chris and no overall I'd say at the symposium, we laid out that revenue growth will be in the 30% range.
I would expect that to the first quarter will be.
Later, but I think you'll see a strong ramp and much stronger second and third quarter than this year.
We have a great deal visibility to 2020 already more than we've ever had in the business.
So oh, we know about where 85% of everything we plan to ship will go which is extraordinary for us I think it shows that the business is really mature.
Okay got it and last one for me what do you think about you know the R&D, how do we think about that spend going forward and what specifically working on and that area.
Sure I'll talk about what we're working on and I will let Paul talk about where he sees suspend getaway.
But one of the R&D fraud, so the key items to us or increasing how are you know power capacity of our products for a variety of applications and.
We probably have about 15 to 20 applications in the funnel funded 15 or 20 opportunities in our funnel and there's about five that quite honestly I really really want and when you look at it lie that starts with higher power stacks. So we're looking to.
A cheap we're looking to have products by.
Second quarter, which will be in 125 kilowatt range for our approach and agent.
We already have a customers wanting to start testing them as soon as possible and that.
By going to Progen.
Our vision of products is that they should be as easy to use is batteries and progenitor design that.
Someone who is not an expert.
You will cells can pick one up plug it in it works as well as a battery and when I think about that Chris that's why people start with battery, sometimes we want them to start with fuel cells that we'll start with fuel cells without a lot of additional support from plug power. So our design philosophy is make it easy put it up.
At two or three connections and you're ready to use the fuel cell.
Oh they spend rate.
Yeah I think.
Just piggybacking off of what Andy shared you know one of the most exciting aspects for me is is that leverage ability into these other applications and other markets. We don't have to double and Triple you know resources in order to.
Take advantage of those opportunities. It's we're building a platform and leverage and building a technology base in a way that makes it very easy to translate that into these other applications and so.
There'll be some nominal increase overtime, but it's probably in that by 5% you know 7% on that on the upper end range and.
The only nominees to that will be some of the things we talked about in terms of.
Incremental.
Opportunities in a other strategic areas that we might get involved in like hydrogen strategy to other areas. You know those are to be determined as we continued to nurture and evaluate those those spaces.
Okay. Thanks again for the time.
Okay.
Thank you. The next question comes from Eric Stine with Craig Hallum. Please state your question.
Hi, Andy handle.
Good morning, Eric how are you more and doing well you know I was hoping we can just start with Angie you mentioned.
You mentioned the one award that you already had and one that it sounds like is pretty near term.
No that's a pretty broad ranging agreement maybe just a you know any specifics you can share.
On both of those but then would also kind of a love to hear I mean, your intra quarter. In you know just how you see that playing out what that means in other areas any color there it'd be helpful. Sure. So.
I expect.
Are we will.
So let me take a step back.
You're correct the opportunity with the.
LNG is fairly widespread.
And it includes both the our ability to provide fueling solutions.
Youre willing systems as well as a then positioning our material handling equipment and other applications around the world.
This first deal was actually Oh that will be that will be announced is for fueling station.
That will support will support to.
Deployments of vehicles.
In the country to be named later.
And Oh, we have a second one which should close should close this quarter and.
That one is actually for material handling equipment again in a region of the world that a.
Plug is never participated I think the combination of those two.
We'll be well over $12 million to $13 million and well, it's a combination for plug UBS.
Expertise in products and capabilities and leveraging ngs roll it service capability.
Said helpful. Yeah, no that that is helpful. I guess I'll stay tuned.
Going forward, maybe maybe next question just.
By the way our both of them.
Early <unk> will be the first half of next year.
Okay for deployment.
Okay. Okay.
Then just a you know you laid out the two major announcements left that you're targeting and maybe this is.
In my my misunderstanding, but I guess I had I had kind of thought that the the next one was more in stationary applications and it sounds like.
You described that a little bit differently. So just.
Curious curious on that whether I had read it wrong in the past or something has changed.
To some extent.
Eric It.
I would say I must have explained it wrong to you in the past.
But it is it is more along the way of our traditional material handling with obviously, a large retail customer.
Got it okay and.
Right that I I guess I'll leave that alone I, maybe that's your maybe that's the a official announcement of the third or the third mega customer that you.
I have discussed you've got it Eric and Oh.
Fourth one as I mentioned.
Is associated with hydrogen got it.
All right, maybe maybe last one for me just United hydrogen.
You know clearly part of the strategy I mean is that something that you you think I mean, I know that your fourth targeted announcement has to do that strategy as well, but but you know aside from that United hydrogen is that something that you potentially can replicate so that you have greater geographic.
Coverage as you roll this out to more customers.
So.
The answer your question Eric.
If you you were you were at the plug powers.
And one of the items that Tim highlighted was looking for a.
One of the items in the path is.
Your production agreements.
With.
With that hikes in providers.
As well as you as we've talked about more extensive partnerships on the genders generation side together.
So you know.
We are.
Thank you can name every hydrogen provider in North America, we are in negotiations for a similar type deals.
But we won't be limited the jets that Oh, I think that there's a big push for renewable hydrogen.
And we are in discussions with the what we called non traditional players in this market.
To work with the.
Leveraging both the Electrolyzers and renewable natural gas.
You know to expand our green footprint with hydrogen.
And as I mentioned before.
Our play into that generation fraud is really to be is really to be.
Part of a partnership.
And ownership position.
Not just the just not just a customer of the product.
All right I'll turn it over thanks, Okay.
Our next question comes from Christopher Southern with Cowen and company. Please state your question.
Hi, good morning, guys.
My first question I was hoping I could just getting a little bit more details on the new subscription program that you guys talked about in the latter.
As far as kind of what percent of the gendrive shipments in the quarter were recognized and.
How the subscription.
Gets recognized.
I would say the piano get overtime, if you could kind of give.
Some examples of that.
Oh do you want to take that.
Yeah, So I guess the to try and give you the simple answer on how it works.
You know when we went to a customer access our solution with the a subscription.
You know, it's it's really like they're doing vendor financing and they're paying us to access to solution over time, so there'll be a recurring amount of revenue that hits goes into RPL over that you know duration of that period.
But when we deploy those projects, we finance them and today, we're financing them with traditional commercial banks and.
Basically doing a sale leaseback and because of the operating accounting lease rolls it qualifies for cell recognition. So we basically you're monetizing the project day, one and recognizing the equipment revenue associated with selling off that project and so those revenues will show up in our financials, you know as we monetize those probe.
For the equipment portions of that and then again over duration of 567 near term or the subscription program.
We'd have a recurring revenue in for from the customer.
Chris Let me, let me kind of add to that.
We've been looking at the way wind and solar we're able to grow so rapidly.
And in 2020 weeks, we expect about 20% of our revenue.
We will fall under the subscription program.
And like wind and solar.
We expect the rate interest rates are rapidly decline over time as plug becomes more and more competitive.
We have.
And engaging with many banks and with that many institutions over the.
How to rollout this program at a larger scale.
We believe we're very aggressive about how to grow this revenue more rapidly.
Because growing revenue more rapidly will increase our margin position to generate more cash for plug power and that's how we're really thinking about the market.
Okay, and then kind of follow up on that.
Hey, or are there any other pending customers are waiting for this type of solution.
And.
Do you see them kind of joining the program over the next quarter or so is that kind of how we should see it.
It was at <unk> I didn't hear what company you were referencing Chris.
Yes Chrysler.
That is not a subscription model.
Okay got it and then.
To touch on the energy and.
Yeah Street Scooter Hamburger it seems to be a lot of focused on international.
Could you talk a little bit about longer term.
Looking at that 20 24 billion guidance.
Billion dollars.
In broad strokes, what do you think Europe and other international markets make up that.
You have kind of a good sensor that sure I would put into 200 million dollar range Chris.
With primarily being in Europe .
Got it Okay, and then just last one with Amazon and Walmart <unk>.
And if you think about what we have already with street scooter.
That could represent a quarter.
Okay, and then I'm just year to date with Amazon or Walmart could you give us a sense of what the percent of revenue as far as versus kind of the other customers that have grown.
<unk>, the 50% to 60% range Chris.
I appreciate it thanks guys okay.
Thank you so don't read lower next year.
Just a reminder to ask a question at this time press star one on your telephone keypad tier move yourself from the Q Press Star too.
Our next question comes from Collyn arch with Oppenheimer and company. Please state your question.
Thanks, so much it's actually Colin rusch.
As you look at the potential or reduce the cost of capital on that subscription business and in general.
Particularly as it gets a sustainable EBITDA positive situation.
Can you talk about your your pricing strategy with customers and how that map off and then Oh, you know enhance your addressable markets.
Well, Chris I will comment, yes, let me give you.
An example that.
There is a.
In for you know there is opportunities.
Long term to certain assets.
And there was assets like hydrogen infrastructure, which are very very valuable.
And.
In round, one you know.
We may have the ability.
To to own those assets at the end of the subscription period.
And.
Those assets are extremely valuable to plug power, whose assets could be revenue generators here just like hydrogen generation assets are available for us.
For generating cash for industrial gas company for years, So I.
I think alive, our thought process is associated with this specially the value there was hydrogen infrastructure long term.
I think on pricing.
We have goals for the business.
That allow us to get the 20% EBITDA and that.
In 2024, and our pricing strategy as we work our numbers today is to support that kind of performance.
Okay, all out a couple of follow sounds like offline.
And then just in terms of what you're seeing in terms of hydrogen fuel cost reduction obviously, there's an element of scale. That's the purchasing power for you guys, that's not the largest consumer about or Chad.
But then also what are you seeing on the technology side in terms of you know the industry's ability to drive costs lower.
Yeah evolution of the cadence of that sort of cost reduction.
Let me give you a reference point Cowen so.
Yeah yesterday.
Mackenzie rolled out the U.S. hydrogen road map.
20 companies participating in developing.
And plug power was one of those companies.
And the number about to give you is.
Also what was presented to the previous day, where no I'm a member of Bache tack, which is the hydrogen technical Advisory Committee to the department of energy.
And in both of those presentations.
Scale, they felt would drive the total cost of hydrogen including infrastructure in the fourth to into four to five dollar range. So if you take a step back when you think about the.
Back, especially if you're comparing against gasoline.
That that's about to 50 hours it effective gallon per gallon.
And if you think about $4 for hydrogen.
That puts you about in the six or seven kilo six or seven cents per kilowatt hour range.
Perfect. Thanks, so much.
Hey, it's a great report so if you Google U.S. hydrogen roadmap Mackenzie there'll be a web site at a late Q2 in the executive summary is up there today.
And I know a forward prescription will be up there in the coming days and I I think it really will give people a broad view what the company's you're thinking this market can be.
Thank you. Our next question comes from Craig Irwin with Roth Capital Partners. Please state your question.
I'm good morning, and thanks for taking my questions.
Andy one of the right Hey, good morning, good morning.
What are the most interesting or pieces of the the shareholder Danny you had in in Albany, What's the presentation by demand from my Deutsche Post right now he showed the chart.
Range versus payload and how things pencil out for economics of fuel cells versus battery electric vehicles.
No.
We've talked a lot about the.
The different things you're pursuing to to grow on wrote right and the opportunities over the over the next couple of years, but the same basic analysis also translates into the you Levy and aviation a environment right where weight is extremely important.
Yes.
You would never bought energy or unless you believed in the future in that market, but we don't hear a whole lot about it on a regular basis.
Is there anything that you can maybe share what that's as far as an update or.
So progress plans for this business and a vision for for where this fits in the future at a plug power.
So Craig.
That is.
Mark I think you.
Your description was Kirk.
Did you say issue.
And I'm going to start talking talking about vertical you know.
Tax taxis aerial taxis.
Ah that.
We.
We see that application almost identical to on road vehicle because of the power density of weight of fuel cells.
Those are programs in which you were engaging with people who work where it's quite long term.
That's not going to be overnight.
We're in discussions for people programs for 2024 2025.
That being said I think the learnings.
We will be extremely valuable for on road applications.
And.
Oh, we have.
Two application to applications in the aerial space.
Where our team.
He is deeply engage with customers and I think one of them will be a real surprise.
Okay. When we look forward to learning about that is there an approximate timeline for us to to see that publicly.
Yeah. So.
I would tell you a much Craig but you know.
It's usually turned into months, so I would say in the next six months.
Fantastic Fantastic.
So so my my next question is about the delivered cost of hydrogen right. Obviously as the largest buyer of hydrogen. This is this is an intense focus for you guys.
Over the next number of years, you know looking to buy hydrogen at the best possible prices for your customers and produce it at the best possible prices.
There were some fairly exotic ideas tossed around several years ago, ranging even to a purpose built nuclear reactors for hydrogen production right. So there's a whole spectrum out there.
Do you see any particular technologies coming onto the horizon that are ready for adoption within the next five years, but that can you know maybe half the a their production cost of hydrogen today, you know and give us a real a major tailwind above and beyond what we're seeing in the fuel cell market.
I can say this correct.
That's a good do what you put in the timeframe a five year.
And.
You mentioned there is.
A great deal of activity going on how to use nuclear energy heat or electricity, because it's so much strain electricity to generate hydrogen.
I.
I I listen presentation companies like the southern company on Monday, and Tuesday, This week at age attack.
I would say about 30% of the presentations for so we see we were to hydrogen.
I I think that's probably more than five years out.
That being said I think there's a.
A good deal of activity going on in three areas.
I think nontraditional players you see some of the Oh.
Utilities really focusing on our LNG to hydrogen.
Which which I don't know be at scale, but I think it could be beneficial and healthy pricing up I think there's a lot of interest with solar companies that leverage it with Electrolyzers and drive down costs.
With that the work best though I think you need to have sites during with 150 miles you need that generation facility within 150 miles of customers and third you know the way the practical way we're a negotiating.
Your term is that we're much focus on the specific cost the site.
And then.
Managing with our customers in negotiation what that they could costs. It and then keeping transportation is a variable.
There's also Craig and.
Work on onsite generation I think you'll see us doing more that next year to eliminate the transportation cost, but I don't see you know it as I mentioned I think the roadmap that was rolled out yesterday with that four to $5 all in and kilogram range.
Probably realistic.
Yeah, no today on a variable basis, probably in the yeah, we're probably.
Between five to $6 in most cases.
Depending upon where the site is you can be a little lower you would be a little higher depending on range.
You know I see.
Buying power impacting that more for us as well as a ownership of some of the assets.
Did that answer again, but yeah I know that's that's that's very helpful. Thank you. Thanks again for taking my questions or.
Thank you ladies and gentlemen, this concludes our question and answer session I'll now turn the floor back over to Mr. Mark. Thank you.
Thank you everyone and.
For those who did not intend to plug power symposium, we have a few minutes video, which provide some snippets I hope you enjoy it. So thank you it up looking forward to talk to you for the fourth quarter Conference call, we got big quarter coming.
[noise].
Thank you. This concludes today's conference.