Q1 2020 Earnings Call
[music].
At this time all participants are in 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.
Now, let's turn the conference over to Mark Mesler, Vice President Finance and Investor Relations at Bloom Energy. Please go ahead.
Thank you operator.
Good afternoon, all and thank you for joining us on a boom Energy's first quarter 2020 earnings conference call.
To supplement this conference call. We have filed our Q1 2020 shareholder letter and earnings release with the FCC posted it along with supplemental financial information that we will periodically reference Ralph this call to our Investor Relations website.
The matters, we will be discussing today include forward looking statements regarding future events in the future financial performance of the company.
These statements are subject to risks and uncertainties that we discussed in detail in our documents filed with the FCC specifically the most recent reports on forms 10-K and 10-Q.
Which identify important risk factors, including those related to the cobot 19 pandemic that could cause actual results to differ materially from those contained in the forward looking statements.
These include statements about the effects of cobot 19 on the company's business results.
And your position liquidity an outlook.
We assume no obligation to revise any forward looking statements made on todays call.
During this call and in our Q1 2020 shareholder letter, we refer to GAAP and non-GAAP financial measures.
These non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.
A reconciliation between GAAP and non-GAAP financial measures is included in our Q1 2020 shareholder letter.
Joining me on the call today, our KR Shreedhar principal co founder and Chief Executive Officer, and Greg Cameron blooms, New Chief Financial Officer.
KR and Greg will review, the operating and financial highlights of the quarter.
And then we'll take questions.
I would also like to notes that we are all dialed into this call remotely. So we apologize in advance for any audio issues that may occur.
Now I'll turn the call over to KR.
Good day, Thank you Mark and thanks to all of you for joining this call.
These are unprecedented time and on behalf of all of us at Bloom I send out prayers to close greatly impacted by cold at night.
We sincerely thank the heels on that front line, who have been relentlessly fighting the wireless.
I hope that also feel joining us today and your loved one harvesting thing.
I want it's Todd by talking about covert 19.
On our business and the marketplace.
Then I will talk about looking to sell and accomplishments this quarter.
I will then turn it over to create Cameron, our new CFO to talk about this and that children. So my balance sheet.
That's fair being taking to D. this current business and our outlook.
Close with a few summary comments.
Bloom energy has continued to operate an essential business who out that's great.
Our manufacturing operations.
Maintenance and service functions.
And seemed installation team have continued to work and testing our core business.
A ball and beyond maintaining that contiguity up our corpus.
The bloom team and sort of call 'cause refurbish ventilator and Delaware or.
<unk> hundred often in working conditions to hospital at a time national need.
Importantly.
The power to pop up seemed hospitals during this crisis with clean reliable electricity you think blooms covers.
One can.
Even from its tending to talk to powering the hospital five days.
Showcasing the time to power capability or sluggish.
In another example be upgraded an existing credit parallel installations are always on makes a good option and drugs get to secure power to a field hospital in just two days.
Demonstrating the beat.
Stability and adaptability of course solution to meet the changing needs of our customers.
I want to thank all of her bloom employees for their passion dedication and perseverance.
And for keeping our core business running while at the same time stepping up to go above and beyond to help fight this battle.
I'm immensely proud of the puts and commitment and my heartfelt gratitude goes out to them.
I have four specific observations about call it 19 and its effect on Arpus.
Part of.
This crisis crystallized, how globally interdependent VR and just how vulnerable society is good disruptions.
That affect a global supply chain and impact the production and distribution good sense.
Communities no understand that theme must be locally that Cindy and to survive that's crazy.
Reliable localized power he said the cool that's helpful Alliance.
It will be who local and state government.
And next policies that promote resiliency.
Second.
Yeah significant number off our customers, we saw art essential goods.
These are hospital.
Telecom provider.
So the threeq dealers warehouses data centers and manufacturing.
I'd global as these businesses are coal at 19 has made all of them acutely aware of the importance of power and the need for reliable see clean cost effective and localized energy solution.
In other words.
The art and essential in service.
To the essential business.
Let me that beat the out an essential Cohen.
Listen children.
Good.
The sheltering please hold or Saddam dialogue doesn't that star satellite images Green monthly urban areas around the globe.
It's a long to sustainability discussion.
On one that only focus upon carbon footprint to include the importance of air quality.
Even after likes it tends to normal.
<unk> Air quality, it's achievable you see that use smog, creating emissions.
That is no doubt that will be millions of people around the world.
Who will suffer from compromised respiratory system has at its on the wireless.
Cleaner air will be essentially because that safety.
We should expect there to be sientra appreciation for.
And desire to have power sources and that no Sox Nox are practically.
Loan system doing just got.
Even been natural got confused people.
So while our focus on let's Indians, Delaware safety and business continuity at lower cost well customers and the community sorry.
Our cohort will also Delaware better air quality and that will be important.
Pork.
We know that nature going to do what nature is going to do.
Whether its wildfires hurricane.
Quick.
Between our ice storms.
Yeah, not claimed to get a path on a natural disaster because of the pandemic.
If anything worse prepared than previous years for the coming natural disasters.
Because of Colin related constraint.
In light of that.
It is particularly important that'd be secure our critical facilities.
But then again infrastructure.
Now, let me discuss some highlights for the year thus far.
Our first quarter results that inline with our estimate.
More than that someone from our CFO.
In the U.S. commercial and industrial markets.
In Q1, the public couldn't come in my Cooper that 255 did okay.
One thing in hundreds of car sales productivity focus.
Yes seen a noticeable increase of interest in our sales pipeline.
Always on like a bit product offering.
Internationally, South Korea continues to be an important market for it.
In the beginning of the Twentytwenty, California with one of the first countries heavily impacted by cold.
Since then the country that seems remarkably successful and come back in the wireless business.
Yeah, it's becoming doing your normal.
We have continued to installed systems and so for you.
In fact in 198 systems installation, that's being constructed this year.
And then go online imminently.
Picture that site is on slide one or anything.
V. and our partner SK.
Very optimistic about this market.
For the rest of the AR and going forward.
We have re imagined and retooled our factories to operate safely and reliably.
Even if the restricted worked at least requirement that to stay in place for a long time.
Our entire manufacturing process line no ensures social distancing at each location and no two people have to be that within less than six feet of each other.
On sites nurses Carter monitoring employee health.
And I knew deep clean and wipe down procedures are in place an additional two cars.
We know these college related work adjustments will add some expenses to our operation.
But it does but most important to ensure employee safety and business continuity.
Our service business operating as normal.
On the U.S. installation side, we've been able to complete the projects, we were planning to except for Q1.
That's evidenced by our revenue.
In Q2.
We have had slight delay on a few construction projects because local moratoriums on permit and construction.
We are beginning to see construction Brasil and are hopeful this trend will continue.
It's worth noting that we came into the or that the backlog or $1 billion in contracted system.
We have not had one cancellation of the healthy backlog.
There have been node equipped to delay the installation of our system.
In addition.
Our installed fleet has more than $2.1 billion service revenue and the contract that systems in backlog has the potential for an additional 1.1 billion in service.
The service revenue paid by our customers such as a TNT Kaiser Permanente Medtronic Gilead.
While Mark Costco.
Cool and then talk.
No I want to introduce our new CFO, Greg Cameron and welcome him disciplined.
Greg comes to us from GE and has a strong background in operation financial services and the capital markets.
Rick will discuss our Q1 results and provide some highlights for the quarter.
Many of you may have already met Greg, what's truly and get excited to have them at though.
He hit the ground grinding and under the made a significant impact helping a secure our recent that extension.
And trade at the end of quarter.
Which he will speak to in more detail.
Right.
Thanks KR.
First let me begin by saying I'm very excited to take on the CFO role at such a category, creating growth company I'm here, because I sincerely believe and this company's mission and the basic societal need for the power it for bye.
I recognize the ability of our technology to transform highpowers produced delivered and consumed around the globe.
No doubt, it's an interesting time to join a copy.
Well what is really struck me is a deeply of everyone. In the mission of this organization in a desire to achieve real results for our partners customers and shareholders.
And I'm looking forward to bringing my experience in finance and operations as well as GE rigor and best practices to bear on behalf of Bloom.
Hi, officially became a bloom employee on April 1st.
Prior to joining I spent time learning about the business industry and customers.
I was also involved as Karen mentioned at the tail end of the debt refinancing and had the opportunity to work with our finance team in partners to reach an agreement.
I'm very impressed with our team.
Over the past few weeks I've also enjoyed meeting either by phone or video our sell side analysts connecting with some of our investors to hear their feedback.
My guiding principle here at Bloom used to be open and transparent with the financial community and overtime I look forward to simplifying our financial reporting and making it easier for you to understand and evaluate our financial health.
Now, let's turn to the financials for the quarter.
For your reference we provided a summary of key financial along with a summary personnel and balance sheet.
I don't plan to walk through each lie.
But I do want to emphasize that we delivered what we said we what for the quarter just as Randy have projected in the last earnings call.
We provided a range on revenue of 140 to 160 million.
We achieved 156.7 million.
6.6% year over year on an increase of 8.9% in systems acceptances.
Our non-GAAP operating expenses, we provided a range of 48 to 51 million we came in at 48.8.
We delivered net adjusted EBITDA loss of 9.8 million, which was better than our range of a loss of 25 to 15 million.
And we ended the quarter 353.9 million, a consolidated cash and short term investment.
Our cash balance excluding PPA unrestricted cash is 180.3 million.
This balance decreased 22.5 billion over the quarter.
Driven primarily by Prebuilding system that would be installed later in the year.
As we discussed on previous call our business has some seasonality and we plan for a surge in our systems acceptances in the second half of the year.
So to me second half demand at our current manufacturing capacity, we would be building in advance.
This is one of the reasons, we raised an additional 30 million in capital in the first quarter and added benefited this approach given the current operating environment is that we have a buffer of finished goods that allow us to take care of customer obligations, even if there's a short term disruption in our operations.
We think this is prudent and reflects the concept of de risking that I will touch on in more detail shortly.
At the end of the first quarter, we announced the extension or need amendments to our debt.
Specifically, we refinanced an extended approximately 260 million, our outstanding 5% and 6% convertible notes.
We also announced that have now closed an additional 100 million and new financing.
Using a majority of the proceeds to refinance existing convertible notes.
I want to sincerely, thank our investors and noteholders for their commitment to blooms future accomplishing this transaction during the peak of uncertainty in a major crisis speaks to the strength of Bloom energy and our strong investor relationships.
Now that we have the convertible notes extended we have time to access the capital markets when conditions are more favorable.
While we've been encouraged by the trend in recent convertible debt deals given the overall economic conditions I do not want to set arbitrary expectation on the timing for us to access the capital markets.
We have the time to be pragmatic in addressing our capital structure and find reef find partners that can bring resources across our value chain.
Okay, our spoke of our relationships with S.K. in South Korea.
We also partnerships with art.
Televisa strong balance sheets and financing capability.
Partnerships like these provide the opportunity for us to not only find that REIT investors, but also access global markets distribution channels through them.
We continue to expand our origination capability in the United States as it is a large in important markets.
And when combined with global distribution. It provides a scale we need to drive significant growth.
As the krona virus continues to create uncertainty around the world like many businesses, we've taken steps to protect our business, we've implemented measures to preserve cash and streamline our operations by causing some capital investments reducing operating expenditures in deferring planned increases in production.
We outline those savings on slide seven in the deck.
I'm server production.
We will keep capacity roughly at our current levels and avoid a avoiding a 40 million rather immaterial purchases.
Which will bring us to cash flow neutral sooner for the year.
It's care referenced we have been impacted by local building ordinances, they've created timing risk on the completion of our server installation and acceptance.
While we received the majority of the cash as we build and ship the servers, we do not recognize revenue.
Or receive final payment until they are accepted by the customer.
Once we have additional confidence on the abatement of installation risk, we basically flat production capability by over 50% with a 90 day lead time.
To reiterate we have ample backlog to absorb these units and customers waiting to be powered by us.
We previously discussed that for 2020, we expected the cadence to be similar to 2019 and that we would be building momentum acceptances in revenue throughout the year.
Our second half would be stronger than our first.
Our current server build plan in inventory levels support revenue similar to last year with an opportunity flex up production in the second half is visibility improves.
It's important to remember that in our long cycle business, 100% of 2020 projects had been identified in all of our U.S.C. and I projects are currently in our backlog.
The impact of local building restrictions on the timing of installations in our U.S.C. NIE business is our largest risk as the timing of revenue recognition may move between quarters.
Again to be clear this is a timing related matter when the product revenue is recognized but there's no lost revenue.
It may get just pushed out to the next quarter.
This risk creates enough uncertainty that we were unable to provide guidance for the second quarter or full year 2020.
As we update through the year, we should have better clarity on or installations and will jump start production levels Accordingly.
Let me now I'll turn it back over to KR for some closing comments.
Thank you Greg.
I'd like to close by emphasizing the following.
One.
I missed the coal that 19 pandemic, we delivered on our financial and operational guidance for the first quarter.
And be able to successfully the finance our debt and strengthened our balance sheet.
Number two.
We entered the year with a backlog of over $1 billion worth of system.
That remain solid throughout this crisis.
Those contract that systems have the potential for an additional 1.1 billion in service revenue from high quality established customers and our installed fleet has more than 2.1 billion of service revenue to be recognized in the future.
Number three.
This stable backlog combined with our demonstrated ability to operate that's an essential business.
The reopening in South Korea signs of progress in California, and the north.
He was optimism about our prospects for the rest of the year and beyond.
Number four.
We have a leadership team and board that season in crisis management.
We have taken steps to D. this car business by managing our costs and preserving cash.
You have done so while putting ourselves the flexibility and optionality to ramp up our business quickly.
As we emerged from described.
Yes, also ensuring that you have preserving and protecting our innovative edge.
This will allow us to further cement our leadership position and March even stronger in the future.
Number five.
The situation around the world underscored that reliable clean safe.
Cost effective localized power is a critical need for all people.
As we emerged from this crisis.
Thanks, Yeah quantity the lead to power generation to be an important topic as a result of coal at night.
Hi, So these are done to a more normalized operation.
Most call it.
We intend to work to help businesses and community.
Increasingly taking that energy needs do that on hand in order to deal with major disruption challenges.
I could not be prouder off our team's efforts during this challenging time.
Thank you again.
With that even now take your questions.
At this time I would like to inform everyone to ask a question you want me to press Star one on your telephone to withdraw your question press the pound or hash key.
Please standby, we compiled acuity roster.
Your first question comes from the line of Stephen Byrd from Morgan Stanley.
Hey, good afternoon, I hope you all are doing well.
Hey, Steven you are doing well, thanks for asking and I Hope you and your family.
With Morgan Stanley staff are doing well too.
Thank you very much in Greg congratulations on the new role look forward to working with you.
I wanted to just touch on the first on the point about Twoq guidance and a great care I think your your commentary was clear as I understand it just given the.
Uncertainty of acceptances, given restrictions like building access restrictions driven by.
The shelter in place rules, it's challenging to to be able to give second quarter guidance, because acceptances of course or are driven by.
By installations and not inside I think I understand that as you as you think about state starting to gradually relax their shelter in place.
Requirements I'm, just not familiar enough with the.
The sort of how that would impact specifically.
Customer acceptances on site.
How quickly can that come back or is that does that potentially going to to be a little bit lagging because you need permitting offices to be re stabbed and other things that could take a little bit longer to actually get back in place I'm, just not familiar enough with how that sort of restarts.
So that's very good question, Steven and you see as a number in our cycle.
First six months since we have in order to installed an entre is and be cooks permits, but the the local cities. We go through with permissions with the utilities and then be do they design working with our customer and any update sits needed.
Customer site.
The actual installation process itself can be a matter of speaks to see months, depending for most projects that are somewhat.
Some projects that fall on either side of that spectrum, but that's just a.
Spectrum for you so it's very easy for us.
And things are moving forward, especially when you look at.
Next I'd have to be accepted this quarter.
You have something to stall.
You get it go ahead on or even a few weeks prior to the ended the quarter you should be able to install and have been accepted so.
It is going to purely to fan for this quarter, which is.
Since your question.
Should be able to pull in some sites.
Many sites.
Given access information in the next couple of weeks next few weeks.
So to speak.
And to be we are seeing signs of that to be an optimistic but as you very well know it's extremely difficult to handicap that on a day to day basis sitting on chip.
Understood and so with that it's just difficult because you just can't predict the behavior of customers in terms of their their staffing of their facilities their final sort of sign off too to accept and allow.
Delivery and that's driven by sort of lack of availability of people on site and I guess other issues like that.
And one thing do you have seen though that I have to emphasize.
Is the customers to utilize the importance and need for other product, especially at this time many of them are essential businesses. The lasting day, one does not have power and they clearly understand leases like hospitals understand the need for this clean power do you want to get it does.
So if you've not seen customers asking.
For us to delay the installation of authentic projects as soon as we have local jurisdictions permissions to move forward in certain places, we should be able to move and we have seen in California. For example, we see as being given permission to do those things. So we are optimistic that'll happen in the northeast.
Understood and then just as a follow up.
Your your system installed cost went down quite a bit which is.
Very encouraging I think from about $4500 down to about a little over $3500 would you might just talking to the outlook for product costs and I guess, certainly covert I guess can have some in fact on on cost, but just on a maybe a more normalized level, where do you see product cost trending we're obviously seeing some improvement there and I'm curious.
But the outlook is.
So what we what we would tell you that look for the long term trend because when you. When you include flick the product cost and these total cost.
Purely depend on the mix of the broadest right. So.
Depending on what kind of an install it is you can have a spectrum of his focus how over here is the most important thing.
Yes blooms product cost per kilowatt.
Continues to drop even in our 5.0 platform, that's roughly 20% to your numbers that you have seen before.
And.
We are continuing to bring down the cost of cotton platform, which is doing extremely well for us.
And you're absolutely right to point that out and be our gain on the install side looking at every best practice there is to bring those costs down so ultimately.
Hey, BQ, our customers a great price on electricity and be getting good margin supply. So we are continuing to do that Greg would you add anything today.
More difficult installation at May drive up a caution a particular projects on an average of may increase, but overall occupancy tranquil could go down.
So similar Stephen that with some of that I see that the following right.
Look at don't look at the weather.
Climate.
Got it according to wouldn't be your pricing, but here is acute curious what the clematis.
Since the introduce this 5.0 fraud.
We have done amazing cost reductions or and over and over again.
And the product is performing better on the field.
Now we are working on the salt costs to come down and so it was caused us to come down so that combination put together with the electricity prices going up into utility.
It's.
Very good opportunity bullets for customers to get your value proposition and for us to commend the margin.
Well that's helpful.
Fair point, the selling price went down $500 per kilowatt and part of that I presume can be mix, but the cost went down a thousand. So I guess the climate result is a is a higher profit per kilowatt, which I guess the ultimate goal. Thanks very much I can let others ask questions. Thank you very much.
Your next question comes from the line of Paul Coster from JP Morgan.
Yes, thanks, very much for taking my questions, Greg will come to a the freight and.
A few quick ones first stop the if you if you look at the backlog in nuclear accounts receivables saum.
Do you see any credit risks or industry specific risks hospitality springs to mind.
Somebody education facilities, where we.
We should be focused.
Thank you.
Yeah, I'll take that one Paul and thank you for for the welcome. It's a it's an interesting time as I said due to join a company and to me the new team.
Listen on the on the backlog is well as our installed base, we monitor that very closely given the service component as well as our future Lynch installation.
We have it's a it's care went through the names. It is a very strong list of customers that are there to date, we have not had any issues and we'll continue to monitor that going forward.
Okay. Our side, there's very little trade receivables that we carry at any particular quarter, when it's true that where the seed or closing process not to pay to that other than some in material amounts nothing related to revenue. We haven't had any pressure on our on or a are.
Given the current environment.
Okay, great follow up putting your point about and been three trying to do so I feel the meaning here you said the venture level support revenue similar to last year.
In the second half of this year, but what what was the point of five because obviously you know this risk of well that's not going to happen right.
Yeah.
Listen I think part of it comes in is how we came into the year right. The team had a very strong finish to the year in the third and especially into the fourth quarter around taking orders that we would expect to install and the second half of this year. So that is they looked at the forecast there in looked at the amount.
Capacity, we had in order to deliver those units from a manufacturing standpoint, we made a decision. The team made a decision really odd to prebuild those systems and leave those in inventory and we would have those to meet the surgeon acceptances in the second half. So I just really wanted to make sure I highlighted that now if you look at the inventory back.
On our balance sheet date may stay flat year over year, and you've got to dig a bit in anywhere footnotes and see that we increased the amount of finished goods in our inventory balance so more finished versus versus a with a raw and then as well. There's other places on the balance sheet that we can point out here on where we.
More units that inventory will move out to the comes from sites and hopefully well eventually become acceptances and we'll have that inventory to support.
To support a larger number of executives in the second half the first half.
Okay. So one thing coming into the you you'd started to ramp up some expenses in <unk> and readiness for the next generation serve a right.
Now you go in bent tree finished goods inventories included a is sitting there I'm assuming current generation service is there anything in this scenario the delays the transition to the seven five server.
And what does this also mean in terms of customer sort of bookings customers readiness for that so some of them hanging back until they see.
What it delivers.
Well that's a great question this is KR.
Good afternoon to you and I hope you don't get them you're seeing safe.
So look here. It is here is the beauty of our business space.
Our customers more than 90% somewhere in the 90% range pretty much by electricity that comes from our servers deal and by particular model up or do I stayed on.
It's not like a cell phone business very few went out and said I'm coming out of the new model somebody's going to wait to buy.
By that old models of the new money comes not enough for contracts, the 1 billion plus and whatever else is in the pipeline.
The customer specify that they want this particular.
Model, so I'm not so the first thing you need to understand that.
Neither with our backlog now with our prospective customers naus notice.
On another sales.
Outreach.
Timing of new product impair our ability to so that's.
Thats the first point the second one is our five point of product.
Continues to do well and bring the cost stone continuously even even better than what people.
So that's number two number three on 7.5.
I'm very happy to do that.
Prototypes, we have built now multiple southeast power modules and put them together in a system mockup operating types and they are performing to technical specs and doing extremely well.
You know not to be surprised this is the first time. This team is bringing out the next generation products and every single time.
This is known to says no detriment.
What we're doing right now is to say.
Let's take this extra time that we have no.
And further reduce the cost because the teams able to see even further improvements super supplements and further improvements cost compared to the prototypes that they have done.
You're going to do that sylvan be launch the product.
Very good question Paul and.
What you're seeing is.
An increased interest from the sectors that you would expect right essential businesses.
The fact that we did these two Papa hospitals. The fact that people are doing ventilators alone created quite a bit of them in this within the hospital sector for us on top of that and dealer doing the bulk of hospitals. So the strong interest from the US was six or so getting inbound calls so saying can you provide.
At this particular and that should make soon enough how can a hospital thats trying to cure people of the respiratory illness have backup generators that few dirty chemicals that affected us the tree count of patient has been factor. That's just absolutely makes no sense and you have a great.
Options. So we are finding inbound calls coming in from the hospital sector coming into the manufacturing sector and some foodservices.
Which now understand why they need to stay on no matter what.
So the funnel is robust the sales team is extremely busy the sales team is also working on some strategic channels and partners you very early stages. So the extremely busy however, I think what you pointed out the signature cycles sit on it it's a very large last stage from the executed.
Yeah.
Given that you're dealing with that immediate tactical save my business no issues.
Dose closing of those orders will gets pushed out by a little bit, but given our long sales cycle and given that these orders Sinatra I just want us to fulfill sort of while you just not impacting our business at all.
Great. Thank you.
And your next question comes from the line of Michael Weinstein from Credit Suisse.
Hi, guys.
I just.
Just wanted to thing regulations again to.
Greg and also a.
Good work on the ventilators in California.
Am I wanted to ask you a little bit more about the.
The profit per kilowatt and that the ASP in T.I.S.C. statistics that you put out looks like there's a big change from the way. It was presented in the Q4 release.
And the Q1 release, especially if you look at the Q.
For 19 numbers.
They look pretty different.
In this latest release can you explain the open.
Yeah, let me take that.
Yeah, I can take it first and then and Mark and add more detail since since I wasn't here on the fourth in the fourth quarter as we've as we've gone through the process of cleaning up on.
Our restatement and work through that there may have been submissions.
To just presentation and what our 19 numbers are to what our 20 numbers, but anything that we're putting out now should be on that on a consistent basis and have a drop bees often.
Looking at Mark I'm a video.
Making sure that I've stated that correctly and he's giving me the sums up.
Yes.
What I'm going to assume as it maybe any now you pulled out the leases that you're not allowed to account for that.
Yeah, Yeah, I'm guessing I'll go back Michael and make sure. That's the case and circle back to you if it's not but overall the trend is.
As presented now should be.
You should be on same basis.
I am a related question is you have a nearly a pretty pretty big increase their $651 a profit per kilowatt going up to 1065.
Quarter sequentially.
But the you know the gross margins are pretty consistent going from a in the 15% range up to 16.2 or so.
This quarter.
Is the is that the because one includes leases and one does not what's the main reason why that what is the difference there.
No I think there they are both going to be presented on the same way in revenue is going to be recognized the way that that we recognize that we'd have it in our in our revenue and EBITDA or all on the same basis. So I think from room do in any comparison on a quarter to quarter basis, whether it's on a ASP here on profit.
You have a little bit of just with the mix is on the revenue in the variables there I talked a little bit before about the installation costs being a little bit different than that would drive an increase in revenue, but not an increase in margin I said to pass through to our customers. But you also have the geographical location of our CFO.
Customer the type of solution that will provide into that in the complexity of the installed. So all that would be included in those numbers in the drive the variances on any quarter over quarter.
So.
What's the thing that you think is different between those two data sets though.
To table.
What's being included in one not including here.
Yeah, I need and what we presented last year versus this year that difference would be would be the changes that we implemented.
At the end that not just that went on something like that the difference on a per kilowatt basis versus an overall gross margin number.
Yes.
Other than mix, Michael I'd have to I had to sit down with they go through it okay, Okay fair enough and.
Can you maybe.
To give us a preview of how the second half of different from the first half in terms of gross margin percent improvements and where where do you think or cost T. I ask people go and SP might go in the second half.
As you ramp up on on acceptances.
Yes, I think our overall yeah.
[laughter] KR do you want to Michael.
Michael you're asking some forward looking numbers that we don't present.
No trend [laughter] fairly about trends jobs, where you're trying to get the new guy. So [laughter]. So I was trying to make sure that Greg doesn't that than before.
[laughter] apologize.
Hello.
Thank you.
This is the problem as well.
But but but anyway look.
Like I said, our aren't material cost continues to come down.
Quarter over quarter. Okay. We are doing good progress. So you should be seeing and in fact relating to that number two.
We are knowing that the out into stream, that's a slight up there that.
Then go to the are.
Trying to be as conservative as we can that our cash and that should also have an impact on what you see in terms of margins now separately.
What you would have seen in 20 17000 Dkktwenty 19.
That I can walk you through its in the second half has had digital audio minutes module bus than the first half and because of that the absorption numbers get better deal at numbers get himself better and you'll see a you see a benefit coming from that assuming 2020, it that way and I gave you the reasons language.
Should be optimistic it has that way.
We should be able to see very similar trends. There also so those are you asking me what the drivers are so is that the drivers and at this point in time get trending well in August right.
Yeah.
Okay. One last question.
California wildfire season starts in May typically that's right about now are you guys seeing other preparing for any kind of major uptick in sales interest in California as result of that.
Look I think I think that is that significant opportunity.
There and.
<unk> lot of foreign customers have been asking us.
You'll be able to installed in a very short notice you feel you need you install and we are preparing ourselves and.
I want to make a point of here Michael that you would have seen in the deck I mentioned it but it's worth mentioning on this one project there we had to cooperation with the state the local utilities.
The local government customer.
From the Davy Arctic being late to the Davy installed was five days.
You have told you our typical install cycle is nine months to 15 months.
That nine month to 16 month got shrunk in five days than the need was there.
So.
Hey, pandemic will.
If you have to shelter in place evacuation is not an option. So micro grids for critical infrastructure is the way to go.
We can do this.
Rapidly.
What we have today.
And the will be reaching out.
You can you know you can believe as if you will be reaching out to local governments and saying why didn't you allow students.
The very very interesting confluence of the two.
The two disasters that data.
Alright, Thank you very much and have again I guess.
It's Michael Thank you.
Your next question comes from the lineup, Jeff Osborne from Cowen and company.
Yeah. Good afternoon, a couple of questions on my end.
Karen in terms of the Gen 7.5, recognizing you're not selling products, but it certainly is expands the market for your sales folks to go out.
And.
Offer additional states and countries et cetera, I just wanted to follow up on Paul's questions that products still slated to launch the Q4 ish timeframe.
That that product will be out for field trials like we told you indeed in the end of Q4, how how.
Exactly the sequence so ramping it out and hopefully that bid out it's not something they have given you other than it will happen next year.
And that is that it's that is still our intent and thats, what we do but give taking what I'm trying to say as they take extra time to make sure even by the time, we launched step products that product has very close to.
Cost entity that that we would like to see and give us the advantages that we need to see.
But we will and then trial will be having field trials of than the.
In the field ended this year like it goes.
Got you and then is there any lessons learned or customer behavior anecdotes from Korea as they recovered on how that might transpire in the U.S. or in Korea, I know piece of the businesses. These tenders.
RF piece for larger projects that are sort of utility Ron it's my understanding but that's so I'm not sure how applicable it is but I was just curious any comments that kind of line of questioning.
No yeah, that's a very good question, Jeff sand.
One of the things that we noted we had a call couple of weeks ago without counterparts.
SK are like partners in South Korea.
And what we see what we actually see in what we heard from them.
He is.
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There was a pause there wasn't moratorium very similar to the moratorium soaked here on working on construction things like that.
But the very first lifting of those moratoriums that he opening happened in construction and construction message relates to infrastructure and so you you will see a picture.
You know stuff showing a 19.8 megawatt installation that God finished construction after they deal and and its imminently going to be accepted that is one the second thing in addition to that.
And we look at our pipeline and when we look at the funnel.
Every indication that all those things are moving forward.
Normal so they expect a unless something else happens going forward based on where they are today that.
There you will look very much like what they had predicted the.
That's great to hear I might've missed a bit as it relates to covert 19 is there any impact to the supply chain or any of your suppliers from Asia or other parts of the world that Youre reliant on as you ramp up for the second half, but maybe you're concerned about.
So.
Everybody globally is affected by this and dealer viewer.
Our own challenges, but we have a phenomenal supply chain team yen into Q1, we had no part shortages.
Ian in Q1, the team made sure that sort of global diversity, bringing a few people on and doing what they needed to do they not only satisfied Q2, but also built up the safety stock.
So should that be short term emergency somewhere we can withstand that well be diverged from one part of that looked to the other to get what we need to do and at this point in time, yeah busy procuring Q3. So at this point in time I would say actually sit here.
The team's doing a great job managing or supply chain.
Excellent that's all I had thinking.
Your next question comes from Pavel knocking up from Raymond James.
Thanks for taking my question you referenced some of the slow down in deployment.
Due to the Lockdowns and stay at home orders My understanding is in most states.
Anything energy related has been classified as an essential business.
Including installation of new power infrastructure are there any particular states, where you've had regulatory restrictions.
The answer is yes and.
Naming names towns and cities.
You know here is the dynamic that we have to deal with.
There could you know there are example that a state the state capital and I'm to go in there or whatever they sure those orders exactly similar to what you said follow but.
It could be a local jurisdiction it city, that's laid a moratorium and when it comes to construction I'm not a lawyer, but I understand according to the low.
Local laws.
That local jurisdictions.
And basically.
From a.
Whatever the state, but said that regulation. So there have been cases that we had been delayed and here again via our optimistic by going and showing the importance of what we do and in most places there VR youre correctly, pointing out by not having that reliable business in clean power.
Or their subjecting themselves potential more crisis, then disastrous season tickets, but it's a hurricane season or the wet season or whatever.
So we are optimistic but V have experienced delays because of these.
Understood and now I'll follow up question regarding India, which has had I I think the strictest block down maybe have any.
Fiction, you don't have a lot of sales terabyte <unk>, but some so I'm curious what the impact wise over the last six weeks that India's economy has been completely shut down.
Very good question, so so in India.
Anything relating to infrastructure.
The government has actually been doubling up and doing it faster because if you have been to India and you know that roads are empty. This is the best time to repair the roads right.
So that's the kind of approach there taking anything infrastructure related construction related it's not a problem how little or the place. There would be are impacted is any sales opportunities because pretty much all the offices and all they could get to that we would have to deal that are not allowed to were not allowed to travel do not even.
I love to get out or fall to go to that they need to go and so I would say that say that's it delayed but like you correctly pointed out follow given that it's such a small fraction of our total or total business that delays for a few months is not impacting the business, but you know for sure.
That will get slowdown.
I appreciate it guys.
Thank you.
You may have time for one more question. Your last question comes from a line of Colin Rusch from Oppenheimer.
Thanks, so much kind of yeah. It was wondering if you could help us understand that the growth in deferred Cogs it looks like a tough, but 20 $20 million in the quarter.
Just want to understand that dynamic going to have one follow up.
Yeah, Collyn its Greg I'll take that so that's one of the places as we talked about earlier on.
From the quarter degrees and see that not necessarily in inventory, but that represents.
Units as well as deferred costs and on our shipments so at the end of December sink.
About 47 ish units were in there and that that's increased not quite double but increased.
Of 70, so low seventys that number so lot of that is so that would be represent systems that we had.
That we have.
Manufactured completed ship to a customer sites are being installed but you have not yet take revenue on and they'll move from their women acceptances complete moving away from there.
Okay, great. Thanks, and then just on.
The borrowings from related parties, there's about 30 million and the cash flow.
Debt.
Related to or issues related parties.
There is more specifics on what that does and how much catskill. Thanks. So much yeah. Yeah. So that was that was the new debt that we announced at the time of the refinancing. So we took $30 million in from our partners historical part I'll turn it back orders here, Yeah that was that that was about $30 million alright, perfect. All right. Thanks to like us.
Thanks.
Well.
That I want to thank everybody for joining our call and we hope all of you and your family still domain safe and healthy as he moves through the fluid thinking tend to make.
This has been a challenging period for everyone. Our team at Bloom Energy has remained focus on operating our business.
And serves the needs of our partners and customers was staying safe and healthy at the same time.
And I want to assure you that.
Via all unwavering commitment to continue our mission to provide clean reliable and affordable energy for everyone.
The need for this has never been clear and high value will Sicilian power is more evident now than ever before.
Confident in our long term strategy, our team's ability to execute it.
Ability to create value for you our shareholders. Thank you very much for your continued support Stacey.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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