Q2 2020 Bloom Energy Corp Earnings Call

[music].

Good afternoon, and welcome to the Bloom energy second quarter 2020 earnings call.

This time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

That's a reminder, this conference call is being recorded I would now like to turn the conference over to Mark Mesler, Vice President Finance and Investor Relations at Bloom Energy. Please go ahead.

Thank you.

Good afternoon, all we appreciate you joining us on wind energy second quarter 2020 earnings Conference call.

This conference if our Q2 2020 shareholder letter and earnings release with U.S.P.C. and opposed today, along with supplemental information that we will periodically reference throughout this call to our Investor Relations website.

The matters, we 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 than 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.

Cause actual results to differ materially those contained in the forward looking statements.

These include statements about the effects of cobot 19 on the company's business results in each acquisition liquidity demand for energy server in new applications timing of new applications, and the supporting market ecosystem and outlook.

Assumes no obligation to revise any forward looking statements made on todays call.

During this call in our Q2 20 shareholder letter, we refer to GAAP and non-GAAP financial measures.

Non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles and aren't in addition to and not a substitute for or superior to measure the financial which prepared in accordance with gap.

A reconciliation between GAAP and non-GAAP financial measures is included in our Q2 2020 shareholder letter.

Joining me on the call today, our key our Shreedhar principal co founder and Chief Executive Officer.

And Greg Cameron Burns Chief Financial Officer.

Carrying break will review the operating and financial highlights of the core and then we'll take questions.

I would also like to know that we're all dialed into this call remotely. So we apologize in advance for any audio issues that may occur I will now turn the call over to care.

Good day, and thank you for joining us.

Let's talk about our business performance and strategy and then turn it over to Greg to walk through our financial performance.

I'd like you anyway.

Then me last book on our first quarter earnings call.

Lever and early stages. So the goal is 19 pandemic.

But uncertain about the length of the locked down.

But our public health system what phase.

The effect on our economy.

The implication for Arpus.

Fast forward, one quarter and Colin Nineteens I mean, it's significant public health crisis in the U.S. and the rest of the world.

This is the fluid challenging and uncertain time or all of us.

We send our prayers.

Two people at home.

And around the log who are being affected by covert 19.

Convey our gratitude to defend planed workers, who are working tirelessly to serve all up.

In times like this all businesses.

And all of their employees are being tested.

Bloom energy, it's no different.

I'm exceptionally proud of how the Bloom energy team is rising up to the challenge.

The team has demonstrated right.

[laughter] silly and C.

Resourceful in that.

And it deep commitment to excellence.

At the height of the crisis.

Bloom refurbished and supply to or close hundred ventilators and rapidly deployed to hospital micro grid.

The implemented new coal that 19, workflows and protocols that our factories and installation site.

Prioritize thing that they feel for employees.

For the last few months.

Engineering team developed an affordable and innovative let's turn to lie.

That can service for patients with one ventilator and obtained ft approval for it.

Our goal is to provide it at cost to the people in places that needed.

We think it could be a lifesaving innovation for the emerging nations that coal at 19 on that right.

Our community in response to covert 19, combined with our strong second quarter performance and the new products and collaboration Cnos.

Thanks to our culture, and the kind of spirit focus and determination that characterize the bloom energy workforce.

I'm humbled.

By their dedication and my heart, so crowded cute goes out to the team.

Now I want to offer some commentary on the highlights and achievement in the second quarter.

Our manufacturing operations maintenance and service functions.

And field installation team have continued to operate and sustained our core business to log this crisis.

As we announced earlier this month, we installed see another six systems in Q2, which is 20% higher than the first quarter off this year.

And significantly better than we anticipated heading into April.

Considering that restrictions and uncertainties on the macro environment.

And that a installation cost has encountered many cold winter related delays.

This is a truly remarkable achievement.

In the second quarter.

Yeah farther sent thinned out relationships.

Our public utility partners by expanding.

Our relationship that Duke energy, and adding a new financing partner Nextera.

The two transaction that for 28.75 megawatts and we look forward to many more such transactions with them.

In addition to installing systems for U.S. commercial and industrial customers.

People three sites for U.S. get Lucky partners.

One was a four story tall six megawatt power tower.

In New York for the long Island Power Authority.

Two other sites there all lease on micro grids in Los Angeles.

For Southern California gas company.

These onsite micro grids, the pro white clean affordable and resilient energy to key facilities and enable soco gas to provide safe and reliable service.

With that 22 million customers.

[noise] Bloom energy.

At its core it's a technology company transforming the energy sector.

Be out a global leader in our field.

The Bloom energy platform enables us to commercialize new features that low capital costs and adapt to new markets acquirements rapidly.

The Devil up these new features for applications, but large markets like.

In commercializing these new applications.

Forged binbin partnerships with industry, leading partners, who called in west in our commercialization and assist us in opening up new markets.

These partnerships follow a similar approach to our existing partnership with SK into South Korean market, which is underneath resulted in sales <unk> hundred and 20 megawatts of fuel itself in South Korea and generated over $1 billion in equipment and future. So it's true.

Partners can add create value.

By bringing strong regional expertise in the areas sales and marketing.

Installation.

Financing and service.

Our partners recognized that loans technology.

Typical for them to maintain market competitiveness.

To that end.

I'm excited to discuss.

Two very important devil up and.

That's easy simply announced.

First.

The shipping industry has a substantial opportunity and as you will need to that use emissions and improve air quality on c. and that courts across the world.

So just need and capitalize on this commercial business opportunity in late June the announced a joint development agreement that Samsung heavy industries, the South Korea to double a pure self powered ships using bloom energy source.

Samsung.

Has set a goal to replace all existing main engine.

And denominator engine without highly efficient solid oxide fuel cells.

With this Mo.

So has the potential to lead the industry in helping their customers meet the international Maritime organizations, 2030, and 2050 environmental requirements.

Because the fuel cell clean electricity coolant electrochemical reaction.

Outcome busting fuel.

These ships would be able to improve air quality by introducing particulate emissions.

No.

So by more than 99%.

They will also reduce carbon emission.

Our target.

Just a precedent that design to potential customers and twentytwenty too.

Based on market analysis.

Both our companies I anticipate that the Bloom energy Star Wars.

On something ship.

Well go to 300 megawatts annually.

One see have reached commercial production.

Next.

I'd like to talk about hydrogen.

At some of you may recall in June 2019, the announced that our fuel cells could operate with hydrogen as a fuel.

Just two weeks ago.

He announced that entering the commercial hydrogen market.

By introducing two products.

One.

Hydrogen powered fuel cells that can produce vito carbon electricity.

And to.

Electrolyzers that produce renewable hydrogen.

Pete will introduce both products in South Korea.

We chose our market entry to deepen our highly successful partnership.

SK E N C and to meet the South Korean government mandate for building at hydrogen economy.

The law.

Quite the construction of 15000 megawatts, so hydrogen fuel cells.

And Ptwo hundred hydrogen fueling station.

Our 6.2 million cars like 24.

By the end of Twentytwenty.

We expect to ship it hundred kilowatt pilot hydrogen sort of worked at South Korea.

Two power in SK E N C facility in early 2021.

The second phase.

And one megawatt hydrogen server.

Installation is targeted for a 2022 deployment.

SK estimates our market opportunity for fuel cells from South Korea.

We'll be full hundred megawatts per year in the future.

The second aspect off our entry to the hydrogen market.

It's our electrolyzers.

You didn't say.

After the future moment.

For blown to run the platform in March mode.

The company's origin.

Can be traced to then that's a market Electrolyzer project.

Bloom and capitalizing on its leadership and commercial solid oxide technology.

And the worst thing the process it uses for fuel cell power generation.

Operated under worse.

The product is causing electrolyzer.

And it takes terrorists trialed venue book power.

And produces hydrogen from Walker.

The new Bill hydrogen.

And produce in this manner.

When fuel cards.

Power instantly and all these on micro grid.

Our be injected into natural gas pipelines to that use carbon emissions.

Since 2000 to.

Bloom has been awarded 19 patents for its solid oxide Electrolyzer technology.

That rapidly that you've seen cost of bulk solar and wind intermittent power should help the hydrogen generated with bloom electrolyzers.

Reach the U.S. department of Energys goal of gasoline price parity.

That's true then other technology.

I would like to know talk about transitions in the Bloom leadership team.

The welcome.

Caused guardino.

In the newly created so I'll take it away President Government Affairs and policy effective August.

Carl comes to us from the Silicon Valley leadership crew.

It prominent public policy Trade Association, that's represent more than 350 of Silicon Valley most respected company.

In his role as president and CEO.

Yeah champion public policy at the local state and federal level for more than three decades.

Known throughout the Bay area at the highly successful consensus builder.

Carl will focus on engaging policymakers and key stakeholders.

But building energy resilient pools to covert quote.

Our Chief Marketing Officer, Madrazo was retired from blown for medical reasons.

And focus on itself.

All of us at Bloom Little Mismatched Daly President.

And send our prayers for as healthy.

Matt.

Yeah extremely grateful for your amazing contributions to the company.

And could you help and building our amazing <unk> culture.

Thank you.

Cherilyn more.

To be joining bloom energy ethics, it get away President.

Chief Marketing officer on August good.

She previously served as senior Vice President network solutions that I try on there she had pianos responsibility for icon largest business.

In addition.

Sharyland has responsibility for icon Mark cities strategy and business.

Sherlund brings more than two decades of experience in the energy and technology sector.

And a very strong background in all aspects of marketing.

We are delighted to welcome for the leadership team.

With that I will turn it over to Greg.

Thanks care, it's great to have completed my first quarter Bloom.

When I began my next chapter with this team I knew they had something very special but as have engaged with the operations and learn more about the products platform capability I'm, even more excited about the opportunities for this company and its impact on our would.

Based upon the products designed it can serve as a platform from which to evolve into different applications with limited R&D or manufacturing investment.

The core product for platform is essentially the same in each of these applications, but of course will be optimized to the specific purpose.

This has significant implications for our operating and financial model as we address each of these new markets and applications.

This is a key element to my confidence that Bloom will continue to grow through new applications and new or expanded markets.

My role is to provide the operating cadence transparency in funding to ensure we execute the playbook.

With that said, let me turn to the financials.

For your reference we provided a summary of key financials, along with a summary, PNM and balance sheet.

I do not plan to walk through each slide, but I do want to emphasize some of our key deliverables and provide context for our strong second quarter performance.

Given the operating environment evaluating our results versus prior quarters more relevant comparison, and we've made progress on nearly every metric.

I'd also note comparisons versus prior year or less relevant as we benefited from a P.A. upgrade that did not repeat this year.

[music].

Revenue for the second quarter was 187.9 million up 19% from prior quarter, an equal increase on the number of acceptances.

And gross margin, we continue to make progress we delivered a 30 basis point improvement versus prior quarter as we continue to improve our profitability through lower product costs and improved service business performance.

Adjusted EBITDA was a positive 2.1 million driven by strong gross margin and lower operating expenses.

We ended the quarter with 324.1 million in consolidated cash and short term investments.

Our cash balance excluding restricted cash is 144 million.

A decrease of 36 million from prior quarter.

The decrease is primarily due to timing of 25 million in cash collections for a couple installations that occurred outside the quarter, but did not impact revenue.

Let me now address or capital structure.

We are committed to being a well capitalized growth company that has the resources to develop cell surface for products.

We earn attractive long term partner, who can work alongside some of the largest companies in the world and capitalize on opportunities to service existing markets and enter new ones.

One of my first priority to CFO will begin the journey of aligning our liquidity and balance sheet the size of our current business and the significant future potential uplift.

This approach comes with an eye of creating value for all of our investors.

With the assistance of our advisors and the guidance of our board, we continue to evaluate options to improve our capital structure in alignment with our growth initiatives. We will provide updates as we make progress on these efforts.

We executed very well operationally in the second quarter. The pandemic continues to provide restore our supply chain manufacturing capability and the completion of installations.

As we discussed last quarter. This can impact the timing of revenue recognition as delays could move revenues outside reporting date.

While we have successfully navigated these challenges in the second quarter.

Potential risk remains the timing of revenue.

For this reason, we will continue to suspend quarterly guidance.

Despite the macro environment no customers cancel their contract Firdapse for project to be delayed.

Additionally, we continue to have a strong pipeline.

This demonstrates the importance of our products in the quality of our backlog.

As we discussed previously for the balance of the year, we expect our revenue quarterly cadence to be similar to last year, we became better clarity around our ability to install our systems in the current environment and we have re initiated our production ramp that will increase our system out but versus the first half.

In addition to the technology milestones, we've announced over the past few weeks, we continued to make progress on our core path platform.

Bloom energy server remain on track to introduce Bloom seven dark fiber shield test later in the year ramp production next year.

I'd like to emphasize that over the past two years, we've reduced our product costs and burn technology Bloom I dunno by 30% through improved design manufacturing supply chain improvements.

These benefits will be leveraged and bloom seven die size and would coupled with increased power density we expect to maintain arch current trajectory driving costs down.

We continue to make progress on finding in working with partners that can allow us to globally scale.

Care mentioned, our new relationship with Nextera and our expanded relationship with Duke energy, our strong relationship with SK in South Korea remains a template cooperation we hope to find both in the U.S. and in new markets strong operators with sufficient capital in resources dedicated to deploying our technology.

We will provide bloom the opportunity to invest in developed markets, while managing operational complexity.

I want to summarize at Bloom had a very strong operating quarter. We're finding partnership will help us scale in our bringing exciting technologies to market.

We're working to align our capital structure with our long term growth initiatives.

We feel bloom is uniquely positioned commercially and has the resources to capitalize on our growth Tailwinds.

With that operator, let's open it up for questions.

At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad, if you'd like to withdraw your question. Please press the pound Keith.

Your first question comes from Michael We signed with Credit Suisse. Please go ahead.

Hi.

Hey, guys.

How are you Michael.

Good.

Can you talk a little bit about the production expense ramp.

You said you expect the expense ramp to continue declining.

You know going into next year, and where do you stand now what do you think you'll be next year.

Yeah, Mike Let me take that I think on you know the product costs, we talked about it in the script of it being 30% Dal over the last two years as we've really worked on our current technology fact that is these accelerating I'd say over over the period 18 to 19, we were down 30.

10% quarter over quarter, 90%, Oh last year to this year you continued to see that.

If it goes from look sequentially into this year as well I think what you're going to see is a continued decline around that chain pace every quarter about the same level.

As we go through will introduce seven dot side, but it won't be a step function as we bring it in as we ramp that product out. We think we continue to get to those same type of lessons.

15% to 20% that we've seen over the last couple of years.

When do you think with 7.5, you'll achieve a you know like US 33% reduction there would be commensurate with a 50% increase in power density.

Yeah. It will it you know it it'll come in overtime right and that's where it is important as you introduced new technology bring that in you have all the learnings that you get from your supply chain you have your learnings that you get from your manufacturing process. So we plan to introduce that ramp in a in a way in which works we will get the levels of saving best you.

We've seen over the last couple of years, So I wouldnt expect to step function at all and that's what I mean by trajectory as we go forward, you'll you'll see that similar movement over the next few years and we you know as we look out forward, we see that curve continuing to bad as we continue to take costs out of 7.5 as well.

Oh, along those same lines of thinking.

Announced a lot of opportunities in Korea over the last couple of weeks and I'm wondering if.

Is that do you think those opportunities might cause you to focus more on gen five improvements.

And rather than Gen seven five developments.

You go forward Michael Michael This is KR for us.

He doesn't end and not in our people to do both assets you have seen the beauty of our platform.

Is it gives us the ability to introduce a new platform a new generation of that platform. Then event from 2.5 to five there the 2.5 costs are coming down.

I've got introduced with a option.

With a great opportunity to bring down cost and what you saw us because I'm fit up quarter by quarter do a sustainable levels and then collectibles that we saw the benefits of it while to find pilots continuing to fill the gap and the cost of complaints I was coming down no. You does that same approach that they're going to.

Turning to the layers that report.

On top of the platform.

Marine is that layer and be hydrogen electrolytes or is the late or the hydrogen fuel cell in the later than we do these things.

A b R.

Confident that working with our partners.

Have an opportunity.

I actually do these things in a capital efficiency. So it's efficient way working with them and be able to do all these things without having to deepen out at dice something.

Got you lost a lot of Ah opportunities to try and pursue so.

Okay. Thank you very much I'll get in the back into queue. Thank you.

It's all about focus and it's all about you know yet.

Looking at each program and staffing attrite, and that's why exact talked about making sure.

That we have the right partners, who can open up the other markets for US that we believe then and we can be can go and execute to them.

Your next question comes from Stephen Byrd with Morgan Stanley. Please go ahead.

Hi, good afternoon.

Thanks Steven.

I just wanted to to a wish Matt Roswell hope a hobby as well and hope I hope itself continues to be.

To be okay, I'm, certainly thinking about them.

[noise], one or two just cover a couple of things around the pipeline of new sales.

I guess in terms of on a on the positive side with respect to existing customers are you seeing any sort of increases in share with existing customers and then just on on the risk side are you seeing any cancellations in the pipeline.

As you go through this process itself.

So on the.

No we don't comment on.

Intra year bookings and we're going to keep it that way, but here is what we can share with you.

Is that on our backlog that that we have still to do and what do you have showed you that are no cancellations. There is no customer telling us that they don't want to the sea water systems.

In fact, if anything.

You know you name a few cases the have seen as request. So can we do something earlier rather than later, Greg do you want to add anything else to that.

No I think is is we've gone through and look at Ed. It's it's where we look at the quality of our pipeline and we look at the quality of our backlog. We obviously don't don't publish that every quarter consistent volatility to that but I do want to emphasize you're specifically about customers delayed projects can.

So with all those things I would say none of that we've experienced at all if anything we've had a general pull from customers to continue do get our systems to their site because it gives them the resiliency that they need as well as is the cost savings.

Understood.

In terms of just I guess shifting over to the the Korean market, obviously, there's a very large market for hydrogen fuel cells.

Could you talk a little bit about the timeline over which you would transition away from your methane based fuel cells over to hydrogen based fuel cells is that something that giving a policy in the nation.

That you're going to need to do fairly quickly or do you see sort of along glide path ahead of.

Nothing based fuel cell sells over what time frame roughly should we sort of thinking about that transition to hydrogen for it for your product sales.

Hi, Stephen that's a wonderful question and.

The beauty of the blue platforms.

Yes.

Then we designed it and I think you know this going back to our early founding documents.

The wanted to make our platform amount of technology fuel agnostic.

Bed the eat as natural gas.

Or hydrogen.

Our systems are going to be able to operating and not just operate operated best in class with either of those fuel.

So and the beauty of our platform is future proofing our customer.

When they buy a product from us today for natural gas should hydrogen become available to them.

It's a fairly easy swap.

It's one of them to switch to that fuel.

And remember our hot boxes typically today last about five years every five years, you know this opportunity and even in between you can go and make that change if you need.

So from our perspective.

The beauty and the strength of the Bloom platform is we can develop boat and we can put both out in the market and he can prove it out and we can be the best in class and best of luck.

Ventos fuels come into the market and how they play is going to be dictated by policy by geography by nations by what they want to do we don't control that to some extent as a citizen. Other was we would like to see the type is an economy come sooner rather than later, because it's better for the planet, but we don't control it but we do.

I need to control it because we have future proofing ourselves as well as our customers by the architecture that we have chosen.

Understood and just to maybe follow up and then I'll get back into queue. The.

Is there a possibility sort of a smooth transition in terms of that that shifting korea towards hydrogen or do you see a period, where you're going to need to replace a lot of a whole lot of the stacks a lot of how box sort of replacement <unk> broadly speaking is that is it possible to kind of allow for that smooth transition or do you see it a sharper transition.

I think I think it's going to be smokes, yeah, I think it's going to be a smooth transition and that's ramped it's going to last for a long period of time.

Simply given the size.

Off this market.

Simply given the physical.

Amount of megawatts that you're talking about around the world not just for us but for anybody else.

To be able to transition from the natural gas economy, because I had its an economy is going to be a gradual ramp that's going to happen.

But again here is that I can emphasize what you do.

Our manufacturing line.

Our supply chain.

They're all have seen common elements.

The same off today, so who knows how to put together the natural gas fuel cells knows how to put together.

The hydrogen fuel trial, the same machines that fill the natural gas fuel cells, okay hydrogen fuel cell.

The same install people do that the same kind of monitoring we do so from our perspective.

If you told us to wake up Tomorrow morning, and switch everything once we have this commercial unit done we should be able to switch and that is the beauty of what we bring to the table right and once one sort of hydrogen product is commercialized simply of keeping you that timeline.

Vehicles on the fly and my vision and I've been this for you the.

Best in class automotive factories, and they came out in Japan on an assembly line.

Simply did not have to changed lines you could have an ambulance apply a truck a.

A off though the sedan and that roadster all falling one one after another in an assembly line and you can just do them without stopping the light.

For us, but there's a hydrogen fuel cell what a natural gas fueling our assembly lines can describe them out and it just depends on when the market wants it you would like to see the market want it sooner, but that depends on how soon the nation and the countries.

Embraces right.

That's really helpful. Thank you so much.

Your next question comes from Paul Coster with JP Morgan. Please go ahead.

Yeah, Hi, this is mark strouse on for Paul Thanks for taking her questions I'm just wanted to just kind of follow up on some earlier questions can you kind of summarize the the timeline for it for both the marine and the hydrogen business as far as.

You know how long it's going to take to reach commercial production you just the start of that and then once you get to that point.

How long does that say before you can fully ramp.

To achieve some of the the numbers that you talked about in the script.

Great question again, thank you and.

So I, let truss one by one that I see elements to this pardon me I've done so each one separately which is.

First one implementing.

The second one that heidrick and nothing Electrolyzer and the third one is has again.

So I Leptra salty [noise].

But with respect to the marine.

What do you have announced is via formed the of the have a joint development agreement now, but something heavy industries.

We have formed the teams and the two companies of resource jet.

Such that in the next two years the will do all the validation testing and all the packaging that facility because our fuel cells for the first time, but he goes from a stationary applications that it's on the ground.

Two immobile application on a ship so that our changes that have to be made for that on the external nothing on the internal platform being exacting Donald platform I just took for packaging to be able to deal with a mobile platform number two is similar to cars getting a.

You know rating from the.

Federal Transportation Authority and you know every part that you have getting it you elevating ships have their own certifying agency. It has to go to certification. So this is the activity that will go on for two years and in Twentytwenty to the whole the two companies hope to go.

Hi, because all completed and president.

Its sales proposal due to the offtake this of ships to the buyers of ships.

Ah Samsung predicts based on their past history.

In two years from that.

The flare ship using that technology, Gobi potency and they predict in commercial production.

We should at least have 300 megawatts a yard annually based on that market analysis.

So that's the shipping industry timeline.

Four out of marine application and again.

Similar to the answer I gave even from Morgan Stanley on nitrogen west as natural gas.

The beauty of our platform I have to emphasize again, it's the same units being built in our factories, just getting package that they're very and differently for the show. So we don't have to make any changes other than that.

It's the up ups I could say nothing delegates of what's needed.

That bit hydrogen fuel cells, we intend to ship the first feeling it hundred kilowatts by the end of the two SK.

Get tested early next year by SK and also by the end of the year next year, we would have done a one megawatt. The two companies are fully funding that and it's fully funded and after that it's purely up to the Korean government in terms of how quickly they want them, though they have indicated a decided to move very fast.

On the whole, creating significant opportunities for the hydrogen fuel cells.

With respect to the hydrogen electrolyzer.

This is now the first part the hydrogen fuel cells take hydrogen as a fuel and produce electricity.

But the euro carbon in addition to all the benefits that we bring which is number one it's clean nor Knox Norsok snow, particularly number two is on site, it's a resilient.

Forest fires hurricanes is not going to bother that unlike the <unk>. So it all those benefits.

Lots you get the fetal carbon thats the hydrogen fuel cell now up somebody needs to produce that hydrogen and if you produce that hydrogen like you are today from natural gas.

That has a carbon footprint. However, if you use renewable electricity from solar and wind.

And breakwater, two hydrogen and oxygen using an electrolyzer and use that heidrick and that is that a neutral hydrogen with its carbon footprint, that's our hydrogen electrolyzer product.

And the yeah, we expect that you have our first commercial units so dies in electrolyte out next year.

Sorry, it's a long answer but it goes to people.

Yeah No there was extremely helpful. Thank you Karen.

Just a quick follow up so it doesn't sound like there's a lot of investment needed on the hydrogen side, but maybe more so on the marine side, how do we think about the investments or near term to get those two production and then longer term any reason why those two or three businesses would be have a deferred.

<unk> margin profile than your your core business.

Look up then be then we evaluate market.

Then we evaluate markets and businesses.

The baby think about it is number one instead of partner, who really understand that market entry really notice there that market is going.

And see.

It's real competitive advantage.

To putting this in.

Into that product and and getting the competitive advantage and ultimately is that a willingness to pay by the.

Before that advantage by the customer, which is when you come and margin.

In our opinion, we think in in these things that feel announced based on all the diligence we have done that these amazing global partners in one case, Samsung and other kids SK.

That is there so.

Be shouldn't we shouldn't in any way expect why we shouldn't be able to come and the margins that you expect to come and given that these large multinationals have looked at around the world and start us out because we have a unique platform and technology that nobody else huh.

Okay. That's number one number two question that you asked was on.

They are all on our.

Spending.

And again I have to emphasize what all these the applications they talked about.

The same factually set ups.

Same kind of pick up from the same kind of operators and training.

It is and the balance of plant and the packaging, which is the external mechanical and how you absorb shopko vibration nortel piece of the things that go to add on features.

It pretty significant portion of that will be they'll be handled by our corporate partners, who are going to integrate our platform into the ship, but we will be working closely with them. So we expect relatively speaking the capital investments related to these things to be fairly light on our side, that's what we expect.

But we do expect if certain expense, but I think the key take away for you.

Yes.

Our early investors.

And our employees.

Have invested a lot to.

To build this platform.

And going forward, we can reap the benefits of all that investment.

[music].

That marginally small amounts of investment.

Given the opportunity that we have that as the <unk>.

That's the take away if you're looking for.

Okay very helpful. Thank you very much.

Your next question comes from Ben Kallo with Baird. Please go ahead.

Thank you guys.

Thank you Karen.

I think following on to that question just as I look at.

The.

Just one more concern.

Three different.

Markets.

You talked about how you allocate capital.

Is it just is it we're going to grow despite what the margins or at least three buckets.

Need to grow in those markets improve were technology.

Reserve threshold.

So.

Words, that's my first question and then my second question is.

I've been reading different different oracle's. Most recently the couple of dynamics do a deal will switch.

There's.

Batteries for Tesla.

Was wondering where were you stand on.

Levelized cost of electricity.

Yeah.

And if that's how you frame it when you sold to a.

Two datas server company here.

Yeah.

If you're selling that gets will be more thanks.

Hey, Ben It's Greg Let me take the first half of the question then I'll I'll turn it over to KR.

Yeah on the batteries. So so on the investment of capital ride.

Building on care ours answer for lot from last time, the great thing that I really seen as as I've gotten in here and under and understand how the product is designed and built in executed a lot of that investments already been made in our supply chain in our production capability.

Distribution et cetera, so when things I'd like to do as I talk to people just talk about how big This company is how we built out all those with a great growth trajectory on it.

As we think about making capital investments in where do we get the return on our capital and trade offs between that as we look at our product road map on the things that we've introduced so far in or attempted to commercialize or things that are are still waiting to come through that pipeline to be commercialized.

We think that the majority of the application of the majority of the product base that was in there is going to be very similar there may be differences to each of those systems in order for to do at specific purpose.

But the vast majority of that product and how it looks will look very much. The same. So it is not in a situation, where you were saying where you've got adjacent seems to a product in your building out a whole new technology that you've got to go to the bugs and bringing it to designing it engineering it building our supply chain working with that in.

Then taking to taking it to market. So it works all through the same process from from an application standpoint, as we think about the returns are those in each of those market. It's one of the reason said things weight sometimes to be introduced.

Okay, our talked about the hydrogen.

And just.

Whether it's the electrolyzer or the fuel cell you know you really sometimes need to wait for not necessarily pool for your individual technology to be belk, sometimes its waiting for the market to be developed so you can that settled into that.

Market with your partners in order to the owner ordered cheat the scale. It turns that you need I think from a global business model. When we think about it chips are so much similarity loved the product consistently is limited capital investment to move across those products and the thing I would point to lose.

We expect within our current.

Planning to stay kind of at the same run rates around R&D Capex and things as we bring the different products products to market. We expect a similar type of finance financial profile, both in where we think our prices will be relative to each of those application, where we think our margins will be what type of service revenues and margins will get on.

Overall over the life of those individual products as we expand with our customer relationships, so they're not dramatically different.

Joe not dramatically different business models, because it's relatively the same product being used in different applications hope that's helpful. And then I'll turn it over to to carrying excess.

Thank you very much that's great.

Hey, Ben So this is a question we get all the time right batteries as fuel cells.

You can go and do a lot of research from everybody. You don't analysts are people who studied the economically the deal you labs as well as industry publication the.

Even.

When you look at it if you want.

Power.

What a few hours at a time.

And it is relatively small amount of power as a backup.

Batteries or a solution.

If you wanted more than seven eight hours you get into a wash if you wanted for more than a day it as hands down fuel cells you better. So if you are sticking with that 20th century model of putting band AIDS to an electric grid because the grid on the field service.

He wants in a while you're not falling down every day and hurting itself. So just having a few mandates is fine batteries are okay.

However, if you are dealing with what is going on today in the world. There's a good sales so often.

And many times for long periods of time, and it's not asked alive, it's not as that.

Batteries cannot do it because it's like a bank and you can keep taking money out, but there's only so much money thats and into bank after that.

No economic activity in the economics of people that money and so that's the kind of way to think about fuel cell. So depending on the application he doesn't end.

You know data centers will have batteries.

And they will highlight for peak shaving they will have its for short duration and uninterrupted.

Power, but for the long duration non interrupted power, especially in city centers and other places that it there.

Thank you don't have power generation happening like that you don't have a large and usable.

There.

You need onsite generation to be the liable and their <unk> as he he is not relevant what is relevant is behind the meter electricity cost and that's what Bloom Lake.

And we have a tremendous value proposition.

Great. Thank you very much I'll leave it there.

Sure.

Your next question comes from.

Oppenheimer. Please go ahead.

Thanks, so much as I may have missed it but can you give us a like for like ASP trend and Asia and the U.S. on a year over year in a quarter over quarter Grisham's.

I don't think we break it down between geographies, but we can give you the try it via for competitive reasons.

Yeah, we don't they don't break it down yeah, Hey, it's Greg So we don't break it down.

By geography for just that reason that care talked about in the shareholder letter, though we do have some trending around where our total prices are.

From an ASP standpoint, and you can see that trend I would say in the any particular quarter because that includes the installation costs. There may be site volatilities round that based on the application. So.

This quarter care talked about a six megawatt like the structure that went in place and that's obviously going to be at higher cost. So it's going to be DSP, but if you're looking for a trend I would point you to the I'd point you to the shareholder letter that's there.

Okay, and then now as we look at your guidance commercializing. This this electrolyzer technology you know how should we think about the cadence a key technical milestones over the next period of time. It sounds like then ask you get through.

Some testing and then send ball approval.

Those sorts of things, but how should we think about the key benchmarks over the next couple of years on that Uh huh.

That's very good question Carlin and.

Look.

The company like I said has its roots and nitrogen.

No I didn't generation using this technology and fuel generation using this technology oxygen generation using this technology for Lars.

From 2002 onwards, we have 19 issued patents in this area so that activity search and be have intellectual property in this area under the for a long time now what we are doing as we speak is doing some extensive testing accelerating that work.

And.

The first benchmark you should see is to hear about are about the introduction of our commercial product next year.

And what we expect to show is.

Hey, best in class performance when it comes to Electrolyzers.

Yes, the benchmark to look for a once we do that he purely a game given that he can use are seeing.

Lines and everything else to operate it is.

You just purely going to be a market pull in don't so how many products. The ball then.

Who we ship it do because it's the same lines that can produce a fuel cells. The other to license. So we can mix and match.

Okay. Thanks, so much for us.

Sure.

As a reminder, could you would like to ask a question at this time. Please press Star then the number one on your telephone keypad.

Next question comes from Gabelli.

Raymond James Please go ahead.

Thanks for taking my question I want to go back almost exactly one year ago.

When you talked about California, New York with 100%.

Zero carbon power standards.

And the headwinds that this what's creating in terms of.

Customer adoption.

What's happened with that issue in the last 12 months, you know to what extent that this.

As impactful as you thought it would be a year ago.

Very good question Powell.

I think.

Hi, equal is not even a few months after we spoke.

The very tragic events up north happened.

The forest fires and delighted fives.

And ER equal us unfortunate.

That's similar to hurricane Sandy.

Similar to the hurricane that happened in Puerto Rico.

Similar to the at the same thing here yet in California.

People did not have power.

And their lives lost not because of the national disastrous event.

But because of medical attention medical needs could not be supply for lack of power.

That is unconscionable in the most advanced nations in the 21st century.

So I think.

For the first time.

Some people who did not quite appreciate.

The need for resiliency as we are dealing with the climate change issues.

Starting to understand that view had.

Significantly good conversations often and conversation he does not an already it is not.

Sustainability, our resilience in sustainability and resilient.

We have been very successful and having that conversation and we continue to have that conversation and we think the.

The state will be Oh, yes, Veritas, upto, two well deceiving such Uh huh.

You know such a message now having lived through Psps, having lived through days off the utility simply shutting the power off.

Okay and I'd during those times you need systems like what we bring to the table and a good example, if that's where you would be then a emergency hospital has to be stood up in.

In a parking lot for covert patients.

Diesel Gen sets are not the option because they put out our sox nox and particulates that people should not be breathing even went down at healthy let alone when they are gasping for the last for up.

So bloom erected a clean reliable solution for that and put that and the state.

Was fully supportive and helped us get that emergency power as quickly as possible. So there's some industry utilization and understanding and there's also understanding that all of all the technologies that's out there bloom as the cleanest me to take that natural gas and produce power and also blooms developed.

Thanks solutions with bio pass and hydrogen and everything else.

Carbonite. So so I think we are sitting in a significantly different place in terms of policy in understanding that need and matter of either before I. Appreciate you asking that question what a different place we find ourselves.

My follow up is on policy on the other side of the Atlantic you you've never historically sold into the European market, but now we're going to have the European climb up law and net zero by 2050.

Does that change your perspective on the opportunity in Europe.

Yes, we do a great follow up question.

You didn't plan this but it was the same week that we announced our hydrogen that South Korea.

That you saw that you put out its hydrogen roadmap and all the article that came towards that very aggressive low so via looking at that market a bit cautious excitement and the hole that we will find that I partners to work with an enter that market.

At the appropriate time, given the emphasis.

[noise] appreciate it.

[noise] that it's all the time, we have to questions I'll turn the call back over to Kate Spade <unk> for his closing remarks.

Thank you so much I really appreciate you all taking the time this afternoon.

As you know we are continuing to innovate and execute on our business plan.

De risking our business.

Focusing investments in new application.

There are bloom energy server technology.

And we're getting the support of very strong partners. The three other commercial business prospects.

In life into the challenge and advancing our mission of providing clean affordable reliable and see energy to everyone.

Please stay safe and healthy and we look forward.

Let's hope and optimism to a day there the covert 19 pandemic that's behind us.

We appreciate your support and interest in our company. Thank you.

This concludes today's conference call. Thank you for Germany, you may now disconnect.

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