Q1 2022 Plug Power Inc Earnings Call

Greetings and welcome to the plug power first quarter 2022 earnings call. At this time, all participants are in a listen only mode.

<unk> and answer session will follow the formal presentation.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note that this call is being recorded.

I will now turn the conference over to our host Teal Hoyos director of marketing and communications. Thank you you may begin.

Thank you and welcome to the 2022 first quarter update call.

Call will include forward looking statements. These forward looking statements contain projections of our future results of operations or of our financial position or other forward looking information. We intend. These forward looking statements to be covered by the safe Harbor provisions for forward looking statements contained in section 27 eight.

Three and section 21 E of the Securities Exchange Act of 934.

We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward looking statements and such statements should not be read or understood as a guarantee.

Since our results.

Such statements are subject to risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including but not limited to risks and uncertainties discussed under item one a risk factors in our annual report on Form 10-K for the fiscal year ending.

December 31, 2021, as well as other reports we file from time to time with the SEC.

These forward looking statements speak only as of the date on which the statements are made and we do not undertake or intend to update any forward looking statements. After this call or as a result of new information at this point I would like to turn the call over to plug CEO Andy Marsh.

Thank you Teal and thank you join clubs first quarter earnings call.

Can find a detailed review of the quarter in our shareholder letter.

But let me give it.

What's the sort of physical.

Recognize that macroeconomic conditions are challenging.

Everyone. We have seen some of the challenges supply chain and the price of natural gas.

Futures not based on the economy today.

<unk>.

Let me highlight.

Very great.

Hey, Brett.

How many companies will increase.

80% this coming year.

Yes.

In the future for hydrogen fuel cells.

Mike Bloomberg and others.

The.

Trillion dollar opportunity.

All of our activities are tied to this opportunity.

Hi, Joe.

Depending on grade.

Oh, that's ultimately.

And energy independence are synonymous.

And as an indicator of our present is our sales funnel for electric <unk>.

Funnels approximately $50 billion, we've committed to book one gigawatt. This year Electrolyze yours, we will most likely be increasing this goal soon.

How about the futures and sometimes J S can this business scale.

Let me give you a simple example, based on Q1 financials by telling you a gross margin improvement story.

Let's start with products.

Our Gen drive product gross margins is over 30%.

The cost of our new products.

We will continue to come down as we experience our traditional 25% learning curve for fuel cells Electrolyze yours.

Oh, our present products at todays volumes, while the minimum at 30% gross margins.

Our service the learnings are being implemented and demonstrate now and will cut our service costs ultimately by 45%.

With deployment of our Green hydrogen network.

70 times, which will be available by year's end, our cost will be one third today's cost.

And our P. P. A which includes assets we can ultimately own will be net positive.

These numbers align with our 2025 goal of 3 billion revenue, 22% EBITDA, 17% operating income.

This is the equation for success.

We're building the category King with the clear strategic and tactical plans great customers employees.

Unmatched in the industry.

I've never been more positive about the fit between our strategic and tactical plans as I feel today.

All saw Jay and I are now ready to take your questions.

Thank you and ladies and gentlemen at this time, we will conduct a question and answer session. If you would like to ask a question.

Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

You May press the Star key followed by the number two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Okay.

Our first question comes from Chris Souther with B Riley. Please state your question.

Hey, guys. Thanks for taking my question here.

Some of the Dod material handling.

Really take off here could you give us a sense of.

How about 45 million breaks down between Electrolyze or on the road and then the other end markets there.

Go ahead I'll go look Hello, Paul I'm going let Paul answer that question, Yeah, I would say, it's you know and there'll be more detail in the queue, Chris but you know it's about probably roughly a third of Electrolyzed yours, but you know that pipeline is growing and scaling that business there'll be a lot bigger in the back.

The second half given the ramp up.

The pipeline and the production capacity of the other stuff is as may only the acquisitions.

Okay got it and then just another one on I'm a few all margin improvements.

Like you're continuing to be very positive on the long term trajectory there.

If we're looking at kind of a one third of the costs for green hydrogen versus kind of what we're paying today.

How should we kind of southern guided as the capacity ramps up do you think that's kind of an immediate you know when capacity comes wine comes online, we should kind of assume that lower pricing or during kind of the ramp up is it going to be.

It takes some time to kind of hit that type of rate.

Okay.

Sorry, Jay you take this one great Hey, Chris how are you. Good question right. So obviously the cost will go down as the plant ramps up that's how it plays out but having said that we've said by you know by the end of 2023, we're looking at breakeven and getting to cash flow positive from operations down by 2024. So you.

Can kind of think about as the 17 tons come online that will really do yourself blended cost in 2023 that cost will further improve in 2024 and as you go to 2025, we feel very confident that we get about corporate gross margin target of 30%. That's really how it plays out from a cadence standpoint, and one more thing.

If I may add right I think like in the month of April our plant in Tennessee actually operated at 93% since of expanded capacity and that is going to help with our overall blended cost of molecule as well. So that's what you will see happen as the plants come online, we will gradually ramp up and once the plant or at that 90% of the capacity.

From the utilization standpoint, you will see the full benefit of the reduction in the fuel cost.

I appreciate it thanks I'll hop in queue.

Thanks, Chris.

Thank you. Our next question comes from James West Evercore ISI. Please go ahead.

Good afternoon Andy.

Good afternoon James.

I'm curious about the recent Mou you signed with with Olin Corporation to take away some of their their byproduct hydrogen I know the initial JV looks to be relatively small, but they they produce if I'm correct a lot more hydrogen in the initial baby suggests it seems like this could be game change.

Could you.

Talk a little bit about kind of your strategic thinking here the rationale and how this came about.

Yeah, James Ed.

We do think it's an important step in building out our network.

Owen.

Has a waste stream.

Which is probably over 350 times.

Hydrogen per day.

That significant yes, and this relationship is really just to be getting.

And when you start looking at the cost it is equivalent to one or two cents a kilowatt hour for electricity plus on top of that the complexity of the plant is much much simpler.

We think the relationship with Olin will become a critical element in building out our hydrogen network across the U S.

Which well position us to expand even rapidly.

This is I think Sanjay.

Sanjay I think we feel we can get these plants up by the first quarter of next year, which is a real you know which will be really beneficial for all costs. So what have I missed.

No I think you've you're putting about summed it up Andy blood, but James as you said, we're obviously really pleased with this partnership more to come and as Andy said, there was a pretty big substantial volume.

Again.

This is one of those opportunities where it should be a pretty critical part of building. This north American Green hydrogen network together with a partner like Colombia.

Right. Okay, and then maybe you saw do you for example, why you chose that or they they were you guys chose the Saint Gabriel Louisiana plant.

To start the project or if there's something unique about that or is that just.

There's available capacity.

Well first off this would be a 15 ton flat trade of given the state of where it is available ETF feed gas you know potential to actually make that feed gas also green and so that's that's the rationale in terms of why we decided to work on that one there. This is the discussion we've been having for a long time James as you can imagine is far from mature.

Tier this recently, but it's the first one and hopefully many more to come going forward.

Okay got it great. Thanks, guys.

Thanks James.

Our next question comes from Colin Rusch with Oppenheimer <unk> Company. Please go ahead.

Thanks, So much guys could you talk a little bit about how you're going.

Good afternoon Colin.

The dog with you Andy.

Could you talk a little bit about the evolution of your pricing strategy relative to adoption rates and any sort of cost management that you're doing obviously inflation is impacting a lot of folks.

And certainly you guys can't be fully immune but just trying to think about how you guys are approaching this with your customers to to kind of thread the needle.

Yeah. That's that's a good question Collin, so if I take a step.

You know we are in a.

<unk> always been hesitant to talk too much about pricing.

But.

I would say that.

Look at the steps were taken and hydrogen.

We are more focused on managing our own cost.

To support our customers.

We find that.

Product pricing for.

And fuel cells.

You know or reflective of the increasing cost in the marketplace.

And.

There was so much of our service is associated with reducing our cost.

That said.

Our service models evolving to the point where.

Chris Soriano, who runs our service group, we clearly see the 45% we're really looking to drive it down even further so you know customers are.

I'm not going to say a light price increases but there.

Or more.

Understanding an open price increasing.

Excellent and then just thinking about the new facility and the ramp there.

I guess, obviously it looks like there's an awful lot of new automation and I'm wondering if you could talk about kind of the initial yields with that automation and what you're seeing so far as you start to start that out and get.

Yeah. So I think that's a and I don't know if we kept it in the letter, but when we look at the stack cost for Electrolyze yours, the automation will allow back costs to be reduced by 70%. So it is significant.

And that Colin really makes our electrolyze or is extremely competitive.

It's why.

It's why during the later during the <unk>.

My opening statement.

I expressed such confidence in the one gigawatt.

Which will.

It will be quite profitable for plug and on top of that.

I really do expect that number to increase as the year goes on we're.

We're looking at projects alone that are one gigawatt in size.

And quite honestly, it's a nice market because.

People really aren't in it.

Position.

In the free world that reduced at this level.

That's incredibly helpful. Thank you so much.

Youre welcome Colin.

Thank you. Your next question comes from Bill Peterson with Jpmorgan. Please go ahead.

Yes, Hi, Hi, Bill.

Yes.

Yeah.

Good day My first my first question is on the policy and I guess, specifically in Europe I, probably saw last week. The Repowering you. The commissioner has lost a lot of industry CEO signed executor latest declaration to basically massively increased actualized the capacity within the next call it three or four years.

I guess my question is is that that's something that of course it needs to be a part of in terms of having local manufacturing in Europe .

What is what is pardon me to do specifically in Europe too.

I guess its fair share of 30 drilling opportunity in Europe .

So one of the hidden secrets bill ways that I, probably investing more in fuel cell electric risers in the past year than anyone else.

I think that uniquely positions us we we do have discussions and if you think about our brand launch the other week, we were well represented by Belgium, and the port of Antwerp as well as many other entities, we have relationships with light which are experts in.

Sourcing low cost renewables in Europe .

Do you think.

This week I was with folks from our <unk> JV.

In down in Miami.

And when you look at that relationship.

Good chance that we will be looking.

Two.

Putting electrolyzed electrolyze your capacity.

I'm not saying this right. So let me step back Bill when you start thinking about it.

Yeah.

We are seriously looking at making that in Europe , which will make fuel cells or electrolyzed yours.

Look we've made the next round of the JV European funding and the amount of funding that J D can get can be substantial to support the activity.

I would not be light about the U S. Either bill last week I met with three senators from fossil fuel states here in the United States.

All of them or thinking about how they can move their economies to hydrogen economy in the future and I can tell you one of those senators who <unk> been getting a lot of press time is very very bullish on making sure that part of the climate Bill includes substantial extension of the.

I T C for fuel cells, and hydrogen as well as the production tax credit so far.

For my time in D C I'm, probably much more bullish than other folks because quite honestly, we were meeting with the folks who were who probably your the moderates and in the debate and all of them were strong strong supporters of hydrogen and fuel cells.

Yeah. Thanks, Thanks for that color and I guess, maybe sticking closer to home.

I am actually here among decent ACP export I know plug has a presence.

It's here, but there's a number of your peers in the hydrogen space pretty clearly the hydrogen is very much of interest here at the show I know you were talking in your shareholder letter to share more on your potential strategy in the second half, but I guess in light of the pit.

Your interest what is.

I guess you said you said in the past I think two quarters ago, you don't really want to be.

Provided to an OEM for somebody else to monetize it but what what can plug D uniquely in.

In a partnership would it be awesome not only provided a fuel cell, but also about yourself I'm just kind of curious what is what is probably looking to do in the heavy duty space.

Well I think if you look at the model we use with IV.

And the model with I V.

We brought our technology they brought.

Now all of <unk>, combining them together to offer a product rapidly to the market.

And I also want somebody who has sales channels and I think that's really important for the future also so.

We are we.

We have people, we're working with we spent a lot of time on this issue.

You know I I've always been.

Maybe not first and making deals in certain areas, but.

But we've always made I think smart deals when it counts.

How we entered Europe al we entered Asia, how we.

Entered Australia.

And I think that Ah I think patience will pay off for plug.

And.

I think.

I think you'll be hearing more quotes in the second half of the year or said in their earnings letter and I can tell you we.

We meet every week on our progress in this area.

Thanks for the quarter to see more progress.

Great. Thanks Bill.

Thank you and just a reminder to ask a question at this time. Please press star one on your telephone keypad.

Remove yourself from the queue you can press star two once again to get into the question queue simply press star one on your telephone keypad.

Our next question comes from Leo Mariani with Keybanc. Please state your question.

Hi, Leo.

Hey, how are you okay great.

Great I was hoping you could expand a little bit I think if I heard you right you made a comment that your youre looking at projects currently on intellectual Azure side that our one gigawatt in size did I hear that right.

You did hear that right.

In terms of ideal for now let me get let me take a step back.

Do you realize that.

If you did a gigawatt project like that it's probably six and a half football fields.

Alkaline and with Pam, it's about 40 yards of a football field.

That's one of the distinct advantages of Tam when.

When you start really lucky that total cost of ownership.

Herb wins hands down.

Yeah.

Right. Okay, I guess that was so it sounds like it would be a large scale potential power project that you are in negotiations on.

It is.

And we have more than one were in negotiations on.

Okay and.

You just mentioned Leo negotiations and discussions I know, it's not an overnight some of the discussions none of the discussions we're having in this areas overnight.

I've personally been in discussions on this for 14 months.

Okay.

And also just wanted to touch base on margins.

So certainly just kind of noticing that your total gross margin.

Was a little weaker here in first quarter versus fourth quarter could you, maybe just give a little color on sort of what the main drivers were there and then additionally, how do you expect to see margins progress during 'twenty two.

Thank you will see margins turned back positive by the end of the year.

Paul you want to take that one sure. So the first thing is.

If you look at the.

Sales volume was down.

Sequentially, that's because of the seasonality of our business. So we always do about one third of the volume in the first half Q1 is always the lowest version of that.

It's just a natural phenomenon in the material handling business. It's also a phenomena almost scaling rapidly the way we are with some of these new markets and products and so.

Right now theyre going to be quite heavier in the second half just because of the passage of time scaling up that pipeline so with that.

Equipment revenues is down.

Sequentially against Q4, so just on apples to apples basis, you have a lower mix of higher margin business, there having said that.

We've got more positive activity going on.

Eight years I've been with this company.

We're scaling a number of new products, which takes time to ramp and scale them up.

They ramp and scale as Andy alluded to they will certainly be in that 30% gross margin profile.

We've got the fuel activities, which we've talked about extensively including on this call.

Think people really appreciate the fact that.

When you can generate that molecule.

40% of the cost today.

That's just.

Dramatic right so.

Really exciting and the progress that we're making there in programs like we're doing with all of them.

It allows us to even accelerate that.

And then.

Chris.

Not only are we shipping products out with a substantially improved.

The liability profile.

Has extensive capabilities to go back and retrofit.

And application and get those benefits.

So we've got a tremendous amount of resources more than we've ever had focused on reliability and pulling back and putting in.

Stack software as improved batteries of different components that will really.

Step function change.

Well the cost per unit, which is why Andy says.

And we're gonna be reduced that cost by over 45%.

So all of those activities are actively ongoing in conjunction with growing bye bye.

More than double.

This quarter from last year, So you know.

Despite the growth, which is hard enough to navigate we're doing all of those activities.

I'm real excited as Andy is about all the prospects of whats happening and how this is going to start to transition in a very short period of time.

You'll see it through the course of this year. If you look at the two thirds of sales volume.

That means we're going to be doing more sales in the last six months of this year than we did all of last year.

In the context, so that's pretty substantial in terms of volume gains and a lot of that means it's going to be very heavily concentrated product, which is where I get the best margin profile.

So it should be very accretive and will be very accretive as we move through the year.

Alright, Thank you very much.

Thanks Leo.

Yeah.

Yeah.

Thank you. The next question comes from Eric Stine with Craig Hallum. Please go ahead.

Hi, everyone. Thanks for taking the questions how.

How're you doing today, Eric doing well doing well thanks for thanks for taking the questions here well.

Well, maybe just to start you announced the offtake with Walmart as part of the Green hydrogen strategy that was great to see but if we think longer term and I know you by 2000 28000 tons per day goal. You know what is the right amount that you think you should have under off take agreements. I mean is there is there a certain.

<unk> do you want to have to be able to sell at spot I guess for lack of a better way to say it or do you really want to maximize that amount that's under contract.

So Craig let me lead Sard, Jay take that one great Hey, Eric how are you. Good question look I think we've touched on it a little bit on our last call as well, we don't want to sell out the entire capacity right because the way we're thinking about building this green hydrogen.

Jim generation network, it's going to be a force majeure resilient network that is going to make sure that green hydrogen is economical and bake into so nobody should ever getting worry about where the hydrogen comes from as they plan to adopt more and more fuel cell application right. So the number that we have been targeting and who have been internally discussing and thinking about is between 70 to 80 per.

<unk> of that capacity, we do want to have under long term contracts, what do we absolutely want to have that 20% to 30% of that capacity as a flex capacity can help other players in the industry other potential customary in the industry. So that the hydrogen really ends up being viewed as being very big hitters in the green hydrogen keeps on getting more and more economical that's how we think.

Got it okay, Eric one another point, it's an important one to note here as well because when we think about this whole green hydrogen offtake strategy on a long term basis and I think you know this but it's probably important for others to keep in mind. So the demand multiplier that comes from new application is a very important one as well that we all need to keep in mind like.

Forklift consumes one kilogram of hydrogen a day you have your light commercial vehicle at about 6% to eight kilograms. A day class eight truck 50 to 60 kilograms, a day and if you have a 20 471 megawatt stationary power that's almost one four times a day, that's how the demand multipliers for hydrogen which is another reason why we're very strategic and thoughtful.

In terms of entering into this long term contracts to make sure that there was enough hydrogen available for our pedestal core customers as they embrace and adopt new application that hydrogen availability is never a concern or an issue.

Yeah, no that makes perfect sense. Good color there maybe just last one for me.

Materials handling a strong quarter here I think in the past you've said you're targeting three additional pedestal customers in 2022, just maybe your thoughts on how you're trending there and can you remind me I mean are you counting on those three.

For your guidance I guess, they probably wouldn't have much of an impact even a few secured them today on 2022 would be more 2023.

That's that's correct, Eric so our guidance of $925 million in revenue does not include that.

Just got a call with there.

Head of that business Who's a crespo.

He's feeling very good about.

The two potential customers in Europe , and they get our earnings letter we've mentioned the relationship with Litle, which is developing and really feel good about the U S customer. So we feel like we're trending well.

You know quite honestly, that's that's the easy business for us.

That's the one that are after.

After these years.

It's very very systematic.

Right.

Got it okay. Thanks.

Next question comes from P. J do you have a car with Citi. Please state your question.

Yes, good afternoon, Andy and Gary and Paul.

Good afternoon P J.

Andy you know with cost of natural gas going up in Europe and on that green hydrogen is at par or even cheaper than great hydrogen in Europe .

So your timing in Europe is great can you talk a little bit about your views Duisburg, Germany facility.

Would that be a hub like Rochester, and what are the plans. There you said water or connection to different ports. What are the what are the plans for that facility.

Yeah, I would say P J that.

No that's still the facility is.

Hum today for light manufacturing and distribution.

But the plans for <unk> I think the plans for Europe .

I think youll see a couple of items.

We announced a small deal for 10 megawatts in Hungary.

I can tell you that.

In Europe alone.

There are probably.

David Bowie tell us today 300 opportunities Paul Yes in Europe alone four electrolyze it and.

And so there is an incredible push.

Between that and our activities with IV in France.

You know there is drawn.

Financial support that we will probably get for putting a facility in Europe that are I think the opportunities in Europe are for Electrolyze yours with this issue of energy independence is enormous.

We see it and so you're right.

Plug is uniquely positioned because we can actually build <unk>.

<unk> today and ship them.

Which puts us in a much different position than I think others in the marketplace.

Okay.

Great and my second question is with Sanjay.

Sanjay you know you mentioned here that the molecule costs to get it could get cut in half next year I just started its green hydrogen plants.

Can you give us a little bit more color on how does the cost go down by half.

With Green hydrogen just curious thank you.

Sure Hey, Jay I think.

We're looking forward to being at your conference Tomorrow, So again on the <unk>.

So, let's take a step back right I mean, I think you guys see it in our P&L as to how negative the fuel business margin is that's a function of what has happened to price on natural gas and how that price of natural gas has got and passed on to us and we obviously don't pass that onto our end customers right. So our margins are negatively impacted here when you can almost.

Extrapolate that those numbers are pretty substantial and high single digit to in some cases low double digits right. Now we've told you all that in every single one of our green hydrogen plant, we have looked at securing low cost renewable electricity. We have told you why how much electricity is needed to produce one kilogram of liquid hydrogen and you know the capex is not that.

Biggest component in that particular case right. So if youre looking at a scenario where green hydrogen spigot cost is closer to $4 per kilogram that number is getting cut in half now from a consolidated number perspective, you would not seen that see that entire pick up in the gross margin right away you see that continue to get better as we go forward.

We still have some legacy contracts that will roll over in 2023, 24, and 25 timeframe. While you will continue to see the margin pickup and one another thing right. As this plan keeps getting ramped up as the utilization keeps going up in the month of April we actually had even more than 90% utilization of our plant in Tennessee and despite.

Everything that's happening in natural gas world right now that is going to actually be a big contributor and will help us with the molecule cost even in Q2 versus Q1 of this year.

Great. Thank you for that color.

Absolutely. Thanks P J.

Yeah.

Thank you. Our next question comes from Craig Irwin with Roth Capital Partners. Please go ahead.

Hi.

Great. Thanks for taking my Hey, Andy.

Thanks for taking my questions separately, you know I appreciate this.

So Andy most most of the things I wanted to talk about I've been thoroughly covered at this point so big picture right plug is one of the very few companies, that's really executing in the broader fuel cells hydrogen space.

And a key part of that is green hydrogen.

You're working with the right partners.

Youre meeting major milestones on a frequent basis.

Yeah.

What would you do possibly to go faster I mean is that.

You know if you want.

$1 million.

100, and 200 million more year.

Could you do.

But Craig I can tell you.

I gave a lot of thought to how to really scale. This electrolyze your business quicker.

That means that the duplicating our facility in Rochester.

Sooner rather than later.

Could have a big benefit.

Two our business.

Item two Craig is that.

The work we're doing on.

Thinking through class eight vehicles over the next six months.

That's an area that.

We're fully committed to making a move and making a smart move.

You know I think there are two big ones I think the Electrolyze your business a lot is going to be whoever has the capacity of win.

And.

I think during these times when people are getting nervous.

We have the balance sheet to do it and to get aggressively ahead.

And it's not off the table that we would think through.

Additional consolidation of this industry at the right time at the right price to even grow plug bigger faster.

So.

This is.

Okay.

She gives us strength that I think sometimes is hidden by other items.

So just just as a follow up then it sounds like Electrolyze theirs and class eight trucks are really key markets that you're prioritizing for a potential acceleration.

And that you're happy with the targets you have for green hydrogen over the next couple of years.

As it is the other side of that.

You just signed this excellent agreement with all went I guess turn on 5400 tons a day.

Available sort of at their facilities.

What would you say the right number but what would make you say the right numbers 2000, do we need market development to move faster to allow you to service into that or are you scaled appropriately for how this is developing.

That's a real good.

Good question.

I think that.

We are building, a new 300000 square foot facility.

New York.

That provides us the infrastructure to be bigger than we are today for equipment.

Emea's capacity of two five gigawatts that we have to give a lot of thought to scaling even quicker.

Aye.

You hit on one of the main premises I have the greater the availability of green hydrogen.

The greater the availability its a flywheel effect.

And as my Buddy Sanjay always says which will drive these apps.

And.

Two was.

Having that hydrogen.

Is critical to our success. So we're laser focused on that.

Electrolyze your business.

<unk>.

I can't tell you how big it could be because it's.

Besides of Heathrow, a round number to be that they think there is.

Probably 150 gigawatt of.

Pending opportunities in the near term and nobody has the capacity or capability to build it that's why hire these folks from Tesla.

If you look at my Ops team, Greg I got the Guy who built the Reno factory I had the folks who did ran supply chain for musk in Reno, I, Havent folks, who automate those factories that work for plug today, we're bringing the talent and capability and to scale. This business quick.

You definitely have the reputation for treating your staff a lot better so I hope they're happier.

On your success.

To say Craig.

[laughter]. Thank you guys.

Thanks, Craig Thanks, Craig.

Thank you just a reminder to queue up for a question press Star one on your telephone keypad to remove your question from the queue Press Star two once again.

<unk> Press Star one on your telephone keypad.

Our next question comes from Jeff Osborne with Cowen <unk> Company. Please state your question.

Hi, Jeff.

Hey, good afternoon, two quick ones clarifications, and then one more strategic question on the clarification side.

I wanted to better appreciate on the Nat gas pricing moves how quickly that flows through.

Your P&L. So hypothetically are your contracts three 612 months in duration of today was the peak of the market and youre buying locking in a contract today when would that flow through on a P&L basis.

Per price per kilogram basis, yes.

Yes.

Sorry, Jay take that.

So Jeff there is about a quarter lag in terms of that natural gas price being adjusted right. So you could almost see what happened to our fuel cost, which rapidly so fuel costs that we buy today from our suppliers natural gas represents about 40% of the cost of that and as you can see what happened to the price of natural gas in Q4, right and that's the <unk>.

<unk> saw it in Q1 so.

You can also track what happened to the price of natural gas in Q1, you will actually see that impact in Q2 that actually gets reset in the beginning of the quarter Thats typically how it happens Jeff this on a quarterly basis.

Got it that's very helpful. I appreciate that Sanjay.

Just.

A lot of moving pieces in your business a lot of hiring international expansion multiple jv's could you give us either formal or informal opex and capex guidance for the year, just things that you can control and life would be helpful to understand where your headset, especially relative to the Q1 run rate.

For plug as overall, yes, I think exactly.

Yes.

Millions is probably a good proxy.

Jeff I think a lot of it is noncash as we've worked through the acquisition accounting there is some amortization of intangibles and things like that that was probably a little bit higher than I expected as we work through those early we did the three deals in the last.

December and January .

But I think as we sit here today kind of a $100 million to $105 million per quarter.

Probably a good proxy on Opex on Capex I expect it to ramp quite frankly, we've talked about getting up to $1 billion. This year.

So I expect as we go through the balance of the year with.

With the plants that was green hydrogen facilities as well as the new buildings that we're building.

Faithful and celebrate.

Got it that's helpful. Paul and then Andy maybe for you. You said you spent a lot of time thinking about how to scale. The electrolyze their business. A two part question for you. If you don't mind. One is is could you articulate why you're winning a and then B would love to understand some of the acquisitions that you've made that your competitors don't have the particular on frames on the EP.

<unk> side and anything on the tanks and distribution side when I'm trying to get at is when you're chasing this business youre looking at the pipeline could you give us a sense of what the attach rate or stickiness would be of EPC in storage and distribution and then what that does on a revenue per megawatt basis for say you folks versus us.

Other people that are maybe just providing an equipment solution.

That's a good question and I'm going to let Sanjay take the second part of it but let me talk take the winning part of it.

And.

You know I think the equation comes down to that.

Pam electric.

Theres always a technology aspect Jeff.

And you don't get to the next stage unless you have technology that can meet.

And I can tell you that.

Yeah.

With our deal with the Ross Com It came down to the fact that.

They did the two year study of who had what they thought was the best M. Electrolyze Your technology and they concluded that plug has the best offering.

I think the second item that.

Folks look at is that who can put all the parts together and actually support the build out of the plant and you mentioned frames.

And if you look at.

<unk>.

We're really deeply involved in the transition from fossil fuel.

Two hydrogen and so many of our people come from the oil and gas industry.

And know how to do big products projects and you know when you started talking about one gigawatt plant how you manage the water how you manage the drawing of the hydrogen.

I think the case that we bring to the table.

Especially with the frames acquisition and all the back office support activity, we have in India, because you've really neat.

For these kind of opportunities.

Lots and lots of documentation of lots and lots of support.

And I think the third item.

I'll give you a fourth item two third is we have manufacturing capability and we know how to make the products. It may seem.

Basic but the fact the matter is.

Plug has been doing this for a long time.

One industry and the fact, you actually know how to buy components do drawing build things make things that work understand those issues uniquely qualifies.

And I can tell you the fourth one that Eros Kam said to me. They conclude the plug was going to be the leader in this industry and they want to be with the leader.

Sanjay I think now you can kind of talk about the stickiness and opportunities for liquid fires in trailers and other opportunities.

So Jeff one of the sort of recent example here with one of the potential customer was.

So there was an electrolyzed team Alright, then we had our team that are actually talking about it why we have the potentially to one of the most energy efficient local fires that we didn't stop there. We said, we'll get actually vizio onsite storage, we can actually build your tankers liquid hydrogen tank cars as well. So when you really look at it from that perspective as Andy talks about it right. This really gives us that really really huge.

<unk> opportunity to a portfolio sale. So it's a one stop shop, we can manage our supply chain better. We can give you a better pricing. We can really give you a turnkey end to end solution and Thats where.

It's sticky too, it's obviously, a higher dollar per customer opportunity even thinking about it.

Yes.

Hydrogen perspective, right, so thats, where it becomes a pretty substantial opportunity for us and Jeff from the numbers perspective is for your sort of modeling out the benefit as well. This is how we run it when you think about a 15 tons per day liquid hydrogen plant you need about seven seven or so liquid tankers right. That's the math do you want to think about you will at least have.

About two to 360000 gallon stores stores on site as well, but once you go to 45 ton plant and that's where you would actually be a large spares to actually do this choice on site and that's not where on site storage would actually be as applicable from an asset perspective.

Got it that's helpful. I appreciate it it's Sanjay.

Of course.

Thank you.

Next question comes from Andrew <unk> with Morgan Stanley . Please state your question.

Great. Thank you for your time I appreciate the question.

Good how are you Andy.

Okay.

Just one quick one on site selection for renewables, just hoping you can give an update in terms of what youre seeing.

On supply cost inflation and your ability to source ppas for additional green hydrogen production facilities and if there's any risk to that 500 tonnes per day.

Goal by 2025 in North America, given this recent department of Commerce anti Circumvention case on the solar industry.

Go ahead, Sanjay Great Hey, Andrew how are you. So very good question. So look I think.

First thing we've been very thoughtful about diversity of that power source, we have hydro ppas, we have wind ppas and we have four number one.

Number two when you really look at our funnel here between 2022 2023, and even into 2024. There was some ppas that have already been signed which puts us if anything it's probably more of a competitive position versus the other way around now even for one for opportunity in the West coast, we've actually locked we locked in the <unk>.

Modular price when we actually entered into the development agreements so that really puts us in a very unique position versus what you've seen to the solar module prices here in the market and Youre absolutely right here in the near term we've seen an escalation in the solar and the wind ppas, but as you know when you see this increase in the module prices fast forward <unk>.

18 months, there was typically a very large capacity that gets at it we've seen that again and again happened and this PD in the solar industry prices do tend to come down and we've been very thoughtful about not really sort of jumping into this very highly.

Fuel prices and therefore high solar PPA, we've been strategic about that we've been looking at opportunity. That's already secured that gets us to where we need to get to and Andy also touched on it right. This all in partnership really also puts us in a very unique position not just to get to that 500 tonnes per day number essentially even exceed that so that's the approach we're taking.

We're being very thoughtful about it and not just jumping into wanting to sign a solar PPA given what has happened to the module prices here in the near term as well as what has happened to the PPA for that new Greenfield sites. If you will.

Great. That's Super helpful. And then just one last one for me I think Andy It before you alluded to some potential additional M&A.

Is there anything left to vertically integrate.

Or would it be more of a potentially more of a.

Strategic acquisition to expand into a new <unk>.

Thiago fee that you don't currently operate them.

Yeah.

I would say Andrew that.

Yeah.

We obviously, you're thinking a great deal about class eight trucks.

And thats, probably an opportunity.

For additional vertical integration.

<unk>.

I think we're also.

Probably more on the partnership side thinking a lot about.

Large scale storage and Laurie and pipelines.

Nothing.

I don't think we would do either without partners, but that certainly an area where gaming alive attention too.

It's quite.

And really kind of also those kind of activities are.

Kind of tagged to the broader infrastructure Bill that is the law and the.

Broader hubs for example in New York.

Where we think.

Those type of offerings.

Could be really beneficial when supercharging the hydrogen economy.

Awesome, Okay I'll leave it there. Thank you okay. Thanks, Andrew.

Our next question comes from Amit <unk> with BMO capital markets. Please state your question.

Hello, Amit.

Hey, Thank you for taking my question, Andy I Hope you're well.

Just a real quick.

Yes.

The acquisitions added $40 million of.

Of revenue in this quarter.

And I was just wondering on a gross margin basis like how does that kind of fair relative to say your core material handling business and your other products business.

It's slower.

These are businesses that are we're scaling with new products right out of the gate.

If you look at our Electrolyze our business as an example.

Probably going to be you know six seven times the volume we did last year. So it is scaling quickly and rapidly.

And I expect the margin on that particularly in the second half as that starts to really scale the size to really be in the startup process, saying that 30% target. So it's on a mixed basis I mean, there's a lot of different components in that so it's hard to probably get in detail on this phone call, but I would just say in general think about it as new products that were.

Quickly scaling and rapid rapidly growing and it's.

Anywhere from low double digits is too.

On some cases up north of 20%.

But we'll scale all of them up to that 30% of the move to the second half of the year and onward.

Great and I think Sanjay just kind of touch on that a couple of times on the call, but I think you guys had talked about being able to kind of get ppas in the two 5% to three kilowatt hour range, but kind of given higher prevailing power prices.

The DLC investigation.

PPA prices have come up.

But just to kind of be clear lake.

We did put I understand that the kind of all of the kind of power capacity you need for this 70.

Ton per day exit rate in 'twenty, two is largely in place and you're going to be kind of opportunistic.

And then layering in kind of additional power capacity to get to the 500 tons per day.

After this kind of settled down.

We're looking at it.

Yes sure.

Yes, but let me let me add even similar to that rate, it's actually beyond that 70 tons per day, where we've actually secured power pricing.

And so again look I think we will obviously be thoughtful about it in terms of when do we think is the right time, so obviously, you're seeing a pretty meaningful impact on the PV module prices as well as the solar ppas. So we're not going to jump into entering into a PPA that we have to live with for the next 15 years, given the short term dynamics here in the market, but it actually.

US well beyond that 70 ton numbers in terms of the already signed PPA with wind.

Even some of the solar deals that also some of the other hydro deals that we have.

Great. Thank you for taking my questions guys.

Thank you Amy.

Our next question comes from Alex Kania with Wolfe Research. Please state your question.

Hi, Alex Great Hi, there how are you.

Okay great.

So two questions first one is just I know that we're expecting maybe a little bit more detail from from the EU on their repower.

Yeah proposal I guess in the next couple of weeks.

From your perspective, what are the most important things that youre looking for from from that if anything.

That's that'd be the first question and maybe the second one is.

One of your renewable PPA providers also talking to or has announced kind of a broad integrated sort of hydrogen project down on the Gulf coast.

And while the midstream in renewables in that I'm, just kind of conceptually.

What role and what things are you looking for for you know for the perspective, maybe either participating in that or are similar types of projects and maybe how midstream.

Has it things like that laid out.

Could it be integrating that overtime.

Yes.

Jay you want to talk about.

The support and their relationship with.

Our PPA provider.

Yes so.

Alexander is right I mean, I think the way we look at it as this is such a massive market. There are times when we're going to be working together, it's almost like the co-opetition kind of an approach where you're cooperating at times and maybe there are times, where you might be competing but we have a really really attractive PPA with this particular partner, especially in the tech.

This area and we're pretty pleased with that look hydrogen is a massive market.

Again, we also do have additional components that we can provide to some of those partners as well. So please don't read into this look we're certainly in a position to be able to provide them with additional solutions. If you would like and you just talked about it there is not a lot of players with the kind of the electric lines of capacity like we are there's not a lot of folks that can provide.

<unk> like we can or the liquid hydrogen tanker so the onsite storage so nothing to share on this call at this point in time.

But look we're not surprised that there are others that are coming into the production of the green hydrogen from our liquid alts.

You should probably expect to see more and more of that and Thats. Why we are positive for the industry because it will help grow more apps, which is the business we're in as well so.

That's how we think about that particular situation.

Great. Thanks, and maybe just on the European side.

Yeah on the European side.

I think the key to US is the support for low cost renewables and quite honestly. This is what we've been working with European governments on is low cost renewables to support deployment of green hydrogen that to me Alex is kind of the key to success and the reason is really kind of.

Clear.

With 75% of the cost for generating green hydrogen really tied to the costs of renewable power. So anything that supports renewable electricity.

That can be used for generation and green hydrogen we believe is critical Alex.

Great. Thanks, so much.

Okay.

Thank you.

Our next question comes from <unk> <unk> with Susquehanna. Please state your question.

Hi, good how are you how are you Andy.

Good.

Hey, a quick question thanks for breaking out all the revenue contribution from the recent acquisition. So the question is as you sort of ramp your hydrogen.

Production capacity is there still going to be an opportunity for third party sales from Goldman.

From July <unk> et cetera.

And also can you give us a sense of how much that could be like in your 3 billion target for 2025, how much of that could come from.

Sort of be sources.

So the answer to the question is absolutely, yes, and I'm going to let Sanjay who overlooks whose activities.

Give you his thoughts about.

How we seize it as part of our 2025 revenue. So so visual short answer is we absolutely expect a lot of third party sales from both of those business look we're here to support the energy transition and we're here to help and work with many companies out there because it is a massive opportunity number one number two.

With with what we could do from our applied Cryo now plug cryo business, we can certainly provide.

Liquid hydrogen tankers onsite storage as well and there was also additional business for liquid oxygen and liquid nitrogen as well as a part of that business that we do so look I mean, I think we have not obviously, given what that could be as a part of that $3 billion number.

Just to have similar growth rate like kind of the growth that we're talking about for the blood parent as a whole. So that's one second on the local fire side.

So since we acquired June processing now plug process system. We believe we have one of the most efficient.

Consumption for the local fire. We also have partnership with the likes of Atlas Copco and fees that allows us to control supply chain better both for our own internal consumption as well as a third party sale. When you think about could those business with between $4 million to $500 million in 2025 that should that does not sound like a stretch to us at all.

Sure.

Got it that's helpful. And then just a quick clarification the 500.

Tons per day of capacity you talked about for 2025 is that inclusive.

All in volumes or is that could it be separate.

Yes.

Answer but.

We're very happy obviously with this partnership.

We're just getting started in one location here at all.

Hopefully more to come but.

Obviously very likeminded companies, we're thinking about hydrogen economy, and a very similar way. So this certainly gives us a lot of flexibility and a lot of diversity. If you would in terms of how we expand and get to that 500 tonnes, but it certainly could get us over a number higher than that as well.

And do you see a lot of leverage in your PPA discussions as well as.

I'm going to take your word on battle in Brazil, and I think I'm going to use that going forward as we're negotiating.

I agree with you.

Okay. Thank you appreciate it.

Thanks Vijay.

Thank you. Our next question comes from Craig Shere with <unk> Brothers. Please go ahead.

Hi, Greg how are you today.

Good. Thank you thanks for taking the question.

Thanks, Rob.

I've got a multipart on fuel, but some of the answers might be very brief.

Sure. So so if we're if.

If we're looking at 70 tons per day green hydrogen at the end of the year and you want to keep 30% flex capacity.

That sounds like roughly balanced to maybe 50 tons per day internal need.

And maybe that means that youre not under pressure.

<unk> pure play just just fuel offtake or slide that refiners, Utah.

Utilities and others.

Maybe next year, so that's kind of a second part of the question.

The third part of the question are you prepared to share anything about proportional roll off on your industrial gas supply agreements from 23 to 25.

And then I noticed your Walmart announcement.

It sounds good but I'm a little confused you need formal agreements or can you just naturally swap in your own green hydrogen and Louisville, a third party industrial gas supply and my final part to the question is at what point can you think about starting to secure very low cost project debt and these completed green Hyatt.

Origin plants.

Well a lot of questions Craig.

One of the day, but not the least.

I'm going to take the Walmart.

Now I'll, let Jay take a few of the others and we'll figure out what we have left open.

So when I look at the Walmart one.

It reminds me of 2008, when we started with 63 forklift trucks.

Which eventually became.

Call 9500 today call it 10000.

And that's really GFS this store.

The focus is on material handling that focuses on providing stationary power to focuses for raw vehicles. This is just to get started.

In their distribution centers and it is an expansion of what we're using today. If you think about 2000 tons that probably supports caught 80 90 distribution centers were 45 today. So there is an expansion there, but I think what's really more important is.

It's just a start on Walmart's journey.

To reduce their suppliers carbon footprint in their carbon footprint by one gigaton by 2030.

<unk> you want to.

Talk about some of the other items that Craig brought up sure. So Craig on the first one question about our demand versus what our capacity is going to be and not needing to necessarily for a lot more offtake, you're right, but having said that keep in mind right like very similar to the traditional energy into.

There is always going to be some sort of a swap agreement and look we want to be continue to be buying from some of our hydrogen suppliers right now on a long term basis pricing has to be right, we might be selling them some green hydrogen.

And they might be setting up some.

They might continue to sell off some of this great hydrogen here in the near term right. So I wouldn't say that we will stop buying hydrogen from some of our existing supplier. One caveat is the price has to be right and thats. The key because we've got to keep focusing on driving the hydrogen economy forward now on the second piece of when do these contracts rollover and I Hope you can appreciate the fact that.

We do not want to get into that level of granularity, but we will share with two that typically these contracts are for about five years thats typically how they're structured.

But beyond that I think at this point in time, we probably don't want to get into too much granularity. So what part of the question did I Miss.

You hinted at almost all of the last question was at what point can we start securing very low cost project uncompleted plants.

Sure.

As you know, it's going to be very similar to any other renewable assets. If you would I think today you know the cap structure for solar the cap structure for wind and if there is a production tax credit for this green hydrogen facilities, you could expect that there'll be similar cap structure like that depending on the structure of that production tax credit rate.

Having said that fast forward a year when we are fully the plant is fully ramped it's generating cash flow, we feel quite confident that you could do back leverage we can probably issue some sort of a green bond against this plants and that's certainly a part of the calculus for us in terms of how we plan to recycle capital as we continue to build out this green hydrogen generation.

Within North America, as well as on a global basis.

Great. Thank you so much.

Thank you.

Thank you there are no further questions at this time I'll turn the floor back to Andrew Marsh for closing remarks sure well. Thank you everyone for joining the call today.

When I look at it we are building out the hydrogen ecosystem.

We're doing it.

We're building the plants.

We have the trailers deliver the products.

We have the customers which is critical.

We have the Electrolyze yours, we have the fuel cells.

No one's in a better position to take advantage of this trend.

For the hydrogen economy for the coming years.

So we're excited we're going to deliver a $925 million this year and I look forward to talking to everyone on the second quarter call. Thanks, everyone.

Thank you. This concludes today's conference all parties may disconnect have a good day.