Q2 2022 Bloom Energy Corp Earnings Call
Good afternoon, and thank you for attending today's Bloom energy Q2, 2022 earnings conference call.
My name is Austin and I'll be your moderator for today.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
If you'd like to ask a question. Please press star one on your telephone keypad.
I would now like to pass the conference over to our House, Ed Vallejo, VP Investor Relations Ed You May proceed.
Thank you and good afternoon, everybody. Thank you for joining us for Bloom Energy's second quarter 2022 earnings call.
To supplement this conference call, we furnished our second quarter 2022 earnings press release with the SEC on form 8-K and have posted it along with supplemental financial information that we will reference throughout this call to our Investor Relations website.
Our second quarter 2022, 10-Q is also in the process of being submitted today as we speak.
During this conference call both in our prepared remarks and in answers to your questions. We may make forward looking statements that represent our expectations regarding future events and our future financial performance.
These include statements about the company's business results products, new markets strategy financial position liquidity and full year outlook for 2022.
These statements are predictions based upon our expectations estimates and assumptions. However, these statements deal with future events. They are subject to numerous known and unknown risks and uncertainties as discussed in detail in our documents filed with the SEC, including our most recently filed forms 10-Q and 10-K.
We assume no obligation to revise any forward looking statements made on today's call.
During this call and in our second quarter 2022 earnings release, we refer to GAAP and non-GAAP financial measures.
The non-GAAP financial measures are not prepared in accordance with U S. Generally accepted accounting principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.
A reconciliation between the GAAP and non-GAAP financial measures is included in our second quarter 2022 earnings press release available on our Investor Relations website.
Joining me on the call today are K R. Shredder, founder Chairman and Chief Executive Officer, and Greg <unk>, Our Chief Financial Officer.
I will begin with an overview of our business then Greg will review, the operating and financial highlights of the quarter.
And after our prepared remarks, we will have time to take your questions I will now turn the call over to PR.
Hello, everyone. Good day to you.
We were delighted to have so many of you join us in person and so streaming on our Investor day in May.
You bet Charles Let me look back from you on how much you appreciate is seeing our innovative technology developments manufacturing excellence and most importantly.
Interacting with and experiencing the caliber of our team.
No.
With a better understanding of the power of our platform its flexibility to rapidly adapt.
And deploy so many different energy solutions in there.
This ever changing energy marketplace and policy environment.
The flexibility of our platform is a unique advantage that sets bloom energy apart in the energy industry.
This diversity and flexibility of our platform.
Exactly why we are so excited about the inflation reduction Act.
This act will enable us to play a pivotal role in accelerating the mission to Decarbonize the world.
Unlike many other energy companies.
There are many facets of the act provisions if you will.
Be able to participate in a material manner.
Let me highlight nine key provisions.
One the hydrogen production credit.
And then directs day option for it.
Greatly accelerate our domestic electrolyzed water business.
True.
Greater availability of clean hydrogen will create greater demand for balloons always on high efficiency hydrogen powered energy servers.
Three.
Growing waste to energy segment will get a big lift from the expanded ITC for biogas equipment.
For the.
The incentives for electric vehicles and their growth will drive demand for our <unk>.
<unk> on site power charging solution.
Five.
Tax credits for controllers switch gear and batteries will drive micro grid adoption.
Six.
Lowering of captured so shows and the increased credit makes carbon capture with our energy servers very attractive.
Kevin.
The capital equipment, and our expanding American factories are eligible for the manufacturing tax credit.
Eight.
Increase and the extension of the ITC for Entergy servers with <unk>.
And then our domestic power business.
Right.
The direct pay and transfer of real estate features will create greater supply of affordable financing for our U S projects.
It's a company with.
Whose technology was invented in America.
Whose products are manufactured in America.
By American workers.
Sure.
Technologists.
Importance of domestic content through additional bonus features.
So you can see.
I am sure glad that we designed a flexible platform that has so many ways to help the world being kind of a nice.
And now.
We have a national policy that will support us.
Speaking of the flexible platform I'm excited to share news on our hydrogen electrolyze there.
It is not only great news on its own but also an illustration of the platform flexibility point I just made.
Our pilot demonstration at the U S Department of Energy's, Idaho National Laboratory is performing at a greater electrical efficiency than any other commercial product or technology demonstration in the world that we know off.
Operating at 37, seven kilowatt hours of direct electricity to produce one kilogram of hydrogen.
It is setting a world record.
Yes.
Good.
Performance of the Bloom Electrolyze, there is over 30% better than most commercial low temperature electrolyte in.
<unk> today.
And we are just getting started.
It is evident to me that the early market for hydrogen are going to be.
One hard to Decarbonize industries, like steel chemicals cement et cetera that produce.
Heat and use onsite hydrogen.
And two nuclear power plants that have curtailed electricity conditions during portions of the day and excess heat available.
Our product performance that is verified by the Doe, Idaho National Laboratory clearly demonstrate that.
The competitive advantage, we have or low temperature <unk> in both these market segments.
This competitive advantage is why LSP industries, the leading north American producer of industrial and agricultural chemicals announced plans to install a 10 megawatt solid oxide, Alex Elisa from Bloom energy at their prior Oklahoma facility.
Integrated with high temperature processes like ammonia synthesis, which produces extra heated algae blooms electrolyte says, we'll be more efficient than competing electrolyzed water technologies, resulting in lower cost hydrogen for LSP.
The clear competitive advantage attainable when combined with nuclear power plants is why investing house electric company and Bloom energy announced signing a letter of intent.
First few clean hydrogen production in commercial nuclear power market.
I am not a demonstration.
And announcement today.
Should provide greater market momentum going forward.
Let me now switch to our waste of our segment.
In July <unk>.
Recognized by the American Biogas Council.
Our daily biogas to electricity project.
<unk> in collaboration with bio <unk>.
The biogas Council.
Cited the project for breaking new ground in the U S biogas industry and across the global energy landscape.
Firstly use renewable biogas to make electricity from fuel cell.
Pilot and onsite micro suede and a fleet of electric vehicles.
Project.
So received the 2022 U S Daily Sustainability Award.
Our waste to energy segment is witnessing solid growth.
We are currently developing multiple landfill biogas opportunities both for the R&D market.
Well, that's for electricity generation and renewable fuels business continues to gain traction with several key development projects utilizing food and agricultural ways.
Let me take a moment to touch on the international opportunity.
During our last earnings call in May we spoke about our interest in entering the European market.
In June we announced the installation of one megawatt of Bloom servers, the Ferrari headquarters and manufacturing plant in modern Nello, Italy.
Ferrari like Bloom energy has a commitment to uniqueness.
<unk> technology leadership and continuous learning that makes them.
E a partner for our entry into the European manufacturing landscape.
Bloom energy fuel cell platform is the best in class solution.
Our best in class luxury automaker.
The Bloom energy servers are expected to cut gastric apartments were around 20% from the combined heat and power system now in use at Ferrari, while also reducing emissions we are showcasing.
Showcasing this as a model for other energy intensive industries in Europe to emulate a way for them to achieve greater energy security.
Our cost and lower carbon footprint.
All at the same time and at a time when energy availability prices and security in Europe are increasingly of great Panther.
I'd like to close with the market at all.
Digitization.
Suffocation of transportation and onshoring of manufacturing are all adding significantly to increased electricity demand.
Interest rates so.
<unk> for new power.
Set an all time high.
On the supply side.
Decades long underinvestment in both power capacity expansion and T&D.
The age and disrepair off the existing infrastructure.
That drug related reduction in hydro electric output.
The loss of capacity from shutting down coal and nuclear power plants.
Are all creating a shortage of supply.
This shortage is significantly greater than the pace at which renewables are being added.
In this scenario utilities have not able to provide additional power to large commercial and industrial customers that are demanding more and demanding them more quickly.
If you're a company how many millions of dollars to build a new facility.
You can wait for months and even years or the power company to run power lines and connected to the grid.
Only then to see extreme weather affect your supply of power shutting down your facility for hours days and even weeks. This is.
Cindy imaginary instead.
The reality companies face in many parts of the U S and in Europe I might add.
There is a bloom energy server, Delaware on a scale and installed within days audits of Bloom energy server power tower in urban settings with very low lending.
Our solutions enable customers to solve energies reliability.
Acuity and de carbonization in the manner that best suits their needs with the very quick to power option.
Before I turn it over to Greg.
Let me just say that we are very pleased with our financial results this quarter.
We are maintaining financial and operating discipline as we invest in the business, while focusing on cost.
Margins and driving towards improved profitability.
And positive cash flow.
With that.
Let me turn this over to Greg for him to elaborate.
Thanks, KR I agree with your comments, we had a strong operating quarter.
Let me point to a few key highlights that can be found in our supplemental financial data posted to our website.
We had record second quarter revenue of $243 million.
We improved our non-GAAP gross margins from prior quarter and last year.
We are on track for adding an additional one gigawatt of manufacturing capacity.
We continue to navigate a challenging global supply chain.
And we're reaffirming our 2022 guidance.
With those as highlights let me provide some additional context on our Q2 performance.
Our value proposition for our 24, seven always on energy server of resilient sustainable and predictable power remained strong.
Specifically, our ability to quickly bring additional power to a client site.
And provide a pathway to decarbonize continues to resonate with our customers.
As <unk> discussed the time to power value proposition is especially meaningful for manufacturers and data centers. When a local utility is unable to provide additional power to support their growth.
These tend to be larger sites that require firm and resilient power.
On the path to de Carbonization, we're hearing from our customers that they need real and resilient solutions to reduce their carbon intensity today, while providing them optionality to incorporate net zero solutions like hydrogen in the future.
We expect these trends to continue to grow, especially with the resurgence of U S manufacturing incur.
Increasing electrification the acceleration of the digital economy and the benefits of the inflation reduction Act.
We continue to navigate a challenging supply chain environment affecting both price and availability.
While much uncertainty remains our team is doing an amazing job of ensuring that our factories can produce the servers to meet our customers' needs.
We continue to work with our suppliers to ensure that they are making the investments to meet our expected growth.
While returning to our historical cost down achievement of 10% to 15% annually once the environment stabilizes.
Our second quarter non-GAAP gross margins of about 20% improved almost four points versus the first quarter and one six points versus prior year.
While our unit cost remained temporarily elevated by the commissioning of our new Fremont manufacturing facility, we benefited from an improved pricing mix in the second quarter acceptances.
As we look towards the second half of the year, we expect unit product costs to decrease as capacity increases, enabling us to achieve our targeted margins.
As I mentioned during our recent Investor Conference.
To further simplify our business we executed the sale of a previously consolidated P. P. A entity this quarter.
By doing so we eliminated $30 6 million of nonrecourse debt.
Enhanced 2022 margins and simplified our financial reporting.
As part of the transaction, we recorded a 45 million noncash asset impairment charge through our electricity segment.
We removed as a pro forma adjustment from our non-GAAP reporting.
We continue to invest in our manufacturing capacity research and development and our commercial resources. During the first half of the year, we invested working capital to meet second half demand and the capital equipment to build capacity.
We maintain sufficient levels of liquidity to fund these investments.
In the second quarter, we commenced operations in our new Fremont facility.
We are on track to increase our fuel stack manufacturing capacity from 280 megawatts to 580 megawatts by the end of this year and over one gigawatt by the end of 2023.
We are reaffirming our 2022 guidance for revenue margins and cash flows.
With our strong backlog and pipeline, we remain confident that we will deliver at least 240 megawatts of acceptances this year.
Just upon lease acceptance as we plan to achieve at least $1 1 billion of revenue and.
And with roughly 24% non-GAAP gross margin, we expect to deliver positive non-GAAP operating margin and positive cash flow from operations.
These will be strong results that when coupled with the manufacturing capacity expansion.
But if im a firm trajectory to grow our revenues and margins in 2023 and beyond.
As we look toward the second half for the third quarter I would expect our acceptances and revenues to increase in our expected annual growth rate.
Our cadence for the second half acceptances will be like last year with our largest acceptance is happening in the fourth quarter as unit costs improve with additional build I would expect our third quarter margins to continue to expand slightly from our first half 2022 levels.
In summary, we had a strong operational quarter and our building momentum into the second half of the year.
Like other global industrial companies, we are navigating challenges in our supply chain, but we have significant tailwind with the push for abundant clean and resilient energy.
We have a strong backlog to deliver on our 2022 targets. We believe the company is at an inflection point to build upon our mature technology platform.
Solid record of accomplishment and robust growth roadmap, we are extremely excited about our future.
With that operator, let's open up the line for questions.
Thank you as a reminder to ask a question. Please press star followed by one on your telephone keypad.
And the reason you would like to remove that question. Please press star followed by two.
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We will pause here briefly ask questions are registered.
Our first question is with Michael Blum from Wells Fargo.
Michael Your line is open.
Thanks, Good afternoon everybody.
So quite a change from last quarter.
You know you've got the pare set to pass here hopefully soon.
But natural gas prices are still pretty stubbornly high.
So I'm just wondering if you could talk about does that change any of your thoughts in terms of commercialization strategy in the U S.
Given that it seems like with all the things that you cited.
The hydrogen economy in the U S probably is going to expand more rapidly with this new bill.
Michael This is K R. A.
Hi, how are you. So that's a very good question look here is what we're seeing in the marketplace today.
The supply demand mismatch in terms of what large commercial industrial needs for the next three to four years.
And the difficulty Utah.
Utilities are having in providing that expansion capacity for the next three to five years.
That time to power is a really big issue for the company.
And there he does not the cost of electricity.
It is the opportunity cost for a company to not be able to do a business. If they don't have power not be able to expand.
We think we have a unique microgrid solution offering for people like that.
That is a game changer.
And even.
In the scheme of things of a company looking at that kind of a scenario.
The cost of natural gas should be de minimis to them.
Variation in natural gas, so we see that as a huge great business growth opportunity for us.
Equally the.
$3 P. D C. The availability of D. C that can go up to 50% for companies like ours that manufactured in America and do what we do.
All that put together.
We see that as a huge impetus for hydrogen and look at the results. We just put out.
Diana.
This is a game changer in terms of.
Oh, almost 30% better than in electrical efficiency than anybody else can do.
You put all that together, we're excited about hydrogen so for us. It is a genius event, we will do both.
Great.
Thanks for that I appreciate it.
Second question I wanted to ask was just about.
The revenue breakdown. So clearly this year you know it's been weighted much more towards international versus domestic so wanted to just get your view of how that should trend for the rest of the year and just the more on a long term basis and then.
Is there a way to think about gross margins on U S versus international is there any really different there. Thanks.
No.
Hey, Michael it's Greg So so on the results for this this quarter very similar to last quarter about 60 plus percent International 30, 30, 40% U S base. The reason that is not at its historical levels have been more around as you know we've got that large order from SK Eco plant this year and we've pre.
<unk>, making sure that they get their units for the year as part of their take or pay contracts given our capacity constraints as we get into the second half of the year really as we get into the back half the second half of the year. Our expectation is those those breakdowns will go back to more of their historical levels, including.
Both what we do in the U S and what we do in Korea, I think going forward, though what youre going to see is we're going to continue to grow on your international line.
And you're going to see a lot more diversity in that international line with the addition of Europe .
With with team teams over there, making traction so on a go forward basis youre going to see a much larger percentage of our revenues coming out of the international segment, but from multiple continents.
And then on the gross margin question I would tell you there yeah theres not a material difference on where it is we price too okay perfect. Thanks Kartik.
Yep.
Our next question is Julien Dumoulin Smith from Bank of America.
Julien Your line is open.
Hey, good afternoon. Thank you for the time appreciate it congrats on the result.
And maybe just to kick things off obviously.
Youre welcome.
Just to kick things off on the on the Iras fried right you all.
I mentioned it in the remarks et cetera would be curious what kind of additional traction could we see with respect to electrolyze. There again, you all are very keen to commercialize this product rapidly or we see where we're looking for more awards through the course of the year how does the shift the pace of what you all had contemplated even back in May at this point.
If you look at this opportunity and perhaps the enhanced economics.
That may be involved.
Yeah. Thanks, Julien, it's Greg sorry, when we put it up on yeah. We yeah, we put together a forecast not only for this year, but for the 10 year forecast build back better was in play at the time and what we talked about was all of those all of those items, whether it be the PTC.
For hydrogen or the 45 to four sequestration or or ITC or any of those work in our long term projections based on what we had seen coming out of this build back better what's what's getting looks like it's going to get passed here. It came out of the Senate as part of.
The act on Sunday listen the $3 PTC is very attractive for US we think it would obviously provide more incentive as projects come online and come online sooner than those would I would say not be forecasted factored yet into our forecast around <unk> around growth of our hydrogen business.
This well will go through the process here and when it's time, we will update our forecast based on those moving through but I would say they'd be all things that would accelerate our view on how we grow our hydrogen our revenues in the near term.
Right. So we're still looking at like three of this year or something like that.
We're still very much focused this year on winning large scale demonstration projects, where we can show like we did with I know the technical advantages that we have with solid oxide electronics.
And also Julien understand our factory.
By the end of next year, we will have a capacity of 2.5 gigawatts of Electrolyze. It.
So we are building the capacity we have the supply chain.
You know we have everything so for us to pivot very quickly to that.
Be great wholly pivot how fast we do it will all be about maximizing margin.
Right and in indeed, and in fact, just if you think about like a target by end of the year, you're talking about one gigawatt by into 23 or two and a half played its way through whichever way you think about it.
Is there a portion of mix of that that we should be expecting today that you won't you would be allocating to the electrolyzed inside of the business or Andrew or how are you feeling about being able to fill up just the two of the gigawatt overall in terms of orders into that production ramp.
Yeah, Julien what's great about the with great about our technology as we build out the capacity, we're indifferent and the capacities in different so the supply chain. The manufacturing capacity all of that is can make natural gas fuel cell hydrogen fuel cells are electrolyze theirs and they all run down the same line. So we don't really need to make those.
Amendments to really the current quarter, when we think about deliveries and and also Julian one thing that you guys didn't ask important to add is the amount of incentives.
In the Bill went bust.
Four ways to power creates an enormous opportunity in that area so for us.
The factory is indifferent to what it has to build and it's all about mix and trying to figure out how to optimize and maximize margins.
Right Yep wasted power indeed, as the third angle excellent guys well best of luck, we'll start we'll talk to you soon.
Alright, Julian talk soon.
Our next question is with Alex Kania from Wolfe Research.
Alex Your line is open.
Right.
Alright, thanks, very much for taking my question.
Maybe maybe the first thing I'd ask is is on the P. T C.
And then changing really the economics of a green hydrogen and companion with Europe , where there's solid oxide electrolyzed or I mean, how do you think about the.
Kind of a long duration energy storage type of solution here do you think it's.
How competitive do you think it ultimately could be as a as kind of a way that to kind of help smooth that renewables on the electric grid.
Alex that's a very good question in the long term.
Long duration storage will be very attractive in the short term.
As I mentioned in my prepared remarks, the two markets that I truly believe are going to be the early adopters are hard to decarbonize industries that can use that hydrogen to decarbonize and have a source of heat.
And have a renewable electricity coming to them, where you don't have the logistics transportation liquefaction pressurization all of that and one is the obvious first place that it will play a big role and it'll have a huge impact on the carbon footprint.
And then the curtail nuclear power very you're getting.
In a way from a marginal cost basis that electricity floor that nuclear operator is free.
Right because during the day, it's being curtailed.
And to be able to use that in the heat and to produce the hydrogen. So I truly believe those are the two big immediate opportunities that that we are going to gravitate to the market and Luckily for us.
Are by design.
V play very well into those two spaces, because we had a high temperature electrolyzed water that can use that heat others that operate at low temperature cannot.
Great. Thanks, and then maybe a question for Greg.
Cause you obviously.
I'm sure Ben have somebody headaches with tax equity and as mentioned up top the transferability.
Certainly change of things as well as direct pay I'm just wondering.
How are you thinking about that the transfer market I guess for for Ptc's.
Evolving.
Over time, and what that man that meeting for cost of capital, obviously, there's there's dry powder for certain elements as well.
Yeah listen I think it's like any market right that the more the more supply comes on it brings increased.
Availability and ultimately brings in better terms and pricing so.
Having more players come into that space and I think youll get it for two reasons right. One is you you'll have the transfer transferability, but you'll also have some tam.
Tax levies within the bill that are going to create some additional tax capacity within the market. So I think a lot of these things will bring more players in the space creates more liquidity and hopefully continue to tighten tightened on pricing, which are which we've which we've seen here for a bit.
Great. Thank you very much.
Thanks, Alex.
Our next question is with Collyn Rouge from Oppenheimer Collyn.
Colin Your line is open.
Great. Thank you. So much this is Christian on for Colin.
I wanted to ask about the opportunities for operating leverage maybe over the next 12 months or or with what we've been discussing with the I R. Ray Yeah should we be expecting any growth in organizational capacity in anticipation of some of that revenue growth.
Hey, Chris It's Greg So I think what you've seen kind of this year versus last year is our revenues have been growing nearly a double what our costs have been growing we've got a target here over the long term that we should be about 15% of our revenues should be spent and operating cost that includes everything from.
R&D to the G&A to run the business I would expect as our revenues continue to grow at this 25, 30% level that we've targeted.
And our costs grow less than that that we're going to we're going to continue to achieve operating leverage that's why it's so important for us this year to get to that operating income positive point because once we know we crossed over that all that leverage comes in and we continue to grow our operating income going forward.
Thank you for that and then sort of a similar line of question, but with the initial ramp in the new facility just any incremental opportunities you may be seeing for additional efficiencies or or sort of returning to that crosstown ramp that you outlined. Thank you yeah. Yeah. Kristen we are very focused on getting back to that ramp or.
Costs being elevated.
Elevated even just a couple of hundred dollars a kilowatt is not a position that we are used to being in where we like to focus on a 10% to 15% down so here's what we're doing part of this just gets better as volumes increase in the second half of the years is tooling comes on and we get the operating leverage through that process. The other thing we're doing.
Is it for folks that were able to see the Fremont facility in May we have a tremendous opportunity to look to.
Increase the productivity of our process by how we how we locate machines, how we use automation how do we get the most for our folks in in order to deliver the product through those lines. So we think we're going to continue to get a true operating leverage now we'll get the first line on this year and.
So youre seeing it through our financials and going from 280 megawatts to 580 megawatts next year, we're going to double that capacity again, but we'll do that over the course of a few lines, so well always probably be adding some level of capacity, but we won't be in a process, we'll be doubling capacity in each year in perpetuity.
That's super helpful. Thank you so much.
Thanks.
Our next question is with Ben Callow from Baird.
Ben Your line is open.
Hey, guys.
I'm just wondering if you've seen any shift in.
Customer orders or anything like that just because of the.
Hey.
Customers are responding to that and then you would think you yeah.
Hey, Ben it's Greg it's too soon I think most customers are are and everyone is still it's still digesting where it is I think I would only emphasize what we had upfront is we are seeing a tremendous interest in.
In the time to power as businesses are looking to grow.
These investments should help alleviate that but in the near term what customers are looking for over the next near term being three to five years, the the ability to meet their growth targets through the time to power and that's a that's where we're seeing a tremendous amount of customer interest.
And there isn't that much.
And.
Sorry, sorry, Ben this gay or Theres. Some adjacencies here that we clearly see as adding to this pressure for example are.
The EV market and the incentives that are going to come in the area for the EV market is going to suddenly create tremendous demand in yeah in congested areas already from an electricity perspective for more electricity demand and so solutions like ours that differ at D&B investment.
Is gonna be preferable Doe, adding that you know, adding their distributions. So we can see from a directionality perspective why all these provisions in the bill are going to help create greater demand for us, but as Greg said, it's too early for us to.
<unk> see anything tangible come out while the bill is still not clear.
The housing and gotten into about.
Thank you.
I know you guys talked about Europe .
Hmm.
Early on in the Europe .
Is that.
Still a place that you can sell to guess where it is or or does it get better because there's so many more opportunities.
Yeah, No Europe is very interesting to us we were really excited about the Ferrari deal last last quarter and in having those units on the ground there.
They're for megawatt to start and there's much more opportunity there I'd say Europe is.
<unk> remains a very interesting place, Italy, given that we have the units there is creating a lot of buzz and interest, Germany, especially around data centers time to power is a very interesting market for us and the UK time to power as well as it's got some of the kind of traditional aspects of our U S C&I market as far as helping.
People with with.
With resiliency is important there so we're finding that our value proposition.
<unk> is gaining a lot of traction in Europe , and we're really excited to see that grow.
Yeah.
Our next question is with Graham price from Raymond James.
Graham Your line is open.
Hey, Thanks for taking the question.
I guess first one a quick modeling question I saw the R&D expense understandably bumped up with all the expansion activity. We're just wondering how.
How do you think about the run rate for that going forward.
Hey, Graham it's Greg so so if youre looking at it on a on a including stock based compensation. There was some retirements that occurred early in the year that are elevating that a bit if you look at it ex.
Ex stock based compensation, which is the way we look at it it was up marginally over the quarter. We are definitely investing significantly in there, but from a modeling standpoint, there was a bit of an anomaly in the second quarter versus the first.
Okay got it got it. Thanks, that's helpful and then.
Just one more on the the IRA I guess in view.
Of the new $3 TTC.
Just wondering if you'd be interested in owning.
And operating hydrogen farms I know that wasn't you know a focus area.
To this point, but would that change at all with this new bill.
Look.
We all have to believe that the PTC and everything that's happened is going to make this market grow enormously into a very big size over time.
This is such a huge market to vertically integrate and tried to do things that people already know how to do on the front end and backend.
It does not make any sense for us whatsoever from a balloon perspective, we're gonna be stay focused on giving people the shovels in the genes.
During this 49 in a rush.
[laughter], which they need.
Different people may or may not find gold, but we will sell those teens to everybody that's going to try to find gold.
Thanks, Graham got it thanks very clear.
Our next question is with Josh part from Tuohy Brothers.
Josh Your line is open.
Good afternoon.
You know.
Hi, just had a couple of things.
I was wondering if.
And also about the.
The I R. A.
Just wondered if it at this.
This point again, it's just passing now do.
Do you have any sense of what the.
Sort of ripple effects positive ripple effects could be on your service business.
Also curious if you had any inkling of.
Just what is the.
The act might do sort of differ.
You know faster commercialization of biogas and how that in turn could be could be beneficial for people looking at a boom solution.
Yeah. So if you if you look at the biogas right, let's just take that at just look at the number of incentives that are in place for for starters.
The biogas plant itself the digester.
The cleanup skid that comes with the bio methane, they're all now eligible for ITC.
If these ways to power projects.
Catered in certain disadvantaged communities, there's a 10% bonus in addition to that there.
There is about $10 billion allocated for rural electrification projects to the U S D. A.
At the very end of transmission and distribution, which does not have reliability. If you can put a micro grid that is separate grants for that.
On top of that our equipment that goes in is going to get the ITC you put all this together.
Waste has become gold.
Okay.
And so this is going to be a huge area for us to tie a tie into we are super excited about that and the one thing that Uh huh.
Maybe you were thinking as a follow up and I may be taking the question away from U S carbon capture.
Right.
Right at $85 with that aided by Doe carbon credit.
And that's coming for a time and a very important.
So the legislation says even at five megawatts it used to be only at 200 megawatts you can avail of those subsidies now you can avail of those subsidies at five megawatts at our emissions kind of rate so to be able to go from abundant natural gas.
Two zero carbon electricity.
At a price point that is below the grid price.
Is what the <unk> is going to enable as soon as people figured out how to see cluster the Seo too which is possible in so many different geographies. So expect in the next few years for this to take off in a big way because we have the technology is ready to go.
Right now all of that we need are people, who know how to take that C O two and pump it into the ground and that shouldn't be that hard.
Right, absolutely absolutely and I.
Hi, I guess.
And it's sort of a similar line just curious.
Can you talk about on the RFG front.
There.
Your.
Transaction with EQT has.
Brought any any similarly interested parties to the table or.
If you're just seeing more going on.
With the finish like similar deals.
You know I can I can tell you for our customers' CNI.
C&I customers in the U S.
When we talk to them about.
As future proofing them.
And stepping them in a very thoughtful way without any bumps to their de carbonization goals. The artist she becomes a very important starting step.
The immediate first thing with which they can do something good for themselves and for the planet and for their ESC requirements. So we are seeing that to be very very attractive to our C&I customers. When we are talking to them.
Great. Thanks, a lot.
Yes.
Our final question will be with BG Perrin <unk> with Susquehanna.
Your line is open.
Hi, Thanks, good afternoon I.
Thank Kerry you touched on my question that was sort of taken the the waste gas opportunities in the carbon capture technology and sort of combined.
Combined the two to produce negative carbon electricity.
Hum, so I guess for that to work.
How much do.
The waste to gas projects have to scale up and and how do you.
What are the ways to scale that up I mean is there an opportunity to use something other.
And then just a natural waste.
In other words, you don't the.
The Reds.
Articles on granite.
Grass to gas type of project. So just wondering about that.
So that's a great question, we do so here's what I would say right. If we just start with.
If we deal with animal waste.
<unk> bio waste.
That alone has several gigawatts worth of opportunity to start with.
Their waste is already being created.
But I think the question that you are you are bringing up.
Is having.
Producing crops.
Crops.
And using that biomass to be able to do this as a way of.
Further benefiting the climate and.
And the planet as well as creating a market for US there is a way that we are already engaged in that's helping that in that there are several companies focused on producing biofuels today, and they actually take a crop and make biofuels with that.
And their carbon intensity score depends on the intensity of the electricity that they use.
And we are able to offer them a phenomenal option.
Our electric power because of which Theyre Ci scores go down and the monetization they get on the other end on the L. CFS is extremely high.
This is a very very attractive segment for that that's the next step okay. Between these two gigawatts worth of opportunities.
Got it so it says there is it.
So there is an opportunity here to sort of access to the carbon credits market down the road.
With these technologies.
Yes for our customers.
For our customers to monetize and therefore for them to appropriately pass for the equipment that we provide to them.
Correct right.
Thank you.
Very helpful.
Well thank.
Thank you all for attending the call Yeah. So let me summarize.
First and foremost.
What you heard from us today.
Is.
We are performing in a very difficult market in a very.
The difficult macro condition in terms of supply chain labor.
Everything that everybody faces, but you can see from the results we are executing well.
Doing well.
And I'm very proud of the Bloom team.
That is dedicated passionate and delivering great results for us.
That's the first thing.
The I R E. The.
Is truly.
Wind on our backs.
It's unlike most energy companies, it's going to help us in so many different ways that we talk to even to the Q&A.
And the.
The good news for US is our platform technology allows us to just pivot.
Do whatever markets at whatever point in time that will provide us the best Optionality in terms of growth.
And margin. So we will not only look for margin, but we will look for margin in places that have tremendous growth opportunity. This is how long are you going to make the decisions and we have built the company and a leadership team that can be nimble.
That is savvy.
And can execute to that.
To the level of flexibility that our platform actually offers.
I'm Super excited about what.
What the future holds for us.
And I think we are off to a different chapter when it comes to Decarbonising. The planet policy I already here in the U S and I don't want to not mention.
Similar dynamics that are happening in Europe .
In Asia, we are already growing.
You put all that together we are building a global company, whose mission is to Decarbonize. The planet. Thank you for joining us.
That concludes today's call. Thank you for your participation you may now disconnect your lines.