Q4 2022 Bloom Energy Corp Earnings Call
Good evening, good evening, ladies and gentlemen, thank you for attending today's Bloom energy Q4, 2022 earnings conference call. My name is Tia and I'll be your moderator for today's call all lines will be muted during the presentation portion of the call.
With an opportunity for questions and answers at the end if you would like to ask a question. Please press star one on your telephone keypad.
Please limit yourself to one question. Once you ask your question. Please mute your Mike If you have a follow up question. Please queue up again I would now like to pass the conference over to your host Ed Vallejo, Vice President of Investor Relations. Please proceed.
Thank you and good afternoon, everybody. Thank you for joining us for Bloom Energy's fourth quarter 2022 earnings conference call.
To supplement this conference call, we furnished our fourth quarter 2022 earnings press release with the SEC on form 8-K.
Posted it along with supplemental financial information that we will reference throughout this call to our Investor Relations website.
This conference call both in our prepared remarks and 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 product and your market strategy financial position liquidity and full year outlook for 2023.
Statements are predictions based upon our expectations estimates and assumptions. However, as 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-K and 10-Q.
We assume no obligation to revise any forward looking statements made on today's call.
During this call and in our fourth quarter 2022 earnings press 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 fourth quarter of 2022 earnings press release available in our Investor Relations website.
Joining me on the call today are <unk>, Schrader, founder Chairman and Chief Executive Officer, and Greg Cameron, Our Chief Financial Officer.
I will begin with an overview of our business and then Greg will review, the operating and financial highlights of the quarter as well as the outlook for 2023.
After our prepared remarks, we will have time to take your questions I will now turn the call over to PR.
Yeah.
Thank you Ed Good day, everyone Blue.
Bloom energy finished 2022.
Very strong position as a resilient and sustainable energy solutions experienced wider adoption and veeva aided by good tailwind.
I expect this trend to continue in 2023 and beyond.
Our revenues and gross margins.
For the fourth quarter and for the full year and we closed 2022 with a $10 billion backlog the strongest order book and blooms history.
We continue to innovate at a rapid pace to further strengthen our technology leadership and competitive advantage in.
In 2020 to be demonstrated record breaking efficiencies for hydrogen production using our electric <unk> and successfully tested our highly promising carbon capture technology.
We released it combined heat and power offering that we are very excited about this offering has wide ranging applications, including in the European markets. We are now entering and four industries that can use the heat.
We successfully deployed our marine product on schedule.
Bloom has also invested in operations and doubled our manufacturing capacity.
Im proud of our team for all we have accomplished in 2022.
<unk>.
We're excited about 2023 and are looking forward to building on the momentum we have generated.
Establishing ourselves as the energy company that offers our customers practical and purposeful solutions fee call. It the power of and.
When it comes to energy, we need security and sustainability.
Liability and resiliency affordability and availability simply put.
When it comes to energy.
Source that is foundational to our wellbeing.
<unk> should not be an option.
The Bloom energy technology platform delivers on the power of and the.
The future looks very bright for growing our electricity and hydrogen solutions, both domestically and internationally.
We are very pleased with the quality and composition of our $10 billion order book It offers predictability and visibility.
We have talked to you in the past about the issue of time to power.
Utilities are not able to meet the growing need of commercial and industrial customers for additional power.
Let me elaborate on this.
Businesses are expanding and many are reassuring their operations digital transformation is driving steep growth in data center and loads vehicles and appliances are being electrified. All these trends are costing a surge in energy demand.
At the same time.
Politics climate concerns and Nimbyism are making it very difficult global energy transition even harder.
There is long term policy uncertainty.
Permitting chaos.
<unk> political decisions to shut down or not allow infrastructure growth based on unrealistic transition timelines all of which have significantly stunted growth of energy supply.
Many jurisdictions have done to dirty and unreliable sources of energy to cope with the situation.
California has spent billions of dollars on dirty diesel generators and antiquated power plants to keep the lights on during the summer.
The northeast is heating homes this winter with carbon intensive heavy oil due to the lack of cleaner gas in Europe has been forced to reopen coal power plants.
We see this acute supply demand mismatch globally.
This imbalance has seriously threatened energy availability security and <unk>.
<unk> ability.
It is also compromise the health of people and businesses around the world.
Furthermore, he just said the world back on its sustainability goals. The biannual EPA egret numbers came out last week and they show that marginal and average Seo to emissions have gone up in the last couple of years in many geographies.
Additionally, the prolonged power outages experienced repeatedly in places like the U S. Gulf States speak to the fragility of the grid.
Commercial and industrial consumers of energy are alarmed by the lack of secure affordable and reliable energy options from the utilities. They are increasingly wanting to take control of their own energy destiny.
Many of them are turning to bloom for behind the meter solutions in these situations.
It should be no surprise to you then that we have booked over 100 megawatts of orders from customers in the U S to solve their time to power issue.
Also.
As Greg will cover in his remarks, we have made great progress operationally.
We will leverage our technology advances.
Creased manufacturing scale and other efficiencies to drive improvements in our margin profile.
The cost down program is a cornerstone value for bloom and as part of our DNA.
Lowering our cost of goods should enable us to enjoy both growth and profitability.
Bloom.
Now with predictable growth company.
For the world of unique mature and proven platform solution at scale solution that can be deployed today with a clear pathway to a net zero future.
With that let me turn it over to Greg to discuss our financial performance Gregg. Thanks, KR. This past year, we achieved strong commercial operational and financial results that position us to be a leader in the global energy transition.
Let me begin with a few highlights.
We had record revenues for the fourth quarter product and service revenue was up over 41% and total revenue increased more than 35% versus a robust fourth quarter 2021.
For the year product and service revenue was over $1 billion in total revenue was $1 2 billion.
Our margins improved fourth quarter, non-GAAP gross margin surpassed 30%, resulting in 23% for the year up 130 basis points versus prior year.
Our backlogs for systems and service has reached $10 billion the largest in balloon history.
We completed the first phase of our Fremont factory, adding 300 megawatts stack manufacturing capacity, which doubled our capacity from the beginning of the year and we built two gigawatts of Electrolyzed or assembly capacity in Delaware.
We are providing a 2023 framework consistent with our long term guidance built on strong growth and margin expansion.
With those highlights let me provide some additional context to our performance.
The value proposition for our energy servers and Electrolyzed as robust.
Our customers need resilient power that reduces their carbon intensity, while providing optionality to move to onsite net zero solutions like hydrogen in the future.
Our time to power a value proposition is particularly meaningful for manufacturers in data centers, especially when the local utilities unable to provide the additional power to support their growth.
For our electric <unk>, we are engaged with large scale developers of hydrogen and green ammonia projects.
They clearly value the efficiency advantages of our solid oxide technology in our manufacturing readiness.
We are also partnering with developers for significant opportunities and waste to energy in some instances, we are providing power solutions to enable low carbon intensity renewable fuels and in other cases, we're providing solutions use biogas for resilient power across dairies landfills and wastewater treatment facilities.
Opportunities are progressing with a sense of urgency aided by the United States inflation reduction Act and similar incentives in Canada and Europe .
The system backlog for our $24 seven always on energy server is $2 8 billion up 16% versus prior year.
When combined with the revenue there should be earned on service contracts, we have a total backlog of $10 billion up 17% versus year end 2021.
When comparing year over year growth in backlog.
<unk> remember that in 2022, it was our first year of a three year take or pay contract with SK Eco plant that was included in our 2021 backlog when adjusting comparisons to reflect SK equal plants 2022 deliveries our system contract value backlog has increased 41% versus.
Prior year.
Our fourth quarter non-GAAP gross margins of 30% improved nine two points versus the fourth quarter 2021.
The margin increase was driven by improved pricing mix on our fourth quarter acceptances.
Unit cost reductions.
See benefits.
For Repowering and product revenue being a larger percentage of the total revenue.
We benefited by a convergence of these events in the past quarter and we would not expect this margin rate to be our new baseline.
The PPA for Repowering with similar to the PPA three a repowering in the second quarter, we executed the sale of a previously consolidated PPA entity and by doing so we eliminated $70 8 million of nonrecourse debt.
Enhanced current margins on higher Asps.
And simplified our financial reporting.
As part of this transaction, we recorded $73 million of charges through our electricity segment operating expenses and other expense that were removed as pro forma adjustments from our non-GAAP reporting.
We have one remaining consolidated entity PPA five that we may repower in late 2023 or early 2024 with a similar approach.
Our supply chain and manufacturing teams are successfully navigating the current environment.
We completed the first phase of our Fremont facility expansion, which doubled our stack manufacturing capacity from the beginning of the year from 300 megawatts to 600 megawatts.
As a number of build increased we saw a decrease in our unit cost quarter over quarter.
To reduce costs in 2023, we are increasing the power density of our energy server identifying material savings securing supply chain deflation.
Automation manufacturing processes and benefiting from operating leverage.
We fully expect to return to our annual product cost reductions of 10% to 15%.
We ended the year with more than $500 million in cash balances.
These balances do not yet include the $310 million from the SK Eco plant equity investment, which is expected to close in the first quarter subject to remaining regulatory approvals.
Last quarter.
Given the rising interest rates, we elected not to factor over $160 million in eligible receivables.
Had we factored these receivables cash flow from operations usage in 2022 would have been only $31 7 million roughly half of our 2021 usage of $60 7 million.
In 2023, we expect strong revenue growth and expanding margins consistent with our long term guidance provided last February as.
As we do less installations and reduce our electricity segment, the more meaningful measure of our growth product and service revenue is expected to grow 20% to 30% to 1.25 billion to $1 35 billion.
We expect total revenues to reach $1 4 billion to $1 5 billion up 17% to 25% for the year.
This year, we plan to reduce our product costs over 10% and expect our non-GAAP gross margins to improve 200 basis points to roughly 25% for the year.
With these revenues and margins, we would expect non-GAAP operating income and cash flow from operations to be positive in 2023 or.
Our business is delivering.
For the first quarter 2023 based on likely acceptances, I would expect product and service revenue growth to be in line with the total year growth targets.
non-GAAP gross margins should be up 200 to 300 basis points versus the first quarter last year as free months startup cost do not repeat.
As in previous years, we expect 40% of our revenue in the first half and 60% in the second half of the year driven by the seasonality of acceptances.
As such our second half margins tend to be higher as accretive product margin as a greater percentage of the total.
In summary, we had a strong operational year and are building momentum with the demand for abundant clean and resilient energy.
We believe the company can build upon our mature solid oxide platform.
Solid record of accomplishment and robust growth roadmap.
We are extremely excited about our future and I look forward to showcasing the team at our Investor Conference on May 23 at the New York Stock Exchange.
With that operator, please open up the line for questions.
Absolutely.
We will now begin the Q&A session.
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Well pause here briefly to allow questions to generate in Q.
The first question is from the line of many with UBS. Please proceed.
Hey, guys congrats on a strong quarter.
My question here is I was just.
Listening to the call.
Stephen's presentation from the World Bank and he was saying that if the world has to Decarbonize, we need 200 gigawatts of electrolyte their capacity every year between now and 2050 and so when you look at Bloom you have shown humans capital discipline, but if some of these growth numbers.
If all agencies all right.
Is that a point that takes a look and say maybe we can be a little more aggressive and perhaps harder on the gas there one gigawatt of capacity in the two years is just not enough and I'll leave it there. Thank you.
Let me. Thank you so much for covering this is K R and here's what I would say we are super excited about hydrogen because that is the abundant clean power that was trading floor.
We are not in the business of guessing then that hockey stick is going to take off but we're extremely prepared what I mean by that is we don't need to do a gigawatt a year.
Can do copy exact line, Ian gigawatt lines across the world, where we need to do it and what we have shown you with the doubling of our capacity is within a year. We can recoup that capital there is not too many factories that I know off that can do that and in technologies that can do that.
<unk> did that so then this hockey stick happens via are there to meet the moment and not say why we can grow so via preferred ready gearing to go the world needs to step up and actually make it happen.
We have the plows.
Somebody needs to now start digging those gold.
Thank you so much.
Thank you.
The next question comes from the line of Julien Dumoulin Smith with Bank of America. Please proceed.
Hey, good afternoon, congrats on the results.
Hey, so just coming back to the hydrogen conversation I'll start there just what's included in 'twenty three guidance here is what I understand what's in what's out and specifically as it relates to hydrogen.
Many projects or what can you discuss with regards to what's assumed in 'twenty three as well as hydrogen in the incremental backlog that's being disclosed here if you can.
Yeah, Hey, Julien it's Greg.
So one of the reasons I highlighted our backlog being around the natural gas server or 24, seven energy server. That's the vast vast majority of what is in our backlog today. The team is very excited about the opportunity. We've got a number of projects that Rick and the team are working through and we're really excited about the commercial.
Momentum in the sense of urgency that that that the team has so as you look at the backlog it is predominantly the.
The server with no electrolyze are in there if you look at the 2023 framework. So we talked about as we get orders.
For the Electrolyze as deliveries and those are likely to be late 2425 before you see any commercial momentum out of them. So as you think about the 2023 guidance that we've put out for revenue, it's really around our core product today that we're selling on the energy server in the U S in Korea, and other parts, where Tim is made of.
A lot of progress on the international side, So really excited about that market, but it is not yet contributing to the overall framework or or backlog at this point.
Thank you.
The next question comes from the line of Michael Blum with Wells Fargo. Please proceed.
Thank you good afternoon everybody.
I want to stay on the backlog for a second it's obviously up quite a bit which is pretty encouraging I wonder if you could just speak to the profile of the customers who are behind that backlog and maybe give us a flavor for geography, and then how many how many years out is that backlog representing now.
Yeah, so listen on our backlog right in order for a contractor or a project to make it in our backlog its fairly stringent on the approach that we use here. So it has to be a firm contract there has to be skin in the game for both of us and it has to be a firm delivery on it. So so in order for that project to be at our backlog. It is.
Got to have those things as you look at the projects that we have our U S. C&I business has really had a strong 2022 and if you look at the types of projects that they are seeing there and the larger scale than they were seeing pre pre pandemic, meaning of size in the 25 megawatts and above type size.
Youre seeing them in the time to power area and resiliency, both together either separately or together, meaning it has a large project that's meaningful for that customer around their ability to perform their operations today or to bring additional operations online. So they can meet their growth prospects. So those are I would say is what we're seeing in the U S Korea.
It tends to be what we're seeing is still very much the take or pay contract and the comment I was trying to make was we had three years of take or pay last year. We now have just two years.
Why did that adjustment math for you and then broadly you saw the announcements that Tim teams have been able to do in Italy and in Taiwan on good sized projects in the 10 megawatt is starting on the relationship side. So we're getting some good scale and making sure that we're re plant flags, we can support not only our core originations.
Our service business once we land those units so I feel like we've got some really strong diversity that we're building into our backlog and in the markets. We're in we're gaining both with both number of deals and size of deals which is really encouraging.
Thank you.
The next question comes from the line of Martin Malloy.
And Ryan and company. Please proceed.
Good afternoon, and thank you for taking my question.
Wanted to ask about.
EV infrastructure, and if youre seeing demand for the energy servers in conjunction with building out commercial size EV infrastructure.
That's a great question Martin and then yes, we are what we are hearing from our corporate customers.
Is when they talk to us about their loads. They are not just talking about the factory industry loads are there data center loads of the carpet loads.
They are simultaneously thing.
We have a fleet of vehicles.
And they are going to be evs for the last mile. How do we how do we power them, how do we keep them going.
So hearing from utilities that are beginning to talk to us about the EV loans being in the middle of congested cities, where the last mile problem is going to be.
Big Nightmare for them unless they have some generation right onsite. So these are the two places where we are beginning to see traction.
<unk>.
Imagine in the next few months. This is only going to get even better given that <unk> has given such a strong incentive for charge offs and fleets to get choice and more and more vehicles are showing up in the market and Cvs.
Thank you.
The next question comes from the line of Jordan Levy with choice Securities. Please proceed.
Good afternoon, all and thanks for taking my question.
Just wanted to hit quickly on the new application you will put a press release out on the <unk>.
In power and maybe just talk a little more detail on that.
Yes.
Yeah, So look.
You look at.
So.
I'm sorry repeat the question one more time, so it's fully clear to me before answering it.
Sure Yes.
We can get more details on the combined heat and power applications.
Yes he'd capture.
Absolutely. So so so look as as the world is marching forward.
The.
Mark you all.
I'll field that hydrogen.
Whether it is natural gas and renewable natural gas that molecule becomes more and more precious.
Decarbonization is going to happen lot more quickly than that molecule can be used to its utmost efficiency.
And the end use customers are beginning to understand that.
And more and more customers are saying, how can you give us more juice out of the same molecule that's coming in.
And a way to extract more juice out of that molecule is useful energy is not only our very high electrical efficiency one of the best in.
In the business.
But on top of that to be able to extract some heat and provide that heat.
And especially in the European market, so the incentives being set the way they are.
It is very very attractive for customers to do that and they will align their incentives with decarbonization and efficiency.
Industries more and more are now looking at the cost of energy.
And wanting to extract that as much as they can and so this offering of combined heat and power is going to be extremely valuable the difference between legacy combined heat and power and US is that the legacy gives you lot less of electricity, which is the higher value commodity and lot more of the heat.
With Bloom you get the exact opposite more of electricity, which is the high value commodity and needed more.
And less of the heat Nevertheless, a very valuable resource and that combination should get us knocking at the door of 90% efficiency with our roadmap and that is very very attractive.
Perfect.
Thank you. The next question comes from the line of Colin Rusch with Oppenheimer. Please proceed.
Thanks, so much guys.
Greg was the concept that you're talking about this year could you give us a sense of where those things are coming from and then with the margin guidance suggests that prices are going to come down all that could you talk a little bit about that.
That's coming on next next basis internationally versus domestic.
The real drivers are on that price down as well.
Yeah, so on the costs down and calling it whether it was.
The pandemic itself and where our engineers were working via zoom and knocked together or the supply chain issues that we were having globally and the inflation that it costs. There are just quite frankly, doubling our capacity last year and the ramp that we were going through and the inefficiencies of running a factory not at full output our cost frankly were not where they wanted.
It would be when we got to the end of the year. This is I think the first time in Bloom history, our costs were up.
Small, but still up year over year, which is not something that is normal for us. So as we look in the middle part later part of the year and said, Okay. What is our path going forward. There was a number of areas that we've been identifying one is just the power density of our machine. It is one of the things that we've levered over the years too.
Increase the output and reduced at the same build cost and reducing our cost per kilowatt. So we had some increases that we've been able to get out of our current design and theres more to come there. The second thing we've been able to do is really help to work with our supply base look at our key components look at their manufacturing processes and ultimately <unk>.
Prove on what their operational efficiencies are and we're seeing some good material price deflation that's coming down at the same time, we've engaged our engineering team to really go in and look at the core of our product and look at for how we design. It the parts that we source and elimination of pieces and simplification of the product.
That theyre able to do and that's really contributing to the cost out and then lastly.
Not only on the components that we buy that and once we bring them in house and how we build the machines. We're seeing some nice operating leverage as Fremont is getting up to its full line capacity and at the same time, we're seeing a lot of improvements in the process that we're able to make around automation.
For us automation is all about our ability to scale in this market.
It is not something that we're looking to reduce our head count on it's really making sure that for our direct labor output, we're able to direct labor, we're able to get a lot more output out of so when we look at the plan going into this year in the framework is about 10% that we built in for costs down into our margin guidance for the year and I would tell you our internal targets are more aggressive.
Round that we're going to push the teams hard to deliver on that 10% and if it gets better and that would be a good thing.
On price going forward year over year, when I strip out some of the unusual so if I strip out the repowering and I strip out some of the other things and look at core on the product prices remained relatively flat over the last three years, both on a mix adjusted basis on a Nymex basis, we don't have a lot of mix on our pricing meaning that.
When we make decisions around where we want to put our units whether it is here or in Asia or in Europe . The decisions. We're making is really where can we get the most amount of growth and the best returns on margins that tends to solve us to having very similar selling prices across across the globe. So as we look into 2023.
A couple of hundred basis margin improvement that we're expecting is really going to come from us holding our asps flat on an after eliminating some one timers for this year on a core basis, and then taken our product costs down and we think we've got a pretty robust plan to get back to get back to that cost out and get continue to expand on our margins.
Thank you.
The next question comes from the line of Sam Burwell with Jefferies. Please proceed.
Hey, good afternoon guys.
Wanted to hit on the backlog once more from a slightly different angle on it obviously very impressive growth in the color you've given so.
So far is very helpful, but the footnote on it saying that it reflects anticipated ITC and other tax incentives as applicable just curious for a little bit more color on that is that as simple as the ITC being effectively renewed and that was a boon for customer orders or is it actually embedded in the backlog number.
In a different way and then just one more thing on the ITC as I understand it it's due to convert to the new clean energy investment credit. After 2024, so as things stand now do you foresee that changing any dynamics between you and your customers.
Yes, so Sam on the way the way it naturally works within the business is most of our sales are through a PPA structure, where we're selling to the customer.
<unk> cost of electricity over a period of time, and then with that with our financier. We then take the cash flows associated with that.
Calculate what we believe.
Our selling price of the machine is going to be with the service costs are going to be what the install costs are going to be so as you calculate your selling price whether it's in the U S and in ITC or in another country. Another jurisdiction jurisdiction that has some other type of incentive we incorporate that incentive into the overall cash flows as we calculate what we will be selling.
The product to the end customer through the SPV. So we just wanted to make sure we're very clear that each year, depending upon what the incentives are for our backlog, we use that as part of our analysis to calculate what we perceive to be what we assume to be will be the selling price of the.
Of that contract listen on the sunsetting of the ITC not something that is new for US right every two years or so we've been through this process before generally what happens is we get an extension for about this period of time, we move forward on it and then depending upon where we where we're sitting is in the global economy on <unk>.
<unk> and resiliency that incentive gets renewed if you're thinking from a practical standpoint, yes. It may be only two years, but they're through safe Harbor and other parts of the parts of the contract we are able to get about three years benefit out of it. So it feels like we're only about six months into the current one.
Which is which is early days.
But but we've obviously taken that in the forecast to us because at the end of the day. Our goal here is to continue to drive down the cost of our product and make sure that we're prepared for able to compete at some point, where these incentives don't exist, but I would say theres a high probability in our view that there will be an extension in the future and that we wouldn't be dependent upon it but it would be.
Part of it I don't know.
And if you could just add to that right.
A fraction of our business.
As we grow internationally is shrinking fraction of our business.
It will depend on ITC and ITC.
Even 30% if we are doing double digit cost reductions every year or two years from now we should be able to offer our customers looking to offer so.
The focus more on what's in our control.
And push that hard and.
We are confident that we can run a business with or without subsidies.
Thanks, Sam Thanks for reading the footnote.
Thank you.
Next question comes from the line of Btu parish shop with Susquehanna. Please proceed.
Hi, Thanks for taking my question wanted to touch on the services margin can you give us some additional color there when do you expect to get to breakeven there and also can you touch on sort of the.
The time now.
For module life, when you do the change outs.
Oh sure.
The service margins right their business is impacted by the same costs that we've had on the product side right, 60% to 70% of our service cost is around that replacement module that happens generally in the four or five or six years and we've seen an extension of that each time. So as we look at our service margins for <unk>.
This year they are not where we wanted them to be there is more work that we need to do on that portfolio, but I would tell you that.
The most significant contributor being off where we expect it to be is really around the first product cost translating over into the replacement power module as we do the work on the costs down and I was talking to Collyn earlier for the product that's going to translate into the service margins and get us and get us back to where we need to be going forward.
Our expectation is still that we're pricing our new deals all at 20% and we expect it in the middle part of this decade around 2025, we should be at that 20% product margin sorry service margin, that's still our expectation for that business going forward in particular on the replacement of the power modules remember, we're replacing power modules not when they are.
End of life, we're replacing the power module within the service contract when it's economically makes sense in order to do that so we've seen an extension of that every year.
What we're shipping today has a much longer life than what we would have shipped four or five years ago and as part of overall on our cost out and why we're so confident in this business as being a really good annuity as we go forward on it having a sizable growth as well as a really attractive margin.
Thank you. The next question comes from the line of Casey Harrison with Piper Sandler. Please proceed.
Good afternoon. Thank you for taking the questions.
Apologize if I missed this somewhere in one of the releases, but how many acceptance is do you expect during 2023 and how should we think about the geographic mix for your revenues or shipments during 2023. Thank you.
Yeah. So we didn't give guidance on acceptances, nor do we really want to.
It's not something that I'm going to focus on going forward and the reason is this.
And as we introduce different applications on our current platform.
Power rating associated with that is going to be different.
We're two or three years ago I could have told you. We shipped 188 megawatts of revenue because we are shipping all natural gas servers globally. As you go forward and you begin to think about deliveries of <unk>.
Electrolyze errors marine and other things to power ratings, where those are going to be different.
Grids all of those things are going to get out for going forward. So I would say as you looked at my revenue growth projections for next year and you look at product and service you can estimate from that what you think volumes are going to be if price is going to be constant over the period.
Because I missed the second part of his question yet.
Yeah.
Thank you.
Our next question comes from the line of Noel Parks with Tuohy Brothers. Please proceed.
Hi, good afternoon.
No.
Something that you've talked about in the past.
Just the time lag between.
When you win new business and when the.
Profit is actually delivered.
Just because of the.
The degree to which you're you're sold out in advance of your production and can you.
Give a little insight into sort of what the current backlog and with what will translate into revenue recognized this year, what sort of error or horizon or pricing.
It's going to be being.
Being booked being realized this year.
Just to kind of clarify me and sort of there there may still be upside on pricing that you're getting in the marketplace now that.
So that will take a while to make its way into revenues.
Yeah. So no I would tell you that even though over the course of the three years that I've been here the timeframe between when we identify an opportunity to win we contract to ultimately when we deliver continues to shrink I would say our impatient as always that it's too long too complicated and from a process capability standpoint, we want to continue.
To lean that out and make that much more predictable.
What we're seeing today and what we would expect where traditionally almost all of the backlog we'd be translated to revenue in the following year, we're seeing opportunities that booked early in the year and may lead to power, especially in the time to power space much sooner contracting that time period that we'd seen we've seen historically is that on the pricing side, we like.
Where we're seeing in the market right now we're able to provide a value.
Product to our customer at a premium and a lot of places to where where other types of technologies would be at and we expect to continue to provide a lot of value for our customers and continue to look to make sure that our margins are met while they're meeting their economic objectives on it forward. It's a fancy word for me to say I don't expect a lot of price.
Compression here as we move forward people still recognize the value of our product and we've been holding our price and we as we take cost downs that should expand our margins.
Okay.
Thank you. The next question comes from the line of IP.
Now with Northland capital markets. Please proceed.
Yeah. Thanks for taking my question.
Just if you could tell us a little bit more about your.
International versus domestic revenue breakdown going forward, how should we look at that is it.
You could just give some color like when you compare and contrast, the two like what applications are being used and what the drag was what are the margins how should we look at comparable congrats to do yes.
Yeah, So, let's say that for the year right. We went there and I kept saying we were doing a lot of our Korea shipments earlier in the year, because we were capacity constrained we wanted to make sure we met our contractual obligations to get to them to their volume for the year and I told you by the end of the year, we'd get it back to our historical levels were about where we were a year ago on our international.
Versus our domestic shipments.
Going forward I would expect that as a percentage the U S will be smaller not that we don't expect to grow very aggressively within the U S. But we are very well.
We are very focused on growing and to continue to grow into Korea and to grow in Europe and other parts of Asia. So my expectation as we go forward that you'll begin to see more and more of that Barbie international versus domestic while the size of the overall bar increases and the domestic component continues to increase at a really healthy clip what we're.
Seeing today for returns is we really were not interested in entering our country today that does not provide us both components of an opportunity to grow meaning the value of our product and there is a need for it and we can sell it and get a healthy return for the shareholder in that growth. So when we compare opportunities.
Back and forth, it's really just that where do we want to put our precious resources, where do we want to apply our capacity for and how do we make sure that were driving the most profitable growth as we go forward and if a country is not ready for us yet or a territory is not ready for us yet either because they don't have they don't value the product or they don't have an inter.
Sensitive or we just not yet met their price point, then that's okay, we'll wait and we'll enter that market in the future. There is more than an offer much opportunity for us to grow we're not going to reduce our profit margins or our expectations on growth and just to simply enter new territory.
Thank you.
Our next question comes from the line of Amit <unk> with BMO capital markets. Please proceed.
Hey, good afternoon, guys congratulations on the quarter.
Okay.
Initial remarks mentioned kind of a 100 megawatts of.
Power projects.
I was wondering does that include and does your backlog reflects I think you guys are working on like 70 megawatt leap five megawatt project in Oregon with.
With Amazon.
Yes, we have we have three stance.
Close to 75 megawatts contracted with Amazon Web services.
And.
The details of that in terms of commercial agreements like any other commercial agreements we will not discuss.
But I think it paints a larger picture if you just step back and think about this right.
The data center market.
Along with the data transmission network operators put together.
Are.
Somewhere in the neighborhood of 600 megawatt hours of power consumption.
And drilling into that.
If they do put together.
As a fraction of the total global power consumption.
Would be some near.
Nearing 4% of global power consumption.
As a huge opportunity.
And we are engaged with both sectors data centers as well as data transmission nickelic operators.
And we see this as an amazing market.
Now if you just look at them growing at that clip and consuming almost 4% of electricity there is no industrial sector.
That is more responsible and cleaner than they are.
If you take the.
The entire global.
The ppas for renewables.
Energy.
Roughly 30 Gigawatts in 2021.
15, gigawatts of that 30, Gigawatts one half.
Came from Amazon Microsoft.
On Google.
For Hyperscale.
These hyper scaler do everything they can to procure every electron renewable energy there is available and.
This is a volatile fan.
They need reliable energy right, where they need.
And they come to us.
For that trial.
<unk> was 24 seven energy.
Not only today, but.
The fuel that's available but for the future because we can transition them to a cleaner fuels.
We are super excited about the opportunity the 100 megawatts includes that.
Hi.
Okay.
Thank you.
The next question comes from the line of Alex Kania with Wolfe Research. Please proceed.
Hi, Thanks for taking my question.
Maybe just a question just on evolution of policy you've had.
Four or five months to think about the IR hire a little bit.
Has there been any kind of evolution of thinking of the opportunities that are embedded in there or any kind of fundamental questions that need to be.
We need to be answered and then maybe tie that in with the hydrogen hubs that have been narrowed.
Narrow down I guess, just what sort of role.
Bloom kind of been envisioned and participating in the ones that that at least we know you're associated with.
Yes, it's Greg So let me start listen we're as excited.
As the first day that the inflation reduction came out on how it applies to a number of parts of our business whether it was the ITC, we're having conversation were having before a hydrogen PTC credits carbon capture around 45, Q on size and scale and in a lot of different biogas and biogas and the whole waste to energy space. So.
We're extremely bullish on it in the U S. And then as you travel the globe and go to different countries. They are very excited that the United States has taken a leadership position on this and they are anxious to get incentives to help them compete in their economies and globally. So it's definitely bringing the rest of the world long and accelerating.
There are incentives to make sure that happens.
As bullish as we were on day, one and we're excited about it and how it plays through really at this point.
It's just making sure that we're driving through all the questions that need to get answered going forward as we take that law and changed it into a practicality. So.
The Treasury Department and the IRS is very busy making laws and rules based on that so they came out somewhere around with ITC at the end of the year. We're excited around learning more about the made in America and the.
In the energy economies disadvantage economy that move forward areas and get those rules made there are some rules around <unk>.
Transferability of tax benefits and refined ability those types of things. So we're really excited about it and kind of within my World is all just making sure that we're able to maximize that.
Benefits as incentives for our customers as we grow.
So we're really excited about it remaining and we think as it translates.
Accelerating like we said the commercial.
Velocity.
Of the funnel and we don't.
It is not it has.
Then and how soon when the when the hydrogen economy really takes off.
It has a double play.
You have the best utilized to convert that hydrogen into electricity.
He is the best device to take keep coming from a.
Waste heat.
Are you able to use in July and generally cheaper.
Hydrogen and if it's a pure play electricity, we still are a lot more efficient than any other technology out there. So we are super excited no matter.
Which direction the world decides to go via ready to take.
Take that challenge on.
Okay.
Thank you.
Next question comes from the line of <unk> molecule.
Raymond James Please proceed.
Thanks for taking the question in the context.
Other.
Actions following the U S lead and.
Driving clean Tech manufacturing the European Union is talking about this green industrial plan based on that do you have any appetite to establish a manufacturing footprint in Europe , either for fuel cells or electrolyzed.
At this point, what we do and how we think about where we set up our factories and what we do depends on where the market turbulence.
What we did in Korea.
Is do the final assembly of our products for that market and any neighboring markets in Korea, because they created a huge market for us we will do.
Something very similar in Europe .
And then the timing is right, but it has to get to a certain scale.
This is not a field of dreams build it hoping they come.
We actually have a factory with which we can supply and then the actual market is there you can put the factory to be able to serve with even better.
That's our approach.
Okay.
Okay.
Thank you. The next question comes from the line of Mohit <unk> with Credit Suisse. Please proceed.
Okay.
I've been sitting in from a heap.
We have a question.
As you guys ship different product types and sizes into different markets, how should we think about capacity utilization at the factories. This year.
So listen we got two factories today right and then we have the joint venture for Assembly in Korea, but the vast majority of our stack.
Manufacturing capacities here in California, we had 300 megawatts with our Sunnyvale facility that remains we've added 300 megawatts in the first phase of our Fremont facility that brings us to 600 megawatts and we have the opportunity to add another 600 megawatts in Fremont as part of the initial part of our.
Build out here, we'll decide later on whether or not it's economical to build more in Fremont, but our initial plan was to take it to a gigawatt to start that gives us a gigawatt or one three gigawatt. The total fuel cell capacity and if you convert that to electrolyze, our capacity youre knocking on the door three gigawatts at that point.
In our assembly operations in Delaware, we have the opportunity to build gigawatts of capacity in our fuel cells than last year, We announced that we also have an assembly line there for our Electrolyze. There's on it. So we are ready to go we have about another 40% to 60 million.
To invest in Fremont to get us to those levels.
As KR scope before the payback on that is less than a year of fully utilized. So we have we are.
The ability to scale very quickly in order to meet demand.
And then from there we'll look how we add more capacity going forward, but that should take us through at least for the framework for this year into next year without needing to add any additional stacked capacity.
Thank you.
Next question comes from the line of Jeff Osborne with Cowen. Please proceed.
Hey, good afternoon, Greg two quick ones I might have missed this but I was wondering could you give us the percent of the $2 8 billion of systems backlog that is from SK, that's part of the take or pay and then the second.
Second question is on the gross margin could you give us a walk between Q3 and Q4 the strong performance other than price was there any other factors that led to the gross margin result that you just printed.
Yes, so Jeff so last year, we talked about the three year take or pay being.
One point.
One 5 billion or 500 megawatts of capacity, we shipped one year of that.
So out of out of what we ship. It gives us about two years left it's not quite a third a third a third so if we shift to 120 megawatts or so this year the eco plant, meaning 2000 to the remainder of that is in the backlog going forward, let's say on the walk from the third quarter to fourth quarter. There was a lot of.
Opportunity on price and we talked about that coming into the quarter not only did we have the opportunity with tpa for and the Repowering. There that we're able to do at nice pricing. We also talked about having an opportunity where we're just frankly prioritizing.
Transactions and opportunities that we are to the right of the mean, we like the mean on our overall gross margins in our backlog, but we definitely prioritize to make sure that we were able to get to our commitments for the year and then on top of that as Fremont coming in if you look at and do a comparison you can do this based off the supplemental we provided for third quarter at <unk>.
Fourth quarter, you can see that we were able to bring down the cost per kilowatt of our machines.
Just shy of a couple of hundred dollars. So price was obviously, a big impact as well as costs coming down and then you can isolate the other components of it.
Thank you.
The next question comes from the line of Noel Parks with Tuohy Brothers. Please proceed.
Hi, I just wanted to follow up too.
Get some additional thoughts specifically on biogas.
I'm just interested in.
Biogas, driven projects and if youre seeing any trends in either deal structure financing their ownership.
Particular to those and I was wondering if there any projects you could talk about in general terms that come to mind.
It seems sort of novel or are in the data in that space.
Good Hey, thanks, Paul its Greg.
I'm going to pass this one over to you. This is last question. So just on your final comments as it relates to energy.
So thanks for that question here is let me give you. An example, there are two ways to think about Vista energy for us.
One is the traditional lucky ive talked about before generating biogas and being able to use that biogas onsite whether it is using animal waste, whether it is using landfill waste and water.
Water treatment plants.
But then the really interesting opportunity that we're seeing and these are fairly good sized opportunities being developed across the country.
And they are all being developed to meet the CFS standards.
And provide a biofuel as well as for SaaS.
And as for the aviation fuel.
And here.
They command a premium.
And the premium they command increases exponentially as your carbon intensity of the field you produce goes to goes down.
So it didn't work.
And honestly propulsion in most places.
They find it attractive to meet either SaaS or this as CFO . He will say in the middle of Iowa to be able to ship it to California.
They are they have the choice.
Also a really carbon intensive grid electricity.
At reasonable prices.
Our bloom at a premium to that reasonable price in that state, but the opportunity they have to put bloom and capture significant value on the other side for the field based on the carbon intensity is very high. So this has become a very attractive value proposition for the devil.
<unk>.
That wanted to do it in addition.
Because they can capture all the carbon dioxide and the heat coming off our systems.
And might that input there.
Biofuel processing refineries.
Ah.
That becomes a game changer.
And so the novel attractive thing is bloom for that synthetic fuel.
It's a source of.
Almost zero carbon electricity because they.
Use the carbon capture.
It is the use of electricity.
It's not zero carbon.
And then the use of heat so.
That's a huge win.
Okay.
And with that.
Let me conclude by saying look you are seeing a company.
That is firing on all cylinders.
Our topline growth.
Has been phenomenal this last year.
And we have not only happy with the volume that we booked.
But the quality and the diversity of that pipeline.
We have.
From a geography perspective from an applications perspective and from the industries, we serve and the growth opportunities, we see in each of those markets and segments and industries and customers.
If you look at how the team has performed internally within the company.
We're extremely happy with how we navigated a very difficult environment.
And Delaware on the promise.
Doubling our capacity on time, we couldn't have reached our Q4 revenues is the fact that he was delayed by a quarter for example.
So youre looking at a company that's firing on all cylinders and we really think this is just the beginning of a great journey and the timing on the market is fabulous.
And this didn't happen by accident. This is a company that's been building and waiting for this moment for the last 20 years.
Now the externalities have aligned.
Both access and value the.
Innovation, we bring which is for both.
Success and significance. So thank you for being part of the journey and we really appreciate it.
That concludes.
Yes.
Yes.
That concludes today's conference call. Thank you you may now disconnect your line.