Bloom Energy Corporation Q1 2023 Earnings Call
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 first quarter 2023 earnings press release available on our Investor Relations website.
Joining me on the call today are K R. Schrader, founder Chairman and Chief Executive Officer, and Greg Cameron, Our President and Chief Financial Officer.
I will begin with an overview of our business and Greg will review, the operating and financial highlights of the quarter as well as the outlook for the year and after our prepared remarks, we will have time to take your questions.
With that I will now turn the call over to <unk>.
Good day everyone.
Bloom energy is off to a very strong start in 2023.
Company is operating well and delivering on our goals.
Making great strides in developing products that serve the needs of our customers today.
Position themselves for the future and importantly create revenue growth for us.
On may 23rd we will be getting together in New York for our Investor day, and you'll hear more about our strategy and roadmap then.
For today.
Let me provide you with six examples of how in addition to executing on our plans we have opportunistically investing in products that have the potential to enable revenue growth and improved margin.
We had record product and service revenue in the fourth quarter of 2022.
On the back of that strong year end finish we achieved record revenue for product this quarter.
We did this because we made the investments to expand factory capacity and executed on bringing that capacity online without any delay.
In our call last quarter.
We talked about our renewed commitment and increased investment in our cost down program and enabler for both growth and profitability.
We were confident in making those investments because we knew that we would deliver strong returns.
I'm happy to report that we have started reaping the benefits of this program has evidenced in our first quarter results.
We are on track and expect to see a double digit product cost down this year.
<unk> told you about our investments in topline growth and focus on international growth to open up new markets.
In Q4 of last year.
We signed a 10 megawatt order in Taiwan.
In Q1, we manufacture and ship those products.
The bloom servers will be installed and delivering clean reliable power in the coming months to our time on these customer.
We take great pride in not only the speed with which we can execute but also the urgency with which we can meet the critical needs of our customer.
During our last earnings call.
Told you about releasing a new combined heat and power are.
CHP product with a total efficiency of 85%.
We now have 20 megawatts of orders for CHP energy servers, and each from Italy and Belgium.
We will start shipping CHP enabled energy servers in the second half of this year. This is a clear example of the ease with which we can adapt our platform technology and tweak our servers to meet specific customer needs.
Let me now switch to hydrogen.
Our high efficiency Electrolyze offers for the first example.
We have reported in the past about a 100 kilowatt Electrolyze innovation project at the Department of Energy's, Idaho National lab, using assimilation of steam and electric inputs from a nuclear power plant.
The <unk> lab has to date completed over 4500 hours of full load operations with the Bloom electrolyze her and found it to produce hydrogen more efficiently than any other process or 25% more efficiently than low temperature electrolyze theirs.
In addition.
Dynamic load testing at INR showed that the bloom electrolyze are handled ramping down power from 100% load to 5% load in less than 10 minutes with no adverse impact in fact, even at 5% load.
Electrolyze it operated at an efficiency that was equal to or better than low temperature, Pam and alkaline electrolyze us operating at 100% load.
I am now.
Will present these results at the dock.
Meeting in Washington D C on June 7th.
And of course I am.
Super excited to share with you a major milestone we achieved in hydrogen production by standing up the world's largest solid oxide electrolyzed demonstration. That's also the worlds most efficient commercial scale electrolyze are in operation.
By investing in demonstrating this electrolyze or deployment.
Were able to showcase the maturity efficiency and commercial readiness of Bloom solid oxide technology for large scale clean hydrogen production.
The four megawatt Bloom Electra Liza is delivering the equivalent of over $2 four metric tons per day of hydrogen output.
It was built installed and operationalized in the span of two months to demonstrate the speed and ease of deployment.
Given that large scale projects are predominantly in the planning and early design stages. This timely bloom demonstration.
Should provide potential customers with the confidence they need to make the right technology choice.
Rather than rely on less efficient legacy technologies.
These examples illustrate how we make judicious and timely investments when we see opportunities to grow revenue and margin and then execute diligently to deliver strong returns on those investments.
Let me finish now with the Mega trend, we are seeing globally on the time to power issue for commercial and industrial customers.
The delays in permitting interconnections and bringing new capacity online.
Coupled with the early retirements of Baseload power plants.
Have contributed to severe generation capacity issues.
Transmission and distribution grid locks and delays in adding to T&D capacity have further severely restricted the ability of utilities to keep up with customers growing electricity needs.
Industrial expansion onshoring electrification of everything including transportation Digitization and artificial intelligence are all placing significant new demand for electricity.
In many places globally.
Customers are told to wait five to 10 years to get additional power.
Such huge shortfalls of delivered electricity.
Is unprecedented in the modern age and places utilities customers regulators and policymakers in unchartered territory.
I see this time to power problem.
Knowing and being an issue that will be with us for the next two decades.
For data centers in factories that need additional capacity fading for multiple years to get power is not an option.
For Bloom.
This issue represents a real opportunity.
Bloom energy has a unique offering that is a perfect solution for such situations Bloom.
Bloom servers can be deployed in front of the meter with the utility as a customer.
Our behind the meter with the end user customer.
Our solutions can be interconnected to the grid are stand alone and an island mode to provide always on clean electricity on site.
As such we.
We can be deployed their transmission and distribution are lacking.
Our low carbon footprint solution is virtually air pollution free can be deployed rapidly has proven resilience and reliability and is future proof to accept green fuels as they become viable and available.
As the March forward in this unprecedented scenario our focus is on ensuring that the policies and regulations enable ease of deployment of our servers. We will also focus on who will be our ideal partner.
The partners be utilities.
And U S customers or both.
Well that varies from geography to geography and.
And be different for the investor owned utility versus a municipal utility.
These questions.
We'll get the answer in time.
But irrespective of that.
I expect this to be a big driver of growth for Bloom This decade.
I will now turn it over to Greg who will discuss our financial performance and then we'll take your questions.
Greg.
Thanks K R. This past quarter, we continued to deliver strong operational and financial results, we are gaining momentum and delivering on our commitments. Let me begin with a few highlights we had record first quarter revenue product and service revenue was up 39% to $234 million in total revenue.
<unk>, 37% to $275 million, both versus the first quarter last year.
Our margins improved first quarter non-GAAP gross margins were 21, 2% up 540 basis points versus the first quarter 2022.
We are seeing strong global demand for our energy server, especially in data centers.
We have achieved product cost reductions with unit costs down nearly 10% versus the first quarter 2022.
We are taking actions to improve our service businesses bottom line.
We are reaffirming our 2023 framework for revenues and profitability.
With those highlights let me provide some additional context to our performance.
The value proposition for energy server and Electrolyze is robust we are hearing from our customers that they need resilient available power that reduces their carbon intensity today, while providing optionality to move to onsite net zero solutions like hydrogen in the future.
Our time to power value proposition is particularly meaningful for data center customers, where their local utility is unable to support their power needs.
We are seeing this need globally, especially in the edge markets that need high quality resilient power to support their growth.
As for our electro liver, we are engaged with large scale project developers hydrogen and green ammonia as well as oil and gas companies, who clearly value our efficiency advantages and our manufacturing readiness.
The commercial market remains robust with hydrogen incentives in the United States.
Canada, South Korea, Japan, and Europe accelerating project development.
Many of these projects are confirming their offtake agreement and completing their front end engineering and design.
As these projects reach their final investment decision, we expect to make announcements on our technology deployment.
We are investing in research and development to support our technology roadmap for electric <unk> hydrogen fuel cells and carbon capture while we drive down our costs.
These investments include demonstrations to showcase our products maturity.
<unk> and resiliency.
The four megawatt solid oxide electrolyze, our demonstration we announced last week is one example of how we're validating the commercial readiness of our technology.
In March we received $311 million from SK equal play it for roughly $13 5 million redeemable convertible preferred shares at a price of $23 <unk> per share.
The price share count and proceeds is consistent with the option SK eco plant exercise in August .
At SK equal plan to request, we changed the shares delivered from class a common to preferred shares to facilitate closure.
We expect the shares to convert to class a common by September 30th 2023.
We ended the first quarter with $483 million in total cash.
We are investing in our business to deliver on our commitment for profitable growth.
Cash used in operating activities for the first quarter with $315 million, partially driven by near term working capital investments in inventory.
Our time to power value proposition is impacting our working capital levels as we build ship permit and install and compress cycle times to meet our customers' power needs.
We expect to recapture this cash over the coming quarters to generate positive cash flow from operations for the year.
Inventory balances net of changes in payables increased roughly $155 million in the first quarter <unk>.
Consistent with prior years and driven by individual project plans are acceptances are greater in the second half than the first half of the year.
This year to minimize the impacts of a production ramp we budgeted a level is to build plan.
This plan requires a temporary increase in inventories in the first half for the second half acceptances.
We are already seeing the benefits of an optimized build plan through lower employee turnover less expedited shipping costs and improved yields.
These benefits coupled with increased automation lower material cost and increased power output are driving down our product costs, 10% versus the first quarter of last year.
We are very pleased with our return to double digit cost reductions and are confident we will achieve our 2023, 12% cost down target.
We are taking actions in service that should position this business for long term profitability.
Some of our actions such as the timing of replacement module shipments will accelerate service costs, but they are incorporated in our 2023 company guidance.
Last year as we were capacity constrained, we prioritized our power module shipment for revenue over service replacement.
Well it was the right economic trade it required some fueled units to operate longer which lowered their electricity output in some locations.
If delivered electricity is below our commitment we are required to make a performance payments to the financial investor.
With our increased capacity, we are aggressively shipping replacement power modules to increase output.
We recognized the full cost of the replacement module at shipment as.
As these replacement modules come online.
Power output will increase thus reducing performance payments.
Over the next few quarters, we will be incurring both the cost of the replacement power modules and the performance payments.
The performance payments should moderate as the power output increases.
In addition service business margins should improve as we continue to reduce our cost and grow revenues with the expanding installed base.
Over the long term, we are confident we will deliver a profitable service business.
To meet localization commitments in South Korea, we've begun to move the final assembly of units to be delivered to SK eco plant to our South Korea JV.
This change will move title transfer and revenue recognition point from the U S Port to post completion of Assembly in South Korea.
As we implement this change we will have minimum Korean acceptances and revenue in the first half of the year.
This does not change our outlook for total year revenue, but instead shifts most of our Korea revenue to the second half of the year.
We are reaffirming our 2023 annual guidance for revenue margins and cash flows.
With our backlog and pipeline, we remain confident that we will deliver at least one $4 billion of annual revenue at our targeted 25% non-GAAP gross margins.
At this annual revenue and gross margin profile for the year.
We should achieve positive non-GAAP operating margins and cash flow from operations.
For the second quarter of 2023 based unlikely acceptances I would expect our revenue growth and margins to be similar to the first quarter as we continue to meet our customers' needs and invest in profitable growth.
In summary, we had a strong operational quarter and are building momentum with increasing demand for abundant clean and resilient energy.
As we move forward, we believe the company can build upon our mature solid oxide platform.
Strong record of accomplishment.
And our robust growth roadmap.
There are multiple growth opportunities to leverage our platform.
To enable the energy transition.
We are extremely excited about our future.
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 the line for questions.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad.
Or any reason you'd like to remove your question Press star followed by Kim.
Again to ask a question press star one.
Reminder, if youre using a speakerphone please pick up your handset before asking your question.
We will pause here briefly ask questions are registered.
The first question comes from Andrew <unk> with Morgan Stanley . Please go ahead.
Great. Thanks, so much for taking my question and congrats on the strong results here.
Just had a question around ASP trends so great to see you executing on the cost down targets, but on the ASP side, I know things can move around from quarter to quarter because of geographic mix shifts, but just given some of the times power demand trends that you mentioned in the prepared remarks is there opportunity for you to take price here in increased Asps and maybe see some faster.
Than expected margin expansion.
Yes, Andrew it's Greg So we're really pleased with our ASP performance year over year, I think we were up better than 6% driven just for those needs fulltime to power as well as a little bit of the ITC benefit coming forward. We see as we go forward. Our model would have existed before will we be talking about taking costs down.
Faster than we take price down I would say as we look forward given the roadmap we have on cost coming down we will continue to execute that but given the demand for our product. We don't expect to be taking price down in line with that if not we'll hold it to get it slightly better we were down sequentially quarter over quarter fourth quarter to first quarter, but remember that whole last.
Year, we knew the fourth quarter was going to be very strong given on the mix of deals I would suspect that our first quarter performance is more in line with Youre going to see for the rest of the year, but to your point going forward as price holds about this point and maybe even creeps up a little bit and our costs come down. That's one of the reasons. We're still confident we're going to get to our margin targets not only for this year.
But for 2025, when we get to the 30% gross margins and Andrew. This is one other element that I would like to address where you on DSD.
There are geographies.
We simply could not transact and make things a lot of it because the cost of the litigated was very low.
Today, then customers faced with the option of not having power, it's no longer for them to cost of power.
Our price to the business of not having the Bod and the expansion of capacity.
It opens up the marketplace that much more significantly for us and we don't have to discount on signing to figure it out.
The magic price so at a slight premium to that.
For them its a choice between non timing.
And B V being the only solution to giving them that baseload reliable clean power.
The next question.
Comes from Manav Gupta with UBS.
Please go ahead.
Guys I just wanted to quickly focus on some of the very interesting stuff you put out in our sustainability report and what really caught my eye was that you are looking to grow sales two 4% to $5 billion by 2026, and then 15% to $20 billion by 2031. So if you could help us walk through some of those buckets.
Because the key areas that that growth will happen and what gives you the confidence.
To get there.
If you do.
Having sub one times sales in 2020 think so there's a big dislocation and yes. Thank you.
Thanks.
Just for the record that wasn't new new guidance, we published that.
Earlier in 2021, we reaffirmed it.
At our Investor day in 2022, and I imagine you're going to see a chart very similar to that in a couple of weeks when we get to New York listen Here's the way, we think about it right.
To power generation business last year will be in the $1 billion for $1 five range.
That growth has historically been in the 25% to 30% range and we've been able to execute on that and we're very comfortable with that as you play that out as you get to 2026 as you said, that's a two and a half to $3 billion power generation business, just continuing what we do and if you play that out to the end of the decade $2000.
31, you've got something in the $8 billion to $10 billion range and I would say based on the way we've been executing since we published that guidance we're on track for that.
But you've also got other applications that we can put.
That we can put on our platform. So in addition to our power generation business that can work on natural gas that can work on renewable natural gas can work on hydrogen we've got a very specific effort here around what we call de carbonization effort and we've targeted by 2026, so that should be a 1% to $2 billion business now the majority of that when we did the analysis was really going to be focused around that.
Electrolyze our business, we've talked about as we go through the investment cycle here with those different projects I would expect to see orders in the 'twenty three 'twenty four lap last half of 'twenty four 'twenty five you begin to see the revenue, but it scales very quickly. So we think a 1% to $2 billion de carbonization platform, primarily driven.
The electrolyze or as well within range, we think that grows to another $6 billion to $8 billion as you get closer to 2031 now in that de Carbonization. We also had a small amount I think that it was less than 20% of the overall MAU we contributed to our.
Two our carbon capture business now it's not a separate business. Its the same same units we ship today with a way to capture the anode exhaust, but I think thats one area that could either be a optionality.
For for folks as we move towards hydrogen and then within a financial modeling standpoint, it creates a bit of a natural hedge is hydrogen.
Begins to take move.
Move into place other types of Decarbonising technologies like carbon capture will replace and since we have an anode exhaust stream here at close to 95% when you knock out the water. We think those two businesses are logical and we think they'll grow to that $6 billion to $8 billion by 2031, and then at the end here, we talked always about our marine business.
We've got an application where we can run on chip we've done some some demonstrations with some customer thats. All scheduled for later later in the decade half back half of the decade, but that in itself could be the $1 billion to $2 billion business. So we're really confident that we've got a growth trajectory here that not only at that 25% to 30% that we've done traditionally.
Additionally, we continue to execute here, but we think we can pick up another five points of growth at least as you add these other applications on it. So we will talk more about this in New York will give you more proof points in commercial points around why we're so confident in this but this.
Manav this is not new.
This is not new analysis for us. This is how we're running the company and this is what we're executing against and this is why we are investigating investing so much in if there's anything you wanted to add to that no I think look <unk>.
But when we put these numbers out.
Our core business.
So there's still adding reliable power.
The time to power issue was not as acute as it is.
Got it.
So if anything our confidence in these numbers.
Much more bullish today.
Then even strong confidence.
We published those numbers and we're staying on track so we see nothing.
But tailings.
Business that we have today.
Great. Thanks.
Thank you. The next question comes from Julien Dumoulin Smith with Bank of America. Please go ahead.
Hey, guys its Alex variable on for Julien.
One if you guys could help me.
Clarify I guess some of the sort of cadence trends through the year and again, maybe certain public back on the pricing question.
Greg I guess the way I'd frame. It as you mentioned the sort of cadence of Korea being more of a second half story now as far as Rev. Rec, presumably there is also a repowering opportunity late in the year.
How would you sort of characterize the pricing drivers with those two.
Sort of moving pieces, it presumably going opposite of each other in the second half and how that informs your revenue cadence throughout the year. Thanks.
Yeah, Alex it's interesting in this as we talk about this a lot internally and externally to the company as we look at pricing opportunities.
Whether it be in geographies or applications.
We really don't.
Differentiate all that much between the markets right I'm not taking a different price in Korea, then I would take within the U S. On a base core ASP price on it so as I think about the rest of the year and I think about the pricing on that in any particular quarter there might be some slight variations given the exact way in which the ultimate.
Project plays out but pricing for me over the course of the year should remain relatively flat say within 100 150 $150 a kilowatt in any particular quarter as we go through it.
We do have some some transactions that will go through some of them will be a little bit higher some will be a little bit lower but we'll come back to that 30, 35 36 $3700 a kilowatt that we've had over the last.
Few quarters I'd say as you look at the year, though just like last year, where every quarter from the first quarter on our product cost came down.
Expectation is that we go through this year not only do we take 10% out at the beginning of this year on average for the year, we're going to take out 12%.
So that.
That's all going to come through as improved margins as we go through the year and that's why we're confident we'll be at that 25% up from the 'twenty. One 'twenty two that we are today.
Okay.
Thank you.
Next question comes from Sam Burwell with Jefferies. Please go ahead.
Hey, guys.
Just taking a quick look at the 10-Q here seeing that like Asia Pac revenues were 5% of total revenues this quarter versus 65% <unk> 22, I mean, I think we're all familiar with the drivers, but certainly implies really really impressive strength on sort of the ex South Korea areas, where you're selling so could you.
A comment on just how the customer mix might have changed this quarter versus <unk> 22.
How much of that is driven by the timing of power of factors that you've called out or anything else behind that.
Yeah. Thanks, Sam So last year right as we got into the year, we talked about each of the first few quarters of us being capacity constrained and really prioritize and get any of the units to Korea as we promised.
In the first quarter last year to your point, we were we were 65% international the vast majority of that was through our partners SK Eagle plant saw that in the second quarter and third quarter and then later in the year it tailed off and we are far more domestic given the changes and I talked about this in my prepared comments that we're making on moving final assembly from Delaware.
Two to our JV in South Korea that is going to delay our Rev. Rec on those units in the first half of the year. It doesn't change our total year outlook, we still have the same contract and commercial relationship with them. We're just going to begin shipping those units and they won't see revenue recognition, we won't see revenue recognition and.
Those units are completed the full assembly and ship from the JV I think to your point, though it really shows the strength of our domestic business that we're able not to have for the most part many many korea shipments at all in the first quarter, but able to still meet our growth trajectory and replace that with all good U S busy.
So that's going to move quarter to quarter, especially when you get into the second half of the year My expectations are youll see a similar type of revenue split on the international versus domestic side and over the long term Sam to your point Youre going to see a lot more international shipments Tim is making a ton of progress both in Europe and in Asia.
They're smaller deals now that won't move it from a revenue from our revenue reporting side in the near quarters, but over the long term. We think we're building a very powerful international platform, just not in South Korea, but in Europe and other countries in Asia.
Thank you. The next question is from Colin Rusch with Oppenheimer. Please go ahead.
Hi, This is Jason on for Colin Rusch I. Thank you for taking my question.
So with the four megawatt electrical is there can you speak to how long it was run at maximum power and your expectation for cadence of maintenance on the product. Thank you.
So what we announced in the press release.
Yes.
What's public at this point is.
Yes.
Commenced operations on those it is either the demonstration needed the demonstration to prove the technology and through the commercialization.
And that's all that's all it is right now and we will keep you posted during earnings.
Our earnings call on how that's operating and give you a lot more details during the earnings call comments.
Comments operation and the most important thing for you to takeaway.
Then.
<unk> said go.
Do the daily build that install.
We installed it.
Does it.
Producing hydrogen once two months.
The speed.
We can simply take our platform technology from a fuel cell.
Doctor license things, we have been talking about.
We showed the world you can do this and we can do that.
Number one number two.
Putting that fuller megawatt and purpose of doing that.
Yes.
Clearly demonstrate.
At a minimum 25% advantage that we have.
Our technology come back to the legacy.
<unk> technologies.
And allows our customers.
And brain dead simple.
<unk>.
So that's the purpose of the demonstration is not about demand.
Clearly on the INR operation.
<unk> thousand $500 and it continues to operate at hunting and stuff.
He effectively.
Great.
Any adverse impact in fact, the department of energy side of our National Lab has shown that they are able to ramp down the power.
Domestically within 10 minutes from 100% loan to 10.25% loan and even at 5% load.
Yet as good as redeploying some of those legacy technologies.
So we will have in units records operating separately, neither have demonstration that scan operating separately.
All of this to provide.
Potential customers with absolute confidence in choosing our technology and using it knowing that became delinquent comments.
Yeah, So Jason will talk more about this at our Investor Conference in New York in a couple of weeks and for those of you that are interested that happen to be out here in the Bay area. We do have a process, which you can click on on our website and we're trying to bring as many people as we can so if you've got an interest in your in the Bay area, Let us know and we'll try to get you in the queue and bringing over.
Moffitt and have you take a look at the technology realized so thanks, Jason.
Thank you. Our next question comes from thank you gain with Keybanc. Please go ahead.
Hi, Greg.
Thank you for taking my question.
I wanted to ask about the clean energy tax credit that comes into effect in 2025 and weather balloons fuel cells will qualify in their current state or if you're going to have to have a carbon capture feature attached to them. If you do have to have a carbon capture feature attached.
The storage and transport it to look like thank you.
Yes, thanks, and thanks for the question so on the carbon capture side. So it's just important to think about that from a business standpoint. Those projects settlements themselves are going to be will be tens of megawatts, if not hundreds of megawatts and we think thats a ideal application for us to use the capture of our anode exhaust and then either to sequester that or utilize that.
In some type of of commercial or industrial applications. So as we think about our everyday fuel cells that were providing.
<unk> resilient primary power in the field.
10, 20 megawatt opportunity, it's probably not going to pencil out for the customer to include all of the other sequestration equipment, our compressors and like that are going to be needed in order to use it for carbon capture demonstration. So we don't look at that as a net tradeoff on something we would do with <unk>.
To your question is we don't know yet.
Some circumstances, we're still waiting for treasury to come out with their final rules. We do have some of them that had been very encouraging around energy communities in Hawaii and around the apprenticeship.
And prevailing wage that are very helpful in telling us how the ITC benefits are going to play out for for our product.
Still waiting for some additional guidance that come out that we expect over the course of the year, but also like everybody else in the industry have some uncertainty as we go forward exactly how it all plays but we know that the purpose of the legislation was to make clean investments and accelerate our path towards the carbonization and we think we are.
We're a primary tool to help enable that transition. So we expect to be part of that conversation.
Thank you. The next question is from Pavel <unk> with Raymond James. Please go ahead.
Thanks for taking the question.
Said that many of the green hydrogen projects around the world are still on the drawing board, but hypothetically if demand were limit lists today, what would be your capabilities to meet that demand with physical.
Product in 'twenty, three and 'twenty four.
Yeah.
Thanks.
As we look at it right the constraint on the green hydrogen isn't the Electrolyze us definitely not our electrolyze right. The largest constraint that we see is the clean energy going and whether that's from existing hydro existing wind or solar or new facilities that need to be built in order to supply that electricity taking that.
Pressures renewables off the grid today to make hydrogen and then turn that back into power is not effective investment from a round trip efficiency standpoint. So we're still very encouraged on seeing folks build out that renewable sources of power that we're going to need in order to build.
In order to build out this this green hydrogen clean hydrogen.
Our economy within our capacity, it's very simple right. We ended the year with 660 megawatts of stack and column capacity out here take 200 megawatts off with after service and Youre left with about 400 megawatts, we could do a gigawatt to two gigawatts, depending upon how we allocate that out for electrolyzed beginning of <unk>.
<unk> as soon as folks as we had orders for them. We can we can move our capacity backwards and forwards between the fuel cell electric <unk> with really little turnover costs.
So I think the hypothetical question utilized assuming that.
The margins are equal or better.
<unk> said, we ship today, we can do two gigawatts authentic analyzers and ship them this year.
Yeah.
Okay.
The next question comes from Luke Calkins with Piper Sandler. Please go ahead.
Alright, thanks for taking the questions.
Can you speak to whether your backlog has grown relative to year end or just any sort of demand trends does it seem like demand is accelerating or is it kind of on the same pace as what you indicated.
Yeah, Hey, look we only give our backlog once a year and we did that on the last call is that I would point you to the comments that both <unk> and I made in our in our prepared remarks around seeing a lot of activity, especially in time to power and data centers listen it's our job over the course of this year to get that interest.
In pipeline built into our backlog. So we can show you than reported report that to you next year and turn that into revenue.
But nothing beyond what we've already talked about in our prepared comments.
Okay.
Thank you. The next question is from Jordan Levy with <unk>. Please go ahead.
Afternoon, all appreciate it taking my questions just a quick one for me I appreciate the commentary.
South Korea JV, just wondering in terms of other international expansion efforts, if there's any areas in particular, youre seeing really strong opportunity set the target and how youre thinking about that.
Yeah.
Oh sure so listen Tim is it very focused both in Europe and in Asia and in the Middle East.
When we look at the when you look at Europe , the time to power constraints that we talked about within the U S are there whether youre looking at Dublin, or Frankfurt or other data center markets for sure. There is a need for resilient power to come online very quickly. We find those themes are similar we were able to land our first units.
In Europe last summer at Ferrari and that created a ton of interest in the Italian market as well as other parts of Europe , and we've got a lot of interest from Tim's team just on our core natural gas fuel cell. We think over time that will naturally morph into a solid oxide electrolyze are especially as.
Additional power comes online and the ability to create sources of green.
Hydrogen on a distributed basis and Asia KR mentioned it we have shipped our first units.
To Taiwan.
<unk> into the industrial sector. There, we think given the process given the given the environment, there and the need for power and the need for energy security. We think that's going to be a very interesting market for us and you've seen similar types of data center issues in Singapore and other places that we think we can play in going forward and then in the middle.
<unk>.
Early days as we think about it but definitely in electrolyze or space given the amount of solar that exists there and the need for other power. So we think those markets are interesting.
So across those different markets, Tim is very active in making sure. He's got a commercial organization that has the technical chops to go sell in that space.
Okay.
Thank you.
Next question comes from Avi Sinha with Northland Capital. Please go ahead.
Yeah. Thanks for taking my question just wanted to build on that internationally you talked about.
How do your geography expansion when it happened I'm just wondering how do you as you expand.
Holly how do you expect margins to fare I mean do.
Do you expect margins to be a drag until you get critical mass or do you expect margins to be in sync with domestic and build on that as you can.
Yeah. Thanks, Avi, it's a good question I'll break it down in two points on the product side.
K Rmi price deals, we look at for the best growth and margin opportunity given where we are on our growth. We generally don't ever entertain the let's go enter this market at reduced margins and assume we can make them larger over time, when we look at the market. We want to make sure. We can at least hurdle and are given margins that we can in other markets.
Sometimes that means telling the sales team not now, let's wait for either our product cost to come down or for competitive <unk>.
Situation in the market to get more advantageous to us. The other thing we look a lot of time that is our service we want to make sure that we're planting a flag that there is a significant amount of megawatts there that it makes sense for us to put not only the people, but the resources there to service our machines going forward. So we not only want to make sure that this particular deal.
Deal has the level of return that we want but theres enough of a pipeline. There that we can continue to build out a franchise thats overall profitable for us and youre not giving it back later by by having a subscale service operation and servicing a bunch of units spread all over the place that you may have made good good margin on originally but give it back over time.
Our next question comes from Noel Parks with Tuohy Brothers. Please go ahead.
Hi, good afternoon.
I just wanted I had a question about manufacturing capacity.
Wondered if have you reached payback on the Fremont investment I think the number you talked about previously was $460 million.
Looking ahead sort of what time horizon manufacturing capacity expansion.
Are you working on right. Now are you are you working on drug contracting.
Two years out five years out.
Yeah.
So the nice thing is is once we've got our building completed like we Havent Fremont, we can add a line. That's about 330, some odd megawatts of stack and calling capacity in six to eight months. So when we decide that we need to add capacity given that it's a copy exact.
Process that we use we can move very quickly and we've got the blueprints in order to go do that and we bought the building to allow us to go do it I tell you what we're doing right now is we're absorbing all the capacity we built last year as we went through and double our capacity from where we started the year to the end of the year. The team has spent a tremendous amount of time, making sure that a the tooling was there and it was op.
<unk> that the parts were there to continue to build that that our associates are labor was well trained.
<unk> has had the opportunity to contribute on and we spent a lot of last year and you saw it in our cost line.
Doing a lot to make sure that we can make that capacity not only.
Theoretical but in existence for us to make the fourth quarter and the year as we come into this year. The capacity, we exited with is enough to have us move through the next several quarters. So jose entities and the team is spending a lot of time, making sure that they are optimizing the capacity we have.
As we move forward through the remainder of the year, we're looking out not only for 2023, where we're looking into 'twenty four and 'twenty five and we're looking at the growth trajectory that we've shared with you all and trying to.
Backdate ourselves on when we need to make decisions around adding capacity. So we know that at some point here as we get in through the remainder of the year, we will add that additional line, we're about $150 million of invested so far in what.
In that facility. So we know we've got about another 50, <unk> 75, but the payback period on that is very quick I mean, if we're making a $1000 a kilowatt on average which is always kind of a hurdle you get to that 200 megawatts situation and you've kind of made back in profit what you've added to that.
So we've got a little bit more time in order to weak.
We've completely paid back on a cash basis for our machine, but they are incredibly attractive and we'll add more as we go forward and we will continue to drive down our cost and run the factory in that way.
I think I.
Take care of that was the last question that we had so I'll pass it over to you okay terrific.
Thank you all for joining the key takeaways as you probably see.
As we had talked to you about.
<unk>, becoming a priority for us this year.
What you should notice from our results is tremendous progress in cost.
There've been questions about drug targets VRT Xena affirming.
Our growth targets for the year on a.
Long term investments.
In terms of.
When you look at our revenue on our performance.
<unk> executing on the key things that we need to stay focused on executing.
The platform.
Flexibility is something we have talked about.
And to give you a great example of a combined heat and power.
<unk> booked many megawatts of lagers.
We will be shipping them.
<unk> same thing about going to a new country and the flexibility.
One we booked in Q4.
Doing what we need to do so you can see the platform flexibility from those examples.
Both international markets for the reasons, we've talked about in our prepared student.
As well as domestic markets on time deposits, we talked to you Bob.
We feel extremely bullish about our core business.
Now.
Here is why blue.
Bloom sits in an enviable position when everybody else in the market to think of that.
Number one in the core business.
Off providing reliable power to be able to expand.
We had a great solution.
As people think about transformation and think about renewable fuels and hydrogen.
We have shown that.
One of the best technologies.
While implementation of the rules and uncertainty.
Time it takes for these big projects to come online. It's not a question off is hydrogen is going to be important. It's a question of timing of when it's going to take off.
Unlike other companies.
Did you put all their eggs in that basket and are sitting on pins and needles wondering about the time for takeoff.
D.
Our happy providing the solutions, we need to provide that complete factory absorption.
Is that an existing product.
And they need to switch and do it as fast as we need to do as the market wants.
Market wants us to be able to satisfy the hydrogen market. So therefore, we sit in this enviable position.
Anybody else on the field.
One takeaway that should be our takeaway and these talk a lot more about it and we hope that you will.
Later this month.
During our Investor day, and we hope you can all come in at that thank you very much for participating thank you.
That concludes the Bloom energy Q1, 2023 earnings call. Thank you for your participation you may now disconnect your lines.