Q3 2023 Bloom Energy Corp Earnings Call

Speaker 1: Good evening, ladies and gentlemen. Thank you for attending Bloom Energy's Q3 2023 earnings conference call. My name is Adam, 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. Once you ask a question, please mute your line. If you have a follow-up question, please queue up again. I will now pass the conference over to your host, Ed Vallejo, Vice President of Investor Relations. Please proceed.

Good evening, ladies and gentlemen, thank you for attending Bloom Energy's Q3, 2023 earnings Conference call. My name is Adam 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. Once you ask a question. Please mute your line if you have a follow up.

Question. Please queue up again I will now pass the conference over to your host Ed Vallejo, Vice President of Investor Relations. Please proceed.

Okay.

Speaker 2: Thank you and good afternoon everybody. Thank you for joining us for Bloom Energy's third quarter 2023 Earnings Conference.

Thank you and good afternoon, everybody. Thank you for joining us for Bloom energy third quarter 2023 earnings Conference call.

Speaker 2: To supplement this conference call, we furnished our third quarter 2023 earnings press release with the SEC on Form 8-K and have posted it, along with supplemental financial information that we will reference throughout this call to our Investor Relations website.

Supplement this conference call, we furnished our third quarter 2023 earnings press release with the SEC on form 8-K and have posted it along with supplemental financial information that we will reference throughout this call to our Investor Relations website.

Speaker 2: During this conference call, both in our prepared remarks and in answers to your questions, we may make forward-looking statements that represent our expectations regarding future events and our future financial performance.

During this conference call both in our prepared remarks and in answers to your questions. We may make forward looking statements that represent our expectations regarding future events and our future financial performance.

Speaker 2: These include statements about the company's business, product, new market, strategy, financial position, liquidity, and full year outlook for 2023.

These include statements about the company's business product and your market strategy financial position liquidity and full year outlook for 2023.

Speaker 2: These 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 you.

These 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 Form 10-K.

Speaker 2: 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.

In 10-Q, we.

We assume no obligation to revise any forward looking statements made on today's call.

Speaker 2: During this call and in our third quarter 2023 earnings press release, we refer to GAAP and non-GAAP financial measures.

During this call and in our third quarter 2023 earnings press release, we refer to GAAP and non-GAAP financial measures.

Speaker 2: 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.

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.

Speaker 2: Our reconciliation between the GAAP and non-GAAP financial measures is included in our third quarter 2023 earnings press release available on our Investor Relations website.

Reconciliation between the GAAP and non-GAAP financial measures is included in our third quarter 2023 earnings press release available on our Investor Relations website.

Speaker 2: Joining me on the call today are K. R. Shruder, founder, chairman and chief executive officer, and Greg Cameron, our president and chief financial officer.

Joining me on the call today are <unk>, founder, Chairman and Chief Executive Officer, and Greg Cameron, Our President and Chief Financial Officer KR.

Speaker 2: KR will begin with an overview of our business, then Greg will review the operating and financial highlights of the quarter, as well as the outlook for the year. After our prepared remarks, we will have time to take your questions. I will now turn the call over to KR. Hello everyone.

<unk> will begin with an overview of our business then Greg will review, the operating and financial highlights of the quarter as well as the outlook for the year.

After our prepared remarks, we will have time to take your questions I will now turn the call over to PR.

Hello, everyone and thanks for joining us today.

Speaker 3: We are continuing to execute on growing our business in the US and around the world.

We are continuing to execute on growing our business in the U S and around the world.

Speaker 3: we remain heads down and focused on performing and innovating.

We remain heads down and focused on performing and innovating.

At a high level.

Speaker 3: we continue to increase revenue and expand our gross and operating margin.

We continue to increase revenue.

And expand our gross and operating margins.

Speaker 3: We do this by selling value to our customers, maintaining price discipline, and reducing costs. In fact, we have lowered costs six quarters in a row, just as we said we would do.

We do this by selling value to our customers maintaining price discipline and reducing costs in fact.

We have lowered costs.

Six quarters in a row.

Just to see said we would do.

We are achieving new levels of success.

Speaker 3: The strong numbers we report today is a proof point that our business model is working and can be profitable.

The strong numbers. We report today is a proof point that our business model is working.

And can be profitable.

Speaker 3: We are well capitalized to continue innovating and handle the cyclical and lumpy nature of our business.

We are well capitalized to continue innovating and handle the cyclical and lumpy nature of our business.

Speaker 3: The rise in power demand continues to be both steep and sustained. Record high temperatures.

The rising power demand continuous to be bought steep and sustained.

Record high temperatures.

Adoption of Evs electric.

Speaker 3: electrification, data center growth, AI, and reshoring of industries.

Electrification datacenter growth.

Hi.

And reassuring of industries.

Speaker 3: have all been strong drivers of electricity demand.

<unk> all been strong drivers of electricity demand.

Speaker 3: the antiquated and sluggish electric grid is unable to keep up with this rapid demand spike.

A case in point.

66, gigawatts of Greenfield projects.

Late.

In the U S.

And only 14% of capacity requesting interconnection from years 2000 to 2017 reached commercial operations by the end of 2022. According to a department of Energy Labs report.

Speaker 3: and Bloom Energy's products and architecture are uniquely suited to these times. For both behind...

Bloom energy products and architecture are uniquely suited to these times for both behind and in front of the meter.

Speaker 3: where necessary, we can operate in an islanded mode without grid interconnection and offer our customers quick, reliable and clean power.

They are necessary.

We can operate in an island mode without grid interconnection and offer our customers quake reliable and clean power.

Speaker 3: As an example, we installed 7.8 megawatts of Bloom servers at Coherence, Pennsylvania factory, allowing for significant electrical load to be supplied to that site independently.

As an example.

We installed seven eight megawatts of Bloom servers at coherence, Pennsylvania factory allowed.

Allowing for significant electrical load to be supplied to that site.

Independently from the grid.

Speaker 3: The Bloom servers provide clean and reliable power that fortifies the factory's critical infrastructure and helps coherent meet both customer demand and revenue growth. While the issue of rising interest rates and global costs

The bloom servers provide clean and reliable power that fortifies, the factories critical infrastructure and helps coherent meet customer demand and revenue growth.

While the issue of rising interest rates and global conflicts.

Create some headwinds.

There is no question that.

Speaker 3: that demand for clean power and the need for availability and reliability will create definite and sustained tailwinds for our business. Looking at our sales inquiry pipeline, the impact...

And that demand for clean power.

The need for availability and reliability.

Will create definite and sustained tailwind for our business.

Looking at our sales in quality pipeline.

The impact of AI to our business cannot be overstated.

Speaker 3: AI clearly has the potential of expanding the adoption of our products in the data center mark.

<unk> clearly has the potential of expanding the adoption of our products in the data center market.

Speaker 3: AI-powered search on a GPU will take 5 to 20 times more power per search compared to a regular search on a CPU.

AI powered search on a GPU will take five to 20 times more power first search.

Page two is regular sorry Chinese CPU.

Speaker 3: and the use of AI is growing rapidly across all segments of our society.

And the use of AI.

Is growing rapidly across all segments of our society.

Speaker 3: This will exponentially increase energy demand in data centers over the next day.

This will exponentially increase energy demand in data centers over the next decade.

Speaker 3: If we look at the projections of future growth from the chip companies and cloud service providers.

If we look at the projections of future growth from the chip companies and.

Cloud service providers.

Speaker 3: The imbalance in grid availability and the accelerating demand for compute power is expanding the case for bloom in the sector from resilience to one of timely primary power.

The imbalance in good availability and the accelerating demand for compute power is expanding the case for bloom in this sector from resilience.

The one off timely primary power availability.

Speaker 3: For example, we powered our first customer in Taiwan and signed our first customer in Singapore recently.

For example be powered our first customer in Taiwan and signed our first customer in Singapore.

Simply.

Speaker 3: In Taiwan, we installed the first phase of a 10 megawatt solid oxide fuel cell contract with Unimicron Technology Corporation.

In Taiwan.

Install the first phase of a 10 megawatt solid oxide fuel cell contract with Uni Micron Technology Corporation.

Speaker 3: a chip substrate and printed circuit board make.

Chip substrate and printed circuit board maker.

Speaker 3: Our energy servers went from contract to power on in less than six months, which shows how quickly we can know to solve power availability problems.

Our energy servers went from contract to power on in less than six months, which shows how quickly we can mow to solve power availability problems.

Speaker 3: And that sexist helped us land our first deal in Singapore.

That success helped us land, our first deal in Singapore.

Speaker 3: Working with our partner SK EcoPlanet, we will deploy our Bloom Energy servers with GDS, a leading developer of high performance data fins.

Working with our partner SK Eco plant.

We will deploy our bloom energy servers with GBS, a leading developer of high performance data centers.

Speaker 3: And this is exciting as it is illustrative of the strength of our servers as a solution for data centers.

This is exciting as it is illustrative of the strength of our servers as a solution for data centers.

In addition.

Speaker 3: Singapore is a market where 90% of power is natural gas based today. While we will start with natural gas,

Singapore is a market, where 90 plus percent of power.

It's natural gas base today.

Wiley will start with natural gas our systems, our future proofed.

Speaker 3: Our customers can switch to carbon capture.

Our customers can switch to carbon capture.

Two hydrogen.

Speaker 3: Or to Greenamonia, once the regional infrastructure, supply chain, and regulatory frameworks are established for those cleaner options.

Hard to green ammonia once the regional infrastructure.

Apply chain and regulatory frameworks.

Established for those cleaner options.

Speaker 3: We think this is a model for future projects and it demonstrates the competitive advantage of our fuel flexible platform.

We think this is a model for future projects and it demonstrates the competitive advantage of our.

Our fuel flexible platform.

Speaker 3: Let me spend just a moment on hydrogen.

Let me spend just a moment on hydrogen.

Speaker 3: We have long been focused on hydrogen, and it's many benefits, particularly given the flexibility of our platform technology, to operate as fuel cells to provide power or as electrolycers to produce hydrogen.

We have long been focused on hydrogen.

And its many benefits, particularly given the flexibility of our platform technology.

To operate as fuel cells to provide power RF electrolyze to produce hydrogen.

Speaker 3: As many of you know, the Department of Energy announced just a few weeks ago a 7 billion nationwide investment designed to launch seven regional clean hydrogen hubs across the country.

As many of you know.

The department of Energy announced just a few weeks ago.

7 billion nationwide investment designed to launch seven regional clean hydrogen hubs across the country.

Speaker 3: Bloom Energy Electrolyzers that included in four of the seven winning hydrogen hubs. This

Bloom energy Electra Licensors that included in four of the seven winning hydrogen hubs.

This should come as no surprise.

Speaker 3: Bloom Energy is unique in the electrolyzer industry in being able to offer both the highest electrical efficiency products.

Bloom energy is unique in the electrolyze it industry in being able to offer both the highest electrical efficiency products.

Speaker 3: and deliver them at scale today from our fully operational giga factories in Fremont, California and Newark, Delaware.

And deliver them at scale today from our fully operational Giga factories in Fremont, California, and Newark, Delaware.

Speaker 3: It is early days for what will be a huge mark.

It is early days for what would be a huge market.

Speaker 3: but we are clearly pleased about our events and what it means for Bloom and the world in the future.

But we are clearly pleased about our wins and what it means for bloom and the world in the future.

So to close.

Speaker 3: growing demand for power solutions driven by data centers and AI.

Growing demand for power solutions, driven by data centers and AI.

Speaker 3: a relentless focus on cost discipline and efficiency.

Its relentless focus on cost discipline and efficiency.

Speaker 3: a deep commitment to innovation and fuel flexibility. All make us excited about Blue Energy's future. I'll be back with you.

A deep commitment to innovation and fuel flexibility.

All make us excited about bloom energy future.

I'll be back with you to answer questions for now let me hand, it over to Greg Cameron.

Speaker 3: for now. Let me hand it over to Greg Cameron. Greg.

<unk>.

Speaker 2: Thanks, KR. Let me begin with a few highlights about our strong execution in the third quarter. We had a record third quarter revenue of $400 million, up 37% versus last year.

Thanks, Kara let me begin with a few highlights about our strong execution in the third quarter, we had a record third quarter revenue of $400 million up 37% versus last year, our margins improved third quarter non-GAAP gross margins were roughly 32%, bringing our year to date margins to 25% up six.

Speaker 2: Third quarter non-gap gross margins were roughly 32%, bringing our year-to-date margins to 25%, up 600.

<unk> hundred 80 basis points versus prior year.

Speaker 2: continued to execute on cost reductions. Product costs are down 18% versus last year, and our operating expenses are down approximately 20% from the first...

We continue to execute on cost reductions product costs are down 18% versus last year and our operating expenses are down approximately 20% from the first quarter.

Speaker 2: service margins improve versus the prior quarter, and we expect this quarterly trend in service to continue.

Our service margins improved versus the prior quarter and we expect this quarterly trend in service to continue.

Speaker 2: We ended the quarter with a total cash balance of roughly 638.

We ended the quarter with a total cash balance of roughly $638 million.

Speaker 2: reaffirming our 2023 framework for revenues, margins, and profits.

We are reaffirming our 2023 framework for revenues margins and profitability.

Speaker 2: With those as highlights, let me provide some additional context to our performance. As in the need...

With those highlights let me provide some additional context to our performance.

As the need for additional electricity grows our customers recognize the value of affordable reliable and flexible power solutions.

Speaker 2: Customers recognize the value of affordable, reliable, and flexible powers.

Speaker 2: Our ability to bring fuel-flexible power on-site quickly with our energy server, coupled with combined heat and power in carbon capture solutions, provides a competitive advantage versus alternatives.

Our ability to bring fuel flexible power onsite quickly with our energy server, coupled with combined heat and power and carbon capture solutions provides a competitive advantage versus alternatives.

We remain focused on both large scale projects such as data centers, where the energy project dynamics are complex requiring longer sales cycles as well as shorter term projects, where the customer need solutions until the powers available from a local utility.

Speaker 2: where the energy project dynamics are complex, requiring longer sales cycles, as well as shorter-term projects where the customer needs solutions.

Speaker 2: As you heard from KR, our electrolyzer has been selected for several hydrogen hubs.

As you heard from K R or Electrolyzed, where it has been selected for several hydrogen hubs.

Speaker 2: These project sponsors, like many large-scale project developers, clearly value our efficiency advantage and manufacturing readiness.

These project sponsors like many large scale project developers clearly value our efficiency advantage and manufacturing readiness as these projects move through their investment decisions, we expect to make announcements on our technology deployment.

Speaker 2: these projects move through their investment decisions, we expect to make announcements on our technology.

Speaker 2: Historically, most of our bookings close in the fourth quarter.

Historically, most of our bookings closed in the fourth quarter. This.

Speaker 2: This year is no different as we are very focused on converting our commercial pipeline to orders over the next couple months. Each opportunity has its own unique challenges, such as permitting, inner...

This year is no different as we are very focused on converting our commercial pipeline to orders over the next couple of months.

Each opportunity has its own unique challenges such as permitting interconnection timing complexity IRA incentives et cetera.

Speaker 2: Although these challenges have added to our sales cycle times, our sales team is committed to delivering a robust backlog to grow our future revenue.

Although these challenges have added to our sales cycle times, our sales team is committed to delivering a robust backlog to grow our future revenues, we look forward to sharing our results and our year end earnings call in February.

Speaker 2: We look forward to sharing our results and our urine earnings call in February .

Speaker 2: This past quarter, SK Ecoplant converted $13.5 million redeemable, convertible preferred shares to common equity. We are grateful for their trust in our community.

This past quarter SK Eagle plant converted $13 5 million redeemable convertible preferred shares to common equity.

We are grateful for their trust and are excited to continue our partnership.

Speaker 2: As part of this conversion, we eliminated $311 million in liabilities and recorded a non-cash interest charge of $53 million.

As part of this conversion, we eliminated $311 million in liabilities and recorded a noncash interest charge of $53 million.

Speaker 2: When SK Ecoplant made their investment in the first quarter, they had the option to convert the RCPS to either debt or equity by the end of the third quarter.

When SK eco plant made their investment in the first quarter. They had the option to convert the cps to either debt or equity by the end of the third quarter.

Speaker 2: As they have elected equity, we are expensing the loan commitment asset established in the first quarter.

If they are elected equity we are expensing the loan commitment asset established in the first quarter to interest expense.

Speaker 2: This expense is being removed as a pro forma adjustment to our non-GAAP report.

This expense is being removed as a pro forma adjustment to our non-GAAP reporting.

Speaker 2: The third quarter non-gap gross margin to 32% improved 12.4 points versus the third quarter.

Our third quarter non-GAAP gross margins of 32% improved 12, four points versus the third quarter 2022.

Speaker 2: The margin increase was driven by maintaining pricing on acceptances while we're doing

The margin increase was driven by maintaining pricing unacceptable, while reducing unit costs.

Speaker 2: Both price and cost were positively impacted by the repowering of PPA5.

Both price and costs were positively impacted by the Repowering of PPA five.

Speaker 2: The PPA5 repowering is similar to the 2022 PPA.

The PPA five Repowering is similar to the 2022 PPA repowering.

Speaker 2: we executed the sale of a previously consolidated PPA.

We executed the sale of a previously consolidated PPA entity and by doing so we paid off $119 million of nonrecourse debt enhanced current margins and simplified our financial reporting.

Speaker 2: And by doing so, we paid off 119 million of non-recourse debt.

Speaker 2: current margins and simplified our financial reporting.

Speaker 2: Part of this transaction we recorded 133 million of charges to our electricity segment operating expenses and other expenses.

As part of this transaction, we recorded a $133 million of charges to our electricity segment operating expenses and other expense.

Speaker 2: that were removed as a pro forma adjustment from our non-GAB reporting. This was our last three-

That were removed as a pro forma adjustment from our non-GAAP reporting.

This was our last remaining consolidated PPA entity.

Speaker 2: I want to spend a minute on the impact from rising interest rates on securing project financing. As rates have increased over the past two years,

I wanted to spend a minute on the impact from rising interest rates on securing project financings.

As rates have increased over the past two years.

Investor cost of capital expectations have also increased.

Speaker 2: Over this period, we have obtained project financing and attractive rates allowing us to maintain our products.

Over this period, we have obtained project financing at attractive rates, allowing us to maintain our product margins.

Speaker 2: Early in the cycle, we offset much of the pressure through an improving Bloom Energy credit profile.

Early in the cycle, we offset much of the pressure through an improving bloom energy credit profile.

Over the last 12 months as benchmark rates have continued to rise we've been able to offset additional pressure through ITC benefit for energy communities and domestic content.

Speaker 2: benchmark rates have continued to rise, we've been able to offset additional pressure through ITC benefits for energy communities and domestic.

Speaker 2: Going forward, we will endeavor to offset additional pressure through reducing product cost.

Going forward, we will endeavor to offset additional pressure through reducing product cost.

Speaker 2: Maintaining pricing discipline as the cost of alternatives continues to increase, competitively bidding new financings.

Maintaining pricing discipline as the cost of alternatives continues to increase.

Competitively bidding new financings and a possible extension of ITC benefits post 2024.

Speaker 2: product margin benefited from nearly 18% reduction in product costs you over year.

Our product margin benefited from nearly 18% reduction in product cost year over year.

Speaker 2: Lower material costs, coupled with automation and increased power output, are driving down product costs. Every quarter this year we...

Lower material costs, coupled with automation and increased power output are driving down product costs.

Every quarter. This year, we've achieved double digit cost reductions and we are confident we will achieve our 2023 target of 12% product cost down as we position ourselves for a strong 2024.

Speaker 2: And we are confident we will achieve our 2023 target of 12% product cost down as we position ourselves for a strong 2020.

Speaker 2: In the fourth quarter, we are consolidating our California stack manufacturing into our state of the art free month.

In the fourth quarter, we are consolidating our California stack manufacturing into our state of the art Fremont facility.

Speaker 2: consolidating our legacy Sunnyvale activities in the free month will reduce headcount and expenses as we maintain our capacity.

Consolidating our legacy Sunnyvale activities in Fremont will reduce head count and expenses as we maintain our capacity.

Speaker 2: As expected, our third-quarter resultant service improved versus the second quarter.

As expected our third quarter results and service improved versus the second quarter, and we expect them to continue to improve as revenues grow performance payments reduce and replacement power module cost reduce.

Speaker 2: expect them to continue to improve as revenues grow, performance payments reduce, and replacement

Speaker 2: We remain committed to our service business achieving a 20% non-GAP gross margin by 2025.

We remain committed to our service business, achieving a 20% non-GAAP gross margin by 2025.

Speaker 2: In the third and fourth quarter, we have executed a few targeted restructuring to reduce costs. We are committed to delivering profitable growth.

In the third and fourth quarter, we have executed a few targeted restructuring to reduce cost.

We are committed to delivering profitable growth as we continue to invest in our future.

Speaker 2: targeted areas that can be reduced without impacting our technical competencies or commercial

We targeted areas that can be reduced without impacting our technical competencies. Our commercial capabilities. These actions have resulted in reducing our operating head count about 10%.

Speaker 2: These actions have resulted in reducing our operating headcount by about 10 percent.

Speaker 2: The structuring charge of roughly 2 million was recorded in the third quarter with an additional 6 million to be recorded in the fourth quarter. Both will be performed at just...

A restructuring charge of roughly $2 million was recorded in the third quarter with an additional $6 million to be recorded in the fourth quarter, both will be pro forma adjustments to our non-GAAP reporting.

Speaker 2: We are reaffirming our 2023 annual guidance for revenue, margins, and profitability. Based on anticip-

We are reaffirming our 2023 annual guidance for revenue margins and profitability.

An anticipated fourth quarter acceptances, we expect to deliver one four to $1 5 billion of annual revenue at our targeted 25% non-GAAP gross margin.

Speaker 2: We expect to deliver $1.4 to $1.5 billion of annual revenue at our targeted 25% non-GAAP gross margin.

Speaker 2: this revenue in gross margin profile, we should achieve a positive non-gap operating margin.

At this revenue and gross margin profile, we should achieve a positive non-GAAP operating margin for the year.

Speaker 2: As we've previously discussed, Bloom is committed to becoming profitable this year and we are well positioned given our performance here to date. I know

As we've previously discussed Bloom is committed to becoming profitable this year and we are well positioned given our performance year to date.

I no longer expect to be CFO, a positive for the full year.

Speaker 2: We are holding additional inventories to support our previously announced time to power value proposition that elevated our working capital levels. We will...

We are holding additional inventory to support our previously announced time to power value proposition that elevated our working capital levels.

We will continue to be diligent with our investments in working capital ensuring that we are balancing growth profitability and liquidity.

Speaker 2: ensuring that we are balancing growth, profitability, and liquidity.

In summary, we had a strong operational quarter as we move forward, we were operating with discipline and focus and we have compelling product solutions for a net zero carbon future. We're excited about our future.

Speaker 2: And we move forward, we were operating with discipline and focus, and we have compelling product solutions for a net zero carbon future. We're excited about our future.

With that operator, please open the line for questions.

Speaker 1: At this time, I'd like to remind everyone to ask a question, press star than the number one on your telephone keypad. Your first question comes from a line of Andrew Perkoko with Morgan Stanley , your line is open. Great, thanks so much, good evening, everyone.

At this time I would like to remind everyone to ask a question Press Star then the number one on your telephone keypad.

Question comes from the line of Andrew <unk> with Morgan Stanley. Your line is open.

Great. Thanks, so much good evening everyone.

Speaker 1: I just want to start with South Korea. I think they recently switched to an auction process for fuel cell purchases over the last few months.

I just wanted to start with South Korea, I think they recently switched to an auction process for fuel cell purchases over the last few months can you maybe just discuss how this is impacting timing of deliveries to SK and and if they are delayed do you have the ability to backfill those orders with other projects outside of South Korea. Thank you.

Speaker 4: you may just discuss how this is impacting timing of delivery to SK and if they are delayed you have the ability to backfill those orders with other projects outside of South Korea. Thank you. Andrew, the graduates, thanks for the...

Hey, Andrew it's Greg Thanks for the question listen with SK huge partner for Us and we're very appreciative that they showed more confidence addressing.

Speaker 2: Listen, with SK, huge partner for us, and we're very appreciative that they showed more confidence in us and as they executed on the conversion equity this quarter, I've spent.

Executed on the conversion to equity this quarter I've spent a lot of time in Korea over the course of this year and really excited about about the market opportunity to your point the CHP standards, a clean hydrogen portfolio standard to come in this year and there's been two bidding processes. There was one in the summer and then Theres one currently going on.

Speaker 2: A lot of time in Korea over the course of this year and really excited about the market opportunity.

Speaker 2: To your point, the CHPS standard, it's a clean hydrogen portfolio standard that come in this year and there's been two bidding process.

Speaker 2: There was one in the summer and then there's one currently going on right now. It looks to be as though as we've lined up with our partner, we're really excited about the opportunities that we've seen. And we're going through that process now with bidding, with conclusion on the bidding. And we'll know more in the next few weeks there, but I would tell you really tight alignment between the two teams and understanding how to add value and continue to win in that market. So we're really encouraged about the near term in that space, and as well as the long term in Korea.

On <unk>.

Right now it looks to be as though is we've lined up with our partner. We're really excited about the opportunities that we've seen and we're going through that process now with bidding with conclusion on the bidding and we will know more in the next few weeks there, but I would tell you really tight alignment between the two teams and understanding how to add value and continue to win in that market. So.

We are encouraged about the near term in that space as well as the long term.

Maria.

Speaker 5: Your next question comes from a line of Julian Dumolin Smith at Bank of America. Your line is open.

Your next question comes from the line of Julien Dumoulin Smith at Bank of America. Your line is open.

Speaker 5: and you have to do it today is very much just first of you will have a little bit more on on the inventory and what's going on in terms of CFO

Hey, good afternoon guys.

Just first off can you elaborate a little bit more on the inventory I mean, what's going on in terms of the CFO.

Speaker 6: what end, you know, the build up and working capital there, I mean, what is that saying about 24 really is, I think, what is an interesting nugget or clue there. And then related, can you just elaborate a little bit on where you stand on some of these data center deals, like Amazon, what's included this year or next year, and what are you seeing just on the data center activity front, whether that's with Amazon or in Ireland or frankly some of these other opportunities, how much of the overall build.

To what end.

The buildup in working capital there I mean, what is that staying about 24 really is I think what what is an interesting nugget or clue. There and then related can you just elaborate a little bit one where do you stand on some of these data center deals like Amazon. What's included this year or next year and what are you seeing just on the data center activity front, whether that's with Amazon or or in <unk>.

Orlando or frankly, some of these other opportunities how much of the overall build could you be seeing in 'twenty four derived from those as you think about your backlog or guidance composition, yes.

Speaker 6: seeing in 24 derived from those as you think about your your backlog or guidance come.

Speaker 7: Yeah, thanks, Julian. I'll start, and Greg, and then I'll pass it over to K.R., specifically on the data.

Yeah, Thanks, Julien I'll start and Greg and then I'll pass it over to <unk>, specifically on the data centers.

Speaker 7: There's on the work in capital, you see the inventory increase so far this year, we're up, we'll call it $250 million as we've built inventory, so we've prepared to really reduce the cycle time for our customers on and need for power. So that's what's negatively impacting our CFOA.

The working capital.

You see the inventory increase so far this year, we are up call it $250 million as we built inventories to be prepared to really reduce the cycle time for our customers on a need for power. So that's what's negatively impacting our CFO.

Speaker 7: You know, I point you to EBITDA, just to EBITDA, I've paused it so far this year. So it wasn't a cash burn that's coming through operations. It's more of an investment that we purposely made in order to make sure that we can continue to respond quickly. And a lot of that is given our confidence in what we're seeing in the commercial pipeline, and knowing that our customers have a time to power issue. And yet, we still need to get through permitting and everything else, but once that's cleared, they very quickly want that power, and they do not want to wait for long lead items to come in. So we've purposely built up some of that inventory based on our confidence in our pipeline and that converting into orders that will need to convert to deliveries very quickly. And that...

I'd point, you to EBITDA adjusted EBITDA is positive so far this year. So it wasn't a cash burn that is coming through operations. It's more of an investment that we purposely made in order to make sure that we can continue to respond quickly and a lot of that is given our confidence in what we're seeing in the commercial pipeline and knowing that our customers have a time to power issue and yet we still.

I'll need to get through permitting and everything else, but once that's cleared they very quickly want that power and they do not want to wait for long lead items to come in so we've purposely built up some of that inventory based on our confidence in our pipeline and that converting into orders that will need to convert to deliveries very quickly and that that's the reason that those inventories.

Speaker 7: That's the reason that those inventories are up and then we were very prudent around our work in capital but as I looked through it for the rest of the year, KR and I set back and said to make the CFOA target, there was no reason for us to drive our inventory levels down below a level that's gonna put us in a spot where we're not gonna be able to meet need next year. So we purposely kept those up and thought it was prudent for the company as a way to help respond to the customers. I'll let KRSFAC Amb Shark 2015 Part 2 studs

They are up and then we were very prudent around our working capital, but as I look through it for the rest of the year KR and I sat back and said to make the CFO a target. There is no reason for us to drive our inventory levels down below a level that is going to put us in a spot where we're not going to be able to meet need next year. So we purposely kept those up and thought it was prudent for the company as a way to.

To help respond to the customers' I'll, let <unk> talk about data centers.

Speaker 3: Hey Julian, so look, data centers was...

Hey, Julien so look data centers.

Was hot.

I have to check GPT.

Speaker 3: I don't even know how to describe the color of where those data centers are going. Post-check.

I don't even know how to describe the color of where those data centers are going fast jet GBT right.

Speaker 3: Right. The AI searches on.

<unk>.

D.

<unk> searches.

On average.

B C.

Speaker 3: significantly greater in the power hungry need of those chips, the GPU chips compared to the CPU.

Significantly greater in the power hungry need of those chips, the GPU chips compared to the CPU chips. So.

Speaker 3: So, whether it's an existing data center that's converting from CPU to GPU.

So whether it's an existing data center, that's converting from CPU GPU.

Speaker 3: or a new data center that's needed because almost all of society is beginning to use AI right now. What part of this is I do? Do you know that that is not going to embrace?

On a new data center, that's needed because almost all of society is beginning to use AI right now what part of this is to really know that.

Is not going to embrace it.

Speaker 3: the shortage of power that existed prior to GPT is only getting significantly greater.

The Charlotte.

Followed that existed prior to GPT.

Is only getting significantly greater.

So whether it's Virginia.

Speaker 3: Are the San Jose-Pandaglara area?

Are the San Jose Santa Clara area.

Speaker 3: between those two centers, roughly 70, 80% of the data centers in the country exist in these two.

Between those two centers roughly 70, 80% of the data centers in the country exists in these two places.

Speaker 3: They both have severe shortage of power for what the needs are. That story, I was in Taiwan, I was in Singapore, where there's chip makers, and where there's the ecosystem in the semiconductor industry supplying these parts.

Both have severe shortage of bar for what the needs are.

That story I was in Taiwan I was in Singapore.

Chipmakers and what is the ecosystem into semiconductor industry supplying these parts.

Speaker 3: or whether it's a data center themselves in Singapore, you're seeing exactly the same story. That story plays over again in Ireland. So we think that this is a real opportunity that's gonna be sustained for a long period of time and bloom with this modular, reliable infrastructure.

Whether it's the data centers themselves in Singapore.

We're seeing exactly the same story that story plays over again in Ireland. So we think that this is a real opportunity that's going to be sustained for a long period of time and bloom with its modular reliable infrastructure.

Speaker 3: ability to switch to a cleaner fuel as they come along, the pay as you grow modular nature of what we do, our established presence in the data central industry already as a reliable provider of power.

The ability to switch to a cleaner fuel as they come along the pay as you grow modular nature of what we do.

As tablets presence in the data center industry already.

As a reliable provider of power.

Speaker 8: We put all that together. We think it's a phenomenal opportunity for us going forward. These are complex big deals. They take time to come together, but we, you know, it is our single largest inquiry.

You put all that together, we think it's a phenomenal opportunity for us going forward. These are complex big deals they take time to come together, but.

It is our single largest inquiries.

Thank you.

Speaker 5: Your next question comes from the line of Chris Dendrino's with RBC Capital Markets. Your line is open.

Your next question comes from the line of Chris <unk> with RBC capital markets. Your line is open.

Speaker 9: Yeah, thank you. I wanted to shift the conversation a little bit to the hydrogen topic here. You know, the project, New Journal, New Jeroquic.

Hi, yes. Thank you.

I wanted to shift the conversation a little bit to the hydrogen topic here.

The project, Jonathan when you Gerald quick.

Speaker 9: It looked like the EIS was submitted a couple months back and still waiting for a response there. Is there anything more to say on that program right now and when we could maybe hear an announcement on the award? I guess of the demands to bloom. I'll leave it there. Thanks.

It looked like the Eas was submitted a couple of months back and still waiting for a response there.

There anything more to say on <unk>.

That program right now and when we could maybe hear an announcement on the.

Award I guess.

The demands to balloon.

I'll leave it there thanks.

Speaker 8: So to the extent that our customers speaks about it or our partners speak about it, we let them do that. But until a deal is finalized, it's normally not our habit to talk about it.

So.

To the extent that our customers speaks about it our partner speak about it we'll let them do that but until a deal is finalized it's normally not our.

Habit to talk about it.

Speaker 8: So I'm not gonna give you any more color other than they are very engaged in that project, I can confirm that. And then in terms of the hydrogen larger story.

So.

I'm not going to give you any more color other than we are very engaged in that project I can confirm that.

And then in terms of the hydrogen larger story I think the big news really is that $7 billion hydrogen hubs and how we have been selected in Florida the hubs.

Speaker 8: I think the big news really is the $7 billion hydrogen hubs and how we have been selected in four of the hubs. And we have invested and we are continuing to invest in a big way in hydrogen because we believe we have the world's most efficient electrolyzer that can be deployed at scale. And we see this is huge.

We have invested and we are continuing to invest in a big way in hydrogen because we believe we have the was most efficient electrolyze there that can be deployed at scale.

And we see this as a huge opportunity.

Speaker 5: Your next question comes from a line of Ben Callow with Baird. The line's open.

Your next question comes from the line of Ben <unk> with Baird.

Your line is open.

Speaker 10: Hey, thanks guys, and good evening. Just on the movement over the free month, how do we think about any impacts into Q4? I think it's probably seamless, but just wanted to get your thoughts on that. And then just on repoweries, anyway you can quantify the impact on margin there. Thank you.

Hey, Thanks, guys.

So just on the move with over a framework how do we think about.

Any impacts into Q4.

Seamless.

Just your thoughts on that and then just on Repower is there any way you can quantify the impact on margin.

Thank you yes.

Speaker 7: Hey, Bennett's Greg. So on Fremont, it is going very smoothly. So we are moving what tooling needs to get moved out of Sunnybell and over to Fremont. And we do not expect it to have any impact on our capacity, this quarter or next quarter. We've pre-built where we've needed to. And it's moving quite seamlessly. You know those two facilities are a quick drive apart and bringing that tooling offline for sure.

Hey, Ben it's Greg so on Fremont.

It is going very smoothly. So we are moving with tooling needs to get moved out of Sunnyvale and over to Fremont and we do not expect it to have any impact on our capacity this quarter or next quarter.

Prebuilt, where we've needed to and it's moving quite seamlessly as you know those are those two facilities are quick drive apart and bringing that tooling offline for a short period of time isn't going to impact. It. So we're excited to get that altogether that lease was ending and Sunnyvale anyways.

Speaker 7: going to impact it. So we're excited to get that all together. That lease was ending in Sunnyvale. Anyways, and we'll just have everything together in a much more efficient place and pay one rent versus two and and have a consolidated inventory and indirect labor force on that. So we're

We'll just have everything together in a much more efficient place and pay one rent versus two in and have a consolidated inventory in indirect labor force in that so we're really excited about it on the repowering. The PPA five it very similar to the Repowering that we did last year with three and four so from a structure standpoint, and you remember we spent a lot of.

Speaker 7: On the repowering, the PPA-5, it's very similar to the repowering that we did last year with 3A and 4. So, from a structure standpoint, you remember we spent a lot of time talking about how we

I am talking about how we bought back in those <unk> and then with Repurposing sold those <unk> to a financial Investor and then that financial Investor bought units from us that we delivered against within the quarter. The particular numbers of it Ben I'm going to point you to the Q I think the team did an amazing job of breaking out the individual.

Speaker 7: Brought back in those VIEs and then went through a purpose and sold those VIEs to a financial investor and then that financial investor bought units from us that we delivered against within the quarter.

Speaker 7: The particular numbers of it, Ben, I'm gonna point you to the queue. I think the team did an amazing job of breaking out the individual components of it.

Speaker 7: So look on pages 28 through 30. They describe each of the steps and what the financial numbers are. And from there, you should be able to pull apart what was the revenue associated with each of those transactions.

So look on pages 28 through 30, they describe each of the steps and what the financial numbers arent from there you should be able to pull apart what was the revenue associated with each of those transactions.

Speaker 5: Your next question comes from the line of Manav Gupta with UBS, your line is open.

Your next question comes from the line of Manav Gupta with UBS. Your line is open.

Speaker 11: Congrats on a very strong quarter. Go to see a hydrant and company not-cut guide and then go towards the top end of the guidance. My question here is, sir, last quarter, you talked about the C10, new C10 solution and some combined heat and power solutions. Can you give us an update on those two offerings? Thank you.

Congrats on a strong quarter good to see a hydrogen company guidance and go towards the top end up the guidance Mike.

My question here.

Last quarter, you talked about the seas.

10, new cities 10 solution and some combined heat and power solutions can you give us an update on those two offerings. Thank you.

Speaker 8: Well now thank you. And so the first question on Series 10, look, Series 10 is one of many opportunities that we are offering our customers. And what is really interesting about that opportunity?

Thank you.

So the first question on series Stan look series 10 is one of many opportunities that we are offering our customers and what is really interesting about that opportunity.

Speaker 8: Yes, it's a five-year commitment for people who believe that the great problem is going to get solved in five years.

Yes, it's a five year commitment for people, who believe that the grid problem is going to get solved in five years.

Speaker 8: We don't want to pass judgment. We just want to give them a five-year solution. And that's a fantastic solution.

We don't want to pass judgment, you just wanted to give them a five year solution and that's a fantastic solution.

Speaker 8: So for people who are in that category who believe that, it's an opportunity that works very well. And obviously we do that at a certain size and scale. There is a lot of...

For people, who are in that category, who believe that.

You would say, it's an opportunity that works very well and obviously, we do that at a certain size and scale.

There is lot of early funnel momentum that but these are long cycles like I said. So we are seeing interest in that area like we would expect to but we wouldn't expect to close anything in a month or two of these are.

Speaker 8: early funnel moment in that, but these are long cycles, like I said. So we are seeing interest in that area like we would expect to, but we wouldn't expect to close anything in a month or two. These are tens of millions of dollars deals, and they take time. So we would expect to see results coming out of that next year, and that was our projection. So that's on track.

Tens of millions of dollars deals.

It takes time so.

We would expect to see results coming out of that next year and that was our protection. So that's on track.

Your.

Speaker 8: Your second question on CHP, I think it's extremely important.

CHP. Your second question on CHP I think is extremely important.

Speaker 8: The CHP is not just for the scheme and the heat and the process.

CHP is not just for the steam on the heat in the process industry.

Speaker 8: I just talked about data centers to you and AI data.

I just talked about data centers to you any AI data centers. The AI data centers not only consume lot more electricity guess, what the cooling load goes up enormously proportionally.

Speaker 8: AI data centers not only consume a lot more electricity, guess what? The cooling load goes up enormously, proportionally, because these chips put out a lot of heat inside the beta-

These tips put out a lot of heat inside the data center, so more than 20% of the cooling of that data center has to happen and that's where the electricity is going to go here's the good news then bloom powers that data center, we can use that excess heat and.

Speaker 8: So more than 20% of the cooling of that data center has to happen, and that's where the electricity is going to go. Here's the good news. Then bloom powers that data center, we can use that excess heat and create...

Create.

<unk>.

Speaker 8: with the heat, that's called a vapor absorption system. Unlike the vapor absorption system, this is a heat-driven cooling system.

The heat Thats called E vapor absorption system.

<unk> of April absorption system. This is a key driven cooling system.

Absorption chilling.

Speaker 8: and we are able to provide that cooling, and it is net zero cooling for them because they're putting no additional fuel. We are seeing tremendous interest from the data center industry on this particular offer.

We are able to provide that cooling and it is net zero cooling for them because they are putting no additional fuel we are seeing tremendous interest from the datacenter industry on this particular offering.

Okay.

Yes.

Speaker 5: Your next question comes from the line of Dishamps Alani with Jeffries. Your line is open.

Your next question comes from the line of Duchamp's Alani with Jefferies. Your line is open.

Speaker 12: Hi, just one quick question on the Prairie Island test. Any kind of updates there?

Hi, just one quick question on the Prairie Island.

Test any kind of updates there.

Speaker 8: It is still in the early stages with our Excel customer, and so no, we don't have anything as of now, but expect something in the next few months as this goes on.

It is still in the early stages with our <unk> customer and so.

No. We don't have anything as of now but expect expect something in the next few months as this fiscal.

Yeah.

Speaker 5: Your next question comes from the line of Jordan Levy with Trist Securities. Your line is up.

Your next question comes from the line of Jordan Levy with Trust Securities. Your line is open.

Speaker 10: Afternoon all appreciate all the comments. Maybe if you can just talk to and remind us kind of what remains to be done on sort of the restructuring and the optics cost bounds and

Good afternoon, all I appreciate all the comments, maybe if you can just talk remind us kind of what remains to be done on sort of the restructuring and the opex cost downs.

And where you are at.

Speaker 7: Yeah, thanks for having us Greg. So this quarter being the third and the fourth quarter, we took actions both in our manufacturing facilities. We consolidated the teams together. Those are those have all been completed. And then on the off-ex side, we went through a process here very targeted to make sure that given the investments and the growth that we had over the last couple of years, that that's still where we prioritize those dollars. And took some small targeted actions over the last few weeks.

Yeah. Thanks, Ryan it's Greg So this quarter, we this quarter being the third in the fourth quarter, we took actions both in our manufacturing facilities as we consolidated the teams together those are those have all been completed and then on the Opex side. We went through a process here very targeted to make sure that given the investments.

And the growth that we had over the last couple of years, So thats still where we prioritize those dollars and took some small targeted actions over the last few weeks.

Speaker 7: in different areas. As of right now, we've completed all the plans that we have in front of us. We'll always continue to make sure that we're getting the highest return on your investment dollars. But right now, we're really comfortable with the team that we've had and the actions we've taken. And think it positions us very well to be down in the next year on a cost year over year basis, which was really excited about that as we drive.

In different areas as of right now we've completed all of the plans that we have in front of US we'll always continue to make sure that we're getting the highest return on your investment dollars, but right now we're really comfortable with the team that we've had and the actions we've taken and think it positions us very well to be down into next year on our cost year over year basis, which is which was.

Really excited about that as we drive towards profitability.

Speaker 5: Your next question comes from the line of Colin Roush with Oppenheimer and Company. Your line is open. Thanks so much, guys.

Your next question comes from the line of Colin Rusch with Oppenheimer <unk> Company. Your line is open.

Thanks Scott.

Hey, Collin we lost you.

Speaker 5: line appears to have dropped. Your next question comes from the line of Jeff Osborne with PD sound. Your line is open.

His line appears to have dropped your next question comes from the line of Jeff Osborne with TD Cowen Your line is open.

Speaker 13: Good evening, a couple of questions on my side. I was wondering if we can just address the 5. I think it was about 150Million in revenue in the quarter. And so I'm just curious, Greg, what visibility do you have?

Hey, good evening couple of questions on my side I was wondering if we could just address the PPA five I think it was about $150 million in revenue in the quarter. So I'm just curious what visibility do you have into Q4 I guess originally maybe.

Speaker 13: into Q4, I guess the original, maybe it's German in the right direction. Originally I was thinking the Amazon PDX one on I'm site.

Maybe it's Jeremy in the right direction, originally I was thinking the Amazon Pdx, one online site.

Speaker 13: in Oregon would be coming online here in late in the second half, as well as South Korea would be ramping up. And it doesn't look like either of those have to happen with the Oregon side. I'm just curious, can you just better flush out the visibility for Q4? That would be helpful.

In Oregon would be coming online here late in the second half.

As well in South Korea would be ramping up and it doesn't look like either of those talks are happening with the fulfillment.

With the Oregon, sorry, I'm just curious can you just better question that the visibility for Q4 would.

It would be helpful.

Speaker 7: Yeah, thanks, Jeff. So when we went and looked at, we looked at the year and we looked at the the sites that we expected to get over the course of the year, that's still consistent. It was how we came in the year, I would say we did really well in the third quarter and making sure that we got everything closed and accepted, which gave us a nice lift, even off of where I thought we'd be this time. Three months ago when we had this call, and I kind of gave us off guidance.

Yeah. Thanks, Jeff So when we went and looked at we looked at the year and we looked at.

The sites that we expect it to get over the course of the year, that's still consistent with how we came into the year I would say, we did really well in the third quarter and making sure that we got everything closed and accepted which gave us a nice lift even off of where I thought we'd be this time.

Three months ago, when we had this call and I kind of gave us off guidance for the quarter, but it doesn't change based on the list of acceptance as that we have planned in the U S.

Speaker 7: the quarter, but it doesn't change based on the list of acceptances that we have planned in the U.S.

Speaker 7: in Korea and a few internationally, we see a path here to stay consistent with the guidance.

In Korea, and a few internationally, we see a path here to get this.

Stay consistent with the guidance, we've given you based on what we anticipate the accept here over the next couple of months.

Speaker 7: We've given you based on what we anticipate to accept here over the next couple months.

Speaker 5: And we have a line of Colin Rooche with Oppenheimer and Company Back Again. Your line is open.

And we have the line of Colin Rusch with Oppenheimer and company back again your line is open.

Speaker 13: Thanks so much guys, I'm not sure what happened there. Can you talk about the potential for pricing power given what we're seeing in terms of interconnection delays?

Thanks, So much guys im not sure what happened there.

Can you talk about the potential for pricing power given what we're seeing in terms of interconnection delays some of the rate increases that we're seeing at the utilities and the the level of demand that you're talking about with sometimes from remote locations. Yeah. Yeah, I'll start and then I'll give it to KR listen on on <unk>.

Speaker 13: Some of the rate increases that we're seeing at the utilities and the level of demand that you're talking about was

Speaker 7: Yeah, I'll start and then I'll give it to K.R. Listen, on a pricing basis, right, if you look at what we've been able to report over the past several quarters, even with some increases on IRRs and other things from the financiers, our pricing is flat to slightly up in certain places in March.

Pricing basis right. If you look at what we've been able to report over the past several quarters, even with some increases on IRR is and other things from the financier or pricing is flat to slightly up in certain places in markets that is driven not only by by an increase in the ITC, but how we are positioning ourselves versus.

Speaker 7: That's driven not only by an increase in the ITC, but how we are positioning ourselves versus the grid and where they see prices increasing versus decreasing. So we're holding onto that pricing power.

The grid and where they see prices increasing versus decreasing so we're holding on to that pricing power.

Speaker 7: so far and we've been able to hold that in each of the quarters over the last two years and that's contributed a lot to our margin expansion that we've had.

So far and we've been able to hold that in each of the quarters over the last couple of last two years and that has contributed a lot to our margin expansion that we've had going forward I would say that trend will only continue.

Speaker 7: Going forward, I would say that trend will only continue. And we continue to prioritize our units in markets based on where we can get the best opportunity for growth in margins. So we're executing a lot of discipline to make sure we stay at these pricing, even as we continue to grow at the levels we are.

We continue to prioritize our units in markets based on where we can get the best opportunity for growth and margin. So we're executing a lot of discipline to make sure. We stay at these pricings even.

Even as we continue to grow at the levels we are carrying.

Speaker 8: Carry, from a strategic standpoint, how you think about it? Yeah, from a strategic...

From a strategic standpoint, how you think about it from a strategic point Glenn I think you have been with us since IPO.

Speaker 8: point, Colin, I think you've been with us in 5th year, the big question back then used to be.

Big question back then used to be.

Speaker 8: Are we going to have pricing discipline or is pricing going to have to shrink pretty significantly as we scale up in volume?

Are we going to have pricing discipline or is pricing going to have to shrink pretty significantly as we scale up in volume.

Speaker 8: If you just look at the supply-demand mismatch, if you just look at the price of utility electricity going up the way it is, there is no reason for us to not.

If you just look at the supply demand mismatch. If we just look at the price of utility electricity going up the way it is.

There is no reason.

For us to not have pricing discipline.

At the same time.

Speaker 8: We are not an instantaneous commodity. We are building these relationships over 15 years, 20 years.

We are not a instantaneous commodity we are building. These relationships for 15 years 20 years that solid C&I customers, who are going to be with us for a long time.

Speaker 8: with solid CNI customers who are going to be with us for a long time.

Speaker 8: So we clearly exercise our pricing in such a way that this is, we fairly price it for them, for us.

So.

The B clearly exercise.

Our pricing in such a way that this is beef.

Be fairly price it.

For them for us and from a market perspective.

That's how we think about it.

Okay.

Speaker 5: The next question comes from a line of Michael Bloom with Wells Fargo. Your line is open.

Your next question comes from the line of Michael Blum with Wells Fargo. Your line is open.

Speaker 14: Thanks. Good evening, everyone. I wonder if we just go back to the hydrogen hubs for a minute. Just want to get a better sense of.

Thanks, Good evening, everyone I Wonder if you just go back to the hydrogen hubs for a minute I just wanted to get a better sense of just any way you can size the opportunity and then.

Speaker 14: Anyway, you can size the opportunity and then the timeline where you would actually start to see shipments that would...

The timeline, where you would actually start to see shipments that would start to hit the P&L.

Speaker 8: So, after four hydrogen hubs, part of the seven that, you know, we were participating in that actually won the DOE selection.

So after four hydrogen hubs out of this.

Kevin that.

Veeva participating and that actually one the dose selection.

Speaker 8: What has come out so far is the DRE announcement. Like what needs to come out in addition to this is their PPCs and things like that because that's a very big part.

What has come out so far is the <unk> announcement right what needs to come out in addition to this.

Yes, Theres PTC and things like that because thats, a very big part.

Speaker 8: for the developers doing these hubs to figure out who the off-takers of their electricity are going to be and what the rules.

For the developers doing these hubs to figure out who the off takers of the electricity are going to be.

And what the rules are.

Speaker 8: then it's about selecting and negotiating with the DOE and getting to where we, where it.

Then it's about <unk>.

Electing in negotiating with the <unk> and getting the revenue that it needs to go.

Speaker 8: most people would tell us today when we talk to the principals who are running these hubs.

Most people would tell us today, when we when we talk to the principals who are running these hubs. It's in the 25 2006 timeframe is when we should see these projects.

Speaker 8: in the 2025-2026 time frame is when we should see these projects.

Speaker 8: going on. So the impact of this on our revenue...

Going on so the impact of this on our revenue.

Speaker 8: That's the time frame we think about, but there's a very important case to be made out here.

That's the timeframe.

We think about but there's a very important.

Case to be made out here.

The deal you're going through a very rigorous process.

Speaker 8: and selecting these winners and the criteria for these winners.

Selecting these winners and the criteria for these winners.

Speaker 8: sends a huge market signal, not just in the U.S.

Since a huge market signal not just in the U S.

Speaker 8: but in Europe , in Asia, in Australia, where people are thinking about big projects. So we think.

But in Europe, and Asia in Australia, where people are thinking about the pricing. So we think of this signal.

Speaker 8: as a huge market sick. And an affirmative market sick.

As a huge market.

And an affirmative markets thing though.

Speaker 7: I'd say, I'd just add to that, K.R., and, Michael, I think our view on electrolyzer revenue remains intact. We always thought 24, we didn't expect much material. As we move into 25, you'll begin to see some electrolyzer shipments that will impact revenue. And we expect this market to scale very quickly. It's going to look very different.

Yes.

I'd say I'd, just add to that Mike I think our view on Electrolyzed revenue remains intact. We always saw 24, we didn't expect much material as we move into 'twenty five you'll begin to see some electrolyze shipments that will impact revenue and we expect this market to scale very quickly. It is going to look very different to how we entered the.

Speaker 7: to how we entered the fuel cell market and grew that over a consistent period of time at double digits. This is going to scale very quickly, consistent with the 10-year guidance we put out two years ago. We still still have confidence that's the way this market.

Fuel cell market and grew that over a consistent period of time at double digits. This is going to scale very quickly consistent with with the 10 year guidance. We put out two years ago, we still still have confidence that the way. This market is going to develop and if you look at the policies that local state and federal are global.

Speaker 8: And if you look at the policies that it's local, state, federal or global.

Speaker 8: All those policy incentives coming together is going to be a huge catalyst, and that's the reason why Greg is saying you should expect the offtake once it takes off to be a pretty steep ramp and not the normal adoption of.

All of those policy incentives coming together is going to be a huge catalyst and that's the reason why Greg is saying you should expect the offtake once it takes off to be a pretty steep ramp and not the normal adoption of new technology.

Speaker 5: Your next question comes from the line of a Mitt Tucker with BMO capital markets. Your line is open.

Your next question comes from the line of Amit Tucker with BMO capital markets. Your line is open.

Speaker 15: Hi, good afternoon. Thanks for taking my question. Um, hey, Greg, I just wanted to come back to the, um, I guess the area of the 10-Q , you pointed out on the, uh, on the restructuring 1st question. Was that always kind of embedded in your guidance for the year? I know you guys have talked about it for a while, but I just wanted to clarify that. Yes, yes. Yep.

Hi.

Good afternoon. Thanks for taking my question, Hey, Greg I, just wanted to come back to the.

C area of the turnkey pointed out on the on the Tpa five restructuring.

First question was that always kind of embedded in your guidance for the year. I know you guys have talked about it for a while but just wanted to clarify that yes.

Yes.

Yes.

Yes.

Yes go ahead.

No just yes.

Speaker 16: Okay, and then so if I like, it looked like it was $162 million of kind of revenue impact, and then the cogs is around like $196 million. If I like back all that out, again based on the disclosure on page 27, I'm coming up with a gross margin of closer to 12%. Is that right?

Okay, and then finally, it looks like it was $162 million of kind of revenue impact and then the <unk>.

Causes.

Around like $196 million finally back all that out again based on that disclosure on page 27, I'm coming up with a gross margin closer to 12% is that right.

Speaker 7: Now, now the 162 million would be for the 31 megawatts that we sold completed in the third quarter. To get to a margin number, then take the COGS number because the COGS number you're pulling has both, has the impairments that we removed for the non-GAPP performance adjustments. So the best way to do it is go to the supplemental and look at what the cost per kilowatt was on an average basis and that'll get you to the margin on.

No the $162 million would be for the 31 megawatts and we sold completed in the third quarter to get to a margin number then take the Cogs number because the Cogs number you're pulling has both you guys.

Has the impairments that we removed for the non-GAAP pro forma adjustments. So the best way to do it is go to the supplemental and look at what the cost per kilowatt was on an average basis and that'll get you to the margin on these so a pretty healthy margin, which is why why we've like these and have done them a few times over.

Speaker 7: So pretty healthy margin, which is why we've liked these and have done them a few times over. But that's the best way to get to a margin calculation for.

But thats the best way to get to a margin calculation for this.

Alright, thank you.

Okay.

Speaker 5: Your next question comes from the line of Ava Shek Sina with Northern Capital markets. Your line is open.

Your next question comes from the line of <unk> <unk> with Northland Capital markets. Your line is open.

Speaker 17: I just wanted to get an update on the electrolyzers in Korea for the nuclear power plant. Any updates on that?

Hey, just wanted to get an update on the.

And then for lasers in Korea.

For the nuclear power plant any updates on that.

Speaker 7: Not in Korea, we've got a lot of work going on here in the US on the nuclear power side. There's some industrial applications that we're working with our partner on that we're proceeding that won't. They'll be larger than pilots, but not at scale. And we expect to make some announcements on those over the next six to 12 months.

Not in Korea, we've got a lot of work going on here in the U S. On the nuclear power side. There are some industrial applications that we're working with our partner on that we're proceeding that won't it will be larger than pilots, but not at scale and we expect to make some announcements on those over the next six to 12 months.

Speaker 7: And they'll deploy very quickly. But hydrogen as a market, as you know, if you spend time in Korea, it's in every billboard. As you go through the airport, they're very committed to a hydrogen market over time. And we think that fits in very well, not only for our electrolyzer, but for our fuel cell, because that continues to run on a mix and then ultimately move into hydrogen. It's one of the reasons we're so excited about that. Thank you.

And they'll deploy very quickly, but hydrogen as a market as you know if you've spent time in Korea. It's in every every Billboard as you go through the airport. They are very committed to a hydrogen market over time, and we think that fits in very well not only for our electrolyze or but for our fuel cell because that continues to run on our mix and then ultimately move into hydrogen.

So one of the reasons, we're so excited about the Korean market.

Speaker 17: and just as follow up out of all the potential international projects, which one seems the most imminent and promising. Thanks.

And just as a follow up out of all the potential international projects projects, which fund seems the most imminent and promising.

<unk>.

Speaker 8: Again, we as a rule don't speak about projects that are not ink, and so we are working on several projects. I can tell you markets, right, just think about this. In the last 18 months.

Again.

We have we don't speak about projects that have not.

Inc. And so we are working on several projects I can tell you market say just think about this.

In the last 18 months.

Five markets, Italy, UK, Belgium, Germany, Taiwan, very soon because our customers spoke about it in our partner spoke about it really entering Singapore right Youre seeing that.

Speaker 3: Italy, UK, Belgium, Germany, Taiwan. Very soon, because our customers spoke about it and our partners spoke about it, we will be entering Singapore, right? You're like seeing that.

Speaker 8: And we just demonstrated our first units using CHP in Italy with Cefla. And for Northern Europe , CHP is super important. And with cooling coming off from what we do for Southern Europe , CHP becomes super important.

And we just.

<unk> demonstrated our first units using CHP in Italy, with Tesla and for Northern Europe, CHP is super important and with cooling coming off somewhat can you do for southern Europe CHP becomes very important.

Speaker 8: So we think all these markets have great potential.

So we think.

All of these markets have great potential Taiwan, Singapore rethink.

Speaker 8: Taiwan, Singapore, we think are amazing markets for us because there's a shortage of power. So if you look at Singapore, short-term

Amazing markets for us because there is shortage of color. So if you look at Singapore.

Short term midterm long term.

Speaker 8: It's a country that just cannot have no land to put the new rules. Solar or wind?

A country that just cannot hasnt.

It has more land to put renewables solar and wind.

95% plus.

Speaker 8: of the power being produced for them is being produced using natural gas. So we can go and write now and give them a lower cover.

Of the power being produced for them, that's being produced using natural gas. So we can go in right now and give them a lower carbon footprint along with the CSP.

Speaker 8: And then they are big into both carbon capture as well as bringing in green hydrogen and green.

And then they are big into bullets carbon capture as well as bringing in green hydrogen and green ammonia.

Speaker 8: If you have future proofing their systems when we put them, unlike other technologies that cannot do.

Yes, future proofing their systems, when we put them. Unlike other technologies that cannot do that.

Speaker 8: And we are offering them quick time to power at a time when their data centers are starving for power.

And we had offering them quick time to power at a time in their data centers are starving for power. So we think we have a great play short term midterm long term. This is all we evaluate the markets and we enter those markets how it plays out and what big projects. We're working on we'll tell you about them once we close.

Speaker 8: So we think we have a great play short-term, mid-term, long-term. This is how we evaluate the markets and we enter those markets. How it plays out and what big projects we are working on, we'll tell you about them once we get to them.

Yes.

Speaker 5: Your next question comes from the line of Noel Parks with Tuley Brothers. Your line is open.

Your next question comes from the line of Noel Parks with Tuohy Brothers. Your line is open.

Hey, good afternoon.

Hi.

Speaker 14: So, um, one thing I wanted to ask about, um, just trying to sort of.

So one thing I wanted to ask about.

Just trying to sort of go.

Speaker 14: broaden my imagination a bit, is

Broadened my imagination a bit.

Speaker 14: For example, you talk about data centers, obvious expansion opportunities of firms pre-existing in that business.

Can you talk about data center is obvious.

Expansion opportunities.

Pre existing in that business.

Speaker 14: And I'm just wondering, when you're looking at projects or potential projects that are more like new-build commercial or industrial sites, I'm just curious, is there a role or are you seeing distribution channels through the EPC vendors, the guys who are planning out sort of

And.

Im just wondering when youre looking at.

Next to potential projects.

More like Newbuild.

Commercial or industrial.

Right.

Just curious.

Is there a rule or are you seeing sort of distribution channels through the EPC vendors the guidance or are planning out.

Speaker 14: longer-term, larger-scale projects. I just wonder, as well as the thinking of you know, boom technology coming in either as an add-in or to solve the immediate pain point in existing or like a microgrid application, so any thoughts you have on that would be great.

Longer term the larger scale projects.

Just wonder as opposed to thinking.

And I will be coming in either as an add in order to solve immediate pain point and existing or micro grid application.

Do you have on that would be great.

Speaker 3: No, that's a very good question. Look, the series stand and even how it structures.

No that's a very good question.

Look.

The CD stand.

And even how it's structured.

Okay.

Some financial perspective should make it easier.

Speaker 8: should make it easier and offerings like that. That's prepackaged easy to understand with very few contractual details. Make it easier for an EPC to put that in their catalog. I'm offered it to their customers. Number one.

And offerings like that.

Feedback is easy to understand that very few contracts will detail make it easier for an EPC to put that in their catalog and offer it to their customers number one.

Speaker 8: The fact that we have made installation so simple with our

The fact that we have made installation so simple.

With our skit.

That.

Speaker 8: very soon. We are almost there. It's almost like a plug-and-play appliance, like an HVAC.

Very soon we are almost there it's almost like a plug and play up lines like an HVAC up lines.

Speaker 8: And be over the last few years, we have made that program.

Over the last three years, we have made that progression.

Speaker 8: That's all positioned so we can exactly do what you want.

That's all positioned so we can exactly do what youre, saying.

Speaker 8: And as we scale, that's clearly the model that we would want to see where a builder, a developer, AEPC, buys our device, views it like a H-Wash.

And as we scale that is clearly the model that we would want to see there a builder and developer APC Vice our device users.

Use it like HVAC appliance puts it for their customer as they do it offers that in the early planning stages for any of the model anything they need to do with its brownfield.

Speaker 8: puts it for their customer as they do it. Offers it in the early planning stages for any remodel, anything they need to do with its brownfield or even architects start looking at this and electrical and mechanical consultants.

Even architects start looking at this and.

Electrical and mechanical consultants start offering it to their customers as an option. So that's how we think about it.

Speaker 8: start offering it to their customers of an option. So that's how it is.

Okay.

Speaker 5: Your last question comes from the line of Martin Maloy with Johnson Rice.

Your next your last question comes from the line of Martin Malloy with Johnson Rice. Your line is open.

Okay.

Speaker 13: Thank you for taking my question. Want to find out if you could maybe give us an update on your carbon capture technology and the development of that?

Alright. Thank you for taking my question wanted to find out.

You could maybe give us an update on your carbon capture technology in the development of that.

Speaker 8: So, you know, we are making extremely good progress on that. So our carbon capture technology.

So.

We are making extremely good extremely good progress on that so our carbon capture technology.

Speaker 8: It's going to be helpful in two different ways. Right? First is...

He's going to be helpful in two different ways right.

First is.

Speaker 8: for large scale applications where there's a orchestration available close by.

For large scale applications, there's a sequestration available close by.

Speaker 3: It's an ability to produce zero carbon power and using our technology. There, we are making good progress early stages.

It's an ability to produce zero carbon power and using our technology. There we are making good progress early stages.

With a lot of potential customers.

Speaker 8: on how we can find an off-taker who wants that zero carbon electricity. And these will be the 1,500 megawatt scale.

On how we can find an off taker, who wants that zero carbon electricity and these will be there.

<unk> hundred megawatt scale.

Let's say it makes sense.

Secondly.

Speaker 8: the serious excitement today about director capture because of the incentives that are being given.

The serious excitement today of our direct air capture because of the incentives that have been given.

Speaker 3: on the per ton incentive of CR2 if you do a direct direct capture.

On the per tonne incentive.

If you go direct air capture.

Speaker 8: Those big projects require a lot of electricity and they have to be clean.

Those big projects require a lot of electricity and they have to be clean.

Speaker 3: So using our technology and our carbon capture, they can get that clean electricity and be able to include the carbon dioxide going from us on the 45Q into the sequestration. They both are serious opportunities.

So using our technology and archived and capture they can get that clean electricity and be able to include the carbon dioxide going from us under 45 Q into the sequestration.

They both are serious opportunities.

And pain that on the larger frame.

Speaker 8: for us to get to whether it's 1.5 degrees, 2 degrees.

For us to get to with its one five degrees two degrees.

Speaker 8: You name the number for us to get any of those numbers.

You named a number for us to get any of those numbers.

Speaker 8: The world is going to need carbon capture and sequestration. There is no other way, including everything else. That is one piece of the puzzle, and we are uniquely suited to do that. We are excited.

The world is going to need carbon capture and sequestration there is no other way, including everything else.

That is one piece of the puzzle and we are uniquely suited to do that we are excited about.

Alright.

Speaker 8: Okay, with that, thank you again for all of you for participating in the call. Whether it is.

And last question, Okay with that.

Thank you again for all of you for participating in the call.

Whether it is our core technology.

Speaker 8: business model at which hopefully you're looking at the numbers.

The business model that which hopefully youre looking at the numbers and.

Speaker 8: agreeing with us that this is a model that leads to a very profitable business if you.

And agreeing with US that this is a model that leads to a very profitable business.

If you look at our case.

Capability.

That hydrogen two ways.

Speaker 8: producing the hydrogen with a electrolyzer, using hydrogen as a fuel.

Producing the hydrogen whatever electrolyzed there.

Using hydrogen as a fuel cell.

Speaker 8: whether it's hydrogen, natural gas, being able to do cooling with RCS.

Yes.

Theres hydrogen and natural gas being able to do cooling with our CHP.

Speaker 8: and being able to offer carbon capture with a straight match of gas to carbon capture or carbon capture for direct...

And being able to offer carbon capture.

Great natural gas to carbon capture.

Carbon capture for direct aircraft here.

<unk> has it all.

Speaker 8: We are excited about where the future is and look forward to updating you in three months.

So we're excited about where the future is and look forward to updating you in three months.

Thank you. Thank you.

Speaker 5: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker 18: Please wait, the conference will begin shortly.

Please wait the conference will begin shortly.

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