Q3 2023 Plug Power Inc Earnings Call
Greetings and welcome to the plug Power's third quarter earnings call.
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It is now my pleasure to introduce your host Teal Hoyos director of marketing Communications. Thank you you may begin.
Thank you welcome to the 2023 third quarter earnings call. This call will include forward looking statements.
These forward looking statements contain projections of future results of operations or our financial position or other forward looking information.
These forward looking statements to be covered by the safe Harbor provision for forward looking statements contained in section 27, a of the Securities Act of 1933 and section 21 E of the Securities Exchange Act of 1934.
We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward looking statements.
And such statements should not be read or understood as a guarantee of future performance or results.
Such statements are based upon current expectations estimates forecasts and projections.
As well as the current beliefs and assumptions of management.
And are subject to significant risks and uncertainties that could cause actual results or performance to differ materially from those as discussed as a result of various factors, including but not limited to the risks and uncertainties discussed under item one a risk factors in our annual report.
Our Form 10-K for the fiscal year ended December 31 2022.
The reports on Form 10-Q for the quarters ending March 31, 2023, and June 30 of 2023 and other reports we file from time to time with the SEC.
These forward looking statements speak only of the day in which the statements are made and we do not undertake or intend to update any forward looking statements. After this call or as a result of new information.
At this point I would like to turn the call over to plug powers CEO Andy Marsh.
Thank you teal.
And thank you for joining the third quarter conference call.
It's a difficult quarter, driven primarily by the availability of hydrogen.
Over the past several months.
Enormous challenges associated with the availability of hydrogen.
Primarily due to down plants, including our Tennessee facility and temporary plant outages across the entire hydrogen network.
For many days demand outstrips supply.
For example, many of the California fueling stations had been without fuel we've had limited view on a regular basis over the past several months.
Additionally, the price of these stations for hydrogen has been over $30 per kilogram at the pump.
Twice the normal price.
Service, our customers plug has been moving hydrogen from the west coast to the East coast.
It's been a yeoman's effort and it's been accomplished while reducing the core cost of hydrogen compared to the second quarter.
Good news is the network is now stabilized and many of the planned outages have subsided.
The additional capacity will be coming online.
We expect our Tennessee plant will be back online producing hydrogen by the end of the year. This plant when fully operational provides about 20% of our production needs.
One of our major suppliers is upgrading what are their facilities to allow the plant to operate at full nameplate capacity in the coming months.
Played out what has been producing between zero to 25% of capacity.
We're continuing to see progress in our Georgia plant and we're finishing the last step in the construction process commissioning the less liquid fire.
We expect the plant to be online by year end.
A few other points.
S. Hydrogen network also caused the delay of deployment in some of our north American material handling customers.
These sites will be commissioned as a hydrogen issues resolved it's.
It's just the timing issue.
Many of those facilities actually.
You'll seldom hydrogen plant.
You're always structure are already available.
We believe that we did this experience.
Reaffirms the criticality of building out a nationwide hydrogen network to support our fuel cell business.
As well as the financial benefits that this network could accrue to the company for both that business and the additional applications there began to be realized.
Furthermore, this experienced underscores the wisdom of our business diversification model in.
In the fourth quarter, we anticipate the revenue from our new ventures will surpass revenue from our traditional business for the first time is there a electrolyze yours and cryogenic businesses continue to grow.
Finally, I like just like to reflect on.
When a conversation I had yesterday morning, with it European customer supplier and partner.
He just toured our facilities and reminded me that no one has built.
Built hydrogen infrastructure when the scale we have.
No one has a product that no one has technical talent.
No one has ever customer relationships and.
And no one has a real life experiences.
It remains our belief is that as the market for hydrogen fuel cell grows.
No one has been a better better position them plug to take advantage of this opportunity.
This is just a bump on the road.
Paul Sorry, Jay and I are now available for questions.
Yeah.
Great. Thank you we will now be conducting a question and answer session.
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One moment, please while we poll for questions.
Thank you. Our first question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.
You know.
I wanted to start off with.
With the balance sheet.
We've got a fair amount of restricted cash you offered a fairly.
Fairly reasonable update and I'll, let her on your process with.
Any potential funding sources I guess the real question is around timing and how you see your ability to free up some of that restricted cash and start to bring on some of those or cause one or more of those deals that you're talking about I'm not sure all right.
Hi, sure caller I'm going to let I'm going to let Paul take that question.
Yeah, Good afternoon, Colin and thanks for the question.
We continue to pursue a number of initiatives.
You know we've had many inbound expressions of interest with different terms and we continue to work through what we think is the best and most prudent solution. It's not for lack of options. Its really just continue to be picky around which ones that we've had to act on them. We haven't felt a compulsion to act quickly.
We you know to be we're taking our time to be thoughtful about which two choices that we have all I'll tell you on the D. O process motivate people asked about that.
That's where we're progressing very well we continue to have great effort in collaboration with them and we expect that that will get through the Hunter page long form term sheets that they need to get through to submit for contingent approval here.
By the end of November and we still expect there's a good chance we can announce that program by the end of the year that'll be very meaningful and we continue to pursue a range of other options and so I expect something in the near term.
Okay, and then on the operation side, you know with with the impact around the Hudson availability can you talk about the cadence of deployment or material handling and how that's impacting some of the equipment sales, but that you're right.
I'm working through for the balance of that year and into the early part of 'twenty 'twenty four.
Yeah, So collin.
We had we left the quarter with Savage sites.
Which we could bring online.
Which would have represented well over $50 million in revenue.
Uh huh.
Because of that we couldn't put more stress on the network.
And so.
We expect that.
We expect that we will have a.
A good quarter for material handling I'm, just going to caveat it by saying that Oh.
First and foremost we have to make sure.
Especially during this holiday season.
Pete that our key customers have hydrogen and as I mentioned, we've got a really good job in moving hydrogen.
Without her fleet of over 40 trucks, we would have never been able to do what we were able to do.
Oh.
I I you know what.
In my opening comments I said it was a timing issue.
Yeah, well I think at the network continues to improve.
It probably will happen this quarter, but I.
I think there probably could be a.
Now when I think about our material handling business.
Yeah, we're swinging.
Between.
Up to about $50 million I think it's possible that being said I think the letter highlighted this summer.
Somebody whose customers that we've gone through this with they have actually increased the number of systems.
Material handling states a watt.
We've added new customers.
And we've added new customers rider and others. So.
It's.
It has not it certainly has been a challenging time, but that you know.
It's you know it's.
Pretty remarkable how well we've done so far in keep.
Keeping hydrogen.
Eligible for our customers.
Excellent appreciate it Andy.
Yeah sure Collyn.
Thank you.
Our next question comes from the line of Manav Gupta with UBS. Please proceed with your question.
Hum.
Hum.
Hi, So help us understand the box to positive gross margin here I think that's the number one question, we're getting how do you get to positive gross margin by when.
Sure Paul do you want to take that and I may have some that I may add on somebody else, but you wanted to take us explain how we get there.
Yeah sure Andy and thanks for the question.
I would tell you.
Couple of fundamental things one.
Andy mentioned this quarter you know the revenue from these new platforms are going to be greater than our legacy business.
Most of those platforms and really all of them are equipment platforms and if you. If you don't know if you've seen our new facility up and Vista or Rochester, but you know we're poised as we start scaling all of these new platforms up for substantial volume leverage and so and if you look at our sales in Q4 and on into Q.
And then the next year.
But really the bulk of the growth is coming from these equipment platforms and we've shown historically.
With material handling as we scale that business that every time, we double the installed fleet, we've been able to reduce the cost by 25% and you're going to see the same trends as.
We get volume leverage we get supply chain leverage you drive greater automation and you know so so equipment sales is really key and that's one thing that you're going to see as we move past launching these new platforms and through the pilot programs into really scaling them. A second thing Youll see is on the fuel margin you already see some abatement in that.
Prices, we expect some additional abatement.
Q4, but the real step function change in fuel happens.
As we turn on our own facilities and so Georgia is coming online this quarter.
Tennessee will be will be reinstating and turned that back up and then we're looking to turn on.
The new facility in Louisiana are towards the end of Q1, and so those will be very accretive events as we start to turn those facilities up to start to be able to.
Source, a lot of that hydrogen from herself, which in many cases is at least 30% cheaper or I'm, sorry is 30% of the market cost that we're paying today and in some cases only 10% when you factor in the PTC credit. So those are the most two massive effects that are going to have on margin in the near term and we expect.
That to start to see that in Q4 and start to really ramp as we as we move through move through 2024 and do you have other comments you want to sure.
Yeah.
I think you're right Paul I mean I think.
The equation is really right.
We have to deploy more equipment and we will be deploying more in the fourth quarter.
We have to get the plants up and operating that helps a great deal and look at them.
We have a clear plan on service margins.
The best plan, we've ever had and I think all of those factors will come into play.
My quick follow up here is to be a leading therapy.
PTC.
When do you think we can get something and what do you think would be reasonable at this point to assume some level of you know I mean, what do you think would be a reasonably good outcome for you in the PTC guidance that has come out.
So.
The administration has shared this week and it's been that they will have the T. T C announcement.
Out before year's end I I I suspect that that's.
Thats probably about right.
When I think about the P T C.
I, we think that really the key item.
Is how regionalisation defied.
And.
If regionally defined it'd be.
The balancing authorities, where there's 69 in the U S.
Most of our future activities would go on in Texas.
If the belt if the.
The reach.
Region Audi comes out to be the ISO.
ISO regions.
We've looked at that and that's concluded that it's you know that would be a that would work for board.
Almost regardless of where they come out with additionality.
Thank you probably need three years.
We also think that.
If you think about time matching it.
It's pretty clear that treasury has realized that hourly time matching doesn't work because they're the rec market for that really doesn't exist.
I think that's actually.
One thing that looks like that will be the final outcome is.
Won't be the perfect outcome.
A broader regional east west in that ERCOT would be the I think best solution for the growth of the hydrogen industry and will coincide.
And I think this is where I think a lot of people would would miss.
It really needs to be broad for the hydrogen hubs to work.
And certainly I can tell you I've spoken with high level of leadership at the Doa and they understand.
Understand that so I think plug is going to be fine when the guidance comes out.
I think the industry will be fine.
I hope that.
It's done in a way that all regions of the United States are winners.
Yeah.
Thank you so much.
Youre welcome.
Thank you. Our next question comes from the line of Bill Peterson with J P. Morgan. Please proceed with your question.
Yeah, Hi, good afternoon, everyone.
Good afternoon.
So it might have been a little bit deeper in the columns questions on that.
Cash raise and shore up the balance sheet. So you talked about corporate debt solutions.
Can you provide more color on what kind of options what kind of facilities you're talking about here.
On the D O long, you're hoping to announce something later this year, but it talks about conditional what does the conditional on them and then you know what when did the dollars actually slow.
I guess can you confirm is this is milestone based.
And then finally I think for the project financing I guess of course, when one could I guess one could these be solidified.
Order to shelf position really just overall, what how should we think about your ability to shore up your kind of cash position in the near term.
Paul do you want to take that.
Sure there's a lot of questions on your Bill I'll do my best.
First on the Doa.
One.
It's a good news bad news is the fact that they require.
A detailed our long form term sheet is actually although it takes time to work through is extremely helpful. Because the way. The process works is you know you effectively put the package together and all of their diligence forces and submit it for the final.
Approval, which once it gets approved you didn't have to go and actually put the agreements in place, but because it's you know 100 pages of long form term sheets and in fact, they've already kind of work through all those key things so that should be a much faster process. The framework that we're working on with them as a $1 5 billion.
Dollar platform that would fund argued.
Our green plants and would fund from construction phase onwards, so and it could be as up as upwards of 80% 80 cents on the dollar that's the framework that we're working on them and we're working very diligently to get that in place.
In addition to that we have.
We've had some some expressions of offers for ABL like facilities we've had.
Some expressions of offers for restricted cash advance facilities like we used to have with generate so there are there's been some a number of parties that have expressed interest for project equity on some of our initial plants.
So we have a range and theres been a number of other ones in different forms and so we have a range of solutions that we continue to work through and we just wrestling through what we think is the best the best choices and the best options given the dynamics and what we're trying to accomplish here. So you know I think oh it could be.
You know even as early as late as the end of end of Q1 potentially more likely early Q2 starts funding where it could actually go back and back lever some of the existing plants like Texas, and maybe even New York and and I think some of these other facilities is what we'd probably levered into as to complement that struck.
<unk> for general working capital and.
And you know other other project capital that we would be advancing all of them. So hopefully that helps bill.
Yeah, No. That's that's a that's a good additional context.
Just how to think about the fourth quarter you are at the time of a symposium you took down your.
See the bottom of it.
Presumably the headwinds you talked about with hydrogen is impacting your ability to provide fuel.
Fuel cell systems for the fourth quarter, So I guess walk us through if you could.
Revenue assumptions, maybe by product type and how we should think about how the fourth quarter could evolve given all the puts and takes you talked about with all the issues in the hydrogen.
I'll take that one bill because we we we spent a lot of time thinking about this.
So.
You know I think that.
If you think about it as a base of $1 2 billion.
Where are the risk and the 1.2 for the year.
Because of hydrogen.
And I think I'd mentioned earlier in this call.
We think there's a risk.
Circle $50 million in our traditional business.
And.
We also when we look at it.
Our cryogenics business, which has really been one of the strengths of this year.
Yes.
There's some timing on some deals where we think 50 million.
Flash and flip.
Go into the first quarter instead of the fourth quarter. They are really the two items, we're looking at and really watching closely.
I think we're feeling good about our Electrolyze your business we feel.
Good about you know the revenue all other revenues in air.
You know what our trailer business.
Other activities in our cryo business, but that's really kind of the breakdown we see.
So if you think about that.
We think you know.
60% of the business.
When I outline those numbers.
Our four.
For Electrolyze or spore.
Four four.
Pour cryogenic equipment and 40% of our traditional material handling business. So that's kind of the give and take from one one to one to bill.
Does that answer your question.
Yeah, no that kind of puts you described some of the risks associated with the rest of the year. It sounds like Electrolyze. It will still be felt good about that is if I can paraphrase yeah, yeah, I mean I feel okay.
I feel really good about material handling I, just got to make sure that Oh.
We feel real good about Electrolyze yours, we feel real good about are some of the expansion activities with our cryogenic trailers.
Now we have this liquid refueling which is.
For.
Bus buses and others, it's a really sold and we can't make enough of them.
<unk>.
So we really do feel good about those things and I.
I have the parts bill for material handling it's just a question of.
Making sure that we can bring them online in a way that meets our customers needs.
Thanks, Andy.
Youre welcome Bill.
Thank you. Our next question comes from the line of Kristen greenhouse with RBC capital markets. Please proceed with your question.
Yeah. Thank you I guess I just wanted to discuss the hydrogen availability situation. Yeah honestly the force majeure events are all right they've been reoccurring kind of throughout the year. Yeah. When you think about that business and sort of your suppliers or is there anything you can do I guess more of that.
Could be done to.
Ensure stable supply is there like the ability to have some backup suppliers or anything like that that you can speak to.
So so Chris.
I think what we're doing.
I've mentioned three items.
There there isn't a.
There isn't additional hydrogen available I was.
I was talking to someone today.
Told me they couldnt get any hydrogen.
What I mean, what we look at it though.
Plants coming on line.
Help a great deal.
Having Tennessee and Georgia.
That provides us 25 tons of hydrogen.
Ring think Gabriel's up.
In the second quarter brings another 15 tons of hydrogen that's 40 tons.
I met with them.
One of the major one of the other major hydrogen suppliers in this industry. The president there American's operations on Tuesday, we sat down and you know, they're bringing on line you know what.
30 tons by Oh.
By putting out Sam Moore's in to replace some waste stream stock that had some big company.
So I do see that.
By the end of January Yeah, there is no additional.
The additional 55 tons and just to give you a feel 55 tons as it probably.
Crocs mentally and the other 20% to 25% of hydrogen availability now we're going to use more hydrogen next year, we are projecting that our hydrogen needs and demands will grow by 40 tons by year's end and that's why Texas is so important to us to bring that on my end.
You know, we're working through that one but that one is really really will be critical for the second half.
Next year to make sure that by the late fourth quarter, that's able to produce to support the customers.
The good news Chris is that.
This is not going to be an issue in January one.
We just got to work through the final stages here.
Yeah, Okay understood and I guess, maybe just as a follow up.
Maybe on a slightly different topic here.
Just the.
The equipment sales margin in the quarter and it looks like it was negative can you just walk us through the dynamics of what what's going on there it sounded like it might've been mix related but I guess any any of just additional color on what's what's happening in that segment. Thanks.
Paul do you want to take that one.
Sure so.
You know Andy mentioned about some of the programs that pushed you know scale matters for US you know when you think about these manufacturing facilities, we have in driving volume leverage that that that's important so that's part of the driver.
Part of the driver as some of the costs associated with launching these new programs, especially some of the early pilot programs.
I always say its hard to make money when you build one of something but as we start scaling this up to hundreds and thousands. It. It's you really start to drive not just volume leverage with supply chain leverage and and and you know.
You know you can drive improvements in your manufacturing processes and so you know those were really the key drivers this quarter and we certainly expect that to be mean.
Meaningfully better in Q4, given the ramp of these equipment sales in and Youll see that ramp even even more so in 2024.
Got it thank you Paul.
Oh, I think it would be fair to say also that that 50 million in material handling revenue would have flipped the other way.
It certainly would have been super helpful in moving in that right direction Andy Yeah.
Yeah.
Thank you.
Our next question comes from the line of Jordan Levy with true Securities. Please proceed with your question.
Afternoon on appreciate all the color and maybe just a high level kind of strategic sort of question here.
If we kind of look out to 2024 and <unk>.
Recognizing you're starting to get some of your own volumes online, but there's some of these other issues in the network persist on the supply side and I'm. Just curious how you think about sort of balancing growth on the materials handling side versus the timing of your own plants ramping and whether it makes sense to probable materials handling down a bit.
As you kind of bring on your own supply and that sort of thing.
Sure.
Thank you for the question and I think that is a.
That is a good question.
As I mentioned.
Uh huh.
We feel that.
We'll be in a much better position come January one.
And.
One of the reasons I have gone around.
And spoke to leadership there.
With that.
Other big suppliers in the industry and we've talked about making sure. There's you know we talked about what their plans are with your public. So there's nothing that are being hidden here.
We feel that.
We can continue to grow and expand that business.
Uh huh.
And that said, yeah, I think I did some math for you which.
The combination of St Gabriel.
The combination of our 25 ton coming back online that's 40 times.
I talked about and an additional 30 tons coming online from another supplier I do know that the other.
Other folks are beginning to look at putting some hydrogen in the market and for us it really needs to be liquid.
But we're really.
We really don't see the need Jordan to throttle back.
Thanks for that and Andy and then maybe just a follow up on the stationary side of the business. I know these are kind of bulkier bulkier shipments, but it seems like from the shareholder letter.
You've made some good traction there going into the fourth quarter interest.
If we could.
Yeah. So.
We will be shipping our products, but first let me and I don't know because it was at the symposium actually was one of the first days.
First product that we deployed was.
Fully operational.
Operational and working.
You know that product.
Is.
In many ways, so much more challenging than our material handling products, but so much more simpler once you get it going.
Say its more challenging because that it's a complicated system I mean, one megawatts of power.
How to manage all that hydrogen in water.
All of those all of those items are really really critical.
Fact, it runs at almost constant power.
The fact that is.
You're not a year.
You're not moving it around.
The product has worked remarkably well the first deployment.
To the point Jordan about two weeks ago I.
You know I I wasn't hearing anything about the performance of the product when it first went in the field, which you know in my 40 years working engineering products is incredibly unusual, but I picked up the phone and called the customer asked them how it was going.
Yes. It is.
<unk> been working remarkably well.
Where we're.
We're really upbeat about that product will.
It won't be doing good deal deployments are a lot of the extra hydrogen for next year will be associated with that product.
Uh huh.
We're we're really pleased.
It's.
It's.
It's probably.
One of the more challenging but the.
One of the best product launches I've ever seen in my career.
I appreciate that and thanks for all the details.
Yeah.
Thank you.
Question comes from the line of George.
Vikas.
Canaccord Genuity. Please proceed with your question.
Hi, everyone and thank you for taking my question.
Hi, George.
How are you.
I wanted to ask.
About an early glimpse you can someone may have alluded to this earlier into 2024.
And 25% gross margin high level, particularly in light of the fact that you the updates.
You've made to your green hydrogen.
And generate.
Yeah.
Paul do you want to take that question.
Yes.
I guess you know we have our.
January business update scheduled most.
Most likely towards the end of January when we will give as we always do every year more specific numbers.
For 2024.
As we just kind of centering around our finalize our plans and forecast, but I guess, what I would tell you is directionally, we absolutely expect it to go north and when you think about the equipment programs and in those starting to scale up.
And you think about the fuel program the fuel sites and how meaningful impactful those are.
Thank you.
Next year, I mean, I think we get not only be positive I think it could be in the low double digits you know.
Directionally and then scale up from there and I think there'll be another big step function.
In 2025, because returning on Texas and targeted to turn on New York I mean, that's the 115.
<unk> tons per day of capacity between those two facilities, so that's substantially meaningful.
Revenue and margin.
Accretion of those programs.
Given those forecast of what we're planning to do and turn those on so I think directionally, that's kind of out of play.
Thank you and as a follow up.
A question I know, we're waiting for Washington to make a final determination as to.
How it views.
P T C and so I'm curious if you can help us compartmentalize basically different outcomes, how do those impact the number in other words you've given.
The long term guidance and when you think about outcome ex in Washington mean, this to our forecast for outcome why it means that like how should we think about.
Your long term forecast when we hear the final outcome from Watson. Thank you.
That's a good question George and we've always taken a very very conservative view of the outcome.
We built the models and our plans not based on the PTC being available.
We know that the P. T C will unlock additional opportunity.
<unk>.
But you know and and further guidance or other elements of the Io array.
So.
I would just say that.
You know it.
If you think about it.
It probably has.
Minimum impact whatever gets said.
For 2024.
Just you know, even though people are waiting it still takes time.
Get to F D, especially when Electrolyze yours.
Uh huh.
I would think that.
Our forecast may be different in the 'twenty five 'twenty six time frame.
With a.
T T C outcome that I'll call it middle of the road.
That's how I would think about it.
Jay I I I I know you've been thinking about this too, but that's kind of my view, but since you're deeply involved in the electrolyze your sales funnel as well as cell hydrogen do you have any additional comments.
No I think Andy you sort of summarized it pretty well, but the only thing I might add here is I think we are obviously <unk> been working on multiple large scale electrolyze our opportunity here in the U S and is the guidance becomes a key.
Clear and as we hear more about that I think some of these opportunity that we've been working on start to unlock and even on the electrolyte decided even before some of this P. D. C guidance, we have talked about working on three Mega deals, we've already announced 200 megawatt in Europe, we've already announced another 280 megawatt in Europe, and we have talked about being a preferred supplier.
550 megawatt opportunity in Australia, but with this PTC, we certainly see meaningful growth for Electrolyze a business as you said, Andy, especially in 2025, and 2026 timeframe, but there'll be a very meaningful growth as well in 2024, given the mix of the business diversity of the markets and then existing backlog.
But I mean.
There are more.
More products that need hydrogen coming online there are folks who are going to want green hydrogen.
Yeah.
Meet their corporate goals.
Regardless of the status of the P. T C.
So I think the P T C L.
A middle of the road decision will be really beneficial for block.
Thanks Jordan.
Yeah.
Thank you.
As a reminder, press star one to ask a question at this time.
Our next question is from Eric Stine with Craig Hallum. Please proceed with your question.
Thanks for taking the question.
Hi, Greg.
And so I've been jumping around on calls today, So I hope that I don't ask something that's already been asked I didn't hear the end of the last one I'll just stick with the eye array just for a second.
Hearing some talk of reeds.
Regionalisation.
In terms of where power needs to be sourced from.
Just curious if you could expand on that a little bit and you know what what would you see that doing for your business.
Yeah. So.
So I think Eric.
If regionalisation is really tight at the balancing authorities and there are 69 balancing authorities.
I think it drives most of the business activity into ERCOT.
I don't think it's going to end up there.
When we think about.
And did all the roads solution that would work for plug in we think worked for for most people in the industry.
That would be.
Use the ISO regions would we think work.
There's there's rec markets, which work there you.
You can the regions are big enough that the additionality issue should be much more minor.
OLED Lee you could face in time matching it probably would work.
Probably whats best for the nation.
And what is probably best for you know the.
The U S leadership in.
And in hydrogen.
It would be having just three regions.
That would also make sure that.
Most of the hydrogen hubs.
Could be successful.
Yeah.
I think from a play perspective, it probably will end up where we're operating more probably quite honestly, probably many of our customers.
I think from a.
I think from a nationwide rollout perspective.
More regions Mehdi.
Betty regions is not is not helpful.
Sure the region.
Quicker the deployments will happen the bedroom will be for our business.
But if it's the ISO regions.
We'll be we'll be good shape.
Okay. That's helpful color I guess, we'll stay tuned on that.
And then maybe so it sounds like you did for for 2023, you know provide.
Provide a little color around it I think the previous outlook had been $1 2 billion and if there is some $50 million or so variability in that number I'm curious if you discussed any of the out year targets I mean, I know 'twenty for you in the past you'd had a $2 billion.
Plus revenue target in.
The symposium you had 27 you had 2030.
So just curious I mean are you.
Did you address that are you, making any changes or is that something that's more for the January update.
Paul explained Eric did people was the January update call.
Okay. He did not make it.
Did make changes okay. Thank you.
Thank you.
Next question comes from the line of Andrew Perm Cocoa with Morgan Stanley. Please proceed with your question.
Good evening, thanks for taking the question.
I just wanted to come back Hey, Andy how are you I did want to just come back to the balance sheet and financing line of questioning because I do think it's.
Important here so in the quarter. It looks like you burned $400 million of free cash flow, which leaves you with about $550 million of unrestricted cash and an available for sale securities on the balance sheet and Paul I know you laid out do you have any timing late this year, but it sounds like that's probably a project milestone based and you also announced the fortescue potential financing.
Perfect level, but it still sounds like that's early stages, though.
It's leading me to think that you probably need to do something at the parent level to manage working capital in the next few weeks one is that correct too.
Are you still confident that you can get with that is there a potential need for a convert or equity here and three you know can.
Can you just give us a sense for size in terms of what you'll need to manage working capital and the profitability drag over the next few quarters. Thank you.
Paul do you want to take that one.
Sure So a.
Couple of things.
Fortunately were kind of in this period, where we've spent largely what we need to for Georgia to turn that on we've also.
The balance further left for.
The Louisiana plant has not.
Context is not very big.
So.
And we're <unk>.
Texas is really kind of more middle of the year and on into the back of the year when the big chunks of money gets spent so I think we have a little bit of latitude on capex this quarter next quarter.
In that regard.
And so and then on top of that and given the scale of a sale.
Sales that we have this quarter that obviously as we convert that into cash that helps and then thirdly.
We are laser focused on reducing our inventory levels, we've built that up substantially to kind of help launch. These broad platforms, but there is a substantial amount of capacity. There that we can we can tap into that we'll see you'll start to see some of those benefits happening into Q4 and on into Q1 as we as we start leveraging that.
Liquidity pool.
So, but you're right.
Look at it is fungible right to fund our plans and we've talked about what our focus is in and we're certainly focused on a range of solutions and some of the more near term ones could include things like the ABL or or restricted cash advance facility like we had with generate before or some of those other structures, but I think we are.
In a good position given the positive effects of those working capital between receivable conversions and inventory as well as that lull period of Capex. It allows us to be a little bit more thoughtful as we move through this quarter and into next quarter about what we do and when we do it and picking the best solutions for plug.
That helps Andrew.
Yeah, Yeah, that's helpful and maybe as a follow up question I guess related to your Electrolyze. Your business today I think you got it.
I know for it to get a lot backlog can you maybe just help us think about how many of those projects have reached F. E. Just trying to get a sense of how we should underwrite that two gigawatts. We've seen obviously, a cross wind solar battery storage and issues is it really financing and supply chain I'm sure. It's the same for hydrogen and so I'm just wondering how many of those projects.
Henry Schein D. At this point thank you.
But Jay do you want to take that one yeah happy to do that and so up Andrew It's a very good question. So let me give you some context on that ride in that backlog, we have a lot of five megawatt system right and these are for a lot of different customers. So they obviously have all gone to <unk> and that represents at least about 30 of those five megawatt system second we.
About a big project with a customer in Europe that has already gone through and Thats, a 100 100, plus megawatt opportunity and this preferred supplier deals that we've talked about that project is expected to go to a high D. Before the year is over then we have another project that is actually looking for an off take that as sort of sustainable aviation fuel expected to go to FID sometime next year right. So keep it.
In mind, though the way the revenue works for us in our electric lines of businesses, we have a standard stock sale. That's a direct sales right. Then we have five megawatt product system, that's a direct sale and with the project business. We end up doing it on a percentage of completion basis, which actually really built that base of business for us as you start to think about Q4 as you start to think about 'twenty four and also too.
<unk> thousand 25, and there are some other pretty substantial projects here Andrew that were actually at that we have been working on for six to nine months I mean, they have funding in place and some of this project. They are really looking for some clarity from the guidance standpoint, and we do expect that look by either by the end of this year or early next year, you will start to actually see some of this project also move ahead.
And because it's a pretty meaningful contributor to revenue again be the megaproject there'll be multiyear and really start to build that base of business and one of the things that I think is worthwhile highlighting here as well is up both on our product side as well as on our project side of the business and all the new bookings as Andy and Paul alluded to we've been very focused on.
Costs down margin expansion and that's the trend its not just the top line. We will also start to see that margin progression as you go into 'twenty four as well as into 2025 and Thats how were looking to plan all those things.
Great. Thank you I'll take the rest offline.
Thank you.
Thank you.
Our next question.
Soccer with BMO capital markets. Please proceed with your question.
Hi, good evening, Thanks for taking my question.
I just wanted to pull up.
Thank you I just wanted to follow up Paul I guess I'm not as familiar with the.
The restricted cash facility you had before one like more any of that 1 billion 15 restricted cash you have right now kind of basically mark work its way into unrestricted unrestricted bucket and then how does that facility worked and I've got one follow up.
There are any I assume you want me to take that.
So.
We've done some in the 10 years I've been here, probably $2 billion worth of.
Sale leaseback transactions to monetize tax credits on our some of our programs with some of our customers some of our customers like to own the assets or like a capex model and by some like to access our solutions and effectively lease it from us and so what we do is we package it and sell it to the bank and in those cases, the best place to be.
Monetize those credits the most efficient places us in the us in the traditional bank market like a like a wells fargo or those kind of institutions, but they're the most regulated as well and so they often make us capital collateralized some other tax.
<unk> tax credit in there. So that's what that most a lot of that represents and so it does get released to us about 20% per year, so out of that.
Balanced that 900 million 950 million number that we have.
Probably around $200 million gets released him, including $50 million in Q1, well there'd be 50 million this quarter it'll be $50 million in Q1, that's kind of it's all up to about a $50 million per quarter release rate.
Okay, and then you guys had I think you said, there's a couple of times.
It's called me and some of the other calls that you guys have kind of a you're.
Youre working through several options for financing and I'm trying to pick the best one but it looks like you guys added key going concern language in the 10-Q and I.
I was just wondering if that like kind of maybe narrows the options that we're exploring previously.
Not really I mean, we have so the language that we've included as you know oftentimes driven by accounting standards and how you have to evaluate it and manage it and.
It's a lot more conservative obviously than what we feel like but you know I have a $5 billion balance sheet. That's unlevered I mean, I really don't have any debt. So you know there is we still are extremely confident about the range of parties and solutions that we're working with and we haven't seen any tempering of intra.
As you know given.
Got news, where we sit with our liquidity position and where we're at we've been pretty clear about that all year.
And what we're doing and where we're going so.
I think most people certainly understand that and appreciate where we're at.
What's to come which is all this growth in this margin accretion and it works going so that's what people are betting on them when they when they want to play we'll work with us and so we don't really see it as limiting our options.
Thank you for the time.
Thank you. Our next question comes from the line of Sharif Elmar hard.
Hmm.
Hello, My hobby with BMO.
With D T I D.
Please proceed with your question.
Hey, everyone. Thanks for taking my questions.
Hi.
Paddy so firstly I, just like a little bit more clarity on this service accrual charge.
It makes sense of course that the hydrogen shortage effects cost of service, but how are these unplanned outages delayed fleet upgrades for customers.
Oh well that's.
I'm glad to give you an answer I hope you understand who pitched.
Understandable, so let me I'm going to separate into different issues sheree.
It does slow down it upgrades because.
<unk>.
We have a fleet.
20, plus rolling hydrogen generators.
Our service folks.
Yes.
Now are out on the hydrogen pad.
Almost every day.
Uh huh.
Often connecting and reconnecting and.
Getting our.
Products position that one can connect I pressured to travel or two.
It also when you have.
When you start running.
Hydrogen down to very low pressures.
Which are.
Which happens often when you're running with these kind of issues you went up.
Cabot catering.
Yeah.
The liquid hydrogen pumps.
And therefore, youre doing a lot more maintenance on the hydrogen pad.
So it has a ramification.
To that.
But let me take it first so it does impact.
It does impact the.
How fast you're implementing because your staff is doing things too.
Two things to keep the customer alive today.
So that's why now when I think about the service accrual.
I I believe.
Yeah.
The late if I take a look and I'm glad to talk about our traditional material handling business.
Our confidence level that the.
And we see it the newer products, we put out in the field.
We're much better or.
Or the latest design.
Do not had issues.
Her legacy units.
You know take a lot of time and effort.
And.
And you know I quite quite you know when I look at it I would not be surprised that over the coming next two quarters, we had maybe an additional service accrual.
And I think that but where I believe that.
We're in a place where that business.
Once we get through the legacy issue unit issues, which I think the accrual will helps us with.
We'll be in a place.
In the second half of next year.
Where that line could go in the other direction could go gross margin positive.
But.
And then I look at our new businesses.
Make references on the call earlier.
It's much more Easter shifting it it's much more simpler to for.
Electrolyze your business and for our stationary business.
Essentially.
Monitor their systems remotely.
Dispatch people, if they need to make repairs all those things actually help.
Take those businesses will start off.
With positive service margins to start.
Uh huh.
So that's kind of how I I know, that's a long answer sheree.
But that's why there's and that's why there's a connection.
Long answer, but really good window into nuts, and bolts of the business. So I appreciate it.
And then I'm, a little bit a little bit shorter of a question I guess.
When it comes to Canada, Bakers shorter answer sure routes [laughter].
[laughter] when it comes from converting the 15 times per day in Georgia from gaseous to liquid is it just a matter of adding to liquefy or is there more of a retooling process involved.
Really I'm trying to drill down into what's driving the decision to have 15 tons gaseous and then the other 15 times liquid.
Well that's it.
The gas it's.
Sure repeat seats illiquid.
So theres not to place.
We are looking at the possibilities of expanding GA, but.
Georgia is George its a liquid plant there is a two and a half.
To try and gas plant that we have there.
Which is failing.
It's high pressure two trailers I talked about which are kind of like generators or high pressure generators on wheels.
But the hydrogen that met the hydrogen that's produced.
Primarily at the Georgia plant feeds the liquid fliers.
Does that makes sense.
Makes total sense, Andy thanks very much.
Youre welcome.
Thank you our next question comes from.
I agree with Citi. Please proceed with your question.
Good evening everyone.
Good evening.
To start off the Georgia facility can provide some risks that could be maybe start to beyond 'twenty Cree and if any of the funding options that you talked about are contingent on.
Georgia up and running.
And then.
Staying on the same topic Winfrey's now over a billion dollars can it be a source of liquidity as we go into next year. How do you see that's trending and then finally <unk> filing has as he talked about some cautionary statement about collecting being in soccer shouldn't put operations next year.
So you can quantify how much minimum quantities required assuming tighter controls to go to next year and I'm assuming.
Clinton environment does not support it.
Okay.
So.
I'm sorry.
Yeah.
Let me take the Georgia question.
And then I'll, let Paul deal with all the financial questions.
So when we look at.
When we look at Georgia, we're at the final steps of.
Uh huh.
Of drawing the cold box the liquefy route.
And you have to dry out to bring it down so we heat the whole liquefy or up to 400, 450 degrees and essentially dry it out.
To ensure.
That.
That when you start running yet.
45 degrees, Kelvin, which is apt almost absolute zero.
Don't have anything in the liquid fire that would impede its performance.
There are.
Eight kind of elements that need to be dried out.
And so last night.
We draw we tried out the first debate, which took only 24 hours.
I don't expect the others to go as rapidly.
But.
That's really kind of making sure that liquid fire is completely dry before we.
Before we turn it on.
It is one of the risk.
<unk>.
The liquefy our spin.
<unk> did before it left the supplier, but there is always a.
Yep.
Big difference, bringing up in the field.
There's a lot of cockpits it'll come up cleanly.
But that's probably where the risks reside.
So that's how I think about it I'll, let Paul.
Answered the rest of your quick so when it comes from a from the finance point of view.
Yeah, well there was a lot in your questions, but let me try and do my best.
A couple of things are you know anymore.
Any more with the with the filings I mean, the way the rules are progressed in the regulations.
It feels like 80% of what's in my filings anymore as risk factors in you know a caveat right. So we follow the rules, where we were compliant and we want to make sure we're disclosing and doing everything in accordance with the rules but.
So that's what we do and but in terms of you know.
The financings themselves, they're they're not it's not like they are contingent on Georgia being turned on and that's not a caveat to us making the decisions on which ones we're going to fix it's not.
So there's a whole range of options that we have available to us and it's really again back to just us being prudent and thoughtful about what choices, we're gonna make.
In terms of the amount of cash that we need next year, you know really where we're in a great position because I mean, a good position I would say because you know you look at the fact that we've largely spent what we need for Georgia were by and large you know we don't have much left relatively speaking on Louisiana, we can pace, Texas.
And Georgia, and New York are the big facilities kind of commensurate with the right solutions and trying to figure out which was which of those are.
Are the right solutions and when you look at our growth, we'll talk more about it in the January business update, but you know given our forecast for next year. Both in terms of topline and margin you know we should be in a good position to middle to latter part of next year.
It could be cross into the operating positive operating cash flows and so really you know in the big scheme of things, it's not a lot to kind of get to that to that bridge.
Where we need to be and life changes for us dramatically.
As we cross that threshold and we in terms of access to institutional money and funding. The next round of projects and things that we're doing so.
Well.
Certainly talk more as in the January business update and as we get through our ear and filing but you know we feel we feel good about the range of options that we have and the position that we're in and we're poised to fund our business plan in the near term.
Thank you and in terms of inventories that sort of like sort of a source of liquidity for you guys in the near term I'm getting can you bring that number down meaningfully from a billion or so.
Yeah, we absolutely can and are focused on it so you know.
You know when you're when you're scaling a bunch of new things at the same time and you are kind of focused on speed to market and scaling up the breadth of platforms. You know, it's hard to focus on efficiencies and optimization as much but now that we're really starting to scale those products up we're able to kind of.
I think more and ramp more from an optimization and efficiency standpoint.
And also time things better and work with the vendors better on on on deliveries and consignment and other other other tools that we use that can drive that down but it is a it is a substantial source of liquidity and obviously it means we can spend a lot less as we as we ramp that down in the near term.
Thanks, a lot I appreciate it.
Yeah.
Our next question comes from the line of Mark.
Mallow.
Johnson Rice. Please proceed with your question.
Thank you for taking my question.
Good evening Martin.
Good evening I was wondering if you could maybe talk about nuclear operators are potential customers for Electrolyze yours.
Sure do you want to take that one Sanjay.
Sure Andy.
Again Martin It just makes a lot of sense right in terms of when we think about all sorts of clean energy and have some of those clean energy can be used to produce green hydrogen so.
Look I mean, we have some effort going on along those lines. So there are some activities happening. So we certainly see that as a part of our Electrolyze a business opportunity where there is just a direct electrolyze a sale or does that also expand into potentially even building a liquid plant there but it's.
It's a very fair question in short answer to that question is we have some of those activities going on and look forward to sharing a lot more with you all that and again some of these areas whether its nuclear or some of the other opportunity here in the U S. There is bigger opportunity I think are going to get unlocked here as we get further guidance surrounding what exactly is going to the language from the treasury on the PTC NII.
Great and for my follow up question.
Just wanted to try to get a sense.
The level of interest.
You all have and maybe monetizing some of these green hydrogen plants as you bring them on.
In terms of selling down interest in them.
The protest skew news that you shared with us.
Maybe if you could.
Give us your thoughts around that.
Paul do you want to take that one.
Yeah I guess.
You know.
Our our my bias selfishly as to not sell equity out of those plants because that obviously is the most expensive.
Capital So it's better for plug, but you know we have to think more broadly than that given the breadth of agenda that we have and the capital needs and the solutions that we have and the timing and also the partners that we're working with I mean in the case of Fortescue. The fact, they've got interesting investment alternatives and platforms.
We can co invest in their platforms that can be a meaningful opportunity for us and so we've not necessarily acted on some of those opportunities.
We've continued to nurture and we continue to see more expressions of interest with multiple parties that would like to take.
QWERTY Stakes in our plants and so we.
We're going to continue to nurture those.
Concepts in discussions and in context with other alternatives and work towards what we think is the best answer hopefully that helps Martin.
Yes. It does its very helpful. Thank you.
Thank you that is.
Our last question for the day.
I appreciate everyone attending the call and asking the questions you're asking your questions Ed.
Paul mentioned, we will be having our January uptake Cogs, we do every year to provide you insight into our strategies for 2024. So thank you very much and look forward to talking to everyone in the near future Bye now.
This concludes today's teleconference you.
You may disconnect your lines at this time, thank you for your participation.
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