Q2 2024 Bloom Energy Corp Earnings Call

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Mandeep: Thank you for standing by. My name is Mandeep, and I'll be your operator today. At this time, I'd like to welcome everyone to the Bloom Energy Q2 2024 earnings conference call.

Martin deep: Thank you for standing by my name is Martin deep and I'll be your operator today at this time I'd like to welcome everyone to the Bloom Energy Q2, 'twenty 'twenty four earnings conference call all want to be placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session.

Mandeep: All lines will be placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Ed Vallejo, Vice President, Investor Relations. You may...

If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad, if you'd like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over to Ed Vallejo, Vice President Investor Relations you may begin.

Ed Vallejo: Thank you and good afternoon, everybody. Thank you for joining us for Bloom Energy's second quarter 2024 earnings. To supplement this conference call, we filed our second quarter 2024 earnings press release with the SEC on Form 8K and have posted it, along with supplemental financial information that we will reference throughout this call, on our investor relations website. 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.

Ed Vallejo: Thank you and good afternoon, everybody. Thank you for joining us for Bloom energy second quarter 2024 earnings call.

Speaker Change: To supplement this conference call, we furnished our second quarter 2024 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.

Ed Vallejo: These include statements about the company's business results, products, new markets, strategy, financial position, liquidity, and full year outlook for 2024. 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 Forms 10-K and 10-Q. We assume no obligation to revise any forward-looking statements made on today's call.

Speaker Change: 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.

Martin deep: These include statements about the company's business results products, new market strategy financial position liquidity and full year outlook for 2024.

Speaker Change: These statements are predictions based upon our expectations estimates and assumptions. However, these statements deal with future events. They are subject to numerous known and unknown risks and uncertainties as discussed in detail in our documents filed with the SEC, including our most recently filed forms 10-K and 10.

Speaker Change: 10-Q, we.

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

Ed Vallejo: During this call and in our second quarter 2024 earnings press release, we refer to GAAP and non-GAAP financial measures. The non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles and are, in addition to, and not a substitute for, or superior to, measures of financial performance preferred in accordance with GAAP.

Speaker Change: During this call and in our second quarter 2024 earnings press release, we refer to GAAP and non-GAAP financial measures.

Speaker Change: 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.

Ed Vallejo: A reconciliation between the GAAP and non-GAAP financial measures is included in our second quarter 2024 earnings press release, available on our investor relations website. Joining me on the call today are K.R. Schroeder, founder, chairman, and chief executive officer, and Dan Berenbaum, our CFO. KR will begin with an overview of our process, and then Dan will review financial highlights for the quarter. And after our prepared remarks, we will have time to take your questions. I will now turn the call over to KR.

Speaker Change: A reconciliation between the GAAP and non-GAAP financial measures is included in our second quarter 2024 earnings press release available on our Investor Relations website.

KR, Schrader: Joining me on the call today are KR, Schrader, founder, Chairman and Chief Executive Officer, and Dan Berenbaum our CFO.

Speaker Change: Okay, I will begin with an overview of our process and then Dan will review financial highlights for the quarter.

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

K.R. Schroeder: Hello everyone, and thanks for joining us today. We executed the first half of 2024 on plan with strong financial discipline. We are on track to meet our yearly guidance. We expect to end the year in a strong financial position and continue to advance our technology, operations, and team for robust future growth. It is now widely understood that demand for electricity is expected to far exceed available supply through the grid. This is presenting Bloom with a huge opportunity. We are seeing high levels of commercial interest in our products and solutions. We have not experienced anything like this in the past two decades. As I see it,

KR Schrader: Hello, everyone and thanks for joining us today.

KR, Schrader: We executed the first half of 2024 to plan with strong financial discipline.

Dan: We are on track to meet our yearly guidance, we expect to end the year in a strong financial position and continue to advance our technology operations and team for a robust future growth.

Speaker Change: It is now widely understood that demand for electricity is expected to far exceed our available supply to the grid.

Speaker Change: It is presenting bloom with a huge opportunity.

KR, Schrader: We are seeing high levels of commercial interest in our products and solutions.

KR, Schrader: We have not experienced anything like this in the past two decades as.

KR, Schrader: As I see it this trend is here to stay for at least another decade, and if anything will gain further momentum in the coming months and years.

K.R. Schroeder: This trend is here to stay for at least another decade and, if anything, will gain further momentum in the coming months and years, while there is concern about the ability to meet growing power needs. I believe it's possible to close the gap in power production in 5 to 10 years by adding a combination of utility-scale renewable and gas-based generation. But it will not solve the time-to-power issues for an end customer who requires electricity to be delivered reliably at their specific location of use.

KR, Schrader: While there is concern about the ability to meet growing power needs.

Speaker Change: I believe it's possible to close the gap in pulp production in five to 10 years by adding a combination of utility scale renewable and gas based generation.

Speaker Change: But it will not solve the time to power issues for an end customer who request electricity to be Delaware reliably at their specific location of use.

K.R. Schroeder: As I see it, even assuming massive coordinated investments and the clearing of all regulatory and permitting hurdles, it would take well over a decade to make the necessary transmission and distribution upgrades that bring power from generation sites to the customer location. Most of the demand for power growth will come from data centers and vehicle and building electrification. In my view, most of this load growth will be location specific. Let me highlight a few.

KR, Schrader: As I see it.

KR, Schrader: Even assuming massive coordinated investments and clearing of all regulatory and permitting hurdles.

KR, Schrader: It could take well over a decade to make the necessary transmission and distribution upgrades that bring power from generation sites to the customer location.

KR, Schrader: Most of the demand for power growth will come from data centers and vehicle and building electrification.

KR, Schrader: In my view most of this load growth will be location specific let.

KR, Schrader: Let me highlight a few.

K.R. Schroeder: To minimize latency, AI and other data centers need to be close to the customer. Therefore, edge data centers will be the dominant users of power. They will be in economic nerve centers that are already power constrained; dense and power-scarce population centers will have the greatest need for power to charge their mass transit EV systems and delivery fleets. Populous cities with distribution constraints will need the most additional power to electrify residences and commercial buildings.

KR, Schrader: To minimize latency AI and other data centers.

KR, Schrader: Need to be close to the customer edge data centers will be the dominant users of power.

Dave: Dave will be an economic nerve centers that are already power constrained.

Speaker Change: Dense and power scares population centers.

Dave: The greatest need for power to charge their mass transit E V systems and delivery fleets.

KR, Schrader: Populous cities the distribution constraints will need the most traditional power to electrify residences and commercial buildings.

K.R. Schroeder: As you can see from these three examples, the markets where the grid is already constrained are also where future stress from increased demand is going to come. The grid's ability to supply more power for timely business growth is going to be severely challenged, and delays will ensue in a competitive business environment. Every delay means lost revenue and opportunity.

KR, Schrader: As you can see from these three examples the markets where the grid is already constrained is also their future stress from increased demand is going to come.

KR, Schrader: The group's ability to supply more power for timely business growth is going to be severely challenged.

KR, Schrader: Delays will ensue.

KR, Schrader: In a competitive business environment.

KR, Schrader: Every delay means lost revenue and opportunity.

K.R. Schroeder: So... What do you do if you're a data center, a manufacturer, a fulfillment center, a mission-critical hospital, or a retail chain that needs power now? Rather than wait for the grid and forego revenue growth, it will be important for companies to take control of their own destiny by procuring distributed power generation at the point of use that is dedicated to them. If you want to generate 24-7 power reliably at the point of use, Without air pollution and no noise, and you need it now, there is no better solution in the market than the Bloom Energy servers. Our energy servers can be grid-tied or completely isolated. No grid interconnection is needed.

KR, Schrader: So.

K.R. Schroeder: Last year, our average fleet availability at over 850 installation sites was 99.995%. Let me repeat, our annual availability of all our energy servers at all our sites, that is, over 850 sites, was 99.995%, a metric that cannot be matched by any other commercial solution in the market today. The Bloom Energy Solution, which emits zero emissions when operated with net-zero fuels, also offers the lowest carbon footprint on-site power when operated with natural gas.

Speaker Change: What do you do if you had a data center.

KR, Schrader: Manufacturer.

KR, Schrader: Most of them in Center Commission critical hospital, or a retail chain that needs power now.

KR, Schrader: Rather than wait for the grade and forego revenue growth it'll be important for companies to take control of their own destiny by procuring distributed power generation at the point of use that as a dedicated for them.

Speaker Change: If you want to generate 24, seven power reliably at the point of use without air pollution, and no noise and you need. It now there is no better solution in the market then the Bloom energy servers.

KR, Schrader: Our energy servers can be grid tied or completely island it.

KR, Schrader: No grid interconnection needed.

KR, Schrader: Last year.

KR, Schrader: Average fleet availability at all of our 850 installation sites.

Speaker Change: Was $99.

Speaker Change: 995%.

Speaker Change: Let me repeat.

Speaker Change: Our annual availability of all energy servers.

KR, Schrader: At all our sites.

KR, Schrader: That is over 850 sites was 99.995% a metric that cannot be matched by any other commercial solution in the market today.

KR, Schrader: The Bloom energy solution, which is zero emission spend operated with net zero fuels also offers the lowest carbon footprint onsite power and operated with natural gas.

KR, Schrader: Today.

K.R. Schroeder: Even the utilities themselves are aware that they need help, and Bloom is an excellent alternative and supplement. They have a choice: either force developers to wait five plus years for power or embrace Bloom's technology and help their customers and communities grow. We see two paths to serving an end user.

KR, Schrader: Even the utilities themselves.

Speaker Change: There that they need help and Bloomington excellent alternative and supplement.

Speaker Change: They have a choice.

Speaker Change: Either forced developers to wait five plus years for power or embraced blooms technology and help their customer and communities grow.

Speaker Change: D C. Two packs to serving an end user.

K.R. Schroeder: First, we can work with the end customer directly, as you have seen with our existing behind-the-meter solution. We continue to see a strong pipeline and large project sizes, both in the U.S. and internationally. Corvieve, a leader in AI, recently purchased Bloom's servers.

Speaker Change: First.

KR, Schrader: We can work with the end customer directly as you have seen without existing behind the meter solutions.

KR, Schrader: We continue to see a strong pipeline and large project sizes, both in the U S and internationally.

Speaker Change: Core reef a leader in AI recently purchased Bloom servers.

K.R. Schroeder: This is further validation of our technology's importance to artificial intelligence; we can serve the end customer with front-of-the-meter solutions. Silicon Valley Power just received city council approval for up to 100 megawatts of new generation to be served with front-of-the-meter generation that will be sleeved to specific customers in dedicated megawatt increments, as part of the 100 megawatt. 20 megawatts was approved using Bloom Energy servers for AWS. Bloom is working with SVP to support the needs of its customers, like AWS.

Speaker Change: This is further validation of our technologies importance to artificial intelligence.

Speaker Change: Kent.

Speaker Change: We can serve the end customer the strength of the Mitra solutions.

Speaker Change: Silicon Valley Power just received city council approval for up to 100 megawatts of new generation to be served with strength of the mate Mitra generation that'll be sleeved to specific customers in dedicated megawatt increments.

Speaker Change: As part of the 100 megawatts.

KR, Schrader: 20 megawatts was approved using bloom energy servers for AWS.

Speaker Change: Bloom is working with SVP to support the needs of its customers like AWS.

K.R. Schroeder: Bloom is excited to support SVP's fuel cell development once it finalizes terms with AWS. Under the planned structure, SVP will resell the power generated by Bloom's energy server directly to customers under a dedicated rate structure or tariff. This fulfills SVP's growth needs without impacting other SVP ratepayers. SVP is currently working on procuring the additional 80 megawatts to serve its customers, mainly data centers, using the same model. We applaud Silicon Valley Power for being a leader in providing power choice to its customers.

Speaker Change: Bloom is excited to support Svp's fuel cell development once it finalized systems with AWS.

KR, Schrader: Under the plan structure SVP will resell the power generated by Bloom energy server directly to customers under dedicated REIT structure or tariff.

KR, Schrader: This fulfilled.

KR, Schrader: S V piece growth needs without impacting other SVP ratepayers.

KR, Schrader: SVP is currently working on procuring the additional 80 megawatts to serve its customers mainly data centers using the same model.

Speaker Change: We applaud Silicon Valley power for being a leader in providing power choice towards customers with.

K.R. Schroeder: We thank them for embracing Bloom's solution. I believe that other utilities should and will follow suit. It is obvious that, rather than losing local jobs and tax dollars, such a solution is a win for the local economy, the ratepayers, the customer, the utility, and Bloom. Now, switching to technology development.

Speaker Change: We thank them for embracing Bloom solution.

Speaker Change: I believe that other utilities should and will follow suit.

Speaker Change: It is obvious that rather than losing local jobs and tax dollars such a solution is even for the local economy the rate payers the customer the utility and bloom.

Speaker Change: Now switching to technology development.

K.R. Schroeder: We continue to innovate and further strengthen our leadership position. Earlier this week, we announced that we have achieved 60% electrical efficiency and 90% high-temperature combined heat and power efficiency while using 100% hydrogen in our fuel cells. These are record efficiencies using hydrogen as a fuel in our energy servers. Also, I see our CHP offering as a key benefit to customers for heating and cooling. We can achieve 90% fuel efficiency with this option.

Speaker Change: We continue to innovate and further strengthen our leadership position.

Speaker Change: Earlier this week, we announced that we had achieved 60% electrical efficiency.

Speaker Change: And 90% high temperature combined heat and power efficiency.

Speaker Change: While using 100% hydrogen.

Speaker Change: Fuel itself.

Speaker Change: These are record efficiencies using hydrogen as a fuel and our energy servers.

Speaker Change: Also.

Speaker Change: I see our CHP offering as a key benefit to customers for heating and cooling.

Speaker Change: We can achieve 90% fuel efficiency with this option.

K.R. Schroeder: The first U.S. installation of our CHP solution is at the Energy and Innovation Center in New Britain Park, Connecticut, for 20 megawatts and is ready for commission. In this case, the Bloom solution will be leveraged for the park's development of a high-performance computing and data center corridor. These examples speak to the capability and speed with which our team executes on innovating and implementing new technology, as well as the versatility of our solid oxide platform. I'll be back to take your questions shortly, but for now, I'll turn it over to Dan. Thank you, KR.

Speaker Change: The first U S installation of our CHP solution.

Speaker Change: Had the energy and innovation Center in New Britain Park, Connecticut for 20 megawatts and is ready for commissioning.

Speaker Change: In this case the bloom solution will be leveraged for the parks development of our high performance computing and data Center corridor.

Speaker Change: These examples speak to the capability and speed with which our team executes on innovating and implementing new technology as well as the versatility of our solid oxide platform.

Speaker Change: I'll be back to take your questions shortly but for now I'll turn it over to Dan.

Dan Berenbaum: Thank you, KR, and good afternoon, everyone. During last quarter's earnings call, which was only two weeks after I joined Bloom, I mentioned that I was already impressed by what I'd seen, the technology, the people, and the drive to succeed in our mission. Now, having had the chance to gain an even better understanding of the depth of the team's expertise, the technology, our manufacturing operations, our commercial pipeline, and our product roadmap, I can tell you that I'm even more excited to have joined this team at an inflection point for our solution. My top priority is to make sure that we're ready to scale profitably as our solution to the problems of delivering power at the point of use becomes more widely adopted.

Dan Berenbaum: Thank you K R and good afternoon, everyone.

Dan Berenbaum: During last quarter's earnings call, which was only two weeks after I joined Bloom I mentioned that I was already impressed by what I've seen the technology the people and the drive to succeed in our mission now having had the chance to gain an even better understanding of the depth of the teams expertise the technology our manufacturer.

Speaker Change: Operations, our commercial pipeline in our product roadmap I can tell you that I'm, even more excited to have joined this team at an inflection point for our solutions.

Speaker Change: My top priority is to make sure that we're ready to scale profitably as our solution to the problems of delivering power at the point of views becomes more widely adopted we.

Dan Berenbaum: We have strong commercial and operational leadership. Our chief commercial officer, Aman Joshi, and our chief operations officer, Satish Choudhury, are strong partners in this effort, and they are leveraging the innovations and products developed by our engineering team. Looking at our Q2 results, revenue for the quarter was $335.8 million, an increase of 11.5% over the second quarter of 2023. Product and service revenue was $278.8 million, an increase of 8.5% year-over-year, slightly trailing the increase in total revenue due to certain higher ASP projects that we booked in Q2. Service revenue increased by 24.1% to $52.5 million, and while electricity revenue continues to decline as expected, data centers are becoming a larger part of our.

Speaker Change: We have strong commercial and operational leadership, our chief commercial Officer, Amman Joshi, and our Chief operations Officer to Chief Tory are strong partners in this effort and they are leveraging the innovations in products developed by our engineering team.

Speaker Change: Looking at our Q2 results revenue for the quarter was $335 8 million an increase of 11, 5% over the second quarter of 2023.

Speaker Change: Product and service revenue was $278 $8 million, an increase of eight 5% year over year slightly trailing the increase in total revenue due to certain higher ASP projects that we booked in Q2 2003.

Speaker Change: Service revenue increased by 24, 1% to $52 $5 million, while electricity revenue continues to decline as expected.

Speaker Change: Data centers are becoming a larger part of our mix. In addition to projects like the previously announced Intel data center expansion, we're executing on opportunities to support the broader ecosystem by providing power solutions to critical manufacturers that support the data center build outs and example of this is our recently announced.

Dan Berenbaum: In addition to projects like the previously announced Intel Data Center expansion, we're executing on opportunities to support the broader ecosystem by providing power solutions to critical manufacturers that support the data center build-out. An example of this is our recently announced deal with Quanta, a large manufacturer of data center hardware, which is looking to grow with its customers but is facing the same time-to-power problems as the data centers they serve.

Speaker Change: <unk> deal with Quanta, a large manufacturer of data center hardware, which is looking to grow with its customers, but is facing the same time to power problems as the data centers they serve.

Dan Berenbaum: Non-GAAP gross margin was 21.8% for the second quarter, an improvement of approximately 140 basis points over the second quarter of 2023. Our service business results have continued to improve as planned, and we expect service to be profitable for the full year 2024, which will be a first for us. Our product cost reduction efforts continue, supported by our technology roadmap, manufacturing efficiencies, and the benefits of scale. We continue to expect a 10% year-over-year cost reduction in our core energy servers, consistent with what we have communicated in the past. Non-GAAP operating loss for the second quarter was $3.2 million, an improvement of almost $22.7 million from a loss of $25.9 million in the second quarter of 2023.

Speaker Change: non-GAAP gross margin was 21, 8% for the second quarter, an improvement of approximately 140 basis points over the second quarter of 2023.

Speaker Change: Our service business results have continued to improve as planned and we expect service to be profitable for the full year 2024, which will be a first for us.

Speaker Change: Our product cost reduction efforts continue supported by our technology roadmap manufacturing efficiencies and the benefits of scale. We continue to expect a 10% year over year cost reduction in our core energy servers consistent with what we have communicated in the past.

Speaker Change: non-GAAP operating loss for the second quarter was $3 2 million an improvement of almost $22 $7 million from a loss of $25 9 million in the second quarter of 2023.

Dan Berenbaum: Turning to cash flow, cash from operating activities was an outflow of $175.5 million in the second quarter, due almost entirely to an increase in receivables. It is common for us to have a meaningful cash outflow in the first half of the year and make it up in the second half of the year as we monetize inventory and collect on receivables. We expect cash flow from operations to be positive for the second half.

Speaker Change: Turning to cash flow cash from operating activities was an outflow of $175 5 million in the second quarter due almost entirely to an increase in receivables.

Speaker Change: It's common for us to have a meaningful cash outflow in the first half of the year and make it up in the second half of the year as we monetize inventory and collect on receivables, we expect cash flow from operations to be positive for the second half of the year.

Dan Berenbaum: Turning to the balance sheet, we ended the quarter with $637.8 million of total cash, including the $402 million gross proceeds of the financing we completed in May, net of repurchasing $142 million of our 2025 convertible debt.

Speaker Change: Turning to the balance sheet, we ended the quarter with $637 $8 million of total cash, including the $402 million gross proceeds of the financing. We completed in may net of repurchasing $142 million of our 2025 convertible debt.

Dan Berenbaum: We're reaffirming our 2024 annual guidance for revenue, margins, and profitability. With our backlog and commercial pipeline, we remain confident that we can deliver $1.4 to $1.6 billion of annual revenue at approximately 28% non-GAAP gross margin. As stated before, where we land within the guidance range will be determined by the timing of projects that are in the pipeline. Consistent with prior years, revenue is expected to be significantly weighted towards Q

Speaker Change: We are reaffirming our 2024 annual guidance for revenue margins and profitability.

Speaker Change: With our backlog in commercial pipeline, we remain confident that we can deliver one four to $1 $6 billion of annual revenue at approximately 28% non-GAAP gross margin as.

Speaker Change: As stated before where we land within the guidance range will be determined by the timing of projects that are in the pipeline.

Speaker Change: Consistent with prior years revenue is expected to be significantly weighted towards Q4.

Dan Berenbaum: Gross margins should improve as we move through the remainder of the year on lower product costs and improved service performance. As we have noted previously, there is significant volume leverage in the financial model. With this annual revenue and gross margin profile, we should be well positioned to achieve non-GAAP operating profit of $75 to $100 million. As we look beyond 2024, we are conscious that changes in our product mix are changing the way we use certain metrics to forecast our business.

Speaker Change: Gross margins should improve as we move through the remainder of the year on lower product costs and improving service performance. As we have noted previously there is significant volume leverage in our financial model with this annual revenue and gross margin profile, we should be well positioned to achieve non-GAAP op.

Speaker Change: Operating profit of $75 million to $100 million.

Speaker Change: As we look beyond 2024, we are conscious that changes in our product mix are changing the way we use certain metrics to forecast our business. We plan to closely evaluate the effectiveness and relevance of certain of our metrics as well as potentially introducing new metrics to give investors the clearest possible.

Dan Berenbaum: We plan to closely evaluate the effectiveness and relevance of certain of our metrics as well as potentially introduce new metrics to give investors the clearest possible picture of how we operate and assess the performance of our business. To conclude, we're pleased with the momentum we're seeing in our commercial pipeline, and I believe we're on a strong financial footing to continue delivering on these projects and to scale our business further. Our product suite is the perfect fit for the energy challenges that companies around the world are facing, and we are laser-focused on positioning Bloom to scale profitably and continue to provide the most efficient and reliable solutions for the world's evolving energy needs.

Speaker Change: Picture of how we operate and assess the performance of our business.

Speaker Change: To conclude we're pleased with the momentum we're seeing in our commercial pipeline and I believe we're on a strong financial footing to continue delivering on these projects and to scale our business further.

Speaker Change: Our product suite is the perfect fit for the energy challenges that companies around the world are facing and we are laser focused on positioning bloom to scale profitably and continue to provide the most efficient and reliable solutions for the world's evolving energy needs.

Operator: Please wait, the conference will begin shortly. Thank you for standing by.

Mondip: My name is Mondip and I'll be your operator today.

Operator: At this time, I'd like to welcome everyone to the Blum Energy Q2 2024 earnings conference call. All lines will be placed on mute to prevent any background noise. After to speak or summarize, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you.

Dan Berenbaum: Before I conclude my remarks, I'd like to note that this will be Ed Vallejo's final earnings call with Bloom as he moves on to other opportunities. I want to thank Ed for everything that he's done for Bloom over the course of the past three years, and we all wish him well in his future endeavors. I'd also like to introduce Michael Tierney, who has just joined Bloom as our new VP of Investor Relations. With over 20 years of buy-side experience, I'm sure that Michael will be able to continue and enhance the investor communications program that Ed has ramped up. With that, Operator, please open the line for questions.

Ed Vallejo: Before I conclude my remarks, I'd like to note that this will be Ed Vallejo. His final earnings call with Bloom as he moves on to other opportunities I want to thank Ed for everything that he has done for <unk> over the course of the past three years and we all wish him well in his future endeavors I.

Speaker Change: I'd also like to introduce Michael Cherny, who has just joined <unk> as our new VP of Investor Relations with over 20 years of buy side experience I am sure that Michael will be able to continue and enhance the investor Communications program that Ed has ramped up.

Edward Vallejo: I would now like to turn the call over to Ed Vallejo, Vice President Investor Relations. You may begin. Thank you and good afternoon everybody.

Speaker Change: With that operator, please open the line for questions.

Edward Vallejo: Thank you for joining us for Blum Energy's second quarter 2024 earnings call. To supplement this conference call, we furnished our second quarter 2024 earnings press release with the SEC on Form 8K and have posted it along with supplemental financial information that we will reference throughout this call to our investor relations website. 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.

Operator: Thank you. We will now begin the question and answer session. If you've dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star 1 again. If you're called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. For today's session, we ask that you please limit yourself to one question. Again, press star one to join.

Speaker Change: Thank you we will now begin the question and answer session.

Speaker Change: All of them would like to ask a question. Please press star one on your telephone keypad raise your hand and joined the queue if you'd like to withdraw your question simply press Star one again.

Speaker Change: We are called upon to ask your question and our listening be allowed speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Edward Vallejo: These include statements about the company's business results, products, new markets, strategy, financial position, liquidity and full year outlook for 2024. These statements are predictions based upon our expectations, estimates and assumptions. However, at these statements deal with future events, they are subject to numerous known and unknown risks and uncertainties as discussed in detail in our documents filed with the SEC, including our most recently filed forms 10K and 10Q. We assume no obligation to revise any forward looking statements made on today's call.

Speaker Change: For today's <unk> session. We ask that you please limit yourself to one question.

Speaker Change: Again press star one to join the queue.

Operator: The first question comes from a line by Andrew Percoco with Morgan Stanley. Please go ahead.

Andrew parochial: Our first question comes from the line of Andrew parochial with Morgan.

Stanley: Stanley. Please go ahead.

Andrew Percoco: Great. Thanks so much, and good evening, everyone.

Andrew parochial: Great. Thanks, so much and good evening, everyone. Thanks for taking the question.

Andrew Percoco: Thanks for taking the question. I do want to start on the data center side here. Great to see you guys make some progress on that front with the CoreWeave announcement this quarter, so congrats on that. But I guess as we think about the evolution of this opportunity, how should we be thinking about the sizing of these deals? The CoreWeave deal looked to be about 15 megawatts. Is that the sweet spot for you guys, or should we start to expect some larger deals? We're starting to see some data centers, obviously well in excess of 100 megawatts. I'm just wondering if we should be expecting those types of deals to be announced from you guys at some point this year.

Speaker Change: I do want to start on the datacenter side here great.

Speaker Change: Great to see you guys make some progress on that front with the <unk> announcement this quarter. So congrats on that but I guess as we think about the evolution of this opportunity how should we be thinking about the sizing of these deals the <unk> deal look to be about 15 megawatts.

Edward Vallejo: During this call and in our second quarter 2024 earnings press release, we refer to gap and non-gap financial measures. The non-gap financial measures are not prepared in accordance with US generally accepted accounting principles in our in addition to in not a substitute for or superior to measures of financial performance preferred on accordance with gap. Our reconciliation between the gap and non-gap financial measures is included in our second quarter 2024 earnings press release available on our investor relations website.

Speaker Change: That the sweet spot for you guys or should we start to expect some larger deals we're starting to see some data centers, obviously are well in excess of 100 megawatts I'm just wondering if we should be expecting.

Speaker Change: Those types of deals to be announced from you guys at some point this year. Thank you.

Andrew Percoco: Thank you.

Speaker Change: Andrew.

Speaker Change: Thank you for the call and Great question. So I think what you should expect is.

K.R. Schroeder: Hey Andrew, thank you for the call and great question. So I think what you should expect is an entire spectrum. You should expect a spectrum from anywhere in the few single-digit megawatts all the way to hundreds of megawatts. And they're all in our mix right now as we speak.

Speaker Change: As an entire spectrum.

Andrew parochial: Yesterday.

Andrew parochial: I expect the spectrum from anywhere in the few single digit megawatts.

Andrew parochial: All the way to hundreds of megawatts and that all in our mix right now as we speak and here's the reason why.

Edward Vallejo: Joining me on the call today are K.R. Schritter, founder, chairman and chief executive officer and Dan Barronbaum, our CFO. K.R, will begin with an overview of our process and then Dan will review financial highlights for the quarter.

K.R. Schroeder: And here's the reason why. There are data centers with additional white space, or switching from CPU to GPU that require more power in the same white space and are not able to get their power right away. There are small edge data centers being built wherever they have excess land and other infrastructure for which they need smaller-sized data centers. And I say smaller size in the single to..., you know, 15, 20, 25 megawatts.

Andrew parochial: Data centers with additional white space.

Andrew parochial: Our seeking from CPU and GPU, that's a class more power in the same light space and are not able to get their power right away.

Andrew parochial: There are small edge data centers being built wherever they have excess land and other infrastructure.

Edward Vallejo: And after our repair remarks we will have time to take your questions.

K.R. Schritter: I will now turn the call over to K.R. Hello everyone and thanks for joining us today. We executed the first half of 2024 to plan with strong financial discipline. We are on track to meet our yearly guidance. We expect to end the year in a strong financial position and continue to advance our technology operations and team for robust future growth. It is now widely understood that demand for electricity is expected to far exceed available supply through the grid.

Andrew parochial: It's been a smaller size data centers, when I say smaller size in the singles too.

Andrew parochial: <unk> 2025 megawatts.

K.R. Schroeder: Then you're looking at data centers on the edge. This is Yen Density, all the way to 100-plus megawatts that are custom-built for the hyperscalers, and those will be in the 100-megawatt range. So as we see it, both from data center operators that purpose-built hyperscalers, as well as from edge data centers, we are seeing a spectrum from 5 all the way to hundreds of mega

Dan Berenbaum: Dan Youre looking at data centers on the edge.

Speaker Change: Is he in dense cities.

Andrew parochial: All the way to 100 plus megawatts that are custom built for the Hyperscale and.

Andrew parochial: And also be in the 100 megawatt things so as we see it.

Andrew parochial: <unk> from data center operators that purpose built.

K.R. Schritter: It is presenting Bloom with a huge opportunity. We are seeing high levels of commercial interest in our products and solutions. We have not experienced anything like this in the past two decades. As I see it, this trend is here to stay for at least another decade and if anything will gain further momentum in the coming months and years. While there is concern about the ability to meet growing power needs, I believe it is possible to close the gap in power production in five to ten years by adding a combination of utility-scale renewable and gas-based generation.

Andrew parochial: Hyperscale us as well.

Andrew parochial: H data centers, we are seeing a spectrum from five all the way to hundreds of megawatts obviously.

Operator: So, obviously... The smaller the size of the deal, you can go to www.verbalink.com for more information on the stripper trick at the website www.verbalink.com. Thank you. Our next question comes from Alana Jordan Levy with Truist Securities. Please go ahead.

Andrew parochial: The smaller of the size of the deal.

Andrew parochial: The quicker the velocity on getting that transaction done.

Andrew parochial: Illustrated in many times that these large deals are fairly complex and big science harder and takes a little bit longer to come so expect fantastic.

Andrew parochial: Okay.

Andrew parochial: Our next question comes from the line of Jordan Levy with tourists Securities. Please go ahead.

Henry: Hi, all it's Henry on for Jordan here, Congrats on the quarter just on the remaining Amazon volumes that have yet to be deployed I just wanted to ask on kind of what the outlook. Our timeline, we should be expecting for those if you can say anything at this point on that thank you.

K.R. Schritter: But it will not solve the time to power issues for an end customer who requires electricity to be delivered reliably at their specific location of use. As I see it, even assuming massive coordinated investments and clearing of all regulatory and permitting hurdles, it would take well over a decade to make the necessary transmission and distribution upgrades that bring power from generation sites to the customer location. Most of the demand for power growth will come from data centers and vehicle and building electrification. In my view, most of this load growth will be location specific.

Operator: Yeah, so I think there are two, two like references there. If you, if you like, look at them.

Speaker Change: Yeah. So I think there are two references if you if you like look at it.

Speaker Change: One is.

K.R. Schroeder: One is with Silicon Valley Power. Amazon, you know, like AWS, is negotiating with Silicon Valley Power separately to get into a contract, and that contract of 20 megawatts will be fulfilled by Bloom by having a contract with Silicon Valley Power. This is in front of the meter.

Speaker Change: With Silicon Valley power.

Andrew parochial: Amazon.

Speaker Change: AWS is negotiating with Silicon Valley power separately too.

Andrew parochial: Get into a contract.

Andrew parochial: And that contract of 20 megawatts will be fulfilled by blown bi.

Andrew parochial: By having a contract with Silicon Valley power. This is in front of the meter.

K.R. Schroeder: It is a – we, our customer – is the municipal utility Silicon Valley Power, and their customer is AWS, but it is dedicated and sleeved to them at a rate that they negotiate specifically for them, and it doesn't impact any other rate there. I think this model is a phenomenal model and that will grow as we go forward. As you are aware, AWS halted work on the 73-megawatt contract they had with us in Oregon.

Andrew parochial: Yeah.

Speaker Change: Our customer.

K.R. Schritter: Let me highlight a few. To minimize latency, AI and other data centers need to be close to the customer. Edge data centers will be the dominant users of power. They will be in economic nerve centers that are already power constrained. Dense and power scarce population centers will have the greatest need for power to charge their mass transit EV systems and delivery fleets. Popular cities with distribution constraints will need the most additional power to electrify residences and commercial buildings.

Speaker Change: Is the municipal utility Silicon valley power and their customer.

Speaker Change: Is AWS, but it is dedicated and sleeve to them.

Speaker Change: At a rate that they negotiate specifically for them and it doesn't impact any other rate. There I think this model is a phenomenal model and that will grow as a pull forward.

Speaker Change: Separately.

Andrew parochial: Youre aware that AWS.

Speaker Change: All that working on the 73 megawatt contract they had with us in Oregon.

K.R. Schroeder: They have separately submitted a relocation request to us for all of 73 megawatts to Ohio. We are currently working with AWS on those details. Both these deals are being worked in parallel, and there'll be many other opportunities, hopefully, given our strong working relationship between AWS and Bloom. Thank you. Our next question comes from the line of Dushyant Ailani with Jeffreys. Please go ahead.

Andrew parochial: Separately submitted a relocation request to us for all of 73 megawatts to Ohio.

Speaker Change: We are currently working with AWS on those details board. These deals are being worked in parallel and there'll be many other opportunities hopefully keelan, our strong working relationship between AWS and globe.

K.R. Schritter: As you can see from these three examples, the markets where the grid is already constrained is also where future stress from increased demand is going to come. The grid's ability to supply more power for timely business growth is going to be severely challenged, delays will ensue. In a competitive business environment, every delay means loss, revenue and opportunity.

Andrew parochial: Okay.

Sean <unk>: Our next question comes from the line of Sean <unk> with Jefferies. Please go ahead.

Sean: Hi, Thank you for taking my questions.

Sean <unk>: Just wanted to get an understanding of.

Sean: The guide the one four to one six does that include any potential near term data center orders or what what are some puts and takes.

K.R. Schritter: So, what do you do if you are a data center, a manufacturer, a fulfillment center, a mission critical hospital, or a retail chain that needs power now? Rather than wait for the grid and forgo revenue growth, it will be important for companies to take control of their own destiny by procuring distributed power generation at the point of use that is dedicated for them. If you want to generate 24.7 power reliably, at the point of use, without air pollution and no noise and you need it now, there is no better solution in the market than the Blum Energy servers.

Speaker Change: Whether it's data center or whether it's from S. K. Thank you.

Dan Berenbaum: So we've talked about the 1.4 to 1.6, and we talked about where we end up within that range being dependent on the timing of projects. We haven't talked specifically about what those projects are, and we don't talk specifically about the sizes of projects with specific customers. We try to avoid providing those details about specific customers.

Speaker Change: So we've talked about the one four to $1 six we've talked about where we end up within that range being dependent on timing of projects. We haven't talked specifically about what those projects are and we don't talk specifically about sizes of projects with specific customers, we try to what we try to avoid.

Andrew parochial: Providing those details on specific customers.

Andrew parochial: So all we can say is that we have between our backlog in our commercial pipeline. We are confident in being within that range of $1 $41 6 billion for the year, where we wind up within that range is dependent on timing of projects and then to add to that this is <unk>, what I would say is given.

Dan Berenbaum: So all we can say is that between our backlog and our commercial pipeline, we are confident in being within that range of 1.4 to 1.6 billion for the year. Where we wind up within that range is dependent on the timing of projects.

K.R. Schroeder: And Dan, to add to that, this is K.R. Dushyant. What I would say is, given how strong the data center market is for us in a segment, you should assume that some amount of our installations will be in the data center space, but it's up to our customers to speak to that size and not up to us. Our next question comes from a line from Manav Gupta with UBS. Please go ahead. Guys, congrats on the new orders. My quick review of...

K.R. Schritter: Our energy servers can be grid tied or completely islanded. No grid interconnection needed. Last year, our average fleet availability at over our 850 installation sites was 99.995%. Let me repeat, our annual availability of all our energy servers at all our sites that is over 850 sites was 99.995% a metric that cannot be matched by any other commercial solution in the market today. The Blum Energy Solution, which is zero emissions when operated with net zero fuels, also offers the lowest carbon footprint on-site power than operated with natural gas.

Andrew parochial: And how strong the data center market has for us in that segment, you should assume that some amount of our installations will be in the data center space, but it is it's up to our customers to speak to that size and not up to us.

Operator: Our next question comes from a line by Manav Gupta with UBS. Please go ahead. Guys, congrats on...

Speaker Change: Our next question comes from the line of Manav Gupta with UBS. Please go ahead.

Manav Gupta: Hey, guys congrats on the new corridors.

Manav Gupta: Back of the envelope math is indicating to hit about 28% gross margin youre happy with around 32% gross margin a significant improvement from one from the first half you guys are known to hit the guidance. So help us understand all the factors that will help drive a materially better gross margin in the second half of this year. Thank you.

Operator: Well, I may not talk through all of the factors, if you don't mind, Manav, but look, as we've discussed, there's significant volume leverage in our model. As we ramp volume, we expect to see the benefits of that. And I mean, to the point, you know, we reiterate our guidance.

Speaker Change: Well I may not talk to you all of the factors. If you don't mind Manav that look as we've discussed there is significant volume leverage in our model as we ramp volume, we expect to see the benefits of that and to the point, we reiterate our guidance. We are confident in our commercial pipeline. We are confident in the margin lever.

K.R. Schritter: Today, even the utilities themselves are aware that they need help and Bloom is an excellent alternative and supplement. They have a choice, either force developers to wait 5 plus years for power or embrace Bloom's technology and help their customer and communities grow.

Dan Berenbaum: We are confident in our commercial pipeline. We are confident in the margin leverage that comes with that growing volume. And so that's what will get us 28%. You know, your math is correct. I do understand that we need to have very strong gross margins in the back half of the year to hit that 28% for the full year. And we're confident in doing so.

Speaker Change: <unk> that comes with that growing volume and so that's what will get us 28% and your math is correct I do understand that we need to have very strong gross margins in the back half of the year to hit that 28% for the full year and we're confident in doing so.

K.R. Schritter: We see two paths to serving an end user. First, we can work with the end customer directly as you have seen with our existing behind-the-meter solutions. We continue to see a strong pipeline and large project sizes both in the US and internationally.

Operator: Our next question comes from the line of James West with Evercore ISI. Please go ahead.

Speaker Change: Our next question comes from the line of James West with Evercore ISI. Please go ahead.

James West: Hey, good afternoon, guys. KR, we certainly agree with your view of the role of the next five to ten years with electrification and the need for gas, especially electrification, and we've heard from a number of traditional energy companies already, especially pipeline companies that are being asked to pipe natural gas directly to data centers. I was curious how that works between Bloom, the data center, and perhaps traditional energy companies. Are you all in a consortium? Is it all run by the data center? producer? I mean, how does it all come together?

James West: Hey, good afternoon guys.

Speaker Change: So.

Speaker Change: We certainly agree with your view of the road in the next five to 10 years.

K.R. Schritter: Corvieve, a leader in AI recently purchased Bloom's servers. This is further validation of our technology's importance to artificial intelligence. Second, we can serve the end customer with front-of-the-meter solutions. Silicon Valley Power just received City Council approval for up to 100 megawatts of new generation to be served with front-of-the-meter generation that will be sleeved to specific customers in dedicated megawatt increments. As part of the 100 megawatts, 20 megawatts was approved using Bloom Energy servers for AWS.

James West: With electrification and the need for gas this electrification, especially in.

Speaker Change: And we've heard from a number of the traditional energy companies already especially the pipeline companies that are being asked to pipe.

Speaker Change: Gas directly to data centers.

Speaker Change: Curious.

Speaker Change: How that works between Bloom the data center.

Speaker Change: Traditional energy companies are you all in a consortium is it all run by the data center.

Speaker Change: Producer has all come together.

K.R. Schroeder: So the way, James, that's a very good question. So there is not a specific model, the first thing that I would say.

Speaker Change: So the rate.

James: James Thats, a very good question so.

Speaker Change: And that is not a specific model as the first thing that I would say it varies.

K.R. Schroeder: It just varies from place to place and state to state. That's the first answer. The second answer is the following: when a data center deal is being put together, assuming it's a purpose-built data center, they would first negotiate their deal with their hyperscaler, who is their customer. They will have an LOI with them, and that's the process. Even for them to have an LOI, they need to have a fairly good handle on their overall cost, their partners, and how much that computation is going to cost in order to have the LOI.

James: Place to place and state to state. That's the first answer the second answer is the following.

K.R. Schritter: Bloom is working with SVP to support the needs of its customers like AWS. Bloom is excited to support SVP's fuel cell development once it finalizes terms with AWS. Under the planned structure, SVP will resell the power generated by Bloom's energy server directly to customers under a dedicated race structure or tariff. This fulfills SVP's growth needs without impacting other SVP ratepayers. SVP is currently working on procuring the additional 80 MW to serve its customers, mainly data centers using the same model.

Speaker Change: Vented datacenter deal is being put together, assuming it's a purpose built data center.

James: They would first negotiate their deal with their hyperscale or who is their customer they will have an LOI with them.

James: And that's that's that's.

James: What's the process even for them to have an LOI they need to have a fairly good handle on that overall cost they're partners and how much that compute is going to cost in order to have the LOI. So these things to some extent happening in parallel.

K.R. Schroeder: So these things, to some extent, are happening in parallel. So they will engage with us as a technology provider. We will be working with them to assess whether there is an upgrade to the gas system? Does the gas system already exist?

James: No.

James: They will engage with us as a technology provider.

James: We will be working with them to assess is that an upgrade to the gas system as the gas system already exist.

K.R. Schritter: We applaud Silicon Valley Power for being a leader in providing power choice to its customers. We thank them for embracing Bloom's solution. I believe that other utilities should and will follow suit. It is obvious that rather than losing local jobs and tax dollars, such a solution is a win for the local economy, the ratepayers, the customer, the utility, and Bloom.

K.R. Schroeder: Are they going to procure the gas wholesale or retail? How is it going to play out? What are the local regulations?

James: Are they going to procure the gas wholesale retail how is that going to play out what the local regulations are so.

K.R. Schroeder: So this is how it all comes together. So, in a way, it's a multi-party negotiation happening simultaneously. So I'm glad you asked the question, because I mentioned multiple times how this deal is fairly complex. But now, if you think about a 100-plus megawatt deal that is well north of a billion dollars in total value, and now you look at the number of parties that have to be engaged and working together, that's what gives you that longer duration or a long-cycle sale. But it's a very sticky good sale, and you will see these things happen. Thank you.

James: This is how it all comes together so in a way it's.

James: It's a multiparty negotiation happening together so.

Speaker Change: I'm glad you asked the question because I've mentioned multiple times.

James: This deal is fairly complex, but now if you think about 100 plus megawatt deal that is.

K.R. Schritter: Now switching to technology development, we continue to innovate and further strengthen our leadership position. Earlier this week we announced that we have achieved 60% electrical efficiency and 90% high temperature combined heat and power efficiency while using 100% hydrogen in our fuel cells. These are record efficiencies using hydrogen as fuel in our energy servers.

James: Well north of $1 billion in total value and now you look at the number of parties that have to be engaged and working together.

James: What.

James: It gives you that longer durations.

James: Long cycle sale, but it's a very sticky good sale and you will see these things happen.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Colin Rusch with Oppenheimer. Please go ahead. Your line is open.

James: Our next question comes from the line of Collyn Rus with Oppenheimer. Please go ahead.

K.R. Schritter: Also, I see our CHP offering as a key benefit to customers for heating and cooling. We can achieve 90% fuel efficiency with this option. The first US installation of our CHP solution is at the Energy and Innovation Center in New Britain Park, Canada for 20 megawatts and is ready for commissioning. In this case, the Bloom solution will be leveraged for the parks development of a high performance computing and data center corridor. These examples speak to the capability and speed with which our team executes on innovating and implementing new technology as well as the versatility of our solid oxide platform.

Speaker Change: Your line is open. Please go ahead.

Speaker Change: Are you there Colin.

James: Okay.

Operator: Okay, we'll come back to Colin then. Our next question comes from the line of Chris Dendrinos with RBC Capital Markets. Please go ahead. Yeah, thank you.

Speaker Change: And we'll come back to calling them.

Operator: Our next question comes from the line of Chris Dendrinos with RBC Capital Markets. Please go ahead.

James: Our next question comes from the line of Chris <unk> with RBC capital markets. Please go ahead.

Chris: Yes. Thank you.

Chris: Well I think South Korea is hosting one of its hydrogen power options and I guess just in light of the announcement on your fuel cell hydrogen and the efficiency improvement can you maybe speak to I guess your overall competitiveness in that market and how maybe this feels that helps position you all there. Thanks.

Chris Dendrinos: Hey Chris, that's a very good question. You're absolutely right.

Daniel Berenbaum: I'll be back to take your questions shortly, but for now I'll turn it over to them. Thank you K-R and good afternoon everyone. During last quarter's earnings call, which was only two weeks after I joined Bloom, I mentioned that I was already impressed by what I'd seen, the technology, the people, and the drive to succeed in our mission.

Chris: Hey, Chris that's a very good question, you're absolutely right as Korea has modified the.

K.R. Schroeder: As Korea has modified the auction process and has a pretty strong emphasis on hydrogen as a possible fuel, you would have noticed, you know; we are not reactive; we are proactive. The press release that we put out is the work in progress of our engineering team and our product development team for the last many years. And I just want to emphasize

Chris: The auction process and has a pretty strong emphasis on hydrogen as a possible fuel.

Speaker Change: You would have noticed.

Speaker Change: We are not reactor we are proactive.

Daniel Berenbaum: Now, having had the chance to gain an even better understanding of the depth of the team's expertise, the technology, our manufacturing operations, our commercial pipeline, and our product roadmap, I can tell you that I'm even more excited to have joined this team at an inflection point for our solutions. My top priority is to make sure that we're ready to scale profitably as our solution to the problems of delivering power at the point of use becomes more widely adopted.

James: The press release that we put out is work in progress of our engineering team and our product development team for the last many years.

James: And I just want to emphasize.

K.R. Schroeder: 60% electrical efficiency and 90% overall efficiency, and that other 30% of that heat coming from high-temperature steam. There is not a technology in the world that can match it. So we are extremely well positioned in that market, both for the natural gas systems as well as the hydrogen systems. Our job is to make sure it is up to the customer to figure out when they transition from one fuel to another.

James: 60% electrical efficiency.

Speaker Change: 90% overall efficiency.

Speaker Change: And that other 30% of that heat coming at high temperatures steam.

James: That is not a technology in the world that can match that.

Daniel Berenbaum: We have strong commercial and operational leadership, our chief commercial officer Aman Joshi and our chief operations officer Satish Chitori are strong partners in this effort and they are leveraging the innovations and products developed by our engineering team. Looking at our Q2 results, revenue for the quarter was $335.8 million, an increase of 11.5% over the second quarter of 2020. 23. Product and service revenue was $278.8 million, an increase of 8.5% year over year, slightly trailing the increase in total revenue due to certain higher ASP projects that we booked in Q223.

James: So we are extremely well positioned.

James: In that market.

James: For the natural gas systems as well as the hydrogen systems. Our job is to make sure. It is up to the customer to figure out when they transitioned from one field to another but irrespective of what that fuel is V provide are a really good partner SK.

K.R. Schroeder: But irrespective of what that fuel is, we provide our really good partner, SK, with the best technology option. And if they were on the call, I would assume they would say Bloom has given them the best technology option.

Speaker Change: The best technology option and if they have it on the call I would assume they would say bloom has given them the best technology option. Thank you.

Speaker Change: Yes.

Operator: Our next question comes from the line of Martin Malloy with Johnson Rice. Please go ahead. Good afternoon. I just wanted to try to maybe get a better idea around the

Operator: Our next question comes from the line of Martin Malloy with Johnson Rice. Please go ahead.

Speaker Change: Our next question comes from the line of Martin Malloy with Johnson Rice. Please go ahead.

Martin Malloy: Good afternoon.

Martin Malloy: I just wanted to try to maybe get a better idea around the economics of the Bloom server I was wondering if maybe you could speak to.

Daniel Berenbaum: Service revenue increased by 24.1% to $52.5 million, while electricity revenue continues to decline as expected. Data centers are becoming a larger part of our mix. In addition to projects like the previously announced Intel Data Center expansion, we're executing on opportunities to support the broader ecosystem by providing power solutions to critical manufacturers that support the Data Center buildouts. An example of this is our recently announced deal with Quanta, a large manufacturer of Data Center hardware, which is looking to grow with its customers, but is facing the same time-to-power problems as the Data Center's they serve.

Martin Malloy: The heat rate for one of your servers or just give us trying to I'm trying to get a sense for how much.

Speaker Change: It would cost with behind the meter situation.

Speaker Change: $2 50 gas on a cents per kilowatt hour basis.

K.R. Schroeder: Hey, Martin. This is KR. You're asking a question that's all over the map, and we may need to spend the rest of the call if I were to explain that. So here's what we will do. I'll have our team work with you separately to provide you with that because we have provided that in multiple other places.

K R: Hey, Martin this is K R. You're asking a question thats all over the map and we may need to spend the rest of the call.

Speaker Change: Explain that so here is what we will do.

Speaker Change: Lot of team work with deal separately to provide any of that because we are delighted that in multiple other places but.

Speaker Change: Look I think this is the way you got to think about our business.

Daniel Berenbaum: Non-GAP gross margin was 21.8% for the second quarter, an improvement of approximately 140 basis points over the second quarter of 2023. Our service business results have continued to improve as planned, and we expect service to be profitable for the full year 2024, which will be a first for us. Our product cost reduction efforts continue, supported by our technology roadmap, manufacturing efficiencies, and the benefits of scale. We continue to expect a 10% year-over-year cost reduction in our core energy servers consistent with what we have communicated in the past.

K.R. Schroeder: But look, I think this is the way you've got to think about our business. At the end of the day, we are serving an end customer, specifically sleeved in, for whom the option of buying from us or not buying from us is based on their cost of electricity when buying from us compared to their alternative, in every case. The customer buys from us because we are equal to or better than the grid in terms of price, along with all the other attributes, reliability, sustainability, you name it.

Speaker Change: At the end of the day, we are serving an end customer.

Speaker Change: Iphicles sleeve then.

Speaker Change: Whom.

Speaker Change: The option of buying from us are not buying from us.

Speaker Change: Based on.

Speaker Change: Their cost of electricity buying from us compared to that ultimate goal.

Speaker Change: In every case.

Speaker Change: The customer buys from us because we are equal to or.

Speaker Change: Our better than the grid in terms of price along with all the other attributes reliability sustainability you name it.

K.R. Schroeder: Then we are in front of the meter. The reason the customer will transact Sleeved In with us is because there is no other way. Let me emphasize, there is no other way for that customer to get reliable power on-site in a time-to-power fashion where the price of not having power is significantly larger than the cost of power. So that's the calculation they do. That's how they do it. So the heat rate and all that is interesting thermodynamically. It's not interesting to the customer.

Speaker Change: Then get in front of the meter.

Speaker Change: The reason the customer will transact sleeved and with us is.

Daniel Berenbaum: Non-GAP operating loss for the second quarter was $3.2 million, an improvement of almost $22.7 million from a loss of $25.9 million in the second quarter of 2023. Turning to cash flow, cash from operating activities was an outflow of $175.5 million in the second quarter due almost entirely to an increase in receivables. It is common for us to have a meaningful cash outflow in the first half of the year and make it up in the second half of the year as we monetize inventory and collect on receivables.

Speaker Change: Is because there is no other way.

Speaker Change: Let me emphasize no other way for that customer to get reliable followed on site.

Speaker Change: I am too positive fashion, there the price of not having power is significantly larger than the cost of power. So that's the calculation. They do that's how they do it so the heat rate and all of that is interesting thermodynamically, it's not interesting to the customer. Thank you.

Speaker Change: Okay.

Operator: Thank you. Our next question comes from a line from Chris Thung with Wolf Research. Please go ahead.

Chris <unk>: Our next question comes from the line of Chris <unk>.

Daniel Berenbaum: We expect cash flow from operations to be positive for the second half of the year. Turning to the balance sheet, we ended the quarter with $637.8 million of total cash, including the $402 million gross proceeds of the financing we completed in May, net of repurchasing $142 million of our 2025 convertible debt.

Chris: With Wolfe Research. Please go ahead.

Chris: Hi, Dan Thanks for taking my question.

Chris <unk>: Hi, I noticed an acute isn't it so let's realize your agreement to sell two European buyer are you able to expand on that a bit just in terms of size and timing of sales.

K.R. Schroeder: So, look, there are a lot of things in the pipeline and various stages of our pipeline. And our policy with talking about any commercial agreement with any customer is when we have the permission of that customer to speak so. So we are pursuing electrolyzers. You know that we have the world's best, most efficient electrolyzer.

Speaker Change: So.

Speaker Change: Look there is.

Speaker Change: Lot of things in the pipeline in various stages of higher pipeline and our policy with talking about a new commercial agreement with any customer is then you have the permission of that customer can speak. So so we are pursuing electrolyze hers, you'll know that we have the world's best most efficient electrolyze there.

Daniel Berenbaum: We're reaffirming our 2024 annual guidance for revenue, margins, and profitability. With our backlog and commercial pipeline, we remain confident that we can deliver $1.4 to $1.6 billion of annual revenue at approximately 28% non-gap gross margin. As stated before, where we land within the guidance range will be determined by the timing of projects that are in the pipeline. Consistent with prior years, revenue is expected to be significantly weighted towards Q4. Gross margins should improve as we move through the remainder of the year on lower-product costs and improving service performance. As we have noted previously, there is significant volume leverage in the financial model. With this annual revenue and gross margin profile, we should be well positioned to achieve non-gap operating profit of $75 to $100 million.

K.R. Schroeder: There are many markets where we are engaged in conversations. Please stay tuned; when we have the proper permissions and the proper timing, we will let you know. Thank you.

Speaker Change: There are many markets that we are engaged in conversations. Please stay tuned then we have the <unk>.

Speaker Change: Or permissions in the proper timing vivo lithium.

Speaker Change: Thank you.

Operator: Our next question comes from a line by Noel Parks with the Tui Brothers. Please go ahead.

Speaker Change: Our next question comes from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Speaker Change: Okay.

Noel Parks: Good afternoon, One thing I was interested in, of course, the most attention-getting situation is a brand-new customer with a specific need coming to you and, you know, what sort of deal in economics can you work out? I wonder, could you talk a bit about trends you're seeing with your repeat customers, maybe some of your long-term existing customers, because they, of course, are also at the door wanting product, wanting expansion. So you can maybe, what comes to mind is maybe just the sales cycle being much compressed with those, and how much, when you're just looking at the year's guidance, how much of that really can be accomplished just on the backs of your well-established customers looking to expand?

Noel Parks: Hi, good afternoon.

Speaker Change: One thing I would just.

Speaker Change: Of course.

Speaker Change: The most attention getting situation is.

Speaker Change: Brand new customer with specific needs.

Speaker Change: And coming to you and what sort of deal economics can you work out.

Daniel Berenbaum: As we look beyond 2024, we are conscious that changes in our product mix are changing the way we use certain metrics to forecast our business. We plan to closely evaluate the effectiveness and relevance of certain of our metrics, as well as potentially introducing new metrics to give investors the clearest possible picture of how we operate and assess the performance of our business.

Speaker Change: I Wonder if could you talk a bit about trends youre seeing with your repeat customers maybe some of your long time existing customers because they of course are also at the door wanting product wanting expansion so maybe what.

Speaker Change: I'm sorry, it maybe Jeff.

Speaker Change: <unk> being much compressed with those.

Jeff: And how much when you're just looking at the year's guidance how much of that really can be accomplished just on the backs of your well established customers looking to expand.

Daniel Berenbaum: To conclude, we're pleased with the momentum we're seeing in our commercial pipeline, and I believe we're on a strong financial footing to continue delivering on these projects and to scale our business further. Our product suite is the perfect fit for the energy challenges that companies around the world are facing, and we are laser focused on positioning bloom to scale profitably and continue to provide the most efficient and reliable solutions for the world's evolving energy needs.

K.R. Schroeder: That's a very good question. Look, without getting into particular quarters in the year, you know, as you very well know, our policy to talk about the year's bookings is at the end of the year. So, without referring to this year, traditionally, I can tell you roughly two-thirds of our business comes from repeat business. Okay, in terms of volume, in terms of volume from dollar amounts. Obviously, from the numbers.

Speaker Change: That's a very good question look without getting into particular quarters in the year.

Speaker Change: As you know very well.

Speaker Change: Policy to talk about the year as bookings as at the end of the year, so without referring to this year traditionally I can tell you.

Speaker Change: Roughly two thirds of our business comes from repeat business. Okay in terms of the what have you.

Daniel Berenbaum: Before I conclude my remarks, I'd like to note that this will be Ed Vallejo's final earnings call with Bloom, as he moves on to other opportunities. I want to thank Ed for everything that he's done for Bloom over the course of the past three years, and we all wish him well in his future endeavors.

Speaker Change: In terms of volume from dollar amounts obviously from the numbers.

K.R. Schroeder: We used to have a lot more new customers, and the reason is that they pilot and then they scale with us. So, Land and Expand has been our strategy. However, what we are seeing now is that some first-time customers, especially in the data center space and other spaces, given that we have a well-established technology for this particular segment, like data centers, are coming in with very large staffs. So that dynamic could change this year, potentially, depending on when we land those big deals, and you'll see more and more of that happen as we go forward.

Speaker Change: We used to have lots more newer customers and the reason is the pilot and then they scale with us so so land and expand has been our strategy.

Daniel Berenbaum: I'd also like to introduce Michael Tierney, who has just joined Bloom as our new VP of investor relations. With over 20 years of buy side experience, I'm sure that Michael will be able to continue and enhance the investor communications program that Ed has ramped up.

Speaker Change: However, what we are seeing now.

Speaker Change: Yes.

Speaker Change: Some first time customers, especially in the datacenter space in other spaces.

Speaker Change: Given that we had a well established technology for this particular segment like data centers are coming in with very large fabs, Texas. So that dynamic could change this year potentially depending on when we land those deals and you'll see more and more of that happen as we go forward. So that's the.

Operator: With that, operator, please open the line for questions. Thank you.

Operator: We will now begin the question and answer session. If you'd all then would like to ask a question, please press star one in your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star one again. If you're called upon to ask your question and are listening to be allowed to speak around your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

K.R. Schroeder: So that's the dynamic, but very clearly, our existing customer base is a strong base. We have a good share of their wallets, but we can get a lot more share of their wallets, and we continue to grow.

Speaker Change: Dynamic, but very clearly our existing customer base and a strong base.

Speaker Change: We have a good share of their wallet, but we can get a lot more share of their wallet and continue to grow that.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Ameet Thakkar with BMO Capital Markets. Please go ahead.

Speaker Change: Our next question comes from the line the meat factor with BMO capital markets. Please go ahead.

Operator: For today's session, we ask that you please limit yourself to one question. Again, press star one to join the queue.

Ameet Thakkar: Hi. Thanks for taking my question.

Speaker Change: Hi, Thanks for taking my question.

Speaker Change: I think since the last time, we had an earnings call with you all the IRS.

Ameet Thakkar: I know, I think since the last time we had an earring to call you all, the IRS has, I guess, Proposed Initial Guidance for the 48E Investment Tax Credit, and I think last week you guys filed comments with the IRS and Department of Treasury on that. I think, kind of to the effect that the credit would be rendered useless as it's proposed. I was just wondering how you could kind of maybe talk to us about how that would kind of necessitate more cost downs if the guidelines stayed as they are. Thanks.

Andrew Percoco: Our first question comes from a line of Andrew Perroko with Morgan. Stanley, please go ahead. Great. Thanks so much and good evening everyone. Thanks for taking the question. I do want to start on the data center side here. Great to see you guys make some progress on that front with the core weave announcement this quarter. So congrats on that. But I guess as we think about the evolution of this opportunity, how should we be thinking about the sizing of these deals?

Speaker Change: Proposed initial guidance for the 48.

Speaker Change: Investment tax credit and I think last week, you guys filed some.

Speaker Change: Comments with the <unk>.

Speaker Change: And department of Treasury on that I think kind of something to the effect that the credit will be rendered useless. As it's proposed I was just wondering how you could kind of maybe talk to us about how that would kind of necessitate more cost downs, if the guideline stays as it is.

Speaker Change: Thanks.

K.R. Schroeder: Yeah, so look, I can't remember in just a couple of decades' commercial history, policy and policy uncertainty were not a looming issues for the company, and there have been times when that policy has been revoked for a while and then brought back on. In those early days, when our cost structure was significantly higher than where it is today, and the need for power and the lack of availability of power were not an issue.

Speaker Change: Yeah, So look.

Andrew Percoco: The core weave deal looked to be about 15 megawatts. Is that the sweet spot for you guys or should we start to expect some larger deals? We're starting to see some data centers obviously well in excess of 100 megawatts. I'm just wondering if we should be expecting those types of deals to be announced from you guys at some point this year. Thank you. Andrew, thank you for the call and a great question.

Speaker Change: I can remember in our.

Speaker Change: A couple of decades commercial history policy and policy uncertainty of not being a looming issue for the company and.

Speaker Change: Being even times then.

Speaker Change: That.

Speaker Change: Policy has been rewarded for a while and then brought back on.

Speaker Change: Even in those early days than our cost structure was significantly higher than where it was and the need for power and the lack of availability of cloud was not an issue.

K.R. Schritter: So, I think what you should expect is an entire spectrum. You should expect a spectrum from anywhere in the few single digit megawatts all the way to hundreds of megawatts. And they're all in our mix right now as we speak. And here's the reason why. There are data centers with additional white space, which are switching from CPU to GPU that requires more power in the same white space and are not able to get their power right away.

K.R. Schritter: There are small edge data centers being built wherever they have access, access land and other infrastructure for which any smaller size data centers when I say smaller size in the single to, you know, 15, 20, 25 megawatts. Then you're looking at data centers on the edge. This is in densities all the way to 100 plus megawatts are custom built for the hyperscalers and those will be in the 100 megawatts range. So as we see it, both from data center operators that purpose built hyperscalers, as well as edge data centers, we are seeing a spectrum from five all the way to hundreds of megawatts.

K.R. Schroeder: We showed the resilience of the company to be able to operate. It is that same discipline we are going to adopt here. We clearly are going to advocate for and try to get the best policies for our customers and for the environment. However, should that not happen, we will find ways to still work with our customers and be profitable. So that's how the company is being built. We not only sell resilient products; we're trying to build a resilient business.

Speaker Change: We showed the resilience as a company to be able to operate it as that same disciplined adopt out here, we clearly are going to advocate for and try to get the best.

Speaker Change: Best policies for our customers.

Speaker Change: And for the environment.

Speaker Change: Or should that not happen.

Speaker Change: We will find ways to still work with our customers and be profitable. So that's that.

Speaker Change: That's how the company is being built.

Speaker Change: We not just sell resilient products, we are trying to build a resilient business.

Dan Berenbaum: I'll just add, you know, we operate in jurisdictions with government support. We also operate in jurisdictions that have no government support. We're successful with customers in all of those cases, and we will make sure that, you know, we're working towards setting up a company that is going to be profitable under any of those circumstances and successful for the long term. Thanks, Dan. Our next question comes from the line of Alex Kenia with Marathon Capital.

Speaker Change: I'll just add we operate in jurisdictions with government support we operate in jurisdictions that have no government support we're successful with customers in all of those cases, and we will make sure that we're working towards setting up a company that is going to be profitable under any of those circumstances four and successful.

Speaker Change: The long term.

Speaker Change: Okay.

Dan Berenbaum: Thanks, Dan.

Operator: Our next question comes from the line of Alex Kenia with Marathon Capital. Please go ahead.

Speaker Change: Our next question comes from the line of Alex <unk> with Marathon capital. Please go ahead.

Operator: Please go ahead. Hi there. Good afternoon. Maybe a broader...

Alex: Hi, there good afternoon.

Speaker Change: Maybe a broader question just on demand if you could definitely help characterize.

K.R. Schritter: So obviously, the smaller the size of the deal, the quicker the velocity on getting that transaction done, I've illustrated many times that these large deals are fairly complex and big size orders and take a little bit longer to come. So expect the entire spectrum.

Speaker Change: Maybe just a sense of of.

Speaker Change: Customers that are interested in the fuel cell solutions, even beyond data centers and I'm, just thinking about the PJM auction and that happened a couple of weeks ago.

Speaker Change: Whether that ends up serving as a bit of a wakeup call for for a broader range of customers that might be more willing to explore.

Speaker Change: Behind the meter, let's say, let's say solutions. Thanks.

Henry: Our next question comes from Alana Jordan levy with tourist securities, please go ahead. Hi, all it's Henry on for Jordan here congrats on the quarter just on the remaining Amazon volume that it gets to be deployed. I just want to ask on what the outlook or timeline we should we should be expecting for those you can say anything at this point on on that. Thank you. Yeah, so I think there are two two like references there.

Alex Kenia: Alex, that's a very good, very good question. And look, the electrification of everything, charging, no matter where you look, from the automation of warehouses, to the amount of power per square foot a warehouse will start consuming when all this automation comes into place. A warming planet means that more cooling electricity is needed in more places. You put all that together.

Alex: Alex that's a very good very good question and look.

Alex: The electrification of everything.

Alex: Charging.

Speaker Change: No matter, where you look.

Alex: From automation of warehouses.

Alex: From the from the amount of power per square foot of warehouse will start consuming when all of this automation comes in place.

Alex: Hey, warming climate means that.

Henry: If you if you like look at it, one is with Silicon Valley power, Amazon, you know, a KWS is negotiating with Silicon Valley power separately to get into a contract and that contract of 20 megawatts will be fulfilled by Bloom. By having a contract with Silicon Valley power, this is in front of the meter, it is a V our customer is the municipal utility Silicon Valley power and their customer is AWS, but it is dedicated and sleep to them at a rate that they negotiate specifically for them and it doesn't impact any other rate there.

Alex: More cooling electricity is needed and more places you put all that together.

K.R. Schroeder: The demand is not just from data. The size, scale, and velocity with which data centers move in the next year will be faster than these other sectors. But notwithstanding that, you will see equal or more demand drivers coming from everything else. So we are focused, as you know, on multiple sectors, but today we talk more about data centers just because that is at the top and it's catching everybody's attention.

Alex: Demand is not just from the data centers.

Alex: But the.

Alex: Size scale and velocity with which the data center, it's more in the next year will be faster than these other sectors.

Alex: But notwithstanding that you will see equal or more and with everything else put together the demand.

Alex: Drivers coming from everything else.

Alex: So we are focused.

Alex: As you know on multiple sectors, but two.

Alex: Today, we talk more about the datacenter is just because that has had at the top and it's catching everybody's attention, but we agree with you our business is log broader and stronger and in each of these places even with utilities right. The Silicon Valley. If our model is a wonderful model.

K.R. Schroeder: But we agree with you, our business is a lot broader and a lot stronger. And in each of these places, even with utilities, right? The Silicon Valley Power Model is a wonderful model. If a utility is not able to serve its customers because of grid congestion,

Henry: I think this model is a phenomenal model and that will grow as we go forward separately. You're aware that AWS halted working on the 73 megawatt contract they had with us in Oregon, they have separately submitted a relocation request to us for all of 73 megawatts to Ohio. We are currently working with AWS on those details, both these deals are being worked in parallel and there'll be many other opportunities hopefully given our strong working relationship between AWS and them. Thank you.

Speaker Change: You say utility is not able to serve with customers because of the condition what prevents them from two keeping that end customer as their customer.

K.R. Schroeder: What prevents them from still keeping that end customer as their customer and using our technology to provide power to their customers using our solution? After all, they don't build nuclear power plants. They don't build coal power plants. They don't build bloom boxes either. But that didn't stop them from using that power to provide power for their customers. Same thing here.

Speaker Change: And using our technology to provide power to their customer.

Speaker Change: Using our solution after all they don't build nuclear power plants, they don't build coal power plants.

Speaker Change: They'll bloom boxes, either that didn't stop them from using that power to provide solid for their customer same thing here. So great question.

Operator: So, great question. We expect to see this trend pick up, and we applaud Silicon Valley Power for being a leader in this space to create that model. Our next question comes from the line of Ben Kallo with Baird. Please go ahead. Hey, good afternoon, guys. Just a short-term question on product costs that have ticked up.

Dushyant Ailani: Our next question comes from a line of Dushyant Ailani with Jeffries. Please go ahead. Hi, thank you for taking my questions.

Speaker Change: We expect to see this trend pick up and we applaud Silicon Valley power for being a leader in this space to create that model.

Daniel Berenbaum: Just wanted to get an understanding of the guy, the 1.4 to 1.6. Does that include any potential near-term data center orders, or what does them put some dicks, you know, data centers, all of that from SK, thank you. So we've talked about the 1.4 to 1.6. We've talked about where we end up within that range being dependent on timing of projects. We haven't talked specifically about what those projects are, and we don't talk specifically about sizes of projects with specific customers.

Operator: Our next question comes from the line of Ben Kallo with Baird. Please go ahead.

Ben <unk>: Our next question comes from the line of Ben <unk> with Baird. Please go ahead.

Ben <unk>: Hey, good afternoon, guys. Just a short term question on product costs ticked up I guess.

Ben <unk>: <unk> year.

Speaker Change: The longer to your question is yes.

Speaker Change: The targets you gave your analyst day.

Speaker Change: So sometimes I think that we.

Speaker Change: We don't know the visibility you have but just wanted to kind of understand.

Speaker Change: Your thoughts around those targets for where you sit now.

Alex: A couple of years closer first Gabe.

Daniel Berenbaum: We try to avoid providing those details on specific customers. So all we can say is that we have between our backlog and our commercial pipeline, we are confident in being within that range of 1.4 to 1.6 billion for the year, where we wind up within that range is dependent on timing of projects.

Gabe: Thank you.

Ben Kallo: Yeah, so there are a couple of questions in there, but good questions, and let me take them one at a time a little bit. So again, this is my first full quarter at the company. We're continuing to look at the business and identify ways to simplify our reporting. Most importantly, we want to ensure that the reporting that we do, what we tell investors, really reflects the underlying fundamentals that we look at when we make decisions, how we operate the business, and how we judge business performance.

Gabe: Yes, so a couple of questions in there, but the good questions and let me take them one at a time a little bit. So again. This is my first full quarter of the company. We're continuing to look at the business identify ways to simplify our reporting most importantly, we wanted to ensure that the reporting that we do what we tell them.

Skye Landon: And then to add to that, this is Skye Landon, what I would say is given how strong the data center market is for us in a segment, you've sure to assume that some amount of our installations will be in the data center space, but it's up to our customers to speak to that size and not up to us.

Gabe: Investors really reflect the underlying fundamentals that we look at when we make decisions how we operate the business and how we judge the business performance on the cost side as you look at our business today, a number of things are changing so.

Ben Kallo: On the cost side, as you look at our business today, a number of things are changing. So metrics that were very relevant are becoming a little bit less relevant. For example, when we talk about the cost per kilowatt that we publish, we're adding new countries, and our geographic mix is changing. We're looking at solutions both front of the meter and behind the meter. We're looking at new solutions like combined heat and power, carbon capture, and microgrid. All of those things add cost per kilowatt if you look at them from a very high level.

Dushyant Ailani: Our next question comes from a line of Minoves, Gupta with UBS, please go ahead. Guys, congrats on the new orders. My quick back of the envelope math is indicating to hit about 28% gross margins, you're halfway around 32% gross margin, a significant improvement from the first half. You guys are known to hit the guidance. So help us understand all the factors that will help drive a materially better gross margin in the second half of this year.

Gabe: Metrics that were very relevant are becoming a little bit less relevant for example, when we talk about the cost per kilowatt that we publish we are adding new countries and our geographic mix is changing we're looking at solutions in front of the meter and behind the meter we're looking at new.

Gabe: <unk> like combined heat and power carbon capture micro grid all of those things add cost per kilowatt. If you look at it from a very high level, but it is because our the flexibility of our product the configurations around our core.

Dushyant Ailani: Thank you. Well, I may not talk to all of the factors, if you don't mind, Minoves. Look, as we've discussed, there's significant volume leverage in our model. As we ramp volume, we expect to see the benefits of that, and look to the point, we reiterate our guidance, we are confident in our commercial pipeline, we are confident in the margin leverage that comes with that growing volume, and so that's what will get us 28%. Your math is correct, I do understand that we need to have very strong gross margins in the back half of the year to hit that 28% for the full year, and we're confident in doing so.

Dan Berenbaum: But it's because the flexibility of our product, the configurations around our core product continue to expand, and so some of those metrics that we've used in the past are maybe becoming a little bit less relevant. It's a little bit more difficult to compare things apples to apples to prior periods. So, again, and this ties into the question you asked about our longer-term model. You know, we still have a little bit of thinking to do about how we want to communicate what additional metrics we're going to start to provide, what metrics we're going to simplify, and how we're going to talk about it.

Gabe: Product continue to expand and so some of those metrics that we've used in the past or maybe becoming a little bit less relevant and it's a little bit more difficult to compare things apples to apples to prior periods. So again and this ties into the question you asked about our longer term model, we still have.

Gabe: A little bit of thinking to do about how we want to communicate what additional metrics, we're going to start to provide what metrics, we're going to simplify and how we're going to talk about it.

James West: Our next question comes from Alina. James West was Evercore ISI, please go ahead. Hey, good afternoon, guys. So K.R., we certainly agree with your view of the role of the next five to ten years with electrification and the need for gases, electrification, especially, and we've heard from a number of the traditional energy companies already, it's just the pipeline companies that are being asked to pipe their natural gas directly to data centers.

Dan Berenbaum: And one additional thing, Dan, that I would add to your response here is Ben, on an apples-to-apples basis, the company, as we promised in the beginning of the year, will meet a double-digit cost reduction. So we are on track to meeting cost reductions on that whole basis, but you are seeing the numbers being reported based on what Dan told you. And that's the beauty and versatility of our platform. But while the cost changes, will we be able to command on the, you know, price side? So, at the end of the day, we should be looking at our revenues and our margins, and that's the true measure of our business. Absolutely And the measure we look at is our profitability.

Gabe: One additional thing Dan that I would add too.

Dan Berenbaum: You like response here has been.

Dan Berenbaum: On an apples and apples to apples basis.

Speaker Change: Company as we promised in the beginning of the year the media double digit cost reduction. So we are on track to meeting cost reductions on that whole basis, but you are seeing the numbers being reported.

Speaker Change: Based on what <unk> told you.

James West: I was curious, you know, how that works between Bloom, the data center, the maybe traditional energy companies, are you all in a consortium? Is it all run by the data center producer? I mean, it has all come together.

Speaker Change: And that's the beauty and versatility of our platform Black line. The cost changes so will we be able to comment on the on the.

Speaker Change: Price side. So at the end of the day, you should be looking at our revenues and our margins and that's a true measure of our business absolutely in the measure we look at is our profitability and our growth.

Dan Berenbaum: Absolutely. The measure we look at is our profitability and our growth. Thank you. The next question...

K.R. Schritter: James, that's a very good question. There is not a specific model as the first thing that I would say. It just varies from place to place and state to state. That's the first answer. The second answer is the following. That's the process. Even for them to have an LOI, they need to have a fairly good handle on their overall cost, their partners, and how much that computer is going to cost in order to have the LOI.

Speaker Change: Thank you.

Gabe: Okay.

Operator: Our next question comes from a line by Pavel Molchanov with Raymond James. Please go ahead. Thanks for taking that question.

Speaker Change: Our next question comes from the line of parallel multi <unk> with Raymond James. Please go ahead.

Speaker Change: Thanks for taking the question can we get a quick update on Baker Hughes and the mic for grid initiatives.

Pavel Molchanov: So, look. Again, instead of talking about a customer, let me tell you the microgrid initiative that we started. We roughly operate north of 150 microgrids. So for you to know where we are, that's where we are as a business, okay? Number one. And number two.

Speaker Change: So.

Speaker Change: Look.

Speaker Change: <unk>.

Speaker Change: Again, instead of talking about a customer let me tell you. The Microgrid initiative that we started roughly operate.

Gabe: North of 115 micro grids today.

Gabe: So for you to know where we are that's where we are as a business.

K.R. Schritter: These things, to some extent, are happening in parallel. They will engage with us as a technology provider. We will be working with them to assess, is there an upgrade to the gas system? The gas system already exists? Are they going to procure the gas wholesale retail? How is it going to play out? What the local regulations are? This is how it all comes together. In a way, it's a multi-party negotiation happening together. I'm glad you asked the question because I mentioned multiple times how this deal is fairly complex.

Speaker Change: <unk>.

Speaker Change: And number one and number two.

K.R. Schroeder: Given how you can turn your TV on and find out every single day in some part of the country, there's a natural disaster, and the grid has gone out. We have done thousands of saves for our customers through this 150 plus microgrid. What is more important, we are graduating even past the microgrid right now because for many of our customers who have time to power issues. It is not only being able to provide them with power quickly but do so without being connected to the grid, completely isolated because interconnection is the hardest, and most technologies cannot do that.

Speaker Change: Given how you can turn your TV on and find out every single day in some part of the country that has a natural disaster in the grid has gone out.

Speaker Change: We have done we have done thousands of safe for our customers.

Gabe: Two of those 150, plus micro grids.

Gabe: What is more important.

Speaker Change: Graduating even past the microbes there right now.

Speaker Change: For many of our customers who have time deposit ratios.

K.R. Schritter: But now, if you think about 100 plus megawatt deal that is well north of a billion dollars in total value, and now you look at the number of parties that have to be engaged in working together, that's what gives you that longer duration or a long cycle sale, but it's a very sticky good sale, and you will see these things happen.

Gabe: It is not only being able to provide them quickly, but do so without being connected to the grid.

Gabe: <unk> Island, because the interconnection is the hardest most technologies cannot do that I don't know if any one that can do that reliably other than us that's.

K.R. Schroeder: I don't know of anyone that can do that reliably other than us. That's why that 99.995% availability that we have on our 850 plus sites is important. So we will not only continue to do microgrids, but we will do island grids, which are microgrids plus, if you want to call them that way. And that business is strong, and we expect it to grow as time goes by. A recent announcement that we made in the AI space for Quanta is an landed microgrid that is not connected.

Gabe: Why that 99, 995% availability that he had on our 850 plus sites it's important.

Gabe: No.

Gabe: We will not only continue to do micro grids, but we will do island grids, which also.

Gabe: Michael It's plus if you want to call it that way, okay and.

Colin Rusch: Our next question comes from a line of Colin Roosh with Oppenheimer. Please go ahead. Your line is open. Please go ahead.

Gabe: That.

Speaker Change: That that business is strong and we expect it to grow as time goes by a recent announcement that we made in the AI space for Quanta is a island at micro grid.

Operator: Are you there, Colin? We will come back to Colin then.

Michael: Which is not connected to the clinic.

Speaker Change: Thank you.

Operator: Our next question comes from Sky Landon with Redburn Atlantic. Please go ahead.

Chris Dendrinos: Our next question comes from a line of Chris Dendroneaus with RBC Capital Markets. Please go ahead. Yes, thank you. So I think South Korea is hosting one of its hydrogen power options, and I guess just in light of the announcement on your fuel cell with hydrogen and the efficiency improvement. Can you maybe speak to, I guess, your overall competitiveness in that market and how maybe this fuel cell helps position you all there?

Speaker Change: Our next question comes from Sky Landon with Redburn Atlantic. Please go ahead.

Sky Landon: Hi, thanks for taking my question. I wanted to circle back on data centers and, specifically, revenue mix. Are you able to provide us with some color around the historical mix of Bloom's revenues that can be attributed to data center deployments, how this has developed over time, and then looking forward, are you able to provide some detail around what percentage of the mix you're currently anticipating that could be associated with data center deployments in the short or medium term? Thank you.

Sky Landon: Hi, Thanks for taking my question.

Sky Landon: I wanted to circle back on <unk>.

Speaker Change: Specifically revenue mix.

Speaker Change: It will to provide us with some color around the historical mix of claims reps in use which can be attributed to the data center deployments.

Speaker Change: This was developed at a time and then looking forward so you're able to provide some detail around what percentage of the mix.

Chris Dendrinos: Thanks. Hey, Chris. That's a very good question. You are absolutely right as Korea has modified the option process and has a pretty strong emphasis on hydrogen as a possible fuel. You would have noticed, you know, we are not reactive. We are proactive. The press release that we put out is work and progress of our engineering team and our product development team for the last many years, and I just want to emphasize 60% electrical efficiency and a 90% overall efficiency and that other 30% of that heat coming at high temperature steam that is not a technology in the world that can match that.

Speaker Change: We are currently anticipating that could be associated with data center deployments in the short or medium term. Thank you.

Dan Berenbaum: So we haven't broken that out as a percentage of our mix. I will tell you you know again relative some of the questions that were asked a bit earlier about our geographic mix and you know obviously we are very strong in Korea we have a strong partner in SK Eco we really like doing business in Korea but if you look at our targets and if you look at the business that we have in front of us you might expect the US and other geographies where there's significant data center activity to grow even faster so we don't break those out as a specific part of the mix but given the commercial opportunity that we've talked about you would expect data center to become a larger portion of our business. That's right Dan.

Speaker Change: So we haven't broken that out.

Speaker Change: As a percentage of our mix I will tell you again relative to some of the questions that were asked a bit earlier about our geographic mix.

Speaker Change: Obviously, we are very strong in Korea, we have a strong partner in SK Eco, we really like doing business in Korea, but if you look at our targets and if you look at the business that we have in front of US you might expect the U S and other geographies, where there is significant data center.

Dan Berenbaum: Activity to grow even faster so we don't break those out as a specific part of the mix, but given the commercial opportunity that we've talked about you would expect data center to become a larger portion of our business. That's right then and I would add two things to what Dan just told you right.

Chris Dendrinos: So we are extremely well positioned in that market both for the natural gas systems as well as the hydrogen systems. Our job is to make sure it is up to the customer to figure out when they transition from one fuel to another, but irrespective of what that fuel is, we provide our really good partner SK with the best technology option and if they were on the call, I would assume they would say, Bloom has given them the best technology option. Thank you.

Dan Berenbaum: That's right, Dan. And I would add two things to what Dan just told you, right? We can tell you that the booked and deployed data center business for us is more than 300 megawatts.

Speaker Change: We can tell you that the book then deployed data center business for us is more than 300 megawatts.

K.R. Schroeder: Right? That should give you a sense of the history, number one. Number two, you should expect that given the issues the U.S. is facing in terms of both growth as well as the shortage, you know, growth on demand and the shortage of supply of power, that our U.S. business is growing much more robustly today than the rest of the world, and the rest of the world will catch up. So you will see that kind of back and forth as time goes on, and that's the beauty of having diversification, and our goal is to diversify more and more as we go forward. Thank you. Our next question comes from a line by Colin Rusch with Oppenheimer. Please go ahead. Thanks so much, guys, and apologies for the trouble earlier.

Speaker Change: Alright.

Speaker Change: That should give you a sense of the history number one number two you should expect.

Speaker Change: Given the.

Speaker Change: <unk> issues. The U S is facing in terms of both the growth as well as the Charlotte growth on demand and the shortage of supply of power.

Martin Malloy: Our next question comes from a line of Martin Maloy, was Johnson Rice. Please go ahead. Good afternoon. I just wanted to try to maybe get a better idea around the economics of the Bloom server. As long as maybe you could speak to the heat rate for one of your servers, I am trying to get a sense for how much it would cost with a behind the meter situation, say $2.50 gas on a sense per kilowatt hour basis. Hey, Martin, this is KR.

Speaker Change: Our U S business is growing much more robustly today than the rest of the world and the rest of the world catch up so you will see that kind of.

Speaker Change: Back and forth.

Speaker Change: As as time goes on and Thats, the beauty of having diversification and our goal is to diversify more and more of that go forward.

Speaker Change: Thank you.

Operator: Our next question comes from a line from Colin Rusch with Oppenheimer. Please go ahead. Thanks so much, guys, and apologies for the delay.

Speaker Change: Our next question comes from the line of Colin Rusch with Oppenheimer. Please go ahead.

Colin Rusch: Okay. Thanks, so much guys and apologize for the travel earlier.

K.R. Schritter: You are asking a question that is all over the map and we may need to spend the rest of the call if I were to explain that. So here is what we will do. I will have our team work with you separately to provide you that because we have provided that in multiple other places.

Colin Rusch: I just had two quick questions on the cash flow statement, the receivables were up $175 million in the contract asset.

Colin Rusch: Were written down I, just want to understand both of those dynamics and how we should think about cash flow on the balance of the year, if youre going to get some of those receivables back or if we should be thinking about this as a more normalized level here on receivables.

K.R. Schritter: But look, I think this is the way you got to think about our business. At the end of the day, we are serving an end customer specifically sleeped in for whom the option of buying from us or not buying from us is based on their cost of electricity buying from us compared to their ultimate. In every case, the customer buys from us because we are equal to or better than the grid in terms of price along with all the other attributes, reliability, sustainability, you name it.

Operator: Yeah, so a couple of points. I said in my prepared remarks that we expect cash flow from operating activities to be positive in the second half of the year. On the receivable side, I mean, you're right, that's just the math. There's nothing strange there.

Speaker Change: Yes so.

Speaker Change: A couple of points I said in my prepared remarks that we expect cash flow from operating activities to be positive in the second half of the year on the receivable side I mean, you're right. That's just the math there is nothing strange there we just had timing.

Speaker Change: And that means that use of cash went to receivables, it's quite common for bloom in its history to see a use of cash in the first half of the year and then for cash to come back in more positive in second half of the year. So I think we're following that kind of normal pattern.

Dan Berenbaum: We just had timing of sales, and that means that the use of cash went to receivables. It's quite common for Bloom and its history to see a use of cash in the first half of the year and then for cash to come back in more positive in the second half of the year. So I think we're following that kind of normal pattern. We'll call that the largest piece of our receivables currently is the SK receivables, the related party receivable. SK is a great partner. We are confident in collecting that receivable. And I think that's all I have to say on that. Operator, next question, please. And thanks for figuring out the technical problems, Colin.

K.R. Schritter: Then we are in front of the meter. The reason the customer will transact sleeped in with us is because there is no other way. Let me emphasize, no other way for that customer to get reliable power on site in a time to power fashion where the price of not having power is significantly larger than the cost of power. So that is the calculation they do. That is how they do it. So the heat rate and all that is interesting for more dynamically. It is not interesting to the customer. Thank you.

Speaker Change: Recall that the largest piece of our receivables currently is the SK receivables the related party receivable S. K is a great partner, we are confident in collecting that receivable.

Speaker Change: And I think Thats, all I have to say on that.

Speaker Change: Operator next question, please and thank you for for figuring out the technical problems column.

Operator: I think, you know, I think we are out of time, so let's keep Colin's question as the last question. I want to thank you all for joining this call.

Speaker Change: I think.

Speaker Change: I think we are out of time.

Speaker Change: So let's keep.

Collyn Rus: Collyns question, that's the last question.

Chris Zung: Our next question comes from a line of Chris Zung with Wolf Research. Please go ahead. Hi, Karen. Thanks for taking my question. I am noticing the queue. There is an electrolyzer agreement to sell to European buyer.

Speaker Change: Want to thank you all for joining this call here is you're at a high level. This is the way I see it right.

K.R. Schroeder: Here is your, at a high level, this is the way I see it, right? I don't have to convince any one of you today that energy demand, driven by AI, electrification, all the other growth vectors in the country, is creating a demand that simply cannot be met by the government in many places. And Bloom has power being provided at the point of use with the right attributes of reliability and cleanliness is becoming the best alternative option in this scenario. Gas for the many years to come is here to stay, and you don't have to take my word for it.

Speaker Change: I don't have to convince any one off year today that energy demand.

Speaker Change: By AI electrification.

Chris Zung: Are you able to expand on that a bit? in terms of size, timing of sales. Thanks.

Speaker Change: All the other growth vectors in the country is creating.

Speaker Change: We had demand that simply cannot be met by the cloud.

K.R. Schritter: So, look, there is a lot of things in the pipeline in various stages of our pipeline and our policy with talking about any commercial agreement with any customer is when we have the permission of that customer to speak so. So, we are pursuing electrolyzers. You know that we have the world's best, most efficient electrolyzer. There are many markets there. We are engaged in conversations. Please stay tuned.

Speaker Change: In many places and loom as a power being provided at the point of use.

Speaker Change: Right attribute of reliability and clean.

Speaker Change: Is becoming the best alternative option in this scenario.

Speaker Change: Gas floods.

Speaker Change: For many years to come is here to stay and you don't have to take my word for it.

K.R. Schroeder: Look at the hyperscalers who have been the leaders in adopting renewable power, telling you that they'll continue to grow their renewable power portfolio, which is the right thing to do, but they simply cannot operate without gas. And under those circumstances, there is no better technology to convert it reliably for them and solve their time-to-power problems than Bloom. The scenario of supply and demand and what needs to happen couldn't come at a better time for Bloom because we have clearly shown through the last few quarters and our numbers that we have a business model that can operate profitably.

K.R. Schritter: Then we have the proper permissions and the proper timing. We will let you know. Thank you.

Speaker Change: Look at the Hyperscale, who have been the leaders in adopting renewable power telling you that they will continue to grow their lab their renewable power portfolio, which is the right thing to do but simply cannot operate without gas and under those circumstances. There is no better technology to convert it.

Noel Parks: Our next question comes from a line of Noel Parks with two e-brothers. Please go ahead. Hi, good afternoon.

Speaker Change: Reliably for them.

K.R. Schritter: One thing I was interested in, of course, the most attention getting situation is brand new customer with specific need and coming to you and what sort of deal and economics can you work out? Can you talk a bit about trends you are seeing with your repeat customers, maybe some of your long time existing customers, because they of course are also at the door wanting product, wanting expansion. So, maybe what comes to that is maybe just sales cycle being much compressed with those. And how much when you are just looking at the years guidance, how much of that really can be accomplished just on the back of your well established customers looking to expand?

Speaker Change: Call that enterprise problems then bloom.

Speaker Change: This.

Bloom: A scenario of supply demand and what needs to happen Couldnt come at a better time for bloom, because clearly shown through the last few quarters in our numbers that we have a business model that can operate profitably.

K.R. Schroeder: And if you ask us what we are seeing, we are seeing that very clearly from the amount of customer engagement and the amount of contract negotiations that's going on when I go to my commercial desk. For that reason, we are continuing to strengthen our commercial team and keep growing it and adding to that because of that enthusiasm that we see on the customer side, which we think is secular and structural and is here to stay for a long time. So we are well-placed, and our team is executing and firing on all cylinders. Thank you for joining us.

Speaker Change: And if you ask because what we are seeing.

Speaker Change: We are seeing that very clearly from the amount of customer engagement and Amar tough contract negotiation, that's going on if I go to my commercial desk for that reason, we are continuing to strengthen our commercial team and keep growing it and adding to that because of that.

K.R. Schritter: That's a very good question. Look, without getting into particular quarters in the year, you know, as you know very well know our policy to talk about the years bookings is at the end of the year. So, without referring to this year, traditionally, I can tell you roughly two thirds of our business comes from the business in terms of the volume in terms of volume from dollar amounts. Obviously, from the numbers, we used to have lot more newer customers and the reason is they pilot and then they scale with us.

Speaker Change: And towards the asset that you can see on the customer side.

Speaker Change: We think.

Speaker Change: Is secular and structural and it's here to stay for a long time. So we are well placed.

Speaker Change: And our team is executing and fighting on top.

Speaker Change: All cylinders, thank you for joining us.

Operator: That concludes today's call. You may now disconnect.

Speaker Change: That concludes today's call you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: [music].

K.R. Schritter: So, so land and expand of being our strategy. However, what we are seeing now is some first time customers, especially in the data center space and other spaces. Given that we are a well established technology for this particular segment like data centers are coming in with very large stem sizes. So, that dynamic could change this year potentially, depending on when we land those big deals and we you will see more and more of that happen as we go forward.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

K.R. Schritter: So, that's the dynamic, but very clearly our existing customer base is a strong base. We have a good share of their wallet, but we can get a lot more share of their wallet and we continue to grow that.

K.R. Schritter: Thank you.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: [music].

Ameet Thakkar: Our next question comes from a line of a meat soccer with BMO capital markets. Please go ahead. Hi, thanks for taking my question. I know I think since the last time we had an earnings, hope you all be iris. I guess proposed initial guidance for the 48E investment tax credit, and I think lastly you guys filed some comments with the IRS and Department of Treasury on that. I think kind of something to the effect that the credit would be rendered useless as it's proposed. I was just wondering how you could kind of maybe talk to us about how that would kind of necessitate more cost-downs if the guidelines stayed as it is. Thanks.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Daniel Berenbaum: Yeah, so look, I can't remember in our couple of decades commercial history policy and policy uncertainty ever not being a looming issue for the company and there have been even times when that policy has been revoked for a while and then brought back on. Even in those early days, then our cost structure was significantly higher than where it was and the need for power and the lack of availability of power was not an issue.

Daniel Berenbaum: We showed the resilience as a company to be able to operate. It is that same discipline we are going to adopt out here. We clearly are going to advocate for and try to get the best policies for our customers. And for the environment, however, should that not happen, we will find ways to still work with our customers and be profitable. So that's how the company is being built. If we not just sell resilient products, we're trying to build a resilient business.

Daniel Berenbaum: Yeah, I'll just add, you know, we operate in jurisdictions with government support. We operate in jurisdictions that have no government support. We're successful with customers and all of those cases and we will make sure that we're working towards setting up a company that is going to be profitable under any of those circumstances and successful for the long term. Thanks, Dan.

Alexis Kania: Our next question comes from a line of Alex Kenia with marathon capital. Please go ahead. Hey there. Good afternoon. Maybe a broader question just on demand if you could definitely help characterize maybe just a sense of customers that are interested in the field of solutions even beyond data centers. And I'm just thinking about the PGM auction happened a couple weeks ago. It's the weather, you know, that ends up serving as a bit of a wake up call for for a broader range of customers. It might be more willing to explore, you know, behind the meter, let's say, let's say solutions. Thanks.

K.R. Schritter: Alex, that's a very good, very good question. And look, the electrification of everything. Charging, no matter where you look from automation of warehouses, from the, from the amount of power per square foot of warehouses start consuming when all this automation comes in place. A warming planet means that more cooling electricity is needed in more places. You put all that together. The demand is not just from the data centers, but the size scale and velocity with which the data centers move in the next year will be faster than these other six.

K.R. Schritter: Doctors, but notwithstanding that, you will see equal or more everything else put together, the demand drivers coming from everything else. So we are focused, as you know, on multiple sectors, but today we talked more about the data centers just because that is at the top and it's catching everybody's attention. But we agree with you, our business is a lot broader and a lot stronger. And in each of these places, even with utilities, right, the Silicon Valley Power Model is a wonderful model.

K.R. Schritter: If a utility is not able to serve its customers because of grid congestion, what prevents them from still keeping that end customer as their customer and using our technology to provide power to their customer using our solution. After all, they don't build nuclear power plants, they don't build coal power plants, they don't build bloomboxes either. That didn't stop them from using that power to provide power for their customer, same thing here.

K.R. Schritter: So great question. We expect to see this trend pick up and we applaud Silicon Valley Power for being a leader in this space to create that model.

Ben Callow: Our next question comes from a line of Ben Callow with Baird. Please go ahead. Hey, good afternoon guys. It's just a short term question on product cost that ticked off by, I guess, year over year. But then the longer term question is just, you know, the the targets you gave at your analyst day, you know, sometimes we, I think that we don't know the visibility you have. But just wanted to kind of understand your thoughts around those targets for where you sit now a couple years closer from what you gave first gave them.

Daniel Berenbaum: Thank you. Yeah, so a couple of questions in there, but the good questions and let me take them one at a time a little bit. So again, this is my first full quarter of the company. We're continuing to look at the business, identify ways to simplify our reporting. Most importantly, we want to ensure that the reporting that we do what we tell investors really reflect the underlying fundamentals that we look at when we make decisions, how we operate the business and how we judge the business performance on the cost side.

Daniel Berenbaum: As you look at our business today, a number of things are changing. So metrics that were very relevant are becoming a little bit less relevant. For example, we talk about the cost per kilowatt that we publish. We're adding new countries and our geographic mix is changing. We're looking at solutions in front of the meter and behind the meter. We're looking at new solutions like combined heat and power carbon capture microgrid. All of those things add cost per kilowatt if you look at it from a very high level, but it's because our flexibility of our product, the configurations around our core product continue to expand. Some of those metrics that we've used in the past are maybe becoming a little bit less relevant. It's a little bit more difficult to compare things, apples to apples to prior periods.

K.R. Schritter: So again, in this ties into the question you asked about our longer-term model, we still have a little bit of thinking to do about how we want to communicate what additional metrics we're going to start to provide, what metrics we're going to simplify, and how we're going to talk about it. And one additional thing, Dan, that I would add to, you know, your response here, is been on apples and apples to apples space.

K.R. Schritter: Oasis, the company, as we promised in the beginning of the year, will meet a double digit cost reduction. So, we are on track to meeting cost reductions on that old basis, but you are seeing the numbers being reported based on what Dan told you. And that's the beauty and versatility of platform, but while the cost changes, so will we be able to command on the on the, you know, like price side.

K.R. Schritter: So, at the end of the day, you should be looking at our revenues and our margins, and that's the true measure of our business. Absolutely. And the measure we look at is our profitability and our growth.

K.R. Schritter: Thank you.

Pavel Molchanov: Our next question comes from a line of Pavel Molchanov with Raymond James. Please go ahead. Thanks for taking that question. Can we get a quick update on Baker Hughes and the microgrid initiatives? So, look, again, instead of talking about a customer, let me tell you the microgrid initiative that we started. We roughly operate north of 150 microgrids today. So, for you to know where we are, that's where we are as a business.

Pavel Molchanov: And number one, and number two, given how you can turn your TV on and find out every single day in some part of the country that's a match for the disaster and the grid has gone out, we have done thousands of saves for our customers through the 150 plus microgrids.

K.R. Schritter: What is more important, we are graduating even past the microgrid right now. For many of our customers who have time to power issues, it is not only being able to provide them power quickly, but do so without being connected to the grid. Completely islanded because the interconnection is the hardest. Most technologies cannot do that. I don't know of anyone that can do that reliably other than us. That's why that 99.995% availability that we had on our 850 plus sites is important.

K.R. Schritter: So, we will not only continue to do microgrids, but we will do islanded grids, which are also microgrids plus if you want to call it that way. That business is strong and we expect it to grow as time goes by.

K.R. Schritter: A recent announcement that we made in the AI space for Quanta is a islanded microgrid, which is not connected to the grid.

Skyland: Thank you.

Skyland: Our next question comes from Skyland in with Redburn Atlantic. Please go ahead. Hi, thanks for taking my question. I wanted to circle back on data centers and specifically revenue mix. Are you able to provide us with some color around the historical mix of blooms, revenues, which can be attributed to data center deployment. How this has developed over time and then looking forward to you able to provide in detail around what percentage of the mix you're currently anticipating that could be associated with data center deployment in the short or medium time. Thank you.

Daniel Berenbaum: So we haven't broken that out as a percentage of our mix. I will tell you, you know, again relative some of the questions that were asked a bit earlier about our geographic mix. And, you know, obviously, we are very strong in Korea. We have a strong partner in SK Eco. We really like doing business in Korea. But if you look at our targets, and if you look at the business that we have in front of us, you might expect the U.S, and other geographies where there is significant data center activity to grow even faster. So we don't break those out as a specific part of the mix, but given the commercial opportunity that we talked about, you would expect data center to become a larger portion of our business.

K.R. Schritter: That's right, Dan. And I would add two things to what Dan just told you, right? We can tell you that the book and deployed data center of business for us is more than 300 megawatts. That should give you a sense of the history. Number one, number two, you should expect given the issues the U.S, is facing in terms of both the growth, as well as the shortage, you know, growth on demand.

K.R. Schritter: And the shortage of supply of power that our U.S, business is growing much more robustly today than the rest of the world and the rest of the world will catch up. So you will see that kind of back and forth as time goes on. And that's the beauty of having diversification and our goal is to diversify more and more as we go forward.

Operator: Thank you.

Colin Rusch: Our next question comes from a line of Colin Roosh with Oppenheimer. Please go ahead. Thanks so much, guys and apologies for the trouble earlier.

Daniel Berenbaum: You know, I just had two quick questions on the cash flow statement. You know, the receivables were up 175 million in the contract assets, you know, we're written down. I just want to understand both those dynamics and how we should think about cash flow on the balance of the year if you're going to get some of those recyclables back or if we should be thinking about this is a more normalized level here on receivables.

Daniel Berenbaum: Yeah, so a couple of points I said in my prepared remarks that we expect cash flow from operating activities to be positive in the second half of the year on the receivable side when you're right, that's just a math. There's nothing strange there. We just had timing of sale and that means that cash went through receivables. It's quite common for bloom in its history to see a use of cash in the first half of the year and then for cash to come back in more positive in the second half of the year.

Daniel Berenbaum: So I think we're following that kind of normal pattern. You know, we'll call that the largest piece of our receivables currently is the SK receivables, the related party receivable SK is a great partner. We are confident in collecting that receivable.

Daniel Berenbaum: And I think that's all I have to say on that operator next question, please. And thanks for for figuring out the technical problems column.

Operator: I think, you know, I think we are out of time. So let's keep, you know, you know, Collins question as the last question.

K.R. Schritter: I want to thank you all for joining this call. Here is your at a high level. This is the way I see it, right? I don't have to convince any one of you today that energy demand, driven by AI, electrification, all the other growth vectors in the country is creating a demand that simply cannot be met by the grid in many places. And Blum has a power being provided at the point of use with the right attributes of reliability and clean is becoming the best alternative option in this scenario.

K.R. Schritter: Gas for the many years to come is here to stay and you don't have to take my word for it. Look at the hyperscalers, who have been the leaders in adopting the new world power, telling you that they'll continue to grow their renewable power portfolio, which is the right thing to do, but simply cannot operate without gas. And under those circumstances there is no better technology to convert it reliably for them and solve their time to power problems than Blum.

K.R. Schritter: This scenario of supply demand and what needs to happen couldn't come at a better time for Blum because we have clearly shown through the last few quarters and our numbers that we have a business model that can operate profitably. And if you ask us what we are seeing, we are seeing that very clearly from the amount of customer engagement and amount of contract negotiations that's going on if I go to my commercial desk.

K.R. Schritter: For that reason, we are continuing to strengthen our commercial team and keep growing it and adding to that because of that enthusiasm that we see on the customer side, which we think is circular and structural and is here to stay for a long time. So we have well placed and our team is executing and fighting on all cylinders.

K.R. Schritter: Thank you for joining us.

Operator: That concludes today's call.

Operator: You may now disconnect.

Please wait, the conference will begin shortly. Thank you very much.