Q3 2024 Bloom Energy Corp Earnings Call
Hello, and welcome to clean energy third quarter 'twenty 'twenty four earnings Conference call. Please note that this call is being recorded after the Speakers' remarks, there will be a Q&A session. If you'd like to ask a question during that time, Please press star and number one on.
Your telephone keypad.
I'd now like to hand, the call over to Michael Kennedy, Vice President Investor Relations you May now begin.
Michael Kennedy: Thank you and good afternoon, everybody. Thank you for joining us for Bloom Energy's third quarter 2024 earnings call to supplement This conference call. We finished our third 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 web.
Right.
Michael Kennedy: 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. These include statements about the company's business results products, new market strategy financial position liquidity and full year outlook for 2020.
Michael Kennedy: Four.
Michael Kennedy: 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.
Michael Kennedy: We assume no obligation to revise any forward looking statements made on today's call. During this call and in our third 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.
Michael Kennedy: Measures of financial performance prepared in accordance with GAAP.
Michael Kennedy: Reconciliation between the GAAP and non-GAAP financial measures is included in our third quarter 2024 earnings press release available on our Investor Relations website.
Speaker Change: Joining me on the call today are <unk>, founder, Chairman and Chief Executive Officer, and Dan <unk> Our CFO.
Speaker Change: I will begin with an overview of our process and then Dan will review financial highlights for the quarter. After our prepared remarks, we will have time to take your questions I will now turn the call over to K R.
K R: Hello, everyone and thanks for joining us today.
Speaker Change: The energy landscape is playing so team gets at a pace we've never seen before.
Speaker Change: Both turbulent and transformation.
Speaker Change: At the energy transformation company Z at.
Speaker Change: At Bloom adapting.
Speaker Change: Adapting to and creating change.
Speaker Change: Just walking the halls of better commercial team operates and looking at the computer screens and white Butch.
Speaker Change: And hearing the calls and conversations.
Speaker Change: Is it possible sense of positive momentum.
Speaker Change: Team is looking at a number of opportunities and it is clear that they have.
Speaker Change: Working on several complex and large deals.
Speaker Change: A big shift in our business today.
Tyler: Thank you Tyler.
Speaker Change: We are providing solutions to meet the urgent needs of our customers who cannot fulfill their power needs from the grid.
Speaker Change: In these cases these rapidly book build ship install and power sites for our customers in a matter of months.
Speaker Change: Much faster timeline than a grid connection.
Speaker Change: Such rapid drill activity will necessarily come the timeline variances, both Portland and delayed and it will affect our quarterly revenue line.
Speaker Change: You are seeing this in our Q3 numbers.
Speaker Change: Based on our current projects and the visibility we have to year end.
Speaker Change: Extremely confident the Bloom energy will meet our total year guidance.
Speaker Change: This is because of our team remaining focused on serving our customers and on delivering results for our anchor place I want to thank them for their hard work and dedication.
Speaker Change: More states in the U S are now facing unprecedented power outages got it yes.
Speaker Change: Steep price increases.
Speaker Change: Our U S commercial and industrial sectors that include healthcare education retail telecom and other industrials.
Speaker Change: Sean and these customers <unk> signed a clean reliable and cost predictable power solution very attractive.
Speaker Change: We have seen an uptick in our U S commercial and industrial business.
Speaker Change: We are very bullish about AI and the data center market and what that means for <unk> growth.
Speaker Change: Youll see a bloom energy fuel cell systems. They are purpose built like a customer.
Speaker Change: For the data center.
Speaker Change: Here are the five fingers or attribute.
Speaker Change: One the milliseconds scale time response of our solid oxide fuel cell technology.
Speaker Change: To load variations.
Speaker Change: Advantage for AI loads.
Speaker Change: Sure.
Speaker Change: Fault tolerant PSU ago, and high power density feature so far system market that chair make our solution economically attractive.
Speaker Change: <unk> ability to deliver AC or DC power at various medium voltage fittings.
Speaker Change: Mikes future electrical options.
Speaker Change: For the use of high temperature heat to provide cooling is a big benefit for Gpus that power of the AI evolution and Fi.
Speaker Change: Ability to grow zero carbon natural gas and switch to heidrick and in the future may explore a sustainable solution.
Speaker Change: The level of commercial activity in the data center space has picked up even more than when I spoke to you in 90 days ago.
Speaker Change: These are multi party deal that are complex.
Speaker Change: 100 megawatt data center deal as a commercial value of over $1 billion.
Speaker Change: And so it takes a minute.
Speaker Change: Maybe along Texas minute.
Speaker Change: To get a deal done.
Speaker Change: Making good progress.
Speaker Change: Expect to hear more from us on this topic in the near future.
Speaker Change: I'd like to highlight a few.
Speaker Change: <unk> that demonstrate <unk> ability to navigate and succeed in the evolving energy environment.
Speaker Change: In Delaware.
Speaker Change: <unk> to our customers.
Speaker Change: First our ability to execute on large scale projects is evident.
Speaker Change: Highlight of the quarter was a landmark agreement.
Speaker Change: AEP megawatt fuel cell project in South Korea in partnership with SK, Tunics, and Korea development Bank KDB.
The worlds largest single site fuel cell installation in history.
Speaker Change: This project is a significant milestone for us and a testimony that fuel cells are now a core solution for large scale power generation.
Speaker Change: We're excited to partner with two global leaders.
Speaker Change: <unk>.
Speaker Change: As a longtime partner of gloom and has been a distributor of our energy solutions in South Korea since 2019.
Speaker Change: Korea Development Bank is.
Speaker Change: Among the largest banks in the world fostering industrial development of Korea with over $230 billion.
Speaker Change: Assets.
Speaker Change: This is a model.
Speaker Change: We'll replicate going forward.
Speaker Change: Partnering with renowned global companies and financial institutions to bring our solutions to other international markets.
Speaker Change: Fortunately.
Speaker Change: This large power block project.
Speaker Change: Proof point.
Speaker Change: To show Bloom can power large datacenters.
Speaker Change: Second.
Speaker Change: Clear that the <unk>.
Speaker Change: Power grid is simply not keeping up with.
Speaker Change: With the growth demands.
Speaker Change: Large amounts of power are needed from new sources of capacity.
Speaker Change: Bloom energy servers provide additionality behind and in front of the meter without adversely impacting the ratepayer our grid reliability.
Speaker Change: We spoke a quarter ago about a unique center the needs or agreement between Bloom energy and Silicon Valley power.
Speaker Change: Good day.
Speaker Change: It's an agreement with SDM development for 20 megawatts of balloons Src across two strategic location in Los Angeles.
Speaker Change: This power provides additional capacity to southern California utilities, while taking advantage of <unk> clean reliable affordable power.
Speaker Change: We are currently in negotiations with the authorities in other parts of the country.
Speaker Change: Transmission is a critical aspect of the energy business.
Speaker Change: And we have been partnering with utilities to complement transmission solutions and remove bottlenecks for our customers.
Speaker Change: The recent FERC ruling highlights the consensus on the need for large scale interconnections through new capacity additions utilities that adopt this model will likely find it easy to get the projects approved by regulators.
Speaker Change: Our SVP model has been successful and allows us to work with utilities in a mutually beneficial manner by adding strength and behind the meter capacity, we can ensure grid reliability and maintain competitive customer rates.
In addition to center the meter solutions to meet customer needs with that utility partner.
Speaker Change: Also work on behind the meter solutions directly with the customer.
Speaker Change: As an example, we spoke earlier this year about how quanta needed power for an industrial facility in northern California to support AI data centers.
Speaker Change: Bloom was able to book manufacturer.
Speaker Change: And install energy servers to.
Speaker Change: To fulfill that need.
Speaker Change: Later in the year Quanta has returned with the request to increase the borrowing capacity by more than 150%.
Speaker Change: Create the largest island at micro grid in Silicon Valley.
Speaker Change: Bloom was once again able to meet their demand out of schedule.
Speaker Change: In this island mode B, not only provide clean reliable power, but also follow the load needs of the customer a new feature load following that we have added to our offering.
Speaker Change: Lastly.
Speaker Change: We remain steadfast in our commitment to cost reduction.
Speaker Change: It is ingrained in our DNA and we are delighted to report that as.
Speaker Change: We are on course to achieve double digit cost reductions for the year just as we have done in previous years.
Speaker Change: By continuously optimizing our operations driving efficiencies in manufacturing and focusing on continuous technical innovation, we can deliver our cost reduction goals. This year.
Speaker Change: We look forward to doing the same FC go forward.
Speaker Change: As we look ahead.
Speaker Change: We are confident in our ability to grow the business based on strong commercial momentum.
Speaker Change: Excellent operational execution and ongoing innovation.
Speaker Change: Our ability to execute large scale projects reduce costs and provide reliable power solutions make us a trusted partner for our customers, but simply if you want to generate $24 seven power reliably at the point of use without air pollution and noise and you need it.
Speaker Change: Now.
Speaker Change: There is no better solution than the market and Bloom energy servers. We are excited about our opportunities ahead I look forward to taking your questions, but for now I will turn it over to that.
Speaker Change: Thank you and good afternoon, everyone.
Speaker Change: During last quarter's earnings call I spoke about how excited I was to be at Valero and how after one quarter of working with this team I felt like our commercial opportunities positioned us well for revenue and profitability growth six months into the job I have even greater conviction that our expanding set of solutions, including micro grid.
Speaker Change: Load following carbon capture and combined heat and power solutions, along with our increasing power density align well with the requests that we see from our existing and potential customers.
Speaker Change: All 2100 Bloom employees are prepared to execute on this opportunity as we provide solutions to the critical problem of power at the point of views and as we continue to be a leader in the global energy transition.
Speaker Change: Turning to near term results and outlook as you know, we generally recognize product revenue as we ship our energy servers for customer projects. These customer projects naturally have schedule variability both positive and negative you've all seen this variability impact bloom in the past pulling in or pushing out revenue by it.
Speaker Change: <unk>.
Speaker Change: Our second half 2024 is a case of this and we recognize that our Q3 results and our expectations for Q4 reflect this natural variability.
Speaker Change: Part of the project. We are currently executing we have full confidence in delivering second half and full year results in line with the guidance that we've previously provided.
I reiterate we expect revenue between one four to $1 6 billion non-GAAP gross margin of approximately 28% and non-GAAP operating income of $75 million to $100 million.
Speaker Change: <unk> is a growing company and a large changing market I feel confident that we can deliver full year results, even as we adjust to these market changes.
Speaker Change: To provide a little more color on these changing market dynamics, we've talked over the past few quarters about the steep rise in demand for electricity and the delays that U S businesses are experiencing in getting additional power from their utilities.
Speaker Change: This dynamic is playing out in our U S commercial and industrial business, where we see robust customer activity along with data center. This is fueling a mix shift towards the U S. Even while our Korea shipments remained strong.
Speaker Change: Further our time to power customers have an urgent need to grow their businesses and meet their own market demands for these customers. We are booking shipping and recognizing revenue within a relatively shorter timeframe and we do try to prioritize customers with time urgent requirements as you can imagine this dynamic along.
With larger project sizes and complexity is part of why we're seeing this year is quarter to quarter variability and also why we have confidence in achieving our full year goals.
Speaker Change: Through all of this our top priority is profitable growth, we expect that emphasis to show in our Q4 results as well as in 2025.
Speaker Change: Crucial to that profitability is our continued focus on product cost reductions.
Speaker Change: Our technology engineering and manufacturing teams have consistently been able to reduce the cost of our core energy servers by 10% or more per year, and we have a roadmap for future progress at a similar rate.
Speaker Change: Turning to our Q3 results revenue for the quarter was $334 million a.
Speaker Change: The decrease of 17, 5% over the third quarter of 2023, which as a reminder was positively impacted by a large repowering.
Speaker Change: Q3 revenue was also down slightly from Q2, largely due to a decline in install revenue while product revenue increased by $7 $5 million and service revenue was flattish.
Speaker Change: This revenue dynamic also led to a sequential improvement in gross margin, while non-GAAP gross margin of 25, 2% was down from 31, 6% in the third quarter of 2023 increased from last quarter's 21, 8% as mix shifted towards product and our product cost.
<unk> continued in line with our expectations.
Speaker Change: Our service business was again profitable in Q3, we continue to expect service to be profitable for the full year of 2024, which would be the first time in <unk> history that services profitable across the full year.
Speaker Change: non-GAAP operating profit for the third quarter was $8 1 million a decrease of $43 $7 million from the third quarter of 2023, and an increase from Q2s $3 $2 million loss non-GAAP EPS was a loss of a penny per share.
Speaker Change: Cash flow from operating activities was an outflow of $69 million in the third quarter, primarily to increases in receivables due to timing of transactions and an increase in inventory made to meet anticipated demand in Q4.
Speaker Change: We still expect cash flow from operations to be positive for the second half of 2024.
Speaker Change: We ended the quarter with $549 million total cash on the balance sheet.
Speaker Change: As we discussed last quarter changes in our product mix are impacting the way we use certain metrics to manage our business. Specifically, we are reevaluating our use of key operating metrics, including measures on a per kilowatt basis, as our offerings evolve and expand the cost of our core energy.
Speaker Change: Server as a percentage of total product costs can vary significantly depending on the solution offered for example, we package our energy servers on skids to accelerate installation time essential in a world where time to power is critical to many customers. This adds value to our solutions that is not accurately.
Speaker Change: <unk> in a per kilowatt measure.
Speaker Change: <unk> engineering solutions to increase our power density such as Stackable energy servers, combined heat and power solutions carbon capture solutions and our increasingly popular Microgrid solutions all increased both the value and cost in a way that is not necessarily correlated to the kilowatts or megawatts.
Speaker Change: Of a particular project, we are committed to providing investors with the right level of useful information and we intend to provide the right set of metrics that will simply and clearly help investors model and analyze our business too.
Speaker Change: To conclude our commercial opportunities remain robust and we are on track to show improved financial results. As we scale. We are extremely focused on positioning bloom to scale profitably as we continue to provide clean reliable solutions for the world's evolving energy needs.
Speaker Change: With that operator, please open the line for questions.
Speaker Change: We are now opening the Flores with question and answer session.
Speaker Change: I'd like to ask a question. Please press star and number one on your telephone keypad kindly limit your questions to one question first.
First question comes from Andrew <unk> from Morgan Stanley. Your line is now open.
Speaker Change: Hey, guys. Thanks for taking the question and congrats on some strong commercial progress with but those announcements Tonight.
Speaker Change: I guess I wanted to maybe take a look at or ask a question about how you're thinking about the roll forward to 2025, I know youre not giving specific guidance on that but just with the ITC is scheduled to phase down with the election now behind US can you just give us any directional commentary about how youre thinking about the setup for 2025.
Speaker Change: Obviously, we're sitting in November now so I assume you have some view of where your backlog stands. So anything directionally that you can help us in terms of where we should it be expecting revenue and maybe margins to trend as we look forward into 2025.
Speaker Change: And then my follow up question would just be around the data center opportunity I apologize if I missed this in the prepared remarks, but can you or can you give us an update in terms of where you stand obviously youre, making some good progress outside of data centers with your traditional commercial and industrial customer base as it relates to data centers I think entering the year you were talking about.
Speaker Change: <unk> may be announcing some rather large data centers by year end of 2020 for what's your latest thinking there in terms of timeline and maybe what's some key milestones that we should be keeping a look forward.
Andrew: Andrew Hello.
Speaker Change: Thank you so much for those two questions.
Speaker Change: So on the first part in terms of where we are seeing the commercial pipeline what youre seeing let me break that up into two parts right. The first is our traditional business as you've seen over the last three to four years.
Speaker Change: What we are seeing is a significant uptake in the U S commercial and industrial market.
Our Korea volumes are stable and strong.
Speaker Change: But the growth.
Speaker Change: Clearly seeing in the U S C&I.
Speaker Change: Thing because it's really good because it's across sectors.
Across regions here in the U S.
Speaker Change: In certain states that are opening up for us all of this put together.
Speaker Change: Believe that.
That core business as we have called it over over the years in the U S is very strong.
Speaker Change: <unk> continue that way.
See it in 2025.
Speaker Change: Yes.
Speaker Change: We think that data centers.
Speaker Change: And the opportunity specifically with large AI data centers.
Speaker Change: Is going to happen we are in active negotiations with multiple partners.
Speaker Change: We are happy with the progress.
Speaker Change: Would I be wood I, one more urgency on the speed you bet you.
Speaker Change: Bet, you I would want to see that but these are complex deals.
Speaker Change: All moving in the right direction.
Speaker Change: So can I handicap it for.
Speaker Change: In particular data on a calendar.
Speaker Change: No, but can I tell you we expect to have some good news in that area soon based on where everything is trending the answer is absolutely yes.
Speaker Change: Next question please.
Speaker Change: Your next question comes from Manav Gupta from UBS. Your line is now open.
Manav Gupta: I ask only one question what I really liked about this press release was that you had.
Manav Gupta: Key orders with three different markets and that is that.
Speaker Change: I mean, theres a lot of focus on data centers, but diversity ultra matters and going ahead should we think about the diverse deals like these three areas, where you'll be providing to utilities in the U S and maybe power internationally and then the data center. So should we expect that the pre diverse markets you showed us in this press release that trend will continue.
Manav Gupta: Yeah.
Speaker Change: Minus very good observation youre, absolutely right there.
Speaker Change: There are two things about your order book right. It is the orders you have but also the quality of the order book.
Speaker Change: And diversity of orders both in terms of sectors and geography is a huge deal as you think about building a company not just for the next quarter, but for the decade to come and many decades to come I'm, particularly about these the orders and where they are.
Speaker Change: So I think you broke it down nicely.
Speaker Change: A shortage of power.
Speaker Change: That we are all seeing not just in the U S. But we will start seeing that in other geographies too. We have already started seeing them in places like Dublin in Ireland in Frankfurt in Germany, and Singapore like places like that.
Speaker Change: Now, it's not just about generation it's about transmission.
Speaker Change: Transmission in the U S is going to be a bottleneck for a very long time to come.
Speaker Change: So our asset becomes both a transmission asset.
Speaker Change: And the end use that asset.
Speaker Change: So to help their utility.
Speaker Change: <unk> mitigate the long cycles, it's going to take them to get transmission into where they need to supply the product to their customer.
Speaker Change: In short ticket to that would be to use our blocks incentive the meter.
Speaker Change: Not have to do transmission upgrades and supply large blocks of power to our customer.
Speaker Change: You are seeing examples of that with SVP and now with the latest announcement that we made in southern California.
Speaker Change: Expect to see more of that.
Speaker Change: The client on the other hand is in places where they.
Speaker Change: <unk> because of its regulation or because of other priorities does not want to do that with us.
Speaker Change: The customer has the choice of coming to us and asking us to be behind the meter.
Speaker Change: And it's the same solution, it's just who is going to deliver the product at home.
Speaker Change: Alright.
Speaker Change: Utility providing.
Speaker Change: Clean reliable always on power for the customer.
Speaker Change: Using our boxes.
Speaker Change: Our the customer directly getting it from us.
Speaker Change: Without <unk>, we think.
Speaker Change: The board will play in different places for different reasons.
Speaker Change: On top of that I think you asked.
Speaker Change: So there you have those deal the third part is we think.
Speaker Change: International.
Speaker Change: For us going forward.
Speaker Change: In the next few years is not just going to be Korea, we are making good strides in other parts of Europe. So good example, other parts of Asia, We think Taiwan as a phenomenon of opportunity.
Speaker Change: Going forward.
Speaker Change: And so we think.
These markets are going to open up so what you're going to see us diversity in geography.
Speaker Change: Our city and customers.
Speaker Change: Like diversity in sectors, giving as a business.
That.
Speaker Change: Ken B.
Speaker Change: Less and less prone to cycles in the market.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Chris <unk> from RBC capital markets. Your line is now open.
Speaker Change: Yes, good afternoon I appreciate it they ask can I ask a question here.
Speaker Change: We noted that you all are expanding manufacturing capacity.
Speaker Change: Fremont facility I am guess I guess I just wanted to ask a question on <unk>.
Speaker Change: Can you comment on the rationale behind that capacity expansion is it indicative of demand increases and then how should we translate that into the outlook for 2025. Thank you.
Speaker Change: Very good question.
Speaker Change: So we have expanded our capacity in Fremont.
Speaker Change: We will have a gigawatt worth of capacity next year for fuel cells.
Speaker Change: And the answer is very simple, we're not going to build capacity expecting they come do you think that this market is growing rapidly and.
Speaker Change: This is something we will do in fact, let me tell you that.
Speaker Change: We have enough space, there and in six to nine month Timeframes, we can add an additional gigawatt does that gigawatt as needed and so not only are we do we have a time to power play we have a time to expansion place. So we can expand more rapidly than most people.
Speaker Change: Okay.
Speaker Change: Be able to meet the explorations demand that's going to be out there in the marketplace. So the bill the not only selected the factory and the science, but also how we scale to be able to scale extremely quickly.
Speaker Change: As we see the demand go up.
Speaker Change: Yes, Chris I'll, just add as you might imagine we are still very conscious of our commitment to grow profitably and to be very mindful of how we use cash so to reiterate what <unk> said, we will expand as we see demand. We believe that we are able to expand our capacity rapidly.
Speaker Change: Enough to meet demand. So we wont fall short we have the time to do it we will spend our cash wisely you will note that as I said in my prepared remarks, our inventories went up this quarter and Thats because we expect the demand we're doing that and we're making the right investments as we see the demand as we saw.
Speaker Change: The commercial activity increasing.
Speaker Change: Four and beyond so we will do this in a very measured very controlled very rational fashion. Thanks, Chris.
Speaker Change: Your next question comes from Noel Parks from Tuohy Brothers. Your line is now open.
Speaker Change: Uh huh.
Noel Parks: Hi, good afternoon.
Noel Parks: No.
Speaker Change: You've just touched on one of the things I was wondering about which was capital inventory.
Speaker Change: This is kind of a big picture question.
Speaker Change: Has there in terms of the many types of partnerships that could be beneficial.
Speaker Change: Was wondering have you.
Speaker Change: Looked into direct partnership between Bloom.
Speaker Change: And Nat gas pipeline infrastructure operators as a means of sort of proportionately different regional markets, because as we see growth coming and.
Speaker Change: Yes.
Speaker Change: Does seem to me that there is some geographical concentration and I'm just wondering if that that point in the energy value chain is something that could be fruitful.
Speaker Change: I think it's a very good question. We are in early conversations is what I will tell you. They are not made stage conversations began in early conversations and I think.
Speaker Change: Correct me if I'm wrong I think your question is gone some of that nature.
Speaker Change: Yes, there are huge transmission problems and if there are these large load speed AI data.
Data centers or others that required lots of power.
Speaker Change: Wouldn't you be better off being very close to a gas pipeline with what we do and be able to provide that power to that customer absolutely logical. We think there is a huge play there.
Speaker Change: But.
Speaker Change: That kind of opportunity is just opening up as seen by the investors and the gas companies.
Speaker Change: And some of them have been approaching us.
Speaker Change: I'd say, we are in early stage conversations on that.
Speaker Change: Vila fullest use appropriate if something breaks there.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Our next question comes from Vishal <unk> from Jefferies. Your line is now open.
Speaker Change: Hi, Thanks for taking my question just wanted to push a little bit on the ITC expiring this year.
Speaker Change: Yes.
Speaker Change: How are your conversations with customers are there.
Speaker Change: A word about it any thoughts there would be helpful.
Speaker Change: Sure.
Speaker Change: So look we have been.
Speaker Change: We have been in this commercial market for almost 15 years and.
Speaker Change: Policy and regulation and that relating to incentives and subsidies have always been part of this equation.
Speaker Change: All of these loans how to navigate through this and this year is going to be no no different for us. That's the first point. The second point is the number is significant portion of our business for the last four years somewhere closer to 40% and even greater numbers as we go forward.
Speaker Change: Does not depend on the ITC already.
Speaker Change: Third point to make because our costs are coming down as you heard from our prepared remarks, and we don't need to tell you how the electricity prices are going up and thats, our liabilities going down and forget cost.
Speaker Change: For people, who need power the price of not having power is a lot more expensive than the cost of power and they are not able to get between all of these dynamics.
Speaker Change: We are.
Speaker Change: We clearly have a game plan.
Speaker Change: To operate with or without ATC.
Speaker Change: That being said.
Speaker Change: Things like ITC.
Like Nitro, if you're playing a video game.
Speaker Change: They help boost steel growth.
Speaker Change: Yes.
Speaker Change: Q, but that not being available is not a break.
Speaker Change: Speed bump.
Speaker Change: And.
Speaker Change: We are now at a place that we will know how to navigate that pretty well. So that's how we think about it. Thank you.
Speaker Change: Sure.
Speaker Change: Your next question comes from Xiaomi.
Speaker Change:
Speaker Change: Ravi from AIG. Your line is now open.
Speaker Change: Hi, good afternoon, Thanks for taking my question.
Speaker Change: I was curious if you can shed some light on what the energy server installation process looks like are there any downstream bottlenecks that could cause acceptance acceptances excuse me to push rate.
Speaker Change: Even if an order is ready to lead free month on time.
Speaker Change: That's a great question so look.
Speaker Change: How we how we recognize revenue depends on the contract.
Speaker Change: There are multiple contracts.
Speaker Change: In some places in some cases and they are fairly small it would be we can recognize revenue when we turn the power on.
Speaker Change: In other cases it is when we ship.
Speaker Change: Irrespective of what it is ultimately it is in our interest because we are serving a customer to turn their powered on as quickly as possible. So now let me explain that process independent of US having received delek revenue recognition, it's important for us.
Speaker Change: And that we serve our customer by turning that on as quickly as possible.
Speaker Change: So in most cases by the time.
Speaker Change: Servers leave Fremont.
Speaker Change: Gas is already facilitated.
Speaker Change: The electrical interconnection has already facilitated dose permissions.
Speaker Change: The site is already prepared so the process of.
Speaker Change: Literally connecting.
Speaker Change: The interfaces.
Speaker Change: Electrical.
Speaker Change: Water and gas to our system.
Speaker Change: Because all the communication is wireless.
Speaker Change: Is ready.
Speaker Change: And it is done and there will be a local inspection for fire safety gas all of that.
Speaker Change: And we are able to get done the follow on for the customer.
That process than it is seamless.
It can be less than a week.
Speaker Change: But construction is consumption per image.
Speaker Change: <unk> permissions at all over the map so the variance on that time can be pretty large.
Speaker Change: One important point to highlight here is the fact that now.
Speaker Change: Our units are all platform. This is the skids.
As we can simply drop that skid without having to pour concrete without having to do anything and be able to connect its shocking about process. So much and it also gives the flexibility for the customer to move it from one location to another location that they need to we see this as a humongous step change.
Speaker Change: Our ability to install very quickly.
Speaker Change: I hope I answered your question, we'd be more than happy to have you come out and watch and installation of ours. It's a joy I mean, it's basically Lego blocks being flicked together and done pilot rock. Thank.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Your next question comes from Amit <unk> from BMO capital markets. Your line is now open.
Speaker Change: Hi, good afternoon, Thanks for taking my question.
Speaker Change: Just real.
Speaker Change: Real quick it looks like in your 10-Q, you guys have factored about $184 million of.
Speaker Change: Accounts receivable year to date, so far I was just wondering does any of that include I guess the receivable that we've asked about before with AWS.
So I mean, we're not being specific about what's included in factoring, but I will say that that specific receivable that we've spoken to the SK receivable, we do expect to collect that before the end of the year. We are very confident of that SK is obviously, a very strong partner for us and all <unk>.
Speaker Change: We remain confident in collecting that receivable.
Speaker Change: Your next question comes from Jordan Levy from truly Securities. Your line is now open.
Speaker Change: Okay.
Speaker Change: Hi, all it's Henry on for Jordan here, Congratulations on the new new orders just on the SK. One what is the long term opportunity look like there for potential additional site developments with them and then could we see larger order sizes moving forward getting into bed, maybe triple digits megawatts or you just kind of the ceiling.
Speaker Change: Expect.
Speaker Change: Look.
Speaker Change: So far.
Speaker Change: It's been a fairly steady numbers and again, you can look them up we like to support them by quarter and by.
Speaker Change: By year.
Speaker Change: It's been fairly steady over the last four years.
Speaker Change: Korea is no different from the rest of the world.
Speaker Change: The day, if you just go and read about it has talked about.
Speaker Change: AI being very important to them.
Speaker Change: <unk>.
Speaker Change: Chairman of the entire SK group, just last week and it's in the public records that's landscaping. This.
Speaker Change: <unk> about them wanting to play a very important role in AI and.
Speaker Change: Specifically called out the partnership that Bloom energy.
Speaker Change: And holidays and they use our systems for that AI. So thats in the public record. So you can go see it so.
Speaker Change: Given the need for AI industrialization that semiconductor chips and everything that goes along with it.
Speaker Change: Our system integration so.
Speaker Change: Ken that market growth similar to the U S market the answers.
Speaker Change: Hopefully, yes, because it's an important trading partner for US Korea is an important trading partner for us and we are uniquely positioned with our technology to support it.
Speaker Change: We believe that we have a terrific partner in this case.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Martin Malloy from Johnson Rice. Your line is now open.
Martin Malloy: Good afternoon I also wanted to ask a question on an eight megawatt award something you've mentioned in the press release about.
Martin Malloy: <unk> financing there and I was just kind of curious.
Speaker Change: This something new that lenders are willing to.
Speaker Change: They are comfortable enough with the balloon technology to offer project financing on projects using the bloom servers.
Speaker Change: Is this something new and how important do you think this is.
Speaker Change: So.
Speaker Change: That's a great question.
So let me answer the <unk>.
Speaker Change: Following the Martin.
Speaker Change: Until rules changed and everything happened the only process to which these fuel cell. So getting deployed was an auction process.
Speaker Change: <unk> process typically happened.
Speaker Change: The.
Speaker Change: Large electric companies that are owned by the Korean government. So it was very different now.
Speaker Change: That auction process now requires developers to come and develop projects on their own.
Speaker Change: And so financing becomes very important.
Speaker Change: But.
Speaker Change: We had stated earlier.
Speaker Change: That the auction process is just one mechanism through which we can tell.
Speaker Change: Our partners are capable of developing processes outset are opportunities outside the auction process.
Speaker Change: And not only to be able to develop this process outside.
Speaker Change: But find if financier of the caliber of Korea development Bank. Because this is your blue chip financier. So your question is very appropriate and the answer is yes.
Speaker Change: It is because of the performance of Bloom.
Speaker Change: For a little over seven years that we have been there and how comfortable they are getting with our technology that is financier like that is coming in willing to backstop.
Speaker Change: Long term contract, it's a very good sign for us going forward. Thank you.
Speaker Change: Your next question comes from Chris Chung from Wolfe Research. Your line is now.
Chris Chung: Hey, Hey, guys. Thanks for taking my question.
Speaker Change: Wanted to ask.
Speaker Change: What drives your conviction to meet full year guidance as <unk> expected to be delivered by year end, but any color on timing from the old SaaS clients the capacity and the 80 megawatt order with it.
Speaker Change: Should we think about those deliveries to be in 2025 and also given the time. It didnt seem like we will see anything from Greenfield or brownfield data center customers for this year is that a fair assumption.
Speaker Change: Hey, Chris So a lot of questions kind of baked in there I'll say the SK <unk>, that's 2025 revenue for us and we talked about that we expect that commissioning in 2025, we expect to.
Speaker Change: Help our partner with that in 2025.
Speaker Change: For 2024 as I said in my prepared remarks, we have visibility on two very specific projects that take us through the end of the year and I talked in my prepared remarks about some of the puts and takes the quarter to quarter variability that we see look we are a large project.
Speaker Change: Base business as we see more of these U S C&I projects and customers coming to us that that leads to some of that quarter to quarter variability, but very specifically when we look at Q4, we're looking at very specific projects that are in various stages of.
Speaker Change: Contracting for example that lead us to be confident in our ability to hit that full year guidance. So these are very specific conversations that we have looking at our relationships with our customers on the projects that they are moving forward with.
Speaker Change: Your next question comes from David <unk> from Baird. Your line is now open.
David: Hey, Dan Hey, Thanks, guys. I. Appreciate you taking my question I know you talked earlier in the year about making some adjustments to both your sales team and your sales process just as some of these deals in the <unk>.
David: Close to one hundreds of megawatts go up to the C suite for customers at some points I'm. Just wondering if you could talk to any traction you've been getting with these new processes and specifically if you think there's going to be a long sales cycle.
David: Going forward or if maybe there will be an acceleration after the first one or two larger deals or side. Thank you.
Speaker Change: David Thank you this chaos so.
Speaker Change: Let me start with the last part first I think I think the first couple.
Speaker Change: Breaking in to any new market is always the hardest hit like takes the longest.
Speaker Change: Is that difficult cycle that we have seen when we enter any segment or any geography.
Speaker Change: And this is similar but.
Speaker Change: In many cases.
Speaker Change: Some of these end users are very familiar with our technology.
Speaker Change: It's not a technology issue, it's a multiparty issue.
Speaker Change: Okay.
Speaker Change: Then something this large is installed.
Speaker Change: There are multiple parties involved as you can imagine and bringing multiple parties together, making sure all the interests are met.
Speaker Change: <unk>.
Speaker Change: There is a.
Speaker Change: Proper deal to put together and when Youre doing it for the first time.
Speaker Change: There's a lot of back and forth. So what is going on right now is not.
Speaker Change: Discussing whether we should do something or not do something or figuring out the technology qualified.
Speaker Change: There is nobody in the data center market.
Speaker Change: Hey that Bloom energy technology cannot properly supported data center. So we technology qualified so this is more on the on the commercial process.
Speaker Change: Like I said in my remarks, it takes a minute.
Speaker Change: Okay.
Speaker Change: I would like to see it happen and second living in Silicon Valley, but it does take a minute.
Speaker Change: So.
Speaker Change: Be patient vehicle thing that we can come back to you as soon as something is.
Speaker Change: Thank you.
Speaker Change: Next question comes from Brad Kessel, mainly from <unk>.
Speaker Change: Sir Your line is now open.
Speaker Change: Hi, Thank you.
Speaker Change: I just had one on on bigger picture bigger picture question on cost reduction curious if you can talk about the timeline on future product generations.
Speaker Change: And the impact they may have on your cost roadmap. Thank you.
Speaker Change: Thank you Brad Thats, a very good question.
Speaker Change: So.
Speaker Change: The way to think about.
What we bring to the table.
Speaker Change: Is not just product generations.
Speaker Change: It is really about the attributes of the product.
The key attribute being if we reduce the cost.
Speaker Change: The increase the affordability and we increase our competitiveness in markets, where we are just sitting on the edge of being competitive with the grid.
Speaker Change: All right so for those reasons.
Speaker Change: Affordability and expansion of market.
Speaker Change: As there are less expansion of margin.
Speaker Change: Cost reduction is super important.
Speaker Change: It's been in our DNA, we do that every single year.
Speaker Change: And.
Speaker Change: Last year, we had a double digit this year, we will have a double digit cost reduction.
Speaker Change: I, absolutely expect nothing less than a double digit cost reduction next year.
Speaker Change: And this will continue.
Speaker Change: So.
Speaker Change: We look for.
Speaker Change: The best ways to bring that cost reduction.
Speaker Change: While we are adding.
Speaker Change: Features to our product.
Speaker Change: So exactly where we bring that cost reduction today, if you think about it.
Speaker Change: Islanders micro grid, making.
Speaker Change: Making our products suitable for island ing.
Speaker Change: Let me explain this to you because that's not a common word everybody understands right and island solution of ours means that it is absolutely not connected to the grid.
Speaker Change: And the unit supports the pilot in the building.
Speaker Change: Then what do you need to do the load in the building goes up and down it can be done Don it can be turned off and in the morning Tonight Peak times no changes.
Speaker Change: People are not familiar with.
Speaker Change: Solid oxide fuel cell being able to launch follow and we never sold load following before.
Speaker Change: Our new products.
Speaker Change: Allow us to be able to follow the load for our customer and not depend on the grid as a flywheel to go up and down to take care of the exercise.
Speaker Change: Net metering is not going to work.
Speaker Change: When the grid is not able to take care of its own needs appropriately.
So bloom solution.
Speaker Change: So much superior than can island and not rely on the grid. It takes away the condition from the grid. It takes away the dependents on the grid.
Speaker Change: So these are the places now we are more focused on making advancements in bringing costs down.
Speaker Change: Rather than just.
Speaker Change: Yes.
Thinking about what is the next release our next release is now.
Speaker Change: Or a combination of better fuel cells better features but I want you to understand we are doing all of this and still continuing to bring the costs down more features lower.
Speaker Change: A lower cost.
Speaker Change: So I will just add as <unk> said it is about adding more value to our customers, but rest assured you'll have to give a shout out to our manufacturing operations. Our engineering teams. They are maniacal about improving the quality reliability and cost of the products and so forth.
Speaker Change: <unk> do a tremendous job every single day and at even as we add more value with these new solutions, we are maniacal about that operations discipline and focus.
Speaker Change: Your next question comes from Colin Rusch from Oppenheimer. Your line is now open thanks.
Colin Rusch: Thanks, so much guys.
Colin Rusch: We're bidding on larger projects can come in.
Speaker Change: How you're approaching pricing and relative to whether it's natural gas turbines or other technologies and how much value really put on potentially future proofing. These sites as micro grids.
Speaker Change: Look.
Speaker Change: That is plenty in the market today opportunities.
Speaker Change: We bring in valuable solution to our customers.
Speaker Change: And the the value price.
The gas turbine market is.
Speaker Change: Hundreds of Gigawatts, and they will keep selling where they sell and they should be.
Speaker Change: But the things that we can do a gas turbine cannot do.
And the things that we do our customer needs.
So a customer is going to look at the.
Speaker Change: We're providing a value via providing enough value for them to transact with us and we have demonstrated time and again in multiple market sectors multiple segments multiple geographies that we are able to do this and if we're not able to satisfy a customer.
Speaker Change: More than two thirds of our order book will not be from repeat customers.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Your next question comes from Kevin Moore from Clear Street. Your line is now open.
Kevin Moore: Thank you I just had a question regarding SK partnership.
Kevin Moore: Do you expect to maybe drive a higher bid win rate. If you did for manufacturing in South Korea to maybe complement your high Assembly steps just wondering if that might convert to more wins.
That's a very good question. We currently have a joint venture in Korea with SK lot of the assembly work outside our core technology, which we call. The Hotbox is done in Korea, I guess it leads to not only.
Kevin Moore: The cost benefits you talked about but a very important localization, we bring to our country. When we enter that market the creative and then for that country.
Kevin Moore: And in addition to that.
Kevin Moore: Even.
Kevin Moore: Given that.
Rick.
Tariff regime that we have lived in and we'll definitely low end for the next few years.
Kevin Moore: Dose dose units.
Kevin Moore: <unk> assembled in Korea, and shift to those customers do not have to undergo those tariffs so that all benefits, but the core technology is not something that we will do any of that other than in places that we have absolute control on that as loans proprietary technology.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: That concludes our question and answer session I would now like to hand back over to <unk> CEO.
Speaker Change: Thank you.
Ali: Thank you very much Ali.
Speaker Change: As I close let me reiterate on a few points.
Speaker Change: First and most important for you.
Speaker Change: We are reaffirming our guidance for this complete here.
Speaker Change: Okay, we are reaffirming.
Speaker Change: Second the deals we announced today show you the quality and the diversity.
Speaker Change: The places where our value proposition is very attractive.
Speaker Change: And there's a strong interest and demand for our Bloom energy servers.
Speaker Change: The third is that we're excited about.
Speaker Change: Robust and drawing sales prospects.
Speaker Change: And as we look into the marketplace, we see that our U S C&I business.
Speaker Change: Davidson.
Davidson: Pick and it's accelerating and we think because of the macros that we've seen the electricity market. It will only continue.
Speaker Change: The fourth thing.
Speaker Change: The dynamics in the marketplace is very much in our favor.
Good power.
Speaker Change: First regulation, saying, if you're going to connect you in.
Speaker Change: Need to bring additionality.
Speaker Change: All of those things are clearly playing in our favor.
Speaker Change: Yes.
Speaker Change: And data centers.
Speaker Change: Supply chain.
Speaker Change: He is going to create the demand.
Speaker Change: Unlike any other that we have ever seen since Edison.
Speaker Change: Together.
Speaker Change: And VR had been growth for that market I can tell you how excited I am a biotech.
Speaker Change: But most of all.
Speaker Change: Any of this we cannot be doing.
Speaker Change: But for our dedicated hard working team members, who are focused on executing.
Speaker Change: Serving the mission.
Speaker Change: Every single day I am excited about our future glad that youre part of it and we are working hard.
Speaker Change: To make your stake in this company very valuable thank you.
Speaker Change: Okay.
Speaker Change: Thank you for attending today's call you may now disconnect have a wonderful day.
Speaker Change: Please wait the conference will begin shortly.
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Speaker Change: Okay.
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Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Thanks.
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