Q4 2024 Bloom Energy Corp Earnings Call
Karen: Thank you for standing by. My name is Karen and I will be your conference operator today. At this time, I would like to welcome everyone to the Bloom Energy Q4 2024 earnings. All lines have been placed on mute to prevent any background noise.
Karen: After today's presentation there will be an opportunity to ask questions. To ask a question you may press star followed by the number one on your telephone keypad.
Karen: To withdraw your question, press star followed by the number 1 again.
Karen: I will now turn the call over to Michael Turney, Vice President of Investor Relations. Please go ahead.
Thank you and good afternoon. Everybody.
Speaker Change: Thank you for joining us for Bloom Energy's fourth quarter 2024 earnings call. To supplement this conference call, we furnished our fourth quarter 2024 earnings press release with the SEC on Form 8K and have posted along with supplemental financial information that we will reference throughout this call to our investor relations website.
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.
Speaker Change: These include statements about the company's business results, products, new markets, strategy, financial position, liquidity, and full-year outlook for 2025.
Speaker Change: 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.
Speaker Change: We assume no obligation to revise any forward-looking statements made on today's call. During this call and in our fourth quarter 2024 earnings press release, we refer to GAAP and non-GAAP financial measures.
Speaker Change: Joining me on the call today are K.R. Sridhar, Founder, Chairman, and Chief Executive Officer, and Dan Berenbaum, our CFO. K.R. will begin with an overview of our progress, and then Dan will review financial highlights for the Court. After our prepared remarks, we will have time to take your questions.
I will now turn the call over to KR.
Good day, everyone.
What a year it has been for the power industry!
Speaker Change: We are witnessing major industry transformations in areas like AI, robotics, automation, the electrification of transportation.
Speaker Change: For decades, many power utilities believed they were in a death spiral.
Speaker Change: They operated with the belief that they were in a shrinking business and divested significant assets.
They were unprepared for a sudden spike in demand.
Speaker Change: This has created an enormous opportunity for scale solutions that can offer timely, reliable, and clean power.
Speaker Change: At Bloom Energy, for the last 24 years, we have been building a company with the deep-rooted conviction that humanity needs more power, not less.
Speaker Change: We have also been convinced that resilient, always-on distributed power is an essential and necessary supplement to the centralized grid.
Speaker Change: Our core technology, the Fuel Flexible Solid Oxide Platform, is the best way to convert molecular fuel to on-site power.
Our disciplined approach.
Unperturbed by fleeting trance
Speaker Change: has made us the preferred choice for businesses seeking to take control of their power, and for utilities looking to satisfy customer needs.
Speaker Change: Now, Bloom is prepared to meet the moment, satisfy customer needs, and seize this opportunity.
And we already are.
Speaker Change: I want to thank the hard-working team at Bloom for delivering a spectacular 2024.
Speaker Change: We were operating income positive for the year and delivered positive cash flow from operations.
a solid $92 million over the last year.
Speaker Change: Another first for us in 2024, our service business was profitable every quarter and for the year.
Speaker Change: We achieved this milestone by improving the life and reliability of our fuel cells, reducing the cost of replacement units, and using AI and machine learning to optimize the field performance of our systems.
Speaker Change: I expect us to build on these improvements and deliver increased service margins in the years to come.
Speaker Change: Our operations team continues to deliver with speed, scale, and efficiency.
Speaker Change: In keeping with our long tradition, we delivered another year of double-digit product cost reductions.
We will have the capacity to meet time-sensitive power demand.
Speaker Change: reinforcing our status as a solution of choice for time-critical power deals.
Speaker Change: On the innovation front, in 2024, we further strengthened our market position by successfully deploying our islanded microgrids.
providing power to our customers without grid interconnection.
Speaker Change: We expanded on our partnership with Quanta to create Bloom's largest islanded load-following industrial installation.
Speaker Change: We view our demonstrated ability to provide tens of megawatts of reliable power to our customers within months of an order as a huge competitive advantage.
We are focused on heat capture and carbon capture solutions.
Two valuable add-ons to our core offering.
and our commercial team delivered strongly in 2024.
Speaker Change: Power-hungry customers in the U.S. transacted with a sense of urgency in 2024, and we expect this increased velocity to continue in 2025. And we are meeting their demands.
four years ago.
Speaker Change: Most of our bookings took 2-3 years to deploy and convert to revenue.
Speaker Change: The majority of 2024 revenue came from deals that were both signed and recognized in the same year.
Speaker Change: I expect us to continue to deploy orders quickly, just as we did in 2024.
Speaker Change: Because for many customers today, the most important purchasing criteria is time to power.
They need reliable power, and they need it now.
Our Bloom solution is purpose-built to meet that need.
Speaker Change: I talked about AI and data centers on our last earnings call, and we remain excited about the opportunities ahead.
Bloom's current sales funnel in the data center segment.
Speaker Change: primarily driven by both training and inference AI applications, is strong, diverse, and robust.
Speaker Change: We view the data center segment to be a strong engine for growth.
Speaker Change: In addition, her order book and funnel show very healthy diversification.
Speaker Change: Our commercial and industrial C&I market segments are strong and an important part of our growth story.
Speaker Change: CNI customers are impacted by the domestic power shortage, aggravated by the massive AI data center electricity needs.
Speaker Change: There is growing sentiment in the non-AI sectors that their power needs, arising from reshoring, growth, and automation, will be deprioritized and result in unpredictable and higher power prices.
a predicament they want to avoid.
Speaker Change: As a result, we have seen an uptick in our CNI segments.
Speaker Change: We secure orders from multiple large telecom companies, retail, manufacturing, education, and healthcare segments who are proactively securing their own power.
Speaker Change: We are thrilled that a vast majority of our U.S. sales comes from repeat customers.
a testament to our products and services.
and the trust customers place in us.
Speaker Change: The quality of logos in our order book and the potential to increase our share of their total electricity spend augurs well for our future growth.
Speaker Change: We are also partnering with innovative utilities looking to add capacity.
I expect to see more such arrangements in the future.
Speaker Change: Bloom has won orders in Ohio and Illinois, and we are now competitive and attractive to customers in the Great Lakes region and the Midwest.
Speaker Change: On the international side, South Korea remains an important market for us and this business is steady.
Speaker Change: We continue to win orders through annual auction and outside development with our partners SK EcoPlant and SK Eternex.
Speaker Change: Additionally, our commercial team is focused on delivering VINs in other parts of Asia and in Europe this year.
In sum,
Speaker Change: I believe that having strong sector diversification combined with a strong geographic diversification will enable Bloom to become a global energy player.
Speaker Change: 2025 is off to an excellent start with strong inbound customer interest.
I want to touch on one more thing.
The ITC or Investment Tax Credit
Speaker Change: by using the Safe Harbor provision that is fully compliant with Treasury guidance.
Bloom's customers
financiers
and other commercial ecosystem partners.
Speaker Change: have collectively secured the option to receive full ITC benefits for their future purchases.
Speaker Change: They are entitled to 40% credits nationwide in light of our U.S. manufacturing.
and 50% credits in predefined energy communities.
Speaker Change: This safe harbor, if fully exercised, has the potential to yield between $12 and $15 billion of gross product revenue to bloom.
Speaker Change: Now, I'll hand it over to Dan to walk us through the numbers and I'll join you afterwards to answer your questions.
Dan
Thank you, KR, and good afternoon, everyone.
Speaker Change: On our November earnings call, we spoke about our confidence in meeting annual guidance targets, despite needing a record financial performance in Q4 to get there. We had that confidence because we understood our customers' projects.
Speaker Change: the products that we were expecting to ship, and the terms associated with those deals.
Speaker Change: As we've discussed, this is a project-based business with quarterly variability. We are pleased that we were able to set and meet realistic targets.
Speaker Change: Before getting to our results and guidance, I wanted to thank all of our employees at Bloom for incredible execution in 2024. Let me call out three highlights that the team drove this year.
Speaker Change: First, we turned free cash flow positive for the full year, for the first time since 2019. $92 million dollars full year cash flow from operations, less $59 million dollars spent on CapEx.
Speaker Change: Second, record full-year gross margin of 28.7%, and third, service business that had positive non-gap gross margin in all four quarters of 2024 and a $4 million full-year non-gap gross profit compared to a $33 million loss in 2023.
Speaker Change: None of that would be possible without this fantastic Bloom team.
Speaker Change: Let's talk briefly about Q4 and then in more detail about the full year 2024.
Speaker Change: As expected, at a quarterly revenue record of $572 million, we saw nearly 40% of our full-year revenue in Q4. This was an increase of 60% over the fourth quarter of 2023 and up 73% from Q3 2024.
Speaker Change: This is a business with leverage to scale. We saw that in Q4, as non-GAAP gross margin of 39.3% was up significantly from 27.4% in the fourth quarter of 2023, and also a meaningful improvement from 23.8% in Q3 of 2024.
Speaker Change: Non-GAAP operating profit for the fourth quarter was $133 million, an increase of $106 million from the fourth quarter of 2023, and an increase from Q3's $8 million. Non-GAAP EPS was $0.43.
Speaker Change: Q4 cash flow from operating activities was 484 million dollars. As expected, we collected our large related party receivable in Q4.
Speaker Change: Additionally, in the spirit of our long-standing partnership, during Q4 we assisted our partner SK Ecoplant to sell a majority of the 73 megawatts of energy servers that they had held as part of a delayed project.
Turning to our full year 2024 results.
Revenue was a record $1.47 billion, up 10.5% from 2023.
Speaker Change: Non-gap gross margin of 28.7% was up from 25.8% in 2023.
Speaker Change: Non-GAAP operating profit was $108 million of $88 million from the previous year on a revenue increase of $140 million, over 60% drop through to operating income.
Speaker Change: Non-GAAP gross profit in our service business was $4 million, a significant improvement from the $33 million loss in 2023, as I mentioned earlier.
Speaker Change: Service was profitable on a non-gap basis during every quarter of 2024.
Speaker Change: We expect to drive continued improvements in service profitability as we move through the next several years.
Speaker Change: In addition, we recorded another year of double-digit Core Energy Server product cost reduction. We expect to continue this double-digit product cost reduction, which benefits both product and service.
Speaker Change: As I mentioned earlier, Bloom also generated positive cash flow from operations and positive free cash flow for the first time since 2019. We view this demonstration of our ability to generate cash as a key milestone for the business.
Speaker Change: We ended the year with $951 million total cash on the balance sheet.
Speaker Change: Before we get to guidance, I want to talk a bit about how we think about the future potential of the business, as well as how we think about the metrics that are important to running our business.
Speaker Change: We have $2.5 billion of product backlog. Excluding dynamics around our supply agreement with SK EcoPlant, our product backlog would have been up roughly 30% year-over-year.
Speaker Change: As a reminder, at the end of 2023, we had extended the term of our SK Ecoplant Distribution Agreement to the end of 2027 and increased their purchase commitment to 500 megawatts, all of which was included in our year-ending 2023 backlog.
Speaker Change: Shipping to that agreement will naturally draw on our backlog, so we want to be clear that elsewhere our product backlog is increasing.
Speaker Change: We also have $9 billion of service backlog. As we've discussed in the past, we have a 100% attach rate of service with our product sales. Our service contracts are anywhere from five to 20 years, leading to a large, long-term backlog.
Speaker Change: With respect to how we think about the business, as we've discussed over the past few quarters, management is primarily focused on overall revenue, product revenue growth, non-GAAP gross and operating margin, and cash flow from operations.
Speaker Change: In the past, when we were primarily shipping grid-connected baseload power and timing of product revenue recognition was somewhat divorced from timing of product shipments, we felt it was important to look at kilowatts shipped to measure and assess performance.
Now, our product revenue is primarily recognized on shipments.
Speaker Change: Further, we're offering multiple solutions based around our core energy server, islanded microgrid, load following to AI data center standards, carbon capture, combined heat and power, and others, which add value to our customers in a way that isn't measured in simple kilowatts.
Speaker Change: As a result, simple proxy of ASP or cost per kilowatt is a less relevant way to look at the business than it was a few years ago.
This brings us to guidance for 2025.
Speaker Change: 2024 was a good year for Bloom and we expect 2025 to be better. We expect 2025 revenue of a range of 1.65 to 1.85 billion dollars.
Speaker Change: non-GAAP gross margin of approximately 29% and non-GAAP operating income of approximately $150 million.
Speaker Change: We also expect positive cash flow from operations, around the same level as we saw in 2024, and we expect CapEx to be around the same levels as 2024. Of course, we will adjust our expenditures as needed as we see business opportunities.
Speaker Change: At the midpoint of our revenue and operating margin guidance, we would see mid-teens percentage drop-through of revenue to operating profit, strong leverage for a high single-digits percentage operating margin business.
Speaker Change: In Q4, both GAAP and non-GAAP EPS were calculated using the as-converted method, that is, using our fully diluted share count and adjusting for interest associated with potentially diluted instruments that are assumed to have been converted.
Speaker Change: For the full year 2024, our EPS is calculated using our basic share count of 227 million shares, as inclusion of shares associated with our convertible notes would have the effect of being anti-diluted.
Speaker Change: We expect 2025 revenue to have a similar pattern to 2024. Near term we expect Q1 to be up approximately 20 to 30 percent year-over-year compared to Q1 at 2024.
Speaker Change: In short, we had a great end to a great year, and we expect continued profitable growth in 2025 and beyond.
Speaker Change: Management will be on the road speaking with you for the next few weeks. We'll attend the Morgan Stanley Power Conference on March 3rd and the Jeffries Power Utilities and Clean Energy Conference on March 4th, both in New York City.
Speaker Change: will attend the Morgan Stanley Technology Conference in San Francisco on March 5th and 6th.
Speaker Change: And we'll also attend both the Roth Capital Conference in Dana Point and the Piper Sandler Energy Conference in Las Vegas, both March 16th to 19th, before entering our Q1 quiet period.
Speaker Change: At this time, I would like to remind everyone in order to ask a question. Press start and the number 1 on your telephone keypad. We ask that you please limit your questions to one and one follow-up. We will pause for just a moment to compile the Q&A roster.
Speaker Change: The first question comes from Andrew Percoco from Morgan Stanley. Your line is open.
Andrew Percoco: Great. Thanks so much. Good evening, guys, and congrats on a strong quarter.
Andrew Percoco: I guess maybe just to start off, again, congrats on that AEP announcement back in November. So just maybe to start there, you know, should we expect to see more of those types of agreements in 2025, you know, where it's with a large utility?
would be great. And then maybe my second question.
Andrew Percoco: is asking both at once, is this around the balance sheet?
Andrew Percoco: Can you just talk about how you're thinking about funding this growth, you know, free cash will obviously turn positive this year. Is that enough or is there a reason to maybe be opportunistic and raise some capital to ensure you have the means to, you know, exploit this growth opportunity? Thank you.
Andrew Percoco: Andrew, thank you very much. This is K.R. and again on your first question, yes, the answer is we are talking...
Andrew Percoco: to several utilities who are interested in some kind of arrangements along the lines of what we announced with AAP. And it is, A, they are realizing that
no matter how fast they augment their transmission distribution system.
Andrew Percoco: No matter where generation happens or not, getting the power to the end customer between now and 2030 is going to be a big issue unless you produce power where you need it.
and using Bloom to do that.
is
very advantageous for them from a time to deployment.
permitting
Andrew Percoco: They like our technology, and more importantly, if that growth is being driven by data centers, the reliability of our modular fault-tolerant architecture is unbeatable.
And now.
Andrew Percoco: The other dynamic that we are seeing there is this strong sentiment about the investment being made to fuel the growth for data centers that cost not be passed on to the rate payers.
So, many utilities are trying to work.
with their own jurisdictions.
Andrew Percoco: to make sure that that construct is available. I would say the long pole, as I see it, to more deals like this happening.
Andrew Percoco: is that construct being worked out between the utilities in the states, but several of them are talking to us, so I can't give you a timing on it. I would expect that to happen, but I can't give you a timing.
Andrew Percoco: On the question of capital, as you know, we've been speaking about something very important about Bloom, which is our capital efficiency.
Andrew Percoco: in modules of hundreds of megawatts as we see the growth.
using the same facilities we have
in California and in Delaware. We don't
We don't need to be thinking about
Howie
you know, how we fund it.
Andrew Percoco: We feel very good about it. Dan, you want to add anything to that? Yes, I'll add it. Thanks, K.R. And Andrew, thanks for the question. I'll add a couple of things. And Warren, obviously, we're very pleased that we were able to generate the cash flow from operations that we did this year. You know, recall in the last call, we talked about being cash flow from operations positive for the second half.
Andrew Percoco: able to execute to be cash flow from operations positive for the full year and we expect something around that same level so for 2025 so we are being pretty tight about how we manage working capital we're being very tight around how we manage expenses we are investing prudently in the right things for the business and to echo KR's comments as we've said before we're quickly approaching about one gigawatt worth of manufacturing we've talked about being
Andrew Percoco: I want to mention that cash flow from operations, a lot of you have always asked about how much factoring we do. I'm very happy to say that we didn't do any factoring in Q4. So again, a much healthier liquidity position than we've been in in the past.
Speaker Change: That makes sense and that's great. Thank you. If I could squeeze one more in here.
Speaker Change: You know, when I look at the guidance, when I look at your backlog, I guess, how much of your existing backlog is scheduled for delivery in 2025, and how much bookingship do you need to essentially do to get to the midpoint of your guidance range for 2025?
Speaker Change: it's picking up velocity like crazy. The need for power and the premium that customers are willing to pay for solutions like ours that
Speaker Change: Give them power quickly is unbelievable. So compared to 2020 when it was two and three years out
from the time he booked
Speaker Change: to when we could recognize revenue, majority, a vast majority of last year's revenue came from booking, building, shipping, and recognizing revenue in the same year. We would expect that same trend to continue, you know, like this year too.
Thank you. Great.
Christen Wieners: The next question comes from Christen Wieners from RBC. Your line is open.
Christen Wieners: Yeah, thank you and congrats on the quarter and the year. I guess maybe to start out and touching on the backlog here, could you maybe break down a little bit more the components of that? Just, you know, how much is AI, how much is CNI, and maybe the verticals or the sectors within that? Thank you.
Christen Wieners: that book and ship becoming an increasingly more important part of our business. So I think, you know, Karen made some commentary about the segments that are growing for us. That's where I would focus when I think about the growth of our business.
Christen Wieners: That sector, obviously, is growing a lot faster than everybody else, but the key point I want to make is that CNI sector, which is a non-data center sector, is really growing fast too, but not at the pace at which the data center is growing. So both sectors are growing for us.
Speaker Change: Got it, thank you. And then maybe to follow up and on the ITC and you know maybe I missed something but I didn't...
Speaker Change: I thought that was rolling off at the end of last year, so if you could maybe just clarify that point and then...
Speaker Change: You know, how are you thinking about that opportunity and realizing that and then, you know, what's been the response from the customer base? Because I think, you know, a 50% or maybe even 60% ITC with the energy community adder is a pretty big game changer for you all in terms of cost competitiveness versus anyone else.
Speaker Change: Yeah, so let me first get the numbers to you slightly differently. Forty percent
You deploy it anywhere in the United States by 2028.
Speaker Change: and 50% if you're in energy communities, so 40 and 50, not 50 and 60. Now there is...
under the Treasury guidance.
Speaker Change: There was a provision of safe harbor as long as it's work in progress and it's very well defined and there are multiple ways to get to that work in progress.
You are still eligible.
Speaker Change: for the investment tax credit as it rolled off last year.
So what we have
Speaker Change: has an option for our customers, our financiers, and our ecosystem to be able to utilize.
Speaker Change: roughly translates, again depends on exactly what that installation is, microgrid not, somewhere between 12 and 15 billion dollars worth. What does that mean? What it really means is
Speaker Change: Anybody in the U.S. who wants to deploy between now and 2028 should be able to find a provision through this safe harboring so ITC is no longer a bloom issue through 2028.
Speaker Change: then the remainder of the project up to the treasury guidelines is still able to avail itself of the ITC. And just as a reminder, it's our customers that avail themselves of the ITC, you know, we don't directly benefit from the ITC, it's our customers, our customer projects that are able to avail themselves of the ITC.
Got it, okay, thank you.
Speaker Change: The next question comes from Colin Rush from Oppenheimer. Your line is open. Thanks so much, guys, and congrats on a strong end of the year. Can you give us a sense of the revenue recognition? I appreciate the detail on that going forward. How much of that, of the 2024 revenue,
would have been impacted by those overdue recognition policies.
Speaker Change: We generally recognize our product revenue on shipment. I think we've been public about that So I'm not I'm not really sure I changed that we haven't changed any revenue recognition policies But maybe maybe I don't understand the question
Speaker Change: You know, let me take it offline then. Maybe I misunderstood the comment earlier. So then going forward here on a margin perspective, can you talk a little bit about the input prices in your supply chain and any impacts on tariffs here as you enter 2025?
Speaker Change: Look, where will tariffs go and what will that mean globally is something I think as a country, as a world, we're all trying to figure out as we go on a daily basis.
It's important for you to recognize.
that cost reduction is in the DNA of Bloom Energy.
various different mechanisms.
Speaker Change: from Diversity of Supply Base, the geographies of where we, you know, procure our materials from, the efficiency with which we manufacture, the yield that we get, the engineering advances that we make, all those lead to a cost reduction.
So while definitely
Tariff-related issues can be a potential headwind for us.
It's one of many factors.
Speaker Change: and we as a company are committed to finding ways around and still getting to cost reduction.
Speaker Change: Tariff is definitely in the playbook for us to say, if that comes, we have to deal with it.
and that's a reality that we can't change.
Speaker Change: but the reality we can impact is cost reduction and we are committed to that cost reduction. Yeah, and I'll just take the opportunity to really put a plug in for our supply chain team. You know, they've done a great job with the diversification of our supply base, working with our engineering and quality teams, working with our manufacturing teams.
like eventual potential tariff impact.
Speaker Change: And one important aspect also that helps us is we are not dependent on China for a supply chain and that is super important as we look at where we are today. Thank you.
Speaker Change: Thanks. Let me just sneak one more in. You know, in terms of the backlog, how much of the backlog is dependent on incremental execution on gas infrastructure getting put into place in 2025?
Again, you know...
Speaker Change: It is a it is a big mix when we look at quarter to quarter what we implement it is about
Speaker Change: about how this is a project-based business, right? But look, we've given you guidance for the full year. We gave you guidance for Q1 within a range. So, you know, we take all of these factors into account when we give that guidance.
Thanks so much, guys.
Speaker Change: The next question comes from Dean Paul Goss-Eye from Bank of America. Your line is open.
Speaker Change: Hi there, thanks for taking the question. Could you talk a little bit about your ASP strategy in light of ITC expiration and that kind of weighed against, you know, the premium customers are willing to pay for time to power as you spoke about?
Speaker Change: How do you kind of think this through? And also, second to that, in terms of cost cutting, do you have any targets in place? I think you were talking about 10% reduction. Was that per annum or cumulative? Can you remind us what that was at some point? Thank you.
So, number one, I just...
explained.
ITC
is not going to impact us.
Speaker Change: given how much potential option our customers and our ecosystem have through 2028.
Speaker Change: The pricing is going to depend on what we can command in the market. It's a value, and we don't discuss that.
Speaker Change: What a superior solution with value we offer to our customers. They're happy with our service and they pay for that service.
Speaker Change: Number one. Number two, in terms of cost reduction, yes it is. We have had for the last 15 years, if you follow the company, we have had double-digit cost reductions per annum other than the years of COVID. Thank you.
Speaker Change: The next question calls from Manav Gupta from UBS. Your line is open.
Speaker Change: market was finally beginning to realize the needs of the data center power market and it was great flowing nicely the information was flowing nicely and then the board got rocked with DeepSeek and what Microsoft did or did not announce
Speaker Change: from these announcements. So what the market was trying to understand is, if you were talking to 100 people the day before, did that suddenly drop to 20 after these announcements, if you could talk about that?
Speaker Change: Manav, great question. Thank you. So all that I can say to you is every single day the franticness that we see
Speaker Change: from our end customers about being able to secure power is going up and not down.
Deep Seek or No Deep Seek
Speaker Change: So, let me paint a very simple picture for you that will tell you why that should be. You all probably were listening to, like the rest of us, the earnings call from NVIDIA yesterday.
Okay.
Whatever they shipped in that quarter, 90 days,
if it were fully facilitized
in a data center.
Speaker Change: will consume anywhere between two and two and a half gigawatts of new power. That's the capacity that's needed.
You fast forward that for the next 12 months.
That's just the chips coming from that one
company.
fully facilitized
Speaker Change: will be somewhere in the range of 10 to 13 gigawatts.
Speaker Change: More than 50% of that is going to stay in the United States.
That's more than 6 gigawatts.
Speaker Change: You're talking about $500 billion worth of infrastructure outside of power that has to happen.
$5,000, sorry, $5 billion.
Let me make this very clear.
Speaker Change: is spending more than $500 billion building a data infrastructure that needs power.
Speaker Change: If power is not available and the chips you're installing there have a very short shelf life because they become old.
Speaker Change: Every year the value of that chip drops like crazy. So the time-to-power premium is so high.
Speaker Change: and the cost of bringing that power, even if you paid a premium, is worth every penny of it.
So, Deep Seek, No Deep Seek.
Absolutely, if you understand
Speaker Change: what is going on in the power industry based on AI and where the solution set is available.
Speaker Change: These are all noise on the margins. They have nothing to do with the reality of the business.
Hopefully I answered your question.
Speaker Change: No, that was that is exactly what we wanted to hear. My quick follow-up here is there is a change in the way people are thinking about the business. When we look at the midstream companies, whether it's Kinder Morgan, TransCanada, ET, all these companies are now finally talking about
Speaker Change: behind the meter solution. So clearly you're talking to the data centers. I'm just trying to understand how are the conversations going with midstream companies, not looking for numbers, but are you seeing midstream companies now more open to you, coming to you and saying, look, we need a solution in six or nine months and a combined cycle gas turbine might take three years. So are those discussions also happening?
Speaker Change: Yes, the answer is yes to all of the above. You know, oil and gas is super interested. You have seen some public announcements come from both large and mid-sized companies.
Speaker Change: in that regard. I think it is going to take all those players and more
Speaker Change: For us to be able to meet this unprecedented demand that we're seeing. So, yeah, we are having conversations at all levels right now. I can't handicap it for you, but those conversations are happening.
Thank you. Bye-bye.
Speaker Change: The next question comes from Michael Bloom from Wells Fargo. Your line is open.
Michael Bloom: Thanks, good afternoon, evening everyone. I wanted to ask a little bit on the AEP deal. We saw the first 100 megawatts were deployed in Ohio. Is there anything beyond that in 25 guidance and then just anything incremental you can share on that remaining 900 megawatts? Thanks.
Speaker Change: So on our customer deals, we always let our customers speak to it rather than us.
Speaker Change: However, you can notice that publicly AEP CEO has said that the reason they got this is to facilitate data centers in Ohio and the other states that they operate in and they are in serious discussions with a lot of them.
Speaker Change: Great, thanks for that. And then I just wanted to ask on the gross margin guidance for 2025, it's roughly flat with 24. Can you speak to any puts or takes?
that might be limiting further improvements this year.
Speaker Change: I know you talked about your aim to continue to improve service margins and of course you already talked about the fact that you're constantly
Speaker Change: streamlining cost and efficiency on the core product. So just want to understand
about the dynamics around gross margins.
Speaker Change: to install, we felt like this was the right place to put the gross margin guidance.
Speaker Change: The next question comes from Sherif El-Maghrabi from BTIG. Your line is open.
Sherif El-Maghrabi: Okay, thanks for taking my questions. I'll ask them at the same time because they're kind of related. You mentioned growth in Asia beyond South Korea. Would any of the energy servers in these markets be covered under the agreement with SK, or should we think about that as incremental?
And on a related note, you talked about CapEx.
Sherif El-Maghrabi: for growing your production capacity, but could you pull the Fremont expansion forward? And, you know, if you could speak to any level of product acceptances where you would start to think about the expansion, that would be helpful.
Sherif El-Maghrabi: Great. They're both very good questions, Sharif. So let me address the Asia question first. The answer is yes. In that, A, we have our own sales force working in a few countries outside of Korea.
Sherif El-Maghrabi: to be able to expand in that market. But should our partners, SKA, bring deals for us forward from other Asian countries that they operate in? Will we accept that and accept that as part of, you know, their contract? The answer is yes, we will do it both ways.
Sherif El-Maghrabi: So, very, very open to both and would like to see both happen, actually.
Sherif El-Maghrabi: And then if you look at the CAPEX question that you asked, look, here is what...
We are telling our customers today.
Thank you. Bye.
Sherif El-Maghrabi: V will not be the limiting factor to you getting power.
and we are demonstrating to time-to-power applications.
that we are able to keep our promise.
Sherif El-Maghrabi: So, our goal is every quarter that goes by to prove we are the preferred solution for anybody who has a time-to-power problem.
Sherif El-Maghrabi: This is what we are doing, and we have a very clear strategy, a plan, and an execution behind it that we are very confident in, of making sure that our capacity is not what is going to limit us from fulfilling a customer's need.
Chris Tsim: The next question comes from Chris Tsim from Wolf Research, Carolina, Zeldin.
Chris Tsim: Hey, K.R. and Dan, thanks for taking my question. I just wanted to confirm something that you mentioned earlier, Dan. Your revenue recognition policy is based on shipment, not delivery, so if that can infer, does that mean some revenue in Q4 was recognized on shipments, i.e. the AEP deal, and if that means all 100 fuel cells were shipped by year-end?
Chris Tsim: Okay, so two questions in there. So number one, we have not spoken about specific timing of shipments to specific customers. As a policy, we generally don't talk about specific customers. Let me just get that out up front.
Chris Tsim: As I said, in general, we recognize product revenue on shipments.
Chris Tsim: Way back, the company used to be divorced a little bit. We used to recognize more of our product revenue on customer acceptance. That shifted a while ago, so now in general, our product revenue is recognized on shipments. And I think we've been clear about that. It's also very clearly spelled out in our filings.
Speaker Change: The next question comes from Gashie Harrison from Piper Sandler. Your line is open.
Gashie Harrison: Good afternoon. Thanks for taking the question and congrats on the results. You know, just just a quick follow-up to the Safe Harbor. Is there a date by which the customers need to exercise the option buy to get the 40%? Is there a cutoff date?
Gashie Harrison: And then, you know, my main question is just on the competitive landscape, you know, there's obviously, as you pointed out, a lot of demand for on-site power, but, you know, we're also seeing some of the oil and gas service companies buying turbines and using turbines to, you know, power data centers near term.
Speaker Change: I was just wondering if you could just help us maybe compare, contrast what you're doing with some of the on-site service companies and when your DCOs and discussions with customers and going head-to-head. I'm just curious, what's the pitch for Bloom?
Mekashi, great questions. Number one is
Speaker Change: on ITC as long as the equipment is placed in service.
by December 31, 2028.
Speaker Change: According to Treasury guidelines, it meets the requirements, and that's all that's needed. Obviously, a customer would have to give us
Speaker Change: advance notice to be able to build ship to them and then for that to get installed and up in service. So you need to back that from that date and that's the only requirement from a investment tax credit policy.
on your question on competitive landscape.
Speaker Change: fortunately or unfortunately, depending on which side you're sitting and looking at it.
All right.
all the all the competing technologies
collectively put together.
have room and more.
to be able to deploy.
because the supply-demand gap is that large.
So we are reading like you do.
statements from gas turbines which will be the
Speaker Change: other option for an on-site power other than what we have because between now and 2030, you're not going to have a backyard nuclear reactor, right? So, obviously, gas turbine is your choice. And, you know, like you, we're reading that they're sold out three to four years ahead.
Speaker Change: So, we just discussed about you're not going to buy a premium GPU chip.
and keep it in a warehouse somewhere.
It's, you know, you like depreciates pretty fast.
Speaker Change: So, I think we have a play, turbines have a play, everybody has a play, so we don't view that. Right now, we don't see competition being the issue.
Thank you.
Speaker Change: The next question comes from Noel Parks from Tukey Brothers. Your line is open.
Hello, you just touched on
Speaker Change: The topic I was interested in you mentioned SMRs and It was interesting. You mentioned letting your customers speak for themselves AEP during their quarterly call
Speaker Change: sort of framed their outlook as a boom for direct power generation, that's the near-term solution for the foreseeable future, and they saw the long-term solution being SMRs. I was wondering since heat solutions are also right in your skill set, any insight on
Speaker Change: Where do you see that business going when you think it begins to materialize?
Speaker Change: Sorry, that last part cut out for me and I was looking at Dan, he also not sorry, would you just repeat that last part, it somehow cut out. Sure, just any updated visibility you have on the development of the SMR market for you.
Speaker Change: Look, I think realistically, right, any kind of nuclear reactor, let alone a new technology coming in with new fuels and a supply chain that needs to be created for new fuels.
Even if a few initial demos come along the line,
Speaker Change: Can they be meaningful in the next six to eight years? The answer is no.
Speaker Change: Okay, that's what I feel and again, you know, I have a master's degree in nuclear engineering. I think I'm qualified to
Speaker Change: speak about it, okay? So, and I'm aware of watching the field and I really don't think.
Speaker Change: You're going to move the needle between now and another eight years.
Speaker Change: with nuclear. Nuclear should be in our option like so many other things that should be in our option of our energy mix. I truly believe that, but it's not going to move the needle. The reality is the AI war
Speaker Change: between nations, which has geopolitical implications, not just market implications, is going to be won or lost in the next four to six years. We can't afford to wait for nuclear to come before we do AI. So that's what creates this opportunity for the next.
Speaker Change: 4 to 6 to 8 years. And for us, look, when nuclear comes, the hydrogen play becomes really interesting. Other things become really interesting. So we have pathways
Speaker Change: in our, where we can play with those dynamics. We are not, just because we focus so much on AI, let's not forget.
what we told earlier. We have a core business.
core business like
Speaker Change: you know, healthcare, all doing extremely well. And that dynamic is again coming from the fear of shortage, the fear of securing their power.
Speaker Change: from a super growth engine and multiple other growth opportunities giving us the diversification both across the customer base segments as well as geographically we are trying to do the same thing.
Great. Thanks a lot.
Speaker Change: The next question comes from Amit Thakkar from the ML Capital Markets. Your line is open.
Speaker Change: Hi, thanks for squeezing in and congratulations on a really strong quarter.
Speaker Change: Just looking at the cash flow statement, it looks like you guys had a $325 million cash benefit from AR coming in. One, is that the AWS receivable that we've talked about for a long, long time? And then second, when we look at your operating income guidance, is there a rule of thumb that we should think of converting the cash flow from operations off of that number?
Speaker Change: okay so first of all in your question on Q4 we discussed having a large related party receivable so we did collect that related party receivable from SK in the quarter we were clear saying we were going to do that we did that second on the operating income guidance we've given operating income guidance and I said that I expect cash flow from operations in 2025 to be at a similar level with 2024 we probably won't
We can go to the next question, please.
Speaker Change: The next question comes from Jordan Levy from Truist Security. Your line is open.
at the Net-Zero instead of through green hydrogen or something.
Speaker Change: decarbonization of the atmosphere will not happen without carbon sequestration carbon capture and sequestration.
Speaker Change: And we truly believe that we are one of the best ways to do that, natural gas to electricity through bloom with a high concentration of carbon dioxide coming out, sequestered into the ground.
We view this as a huge opportunity.
Amazingly huge opportunity.
Speaker Change: The large hyperscalers who would want to build data centers would be very interested.
in reducing their carbon footprint if this were available today.
Speaker Change: I think this market is going to take off in the coming years. It's going to take off in a much bigger way and a faster way in the short term than hydrogen for the obvious dynamics that you mentioned.
Speaker Change: So, we are excited about this announcement we made with CHART.
Speaker Change: and we are going to invest in this area because we truly believe
Speaker Change: that it's a huge opportunity for Bloom and it's a great way for us to offer an economically viable, scale, immediately available technology for carbon capture and sequestration. Thanks for asking that question.
Speaker Change: The last question comes from Dushyant Elani from Jefferies. Your line is open.
Dushyant Elani: Hey, thanks for squeezing me in guys. Two quick questions. What's the, I guess the percentage, because I know that you guys talked about book and ship being an increasingly important piece of the business, so could you talk about what percentage of the guidance is that book and ship?
oh
Dushyant Elani: No, the only thing we said was that a majority of our 2024 was book and ship within the year, but we're not talking about what percentage of the guidance. Again, look, it's a good underlying question and you should understand that when we look at our forecast, we look at our backlog, we look at potential orders, we have a very rigorous process that we go through in order to understand what our internal plans are and what guidance we're giving
Dushyant Elani: Understood. And then just a quick one. I know that you guys talked about Ohio, Illinois, and then also, you know, talked about access to natural gas. Could you talk about the regions within in the U.S. where you see kind of opportunities, you know, that are, I would say, you know,
easier or quicker that can turn around versus others.
Look, I think...
Dushyant Elani: Look, I think today, if you look at the Northeast, right?
Dushyant Elani: Very large installations are very difficult to do in the Northeast because of the pipeline issue.
Dushyant Elani: But the Great Lakes in the Midwest, I think that's a sleeping giant. It's a sleeping giant because reassuring of most industries are going to happen in that area.
Speaker Change: and when that kind of reassuring happens there, those are states that are welcoming of natural gas?
Speaker Change: gas is available, the infrastructure is there, and our solution without needing to add additional transmission distribution and making the average rate payer incur that cost is going to be politically very attractive.
Speaker Change: For all those reasons, we think that that's a great market for us going forward.
Speaker Change: So, with that, I think we will say thank you for the questions, and let me close by simply saying, look.
Speaker Change: Very simply put, AI is reshaping the global economy, and it's driving an unprecedented demand for power.
And you know the...
Speaker Change: Deep-seek, yes, no, you know, if you're at a loss, I understand that and of understanding what's going on. But here's the reality, deep-seek or no deep-seek?
Speaker Change: There's one thing you can't hide from, you can't seek from, no hide and seek, is they all require power.
Okay, and they require power now, lots of it now.
and we are Purpose-Built.
Speaker Change: to be able to provide quick time to power in a reliable fashion, not just for the short-term,
but even for the long term.
Speaker Change: with all the attributes one would want short-term, mid-term, and long-term. For those reasons, I'm super excited about where we are as a company to meet this moment. And meet this moment not just for AI and data centers, but frankly for all businesses.
Speaker Change: and we can create good economic value while doing good for the country and the world. Thank you so much.
Yeah.
Speaker Change: I will turn the call over again to K.R. Sritar, Chief Executive Officer, for some closing remarks.
Speaker Change: Hi, KR just gave his last remarks, so we are going to close this out and we look forward to talking to you on the road in the next few weeks. Thank you very much.
Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.