Q1 2025 Bloom Energy Corp Earnings Call
Hello, and welcome to the Bloom Energy first quarter 2025 financial results earnings call.
Operator: Hello and welcome to the Bloom Energy First Quarter 2025 Financial Results Earnings Call. All lines have been placed on mute to prevent any background noise.
Speaker Change: So I've been placed on mute to prevent any background noise. After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time Ctrip Press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you now I would like to hand, the call over to Michael Cherny, Vice President Investor.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to re-charge your question, press star 1 again. Thank you.
Michael Turney: Now, I would like to hand the call over to Michael Turney, Vice President, Investor Relations. Michael, you may begin. Thank you and good afternoon everybody. Thank you for joining us for Bloom Energy's first quarter 2025 earnings call. To supplement this conference call, we furnished our first quarter 2025 earnings press release with the SEC on Form 8K and have posted it along with supplemental financial information that we will reference throughout this call to our investor relations website.
Speaker Change: Our relations Michael you may begin.
Michael Cherny: Thank you and good afternoon, everybody. Thank you for joining us for Bloom Energy's first quarter 2025 earnings call to supplement this conference call. We furnished our first quarter 2025 earnings press release with the SEC on form 8-K and have posted it along with supplemental financial information that we will reference.
Speaker Change: Throughout this call to our Investor Relations website.
Michael Turney: 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 plans. These include statements about the company's business results, products, new markets, strategy, financial position, liquidity, and full year outlook for 2025. 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: 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 markets strategy financial position liquidity and full year outlook for.
Speaker Change: 2025.
Speaker Change: 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 Turney: We assume no obligation to revise any forward-looking statements made on today's call.
Speaker Change: We assume no obligation to revise any forward looking statements made on today's call. During this call and in our first quarter 2025 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.
Michael Turney: During this call and in our first quarter 2025 earnings press release, we refer to GAAP and non-GAAP financial The non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles and are, in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between the GAAP and non-GAAP financial measures is included in our first quarter 2025 earnings press release available on our investor relations website.
Speaker Change: To measures of financial performance prepared in accordance with GAAP a.
Speaker Change: A reconciliation between the GAAP and non-GAAP financial measures is included in our first quarter 2025 earnings press release available on our Investor Relations website. Joining me on the call today are <unk> founder Chairman and Chief Executive Officer, and Dan Behrendt ball, our CFO will begin with an overview of our progress and then Dan will review.
Michael Turney: Joining me on the call today are K. R. Sridhar, founder, chairman, and chief executive officer, and Dan Berenbaum, our CFO.
Michael Turney: K. R. will begin with an overview of our progress, and then Dan will review financial highlights for the quarter. After our prepared remarks, we will have time to take your questions.
Speaker Change: <unk> 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 Ken <unk>.
K. R. Sridhar: I will now turn the call over to K. R.
K. R. Sridhar: Good afternoon and thank you for joining us today. Bloom had an excellent quarter, in fact, the best first quarter in our 24-year history. You're seeing strong, disciplined execution across the entire company. from sales to service, technology and manufacturing operations. I want to thank the incredible team at Bloom for their dedication to serving our customers and building on the success of last year. We are off to a good start for the year, and we are very excited to continue building on that success throughout 2025.
Ken: Good afternoon, and thank you for joining us today.
Ken: Bloom had an excellent quarter in fact, the best first quarter in our 24 year history, Youre seeing strong disciplined execution across the entire company from sales to service technology and manufacturing operations I want to thank the incredible team at Bloom.
Ken: Their dedication to serving our customers and building on the success of last year.
Ken: Off to a good start for the year and get a very excited to continue building on that success throughout 2025.
Ken: We know the current economic environment affects various businesses differently.
K. R. Sridhar: We know the current economic environment affects various businesses differently. Here is the dynamic we are seeing at Bloom. The world needs a lot of power, and demand for electricity will continue to expand at a rate that cannot be met solely by traditional sources of supply and methods of delivery. We don't see that changing any time soon. This reality means that major users of power have accepted on-site generation as a necessity. Here is how that realization impacts Bloom's major customer segment. first AI data center. We have seen no slowdown in this sector.
Ken: Here's the dynamic we are seeing at Bloom.
Ken: The world needs a lot of power and demand for electricity will continue to expand at a rate that cannot be met solely by traditional sources of supply and methods of delivery.
Ken: We don't see that changing anytime soon.
Ken: This reality means that major users of power have accepted onsite generation as a necessity.
Ken: Here is how that realization impacts blooms major customer segments.
First AI data centers.
Ken: We have seen no slowdown in this sector.
Just last week I was at a gathering of business leaders, including some of the largest cloud service providers.
K. R. Sridhar: Just last week, I was at a gathering of business leaders, including some of the largest cloud service providers. What I heard loud and clear was that they remain committed. to investing in data center capacity growth and the necessary power needs that come with it. even down the road. Should there be a slowdown in the pace of investment? The total gigawatt gap is so large that it will not have a meaningful impact on Bloom's growth in this market. This is an investment super cycle, and short-term economic issues will not adversely impact the megatrend. The robustness in this sector is clearly validated by the customer activity we are experiencing.
Ken: What I heard loud and clear was the days of main committed to.
Ken: Two investing in data center capacity growth and the necessary power needs that come with it.
Ken: Even down the road.
Ken: Should there be a slowdown in the pace of investing.
Ken: The total gigawatt gap is so large that it will not have a meaningful impact on bloom's growth in this market.
Ken: This is an investment super cycle, and short term economic issues will not adversely impact the mega trend.
Ken: Robustness in this sector is clearly validated by the customer activity we are experiencing.
K. R. Sridhar: The second segment is our commercial and industrial business.
Ken: The second segment is.
Ken: Our commercial and industrial business.
K. R. Sridhar: which I'm breaking down into two parts. First, we see robust activity in large load advanced manufacturing operations. AI-related hardware and semiconductor chips. as well as essential services like hospitals and health care for whom power is mission critical. We don't see any slowdown. reshoring and growth in the U.S. industrial base is continuing. Their need for electricity has not diminished and their operations cannot afford to pause.
Ken: Uhm breaking down into two buckets.
Ken: First we see robust activity in large Lord advanced manufacturing operations Yeah.
Ken: <unk> related hardware.
Ken: And semiconductor chips.
Ken: Well as essential services like hospitals, and health care for whom power it's mission critical.
Ken: We don't see any slowdown here.
Speaker Change: Please shoring.
Speaker Change: And growth in the U S industrial base is continuing there.
Speaker Change: Their need for electricity has not diminished and that operations cannot afford to Pos.
K. R. Sridhar: The second bucket of commercial and industrial customers. are the consumer-facing businesses, such as retail. They may see a stretch out of decision-making cycles until the economic scenario is clear. We are keeping a close eye on this segment and are staying close to our customers.
Speaker Change: The second bucket of commercial and industrial customers or the consumer facing businesses.
Speaker Change: S retail.
Speaker Change: They may see a stretch out of decision, making cycles until the economic scenario is clear.
Speaker Change: We are keeping a close eye on this segment and are staying close to our customers.
K. R. Sridhar: Our third customer segment is in the international arena. Our Korea business remains strong, and the rest of international is growing off a small base.
Speaker Change: Our third customer segment.
Speaker Change: The International Arena.
Speaker Change: Our Korea business remains strong and the rest of international is growing off a small base.
Speaker Change: Our fuel cells provide reliable scalable high density Baseload power, making them an ideal powers choice in many industrialized nations.
K. R. Sridhar: Our fuel cells provide reliable, scalable, high-density baseload power, making them an ideal power choice in many industrialized nations. This international expansion continues to progress well. When you put the three segments together, the diversification of our customer base, both in terms of sector and geography, is a key strength that gives us the flexibility to soften the impact of exogenous factors that make us more resilient. Based on the bottoms-up, customer-by-customer forecast in these three segments, we remain confident in our previously provided 2025 Revenue Guide.
Speaker Change: This international expansion continues to progress well.
When you put the three segments together.
The diversification of our customer base, both in terms of sector and geography.
Speaker Change: He is a key strength.
Speaker Change: It gives us the flexibility to soften the impact of exogenous factors that make us more resilient.
Speaker Change: Based on the bottoms up.
Speaker Change: Tomorrow by customer forecast in these three segments, we remain confident in our previously provided 2025 revenue guidance.
K. R. Sridhar: Tariffs are probably another topic everybody wants to hear about today. The main takeaway is that the strength of our supply chain, in combination with the relentless execution of our product cost reduction goals, will greatly mitigate the impact of tariffs on Bloom. We have been developing, diversifying, and fortifying our supply base for years to mitigate the impacts of any particular country or supplier. We have two manufacturing and assembly facilities, and they are both located in the United States. Our products are proudly made in America. Yes, we do import materials and components from abroad, but not from China.
Speaker Change: Tariffs are probably under their topic, everybody wants to hear about today.
Speaker Change: Main takeaway is that the strength of our supply chain in combination with the relentless execution of our product cost reduction goals.
Speaker Change: Lately mitigate the impact of tariffs envelope.
Speaker Change: Via being developing.
Speaker Change: So fine.
Speaker Change: And fortifying our supply base for years.
Speaker Change: To mitigate the impacts of any particular country or supplier.
Speaker Change: We have two manufacturing and assembly facilities.
Speaker Change: And they are both located in the United States.
Speaker Change: Products.
Speaker Change: <unk> made in America.
Speaker Change: Yes, we do input materials and components from abroad, but not from China.
K. R. Sridhar: The majority of our material spend is in custom-made components unique to us, which give us control over pricing and sources. We have excellent long-standing partners. and are jointly invested in each other's success. If the current tariff structure continues throughout the year, we expect to see up to 100 basis point impact on our gross margin for the year. Cost reduction is in our DNA, and we will work extra hard to mitigate the adverse impact through innovations and efficiency improvement. As of now, we remain committed to our margin and profit guidance for 2025.
Speaker Change: The majority of our material spend is in custom made components unique to us, which gave us control over pricing and sourcing.
Speaker Change: We have excellent long standing partners.
Speaker Change: Jointly invested in each other's success.
Speaker Change: If the current tariff structure continuous throughout the year, we expect to see up to a 100 basis point impact on our gross margin for the year.
Speaker Change: Cost reduction is in our DNA.
Speaker Change: And we will work extra hard to mitigate the adverse impact through innovations and efficiency improvements.
Speaker Change: As of now we remain committed.
Our margin and profit guidance for 2025.
Speaker Change: As we look ahead, we are excited about the super cycle in electricity infrastructure growth.
K. R. Sridhar: As we look ahead, we are excited about the supercycle in electricity infrastructure growth. The ongoing momentum will be driven by growing demand for on-site power generation, and Bloom Energy is at the forefront of this revolution. The opportunity for Bloom is immense and we are focused on growing the business. We have the resilience to navigate through short-term challenges and execute on strengthening market leadership in the long term.
Speaker Change: The ongoing momentum will be driven by growing demand for onsite power generation and Bloom energy is at the forefront of this revolution.
Speaker Change: The opportunity for Bloom is immense and we are focused on growing the business.
Speaker Change: We have the resilience to navigate through short term challenges and execute on strengthening market leadership in the long term.
Speaker Change: Before I turn it over to Dan to go through the numbers I wanted to thank him for his service to bloom over the past year.
K. R. Sridhar: Before I turn it over to Dan to go through the numbers, I want to thank him for his service to Bloom over the past year. Dan will be exiting the company on May 1st, and we have started a search for a permanent CFO. in the interim.
Speaker Change: Dan will be exiting the company on May 1st and we have started a search for a permanent CFO.
Speaker Change: In the interim.
K. R. Sridhar: Marchek Kosemski, Bloom's chief accounting officer for the last four years, will assume the role of acting principal financial officer. Bloom has a strong leadership team and capable finance organization, and we will continue to perform without missing a beat.
Speaker Change: <unk> key blooms Chief accounting officer for the last four years.
Speaker Change: The role of acting principal financial officer.
Speaker Change: Bloom has a strong leadership team and capable finance organization and we will continue to perform without missing a beat.
Dan Berenbaum: I'll turn it over to Dan for now, and I look forward to answering your questions. Thank you, KR, and good afternoon, everyone. KR gave some great detail about how we view the current economic environment and, more importantly, how excited we are about future growth potential. Bloom's product capability enhancements over the past few years have dramatically improved our value proposition to customers and our relentless focus on cost reduction and profitable growth has left Bloom in a very healthy financial position.
Speaker Change: I'll turn it over to Dan for now and I look forward to answering your questions.
Dan Behrendt: Thank you KAR and good afternoon, everyone.
Dan Behrendt: <unk> gave some great detail about how we view the current economic environment and more importantly, how excited we are about future growth potential.
Dan Behrendt: <unk> product capability enhancements over the past few years have dramatically improved our value proposition to customers and our relentless focus on cost reduction and profitable growth has left to believe in a very healthy financial position.
Dan Berenbaum: Turning to our excellent first quarter. Execution was and remains strong. We saw record revenue for a first quarter, our first ever positive Q1 non-GAAP EPS, and our fifth consecutive quarter of service profitability.
Dan Behrendt: Turning to our excellent first quarter execution was and remains strong we saw record revenue for our first quarter, our first ever positive Q1, non-GAAP EPS and our fifth consecutive quarter of service profitability.
Dan Berenbaum: As a reminder, I'll focus my discussion on non-GAAP-adjusted cost and profitability measures. For a reconciliation of GAAP to non-GAAP, please see our press release and the supplemental deck on our website. Revenue for the quarter was $326 million, up 39% year-over-year. We've talked before about how this is a project-based business with quarterly variability, and that continues. Q1 was better than implied by the commentary we provided on our late February call, driven by timing of customer project. Gross margin was 28.7%, more than 1,000 basis points higher than the 17.5% gross margin in Q1 of 24, attributable to our product mix and level-loaded manufacturing.
Dan Behrendt: As a reminder, I'll focus my discussion on non-GAAP adjusted cost and profitability metrics for a reconciliation of GAAP to non-GAAP. Please see our press release and the supplemental deck on our website.
Dan Behrendt: Revenue for the quarter was $326 million up 39% year over year, we've talked before about how this is a project based business with quarterly variability and that continues Q1 was better than implied by the commentary we provided on our late February call driven by timing.
Dan Behrendt: Customer project gross margin was 28, 7% more than a 1000 basis points higher than the 17, 5% gross margin in Q1 of 'twenty four attributable to our product mix and level loaded manufacturing.
Dan Berenbaum: As expected, we took advantage of our balance sheet and our confidence and visibility into customer demand to build inventory and level-load our factory. Our operating income was a positive $13.2 million, as opposed to the $30.7 million deficit in Q1 last year. EBITDA was $25.2 million versus a negative $18.2 million in Q1 of 24, while EPS was 3 cents per share versus the loss of 17 cents per share a year ago. Again, these are all non-GAAP numbers.
Dan Behrendt: As expected, we took advantage of our balance sheet, and our confidence and visibility into customer demand to build inventory and level load our factory.
Dan Behrendt: Our operating income was a positive $13 $2 million as opposed to the $37 million deficit in Q1 last year EBIT.
Dan Behrendt: EBITDA was $25 2 million versus a negative $18 $2 million in Q1 of 'twenty four while EPS was <unk> <unk> per share versus the loss of <unk> 17 per share a year ago. Again. These are all non-GAAP numbers turning to the full year, we are reiterating.
Dan Berenbaum: Turning to the full year, we are reiterating our 2025 guidance. As a reminder, we expect 2025 revenue of $1.65 to $1.85 billion. non-GAAP gross margin of approximately 29% and non-GAAP operating income of approximately $150 million. We also expect positive cash flow from operations around the same levels as we saw in 2024. And we also expect CapEx to be around the same levels as 2024. Of course, we will maintain our strong fiscal discipline to flex our business as needed. As we discussed on our last call, consistent with historical patterns, we continue to expect the majority of our revenue in the second half of the year, with a roughly 40-60 first-half-second-half I mentioned our services business as a highlight for the quarter, as it was profitable for the fifth consecutive quarter.
Dan Behrendt: Our 2025 guidance as a reminder, we expect 2025 revenue of $1 65 to $1 85 billion non-GAAP gross margin of approximately 29% and non-GAAP operating income of approximately $150 million. We also expect positive cash flow from op.
Dan Behrendt: Operations around the same levels as we saw in 2024, and we also expect capex to be around the same levels. As 2024 of course, we will maintain our strong fiscal discipline to flex our business as needed.
Dan Behrendt: As we discussed on our last call consistent with historical patterns. We continue to expect the majority of our revenue in the second half of the year with a roughly 40, 61st half second half split.
Dan Behrendt: I mentioned, our services business is a highlight for the quarter as it was profitable for the fifth consecutive quarter. This is a critical part of our business in the long tail and our backlog service performance over the past year is dramatically better than we saw in prior years and we expect this trend to continue.
Dan Berenbaum: This is a critical part of our business and the long tail in our backlog. Service performance over the past year is dramatically better than we saw in prior years, and we expect this trend to continue. Technology improvement, scale, and AI-assisted execution will drive continued improvement in service profitability.
Dan Behrendt: Technology improvements scale and AI assisted execution will drive continued improvement in service profitability.
Dan Berenbaum: To conclude, we delivered record Q1 revenue and continue to execute in a strong commercial environment.
Dan Behrendt: To conclude we delivered record Q1 revenue and continue to execute in a strong commercial environment.
Dan Berenbaum: I am excited about the future opportunities for Bloom, and even as I leave the organization, I have full confidence in the finance team, and I wish all of Bloom's employees the utmost success.
Dan Behrendt: I am excited about the future opportunities for Bloom and even as I leave the organization I have full confidence in the finance team and I wish all of Bloom's employees the utmost success.
Operator: Operator, we are now happy to take questions. We will now begin the question-and-answer session. If you'd like to ask a question, simply press star followed by the number 1 on your telephone keypad. If you would like to record your question, press star 1 again. And please, limit yourself to one question and one follow-up.
Dan Behrendt: Greater we are now happy to take questions.
Speaker Change: We will now begin the question and answer session, if you'd like to ask a question Steve the breast star followed by the number one on your telephone keypad.
Speaker Change: Like do we target a question press Star one again and please limit yourself to one question and one follow up thank you.
Operator: Thank you.
Speaker Change: And your first question comes from the line of Andrew <unk> with Morgan Stanley Andrew. Please go ahead.
Andrew Percoco: And your first question comes from the line of Andrew Percoco with Morgan Stanley.
Andrew Percoco: Andrew, please go ahead. Great, thanks so much. Good evening, guys. Congrats on a strong start to the year. And Dan, unfortunate to see you go, but wish you the best of luck.
Great. Thanks, so much good evening guys. Congrats on the strong start to the year and Dan.
Speaker Change: See you go but bullish in the best of luck.
K. R. Sridhar: You know, multi-part question here, but just maybe to start out with the guidance. KR, it sounds like you're not really seeing any change in demand, particularly from data centers. But just curious, you know, more on a granular level, if you're seeing any impact on timing of that pipeline conversion. I guess I'm thinking about some of the projects that may have been commissioned in 2025 that might get commissioned in 2026 because of supply chain issues, policy uncertainty. So, just curious if you've seen any shift to the right in those types of conversations.
Speaker Change: Multipart question here, but just maybe to start out with the guidance.
Speaker Change: It sounds like Youre, not really seeing any change in demand, particularly from data centers. So just curious more on a granular level, if youre seeing any impact on timing of that pipeline conversion I guess I'm thinking about some of the projects that may have been commissioned in 2025 that might get commissioned in 2026.
Speaker Change: The supply chain issues policy uncertainty and I'm just curious have you seen.
Speaker Change: Any shifts to the right and in those types of conversations.
K. R. Sridhar: And then, you know, second part of the guidance question is around margins. You mentioned 100 basis point margin impact from tariffs, but you reiterated the gross margin guidance. So, just to be clear, are you not including tariffs in the reiterated guide?
Speaker Change: And then second part of the guidance question is around margins, you mentioned 100 basis point margin impact from tariffs, but you reiterated the gross margin guidance. So just to be clear are you not including tariffs in the reiterated guide.
Dan Berenbaum: If you could just maybe clarify that and then Dan, just to end it with you, can you provide any more information or context around your decision to leave here? I was pretty quick turnaround, so anything that you can provide there would be helpful. Thank you.
Speaker Change: Just maybe clarify that and then Dan just to.
Speaker Change: And with you can you provide any more information or context around your decision to leave here.
Speaker Change: It's a pretty quick turnaround so any anything that you can provide there would be helpful. Thank you.
Speaker Change: Hello, Andrew Thank you for that series of questions and I'll start and then pass it onto them afterwards.
K. R. Sridhar: Hello, Andrew, thank you for that series of questions, and I'll start and then pass it on to Dan afterwards. So let me start with the simple question first on margins. So we had guided for the year at 29%. And we said, because of all the reasons that I said in my script, but let me reiterate very simply, we're not dependent on China. We have a multi-country strategy. But predominantly, we are a U.S. manufacturer with our two factories here in the U.S. made in America products. For all those reasons, we can mitigate the impact of tariffs, if they continue the way it is today, to the 100 basis points.
Speaker Change: So let me start with the simple question first on.
Speaker Change: Margins.
Speaker Change: We had guided for the year at 29%.
Speaker Change: And we said because of all the reasons that I said in my script, but let me reiterate very simply we're not dependent on China, we have a multi day.
Speaker Change: Country's strategy, but predominantly we are a U S manufacturer.
Speaker Change: Two factories here in the U S made in America products for all those reasons.
Speaker Change: We can mitigate the impact of tariffs if they continue the way it is today.
Speaker Change: Two of the 100 basis points how alert.
K. R. Sridhar: However, I'm still reiterating the 29%, because as you know, over 15 years, Cost reduction is in our DNA. We have a culture of pushing ourselves hard and finding ways to optimize and reduce cost. So we are going to take this externality and make it a challenge to find that 100 basis points and other activities we do and speed it up and not use that as an excuse to not meet our guidance. This is our culture of being able to get to that point. We're not gonna pass it on to customers. We are not gonna take it on ourselves.
Speaker Change: Still reiterating the 29% because as you know over 15 years.
Speaker Change: Cost reduction that's in our DNA, we have a culture of pushing ourselves hard and finding ways to optimize and reduce cost. So we are going to take this externality and make it a challenge to find that 100 basis points and other activities, we do in speed it up and not use that as an excuse.
Speaker Change: It does not meet our guidance. This is our culture of being able to get to that point I'm going to pass it on to customers. We are not going to take it on ourselves youre going to find ways to solve that so net net.
K. R. Sridhar: We're gonna find ways to solve it. So net net, we would still reiterate the 29% guidance. So that's the first answer. Hopefully that's clear.
Speaker Change: We would still reiterate that 29% guidance. So that's the first answer hopefully that's clear.
K. R. Sridhar: Now on your question on where the macros are with respect to guidance, you're asking the right question. We have to book, build, ship, and recognize revenue. for a portion of our second half revenue in order to meet the guidelines. Now, if we didn't have confidence. in that entire process. and also timing, because timing means revenue recognition, we wouldn't be making this. So very strong confidence. based on everything that we see.
Speaker Change: Now on your question on where the macros are EBIT aspect the guidance Youre asking that question.
Speaker Change: We have to book.
Speaker Change: Build ship and recognize revenue.
Speaker Change: For the for a portion of our second half revenue in order to meet the guidance.
Speaker Change: No.
Speaker Change: You didn't have confidence.
Speaker Change: In that entire process.
Including the bookings.
Speaker Change: And also timing because timing means revenue recognition.
Speaker Change: We wouldn't be making this so very strong confidence.
Speaker Change: Based on everything that we see.
Speaker Change: Okay.
K. R. Sridhar: And let me explain a couple things here. The big shift, Andrew, that's happened in our business, and I think it's worth taking the two extra minutes to explain this to you. It is no longer do we see our customers, whether it is data centers. or a large factory. asking if on-site power is needed. That debate is over. The grid can only do so much in the short term, and without on-site power, people are not going to have power. That is no longer a question to us. Then it becomes a question of, are we a viable on-site power solution for people?
Speaker Change: And let me explain a couple of things here.
Speaker Change: The big shift Angela that's happened in our business and I think it's worth taking the two extra minutes to explain this to you.
Speaker Change: It is no longer do we see our customers whether it is data centers are large factories.
Speaker Change: Asking if onsite power is needed that debate is over the grid can only do so much in the short term and without onsite power people are not going to have power that is no longer a question to US then it becomes a question of RV a viable onsite power solution for people.
K. R. Sridhar: That's what we built the company for. We have a record of doing this more so than any other technology. However, the easy button is to go to Combustion Turbines and, I know, Combustion Reciprocating Engines because they've been around a lot longer than we have. Not too many people know us. However. The people that know us are expanding with us, and every time that we succeed, people are wanting our solutions. We can compete both economically and from a technical performance. And from an environmental perspective, it's a check, check, check. So we are super excited about the cycle.
Speaker Change: That's what we built the company for we have a record of doing this more so than any other technology.
Speaker Change: However, the easy button is to go through combustion turbines in.
Speaker Change: I know combos to invest implicating engines, because they've been around a lot longer than we have not too many people know us.
Speaker Change: However.
Speaker Change: The people that know us are expanding with us and as the time that we succeed people are wanting our solutions, we can compete both economically and from a technical performance.
Speaker Change: And from an environmental perspective.
Speaker Change: Check check check so we're super excited about this cycle extreme confidence in being able to meet those demands and those certain projects.
K. R. Sridhar: Extreme confidence in being able to meet those demands. And those certain projects. shift in the short term? Maybe they will, but the amount of projects that get executed is plenty and enough, given where we are, for us to be able to meet the guidelines. That's how we see it.
Speaker Change: Shift in the look.
Speaker Change: In the short term, maybe they will but the amount of projects that get executed is plenty and enough given where we are for us to be able to meet the guidance.
Speaker Change: That's how we see it I'll pass it on to Dan miles length of haul cost, yes. Thanks, Andrew So listen I'll, just say that I think the opportunity ahead for Bloom is fantastic I think theres a huge commercial opportunity for all the reasons that <unk> discussed for all the reasons that we've talked about previously.
Dan Berenbaum: I'll pass it on to Dan now to answer those questions. Yeah, thanks, Andrew. So, listen, I'll just say that I think the opportunity ahead for Bloom is fantastic. I think there's a huge commercial opportunity, you know, for all of the reasons that Cara discussed, for all the reasons that we've talked about previously.
Dan Berenbaum: Nothing more to add for myself personally at the moment, but you'll hear more from me, I'm sure. and your next question.
Speaker Change: Nothing more to add for myself personally at the moment, but youll youll hear more from me I'm sure.
Speaker Change: Your next question.
Manav Gupta: And your next question comes from the line of Manav Gupta with UBS. Manav, please go ahead. I just wanted to thank Dan upfront. You came in and you were very helpful right away. You brought in transparency, so thank you for all the help.
Speaker Change: And your next question comes from the lineup Manav Gupta with UBS. Please go ahead.
Speaker Change: Just wanted to thank Dan upfront you came in and then you will very helpful. Right away you brought in transparency. So thank you for all the help.
K. R. Sridhar: My question here is, as you are trying to scale up, Sri, there are two ways you're doing it. One, obviously, you are directly working with data centers, but the other, which we kind of liked last year, was you're building this partnership with utilities. So can you help us understand which will be the bigger driver of your product deployment in 25 and 26? Will it be you directly going to these customers, or will it be a combination of that and working with AEP or maybe even more utilities to place more product into service? Manav, thank you so much for that question.
Manav Gupta: My question here is as you are trying to scale up three there are two ways youre doing it. One obviously you are directly working with data centers, but the other which we kind of like last year, what Youre building. This partnership with utilities. So can you help us understand which will be the bigger driver I'll feel product deployment in 2500 <unk>.
Speaker Change: Thank you.
Speaker Change: Youll directly going to these customers or will it be a combination of that and working with AEP or maybe even more utilities to place more product into service.
Speaker Change: Thank you so much for that question.
K. R. Sridhar: So here's what I can tell you very simply, right? The grid is what is constrained. The grid is what is challenged. Utilities are a business that manages their customers. In many cases, the utilities have both the willingness and the ability from a regulatory perspective. to procure our products and supply it to their customers. That always will be our preferred choice, and it will be the customer's preferred choice because they can continue to procure their power from whoever they got it all along, except through a different means of generation right on site. So, for that reason, we are working with multiple utilities and with AEP.
Speaker Change: So here's what I can tell you very simply right.
Greg: Greg This is what is constrained.
Greg: The good news what is challenged.
Speaker Change: Utilities are a business that manage their customers.
Speaker Change: In many cases, the utilities have both the willingness and the ability from a regulatory perspective.
Speaker Change: Procured our products and supply to their customers that always will be our preferred choice and it will be the customers preferred choice because they can continue to procure their power from whoever they got it all along except to a different means of generations right onsite. So.
Speaker Change: For that reason, we are working with multiple utilities.
Speaker Change: And with AEP.
K. R. Sridhar: We are very bullish on that partnership, and that's going to go. But we are also working with several other utilities, as we speak right now, both electric utilities and gas utilities. And when they materialize and when we are allowed to speak about that by them, those are the two conditions for us to announce anything. Sometimes we book things and we can't speak about it because the customer tells us not to. Sometimes it takes a little while to get there, but we are very confident we're going to get there within the timeline. So it's that combination, but definitely we are working with them.
Speaker Change: We are very bullish on that partnership and that that's going to go but we are also working with several of the utilities as we speak right now both electric utilities and gas utilities.
Speaker Change: When they materialize and when we are allowed to speak about that buy them. Those are the two conditions for us to announce anything sometimes it both things and we can speak about it because the customer tells us not to.
Speaker Change: Sometimes.
Speaker Change: It takes a little while to get there, but we are very confident you're going to get there within the timeline. So it's that combination, but definitely we are working with them in certain other cases, because of regulatory reasons or because of our customers wish Dave wanted to procure those systems directly in particular the power from us in that case, we work.
K. R. Sridhar: In certain other cases, because of regulatory reasons or because of a customer's wish, they want to procure those systems directly and procure the power from us. In that case, we work with the utility to get the fuel from them and supply to the customer. We are agnostic. and we like both models. In terms of small retail, there most often the utility doesn't want to get involved and would rather have it supplied directly to the customers. But for the large loads, I think partnering with the utility is a very smart option.
Speaker Change: With the utility to get the fuel from them.
Speaker Change: And supplied to the customer we are agnostic.
Speaker Change: And we like both models.
Speaker Change: In terms of small retail there most often the utility doesn't wanted to get involved and we would rather have a supply directly to the customers, but for the large loads.
Speaker Change: <unk>.
Speaker Change: Entering with a utility is a very smart option hopefully that answers your question.
K. R. Sridhar: Hopefully that answers your question.
K. R. Sridhar: Thank you, sir.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And your next question comes from the lineup Deshaun Iolani with Jefferies.
Dushyant Ailani: And your next question comes from the line of Dushyant Ailani with Jefferies. Dushyant, please go ahead. Hi, thanks for taking my question.
Speaker Change: Please go ahead.
Deshaun Iolani: Hi, Thanks for taking my question Dan.
Dan Berenbaum: Dan, it was nice working with you, and hopefully we can see you again. Maybe on the first question, guys, margins for repowering came in a little strong. How are you gonna think about that going forward? And then my second question is on tariffs, the 100 basis points. What's the sensitivity to that if, let's say, the 90-day pause is over, and maybe we revert back to higher tariffs? Look, in the estimation and everything that we have given you, we have based it on the best current understanding, with the tariffs remaining the way they are, and balancing it as a portfolio against all the countries that we deal with and everything that's going on.
Speaker Change: Dan It was nice working with you.
Speaker Change: Hopefully we can.
Deshaun Iolani: See you again.
Speaker Change: Maybe on the first question guys.
Speaker Change: Margins for Repowering came in a little strong how do you kind of think about that going forward and then my second question is on <unk>, the 100 basis points.
Speaker Change: You talked about what's the sensitivity to that if let's say the 90 balls at the 90 day pauses or and maybe.
Speaker Change: I'll revert back to a higher.
Speaker Change: Carlos.
Speaker Change: Look in the E&E.
Speaker Change: Estimation and everything that we have given you we based it on the best current understanding with that that is remaining the way they are.
Speaker Change: Balancing it asset portfolio against all the countries that we deal with and everything that's going on so we stand by those numbers.
K. R. Sridhar: So, we stand by those numbers. We wouldn't lightly reiterate that guidance if we didn't have... strengthen our conviction. So it's a strong conviction that we can represent it. The how we do it is internal to us, but the what we will deliver is what I can state with conviction to you. So that's the key part that I want you to understand in terms of where are guidance.
Speaker Change: We wouldn't lightly reiterate that guidance.
Speaker Change: Didn't have.
Speaker Change: Strengthen our conviction so it's a strong conviction that we can represent at the how we do it is internal to us, but what we will Delaware is what I can state with conviction to you. So so that's.
Speaker Change: That's the key part.
Speaker Change: Wanted to understand in terms of their guidance.
Speaker Change: Guidance, yes.
K. R. Sridhar: And then the other question was on. I'm repowering. Yeah, repowering. John, in my script, I just said, you know, MIX did have an impact on Q1 gross margin, obviously. You know, we won't comment more specifically on MIX. Repowerings are part of our business. There's some quarters that will be some, some quarters there won't be any, but it is an ongoing part of our business. And we do try to give you some color around that as we think about our guidance for the And understand, this is part of the reason why Dan had explained how our metrics were changing in the last two scripts.
Speaker Change: And then the other question Europe.
Speaker Change: On.
Speaker Change: The Repowering I mean, yes.
Speaker Change: John in my script I, just said mix did have an impact in our Q1 gross margin obviously.
Speaker Change: We won't comment more specifically on mix Repowering are part of our business. There is some quarters and we saw some quarters there won't be any but it is an ongoing part of our business and we do try to give you some color around that as we think about our guidance for the full year and understand this is part of the reason why Dan had explained how our metrics are changing.
Speaker Change: In the last two scripts.
K. R. Sridhar: You know, not every installation, not every customer stuff is the same. There is so much complexity associated with load following, islanded, microgrids. And so we take all that into consideration, deal by deal, line by line, as we project through the margins. And again, when we reiterate a guidance, we take that pretty seriously. And it's through that extensive rigorous analysis we are giving you those numbers. So, yes, your point is well taken. We appreciate it. But we stand by the numbers.
Speaker Change: Not every installation not every customer staff is the same there is so much complexity associated with load following Islander, micro goods and so we take all that into consideration.
Speaker Change: Deal by deal line by line as the protect to the margins.
Speaker Change: And again.
Speaker Change: We reiterate the guidance, we take that very seriously and it's true that extensive analysis. We are giving you those numbers. So yes. Your point is well taken we appreciate it but we stand by the numbers we gave you.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Colin Rusch with Oppenheimer. Colin. Please go ahead.
Colin Rusch: Your next question comes from the line of Colin Rusch with Oppenheimer. Colin, please go ahead. Thanks so much.
Colin Rusch: Thanks, so much guys.
K. R. Sridhar: As you look at some of the stack technology and your ability to multi-source critical materials, as well as evolve the chemistries, can you talk a little bit about the resilience in the supply chain around some of those critical materials as the trade war starts to heat up a little bit and we kind of go through some waves around what's getting shipped between the U.S. Again, a very good question. What you need to understand is None of our critical materials come from. Contested Supply Chain or War Zones, and there is no China supply chain. Okay, so, and with respect to our, you know, we, you know, I spoke in my script about commercial off the shelf.
Speaker Change: As you look at some of the stack technology and your ability to multi source critical materials as well as evolve. The chemistry is can you talk a little bit about the resilience and the supply chain around some of those critical materials.
Speaker Change: The trade war started to heat up a little bit and we kind of go through some weights around.
Speaker Change: Whats getting shipped between the U S China.
Speaker Change: Again, a very good question, what you need to understand this.
Speaker Change: None of our critical materials.
Speaker Change: Come from.
Speaker Change: Contest at supply chains.
Speaker Change: Our water zones, and there is no China supply chain for us.
Speaker Change: Okay. So.
Speaker Change: And.
With respect to <unk>.
Speaker Change: Are we.
Speaker Change: I spoke in Mexico about.
Speaker Change: Commercial off the shelf.
K. R. Sridhar: is a small portion of our buy. Custom-made parts for us where we have developed vendors over the last 15 years is what we depend on. They are geographically very diverse. and we have learned and we have actually first-hand battle-tested this strategy of resilience. Bloom never had a part shortage and never shut down a factory once or slowed down an order during the entire time of COVID. So we have actually battle tested this for another scenario. So we feel very strongly that not only will we maintain that now, but we will be able to keep that kind of a discipline as we scale the company many times over.
Speaker Change: Is a small portion of our buy.
Speaker Change: Custom-made box for us that we have developed vendors or the last 15 years is what we depend on.
Speaker Change: Derek geographically very diverse.
Speaker Change: And.
Speaker Change: We have learned and we are actually firsthand battle tested this strategy of resilience.
Speaker Change: Bloom never had a part shortage and never shut down a factory ones.
Speaker Change: Our slowdown in order during the entire time of Covid.
Speaker Change: So we are actually battle tested this.
Speaker Change: Another for another scenario, so we feel very strongly that.
Speaker Change: Not only will we maintain that now, but we will be able to.
Speaker Change: Keep that kind of discipline as we scaled the company many times solar so we built the supply chain not just for today, but for the very large scale that we wanted to grow at a very fast. So extremely confident then huge shout out to our supply chain team.
K. R. Sridhar: So we built the supply chain, not just for today, but for the very large scale that we want to grow to very fast.
K. R. Sridhar: So extremely confident and huge shout out to our supply chain team and to our chief operations officer, Satish Chaturvedi, who leads this effort.
Speaker Change: And two our chief operations Officer statistically who leads this effort.
Speaker Change: Thanks, so much.
K. R. Sridhar: Thanks so much. And can you just give us an update on customer attraction outside of the U.S. and outside of Korea? I mean, there's been, you know, a lot of activity in and around, you know, the end market in Europe, as well as, you know, places like Australia. Just curious how your sales efforts are going in both those geographies. Sure. So we are focused predominantly right now on a couple countries in the EU and a couple countries in Asia. So that's how we think about expansion, and we build a base. This is outside of U.S.
Speaker Change: Just give us an update on customer traction outside of the U S and outside of Korea.
Speaker Change: Ben.
Speaker Change: A lot of activity in and around.
Speaker Change: The end market in Europe, as well as some.
Speaker Change: Places like Australia, just curious how.
Speaker Change: On your sales efforts are going on in both those geographies.
Speaker Change: Sure.
Speaker Change: So we are focused predominantly right now on a couple of countries in the EU.
Speaker Change: <unk>.
Speaker Change: And in a couple of countries in Asia. So that's how we think about expansion and we build a base.
Speaker Change: This is outside of U S and Korea right. So if you think of Europe.
K. R. Sridhar: and Korea, right?
K. R. Sridhar: So if you think of Europe, we are targeting right now Italy. Germany and the UK. And if you look at Asia, we are really targeting Taiwan in a major way because the entire AI supply chain, the amount of growth that's happening in Taiwan in the face of them, in the face of their grid not being able to grow fast enough and deliver power and rising costs of power out there, and them depending quite significantly on natural gas as their source of energy, all that fits very well for us. So we are targeting on those. And again, we will see in the next two years, you will see these markets take off and grow.
Speaker Change: We are targeting right now Italy.
Speaker Change: Germany and the UK.
Speaker Change: And if you look at Asia.
Speaker Change: We are really targeting Taiwan.
Speaker Change: Major way because.
Speaker Change: The entire AI supply chain.
Speaker Change: The amount of growth that's happening in Taiwan.
Speaker Change: In the face of them in the face of very great not being able to grow fast enough in Delaware power and rising cost of power out there and then and then depending.
Speaker Change: Quite significantly on natural gas as their source of.
Speaker Change: Energy all of that fits very well for us so we like targeting on those and again, we will see in the next two years you will see these markets take off and grow.
K. R. Sridhar: We are strategic. And so we don't take a shotgun approach to this. We take a rifle approach to our international growth.
Speaker Change: Were strategic and so we don't take a shotgun approach to this we take a rifle approach to our international growth. Thank you.
Jordan Levy: Thank you.
Speaker Change: And next question comes from the line of chart doesn't Levy, which always securities Chardan. Please go ahead.
Jordan Levy: And the next question comes from the line of Jordan Levy with Tourist Securities.
Henry: Jordan, please go ahead. Hi, all.
Speaker Change: Hi, all it's Henry on for Jordan here, Firstly, congrats on the strong quarter and thank you Dan for your work over the last year.
K. R. Sridhar: It's Henry for Jordan here. Firstly, congrats on the strong quarter and thank you, Dan, for your work over the last year. Just looking at the domestic C&I side of the business, can you just talk to, you know, maybe provide some more color on the power demand concerns there and how that's translating into orders? Yeah, on the commercial industrial side, I think what we are seeing right now is most customers coming and talking to us are asking us for islanded power. Okay, that's a big shift. Interconnection times, even for a few megawatts in most of the regions that we operate in seem to be very long and our customers are seeking islanded power.
Speaker Change: I'm just looking at the domestic C&I side of the business can you just talk to maybe its provides more color on the power demand concerns there and how thats translating translating into orders.
Speaker Change: Yes on the on the commercial industrial side I think what we are seeing right now is most customers coming and talking to us and asking us for island power. Okay. That's a big shift.
Speaker Change: Interconnection times, even for a few megawatts in most of the regions that we operate in seem to be very long and our customers are seeking.
Speaker Change: Islanders power.
K. R. Sridhar: There, it should be very obvious to you that being in a manufacturing environment, sometimes the factory shuts down or operates at very, very low load during a weekend period, depending on what they do. Some don't. Some do. So the ability to load follow becomes very important. Unlike in the past, when Bloom only offered baseload power, we now are able to offer islanded power. And here is the beauty of it. We say this many times, but not everybody may understand. So let me use your question to tell all of you on the call that we don't require battery.
Speaker Change: There it should be very obvious to you that being in a manufacturing environment, sometimes the factory shuts down or operates at very low very low load during a weekend period, depending on what they do some zones. Some do.
Speaker Change: So the ability to load follow becomes very important.
Speaker Change: Like in the past when Bloom only offered.
Speaker Change: Base load power, we now are able to offer island at power and here is the beauty of it we say this many times, but not everybody may understand so let me use your question to tell all of you on the call that we don't require batteries.
Speaker Change: To operate in micro grid to follow our load that is a huge advantage right now given supply chain challenges with batteries data challenges with batteries and all of that so not only do we not need an interconnection, we don't need batteries and we can load followed for customers so that.
K. R. Sridhar: to operate a microgrid to follow our load. That is a huge advantage right now, given supply chain challenges with batteries, data challenges with batteries, and all that. So not only do we not need an interconnection, we don't need batteries, and we can load follow for customers. So that is taking a big traction.
Speaker Change: He is taking a big traction so now let me focus on.
K. R. Sridhar: So now let me focus on, you know, I broke it down for you into two sectors. Let's focus on the large load factor. Here are the numbers, right, all of 2000s and 2010s. The average over those 20 years of construction-related spending related to manufacturing facilities was roughly $85 billion a year, $85 billion a year. That number in 23 and 24, and we expect it to continue in 25, is close to $250 billion a year, three times that expand. And these factories are more automated, more roboticized, with AI coming in, which means the amount of power per square foot goes up enormously.
Speaker Change: I broke it down for you into two sectors.
Speaker Change: Focus on the large load.
Speaker Change: Factories.
Speaker Change: Here are the numbers.
Speaker Change: All of 2002 thousand tens.
Speaker Change: The average over those 20 years of construction related spending related to manufacturing facilities.
Speaker Change: With roughly $85 billion, a year $85 billion, a year that number in 'twenty, three and 'twenty four and we expect it to continue in 'twenty five is closer to $250 billion a year three times debt expansion.
Speaker Change: And these factories are more automated motor blocker sized with AI coming in which means the amount of power per square foot goes up enormously.
K. R. Sridhar: We see this as a huge growth area. This $250 billion that was invested in 23 and 24, that's already invested. Those factories are not going to be mothballed. They have to be powered up. They will go on. There could be a few slips in terms of cycles. It comes from the CHIP Act, you know, CHIPS Act. It comes from the Infrastructure Act. It comes from abundance of cheaper, you know, energy that customers have today. It comes from shortening the supply chain. All these things are driving that. It's very strong for us.
Speaker Change: We see this as a huge growth area. This $250 billion that was invested in 'twenty three and 'twenty four that's already invested those factories are not going to be mothballed. They have to be powered up Dave will go on there could be a few slips in terms of cycles. It comes from the chip back <unk>. It comes from the infrastructure at <unk>.
Speaker Change: Comes from.
Speaker Change: Abundance of cheap.
Speaker Change: NRG that customers have today it comes from shortening the supply chain. All these things are driving that it is very strong for US now the other side of.
K. R. Sridhar: Now, the other side of. our CNI business, Think of Retail. You know that we do big box stores, other people, these are consumer facing businesses. They are going to stretch out their decision making cycle in this time of economic uncertainty until they fully understand where it falls, but understand it's a small part of our business and we have enough diversification. That's how we think about the whole business. Hopefully that color helps. No, that's very helpful. And then just a quick follow up for me, looking at the margin trajectory during the rest of the year, with the, you know, the strong first quarter and the reiterated guide, it looks like gross margins will actually, you know, be relatively flat, maybe see a little bit of upside during the remainder of the year.
Speaker Change: Our C&I business.
Speaker Change: Think of retail.
Speaker Change: That we do a big box stores. Other people these are consumer facing businesses.
Speaker Change: They are going to stretch out their decision making cycle in this time of economic uncertainty until they fully understand that it falls, but understand its a small part of our business.
Speaker Change: And we have enough diversification, that's how we think about the whole business hopefully that color helps.
Speaker Change: No that's very helpful.
Speaker Change: And then just a quick follow up for me looking at the margin trajectory during the rest of the year.
Speaker Change: With the strong first quarter and reiterate reiterated guide it looks like gross margin will actually be relatively flat, maybe you see a little bit of upside during the remainder of the year I guess, just how should we think about about that trajectory and is there any.
K. R. Sridhar: Because just how should we think about that trajectory? And is there any, you know, Incremental upside from the guidance at this point. No, again, what I said is what I meant in the script. We are just reiterating guidance at this point in time. And, again, look, we are going to have to do a lot of things very innovatively, and we are confident we will do it to make up for any of these tariff issues. And, you know, I'm sure you're not on too many calls with too many companies that are saying that in spite of the tariffs, they are not, you know, downward revising their margin.
Speaker Change: Incremental upside from the guidance at this point.
Speaker Change: No.
Speaker Change: <unk>.
Speaker Change: What I said is what I meant in the script, we're just reiterating guidance at this point in time and.
Speaker Change: Again look.
Speaker Change: We're going to have to do a lot of things very innovative Lee and we are confident we will do it to make up for any of these tariff issues and.
Speaker Change: I am sure Youre not on too many calls with too many companies that are saying that in spite of the tariffs.
Speaker Change: Download realizing there.
Speaker Change: Margins.
Dan Berenbaum: Thank you. And I would say, you know, just to go back to my prepared remarks, remember what I said in the commentary that, you know, our mix, as well as the level loading, those were both positive impacts on our Q1 gross margin. Obviously, just to reiterate that ability to level of the factory, given the strong balance sheet, given the visibility that we believe it to have, you know, we'd made that comment on last quarter's earnings call that we thought that, you know, you wouldn't see the sort of more extreme peaks and valleys that you saw in gross margin that we saw last year.
Speaker Change: Thank you.
Speaker Change: Just to go back to my prepared remarks, I remember, what I said in the commentary that you know our mix as well as the level loading those were both positive impacts on our Q1 gross margin, obviously just to reiterate that ability to level of the factory given our strong balance sheet given the visibility that we believe to have we'd made that comment.
Speaker Change: On last quarter's earnings call that we thought that.
Speaker Change: You wouldn't see this sort of more extreme peaks and valleys that you saw in growth that we saw last year. So this is a little is relatively consistent with I think that.
Dan Berenbaum: So this is, you know, a little, it is relatively consistent with, I think, that.
Chris: Your next question comes from the line of Chris <unk> with RBC capital markets. Chris. Please go ahead.
Chris Dendrinos: Your next question comes from the line of Chris Dendrinos with RBC Capital Markets. Chris, please go ahead. Yeah, thank you. And maybe just to start and follow up on that prior commentary around around the tariffs. Could you maybe just provide a bit more detail on where you think there's opportunities to save and sort of, you know, what types of things you're looking at? Thanks.
Chris: Yes, Thank you and maybe just to start and follow up on that prior commentary around around the tariffs.
Speaker Change: Could you maybe just provide a bit more detail on where you think there is opportunities to save and sort of.
Chris: What you are looking at thanks.
Speaker Change: So when you when you look at our.
K. R. Sridhar: So when you when you look at our, you know, we have Always, in the last 15 years, there's a weekly operational review that I sit in, where all my direct reports sit in. And we review, at any point in time, there are probably 100 cost reduction projects that go on in the company. And we review them routinely on a weekly basis. And every quarter, at least once, these projects will get reviewed, depending on their criticality. and it's a portfolio approach for us. And it's never a straight line. There will be a few projects that come in ahead.
Chris: We have.
Speaker Change: Always in the last 15 years.
Speaker Change: There is a weekly operational review that I sit in there all of my direct reports and visa view.
Speaker Change: At any point in time, they are probably 100 cost reduction projects that go on in the company.
Speaker Change: We review them routinely on a weekly basis.
Speaker Change: Every quarter at least once these projects will get reviewed depending on the criticality.
Speaker Change: And it's a portfolio approach for us.
Speaker Change: And it's never a straight line there will be a few projects that come in ahead there'll be a few projects that fall behind there'll be unexpected things that happen.
K. R. Sridhar: There will be a few projects that fall behind. There will be unexpected things that happen in like commodity prices, other things. And we manage these things very effectively. And it is that discipline that has allowed us to continue to keep reducing costs time after time. So there are technology improvements. There are simplification in building the products. There are yield improvements. There are factory improvements. There are efficiencies we gain from the learning curve, not just in our factories, but with our supply chain partners. We go help them with those learning. So because it's really hard to single out any one thing, it is just part of our DNA.
Speaker Change: Commodity prices other things and we manage these things very effectively and it is that discipline that has allowed us to.
Speaker Change: <unk> to keep reducing costs.
Speaker Change: After time, so there is technology improvements there is simplification and building the products the yield improvements that our factory improvements.
Speaker Change: There are efficiencies we gained from the learning curve not just in our factories, but with our supply chain partners, who will help them with those learning curves.
Speaker Change: No.
Speaker Change: Because it's really hard to.
Speaker Change: A single out any one thing it is just part of our DNA and for 15 years to get double digit cost reductions almost every single year.
K. R. Sridhar: And for 15 years to get double digit cost reductions almost every single year as an industry of one, right? This is really at the core of what we do every single day. And starting at my level, everybody in the company is focused on that. And then just recall that everything that Kara just talked about, that we focus on benefits of product, and it also benefits service, right? So all of that scale, those technology cut-ins, those continuous improvement programs, they benefit both product and service with a very long tail. That's a very good point.
Speaker Change: As an industry of one right.
Speaker Change: Really at the core of what we do every single day and.
Speaker Change: Starting at my level.
Speaker Change: Everybody in the company is focused on this and then just call the everything that Gary just talked about that we focus on benefits product and it also benefits service right. So all of that at scale those technology cut into those continuous improvement programs and benefit both product and service with a very long tail. That's a very good point Dan.
Speaker Change: Alright. Thanks.
K. R. Sridhar: Thanks.
K. R. Sridhar: And then maybe shifting gears a little bit here, you know, on the utility regulatory environment, I know there's, you know, the FERC co-location decision, you all are AEPs waiting on the PUC approval process. You know, I guess maybe more broadly, is this maybe sort of a bottleneck or holding back deal flow near term as your customers look for those decisions? Or how is that kind of playing out in your eyes? Thanks. Uh, very good question again. Look, uh... I know that many of you have been talking to AEP regarding this, and you're getting directly from them.
Speaker Change: And then maybe shifting gears a little bit here.
Speaker Change: On the utility regulatory environment I know, there's the FERC co location decision you all are AEP is waiting on the <unk>.
Speaker Change: C approval process.
Speaker Change: I guess, maybe more broadly is this may be sorted.
Speaker Change: Bottleneck or holding back deal flow near chairman.
Speaker Change: Your customers look for those.
Speaker Change: Hey, Jim.
Speaker Change: How is that kind of playing out in your eyes.
Speaker Change: Very good question again look.
Speaker Change: UK I know that many of you have been talking to AEP is adding this and.
Speaker Change: Youre getting directly from them it is better for them to answer from their point of view.
K. R. Sridhar: It is better for them to answer from their point of view where things are. They feel very confident that the projects that they've already signed up are going to go through and not have any issues. And going forward, they have a very robust pipeline of customers that they're talking to and are confident that with what they believe and the reason they chose this is we had a superior technology with a superior value, that they can make many more of these transactions. And they have pathways very clearly to be able to satisfy those customers.
Speaker Change: Where things are.
Speaker Change: They feel very confident that the projects that they have already signed up.
Speaker Change: Going to go through and not have any issues and going forward. They have a very robust pipeline of customers that they are talking to atlanta or confident that.
Speaker Change: What they believe in the reason they chose US as we added superior technology with the superior value that they can make many more of these transactions.
Speaker Change: And they have pathways.
Speaker Change: Very clearly to be able to satisfy those customers. So that's that's AEP and there'll be more than happy to answer more questions on that from that perspective now from the customer side, what do they see.
K. R. Sridhar: So that's AEP, and they'll be more than happy to answer more questions on that from that perspective.
K. R. Sridhar: Now, from the customer side, what do they see? I think our large customers are very, very sophisticated when it comes to power and electricity buy. They clearly understand that any arrangement that they can make that does not impact the local ratepayer is not only a nice thing to do, but a necessary thing to do if they want to locate their new data centers in a new neighborhood. And our solution becomes extremely useful for the regulators and the policymakers. It's very clear to them if they don't if they do not allow. a structure there. without affecting the rate payer, they can also provide electricity to these big data centers.
Speaker Change: I think our large customers are very very sophisticated when it comes to power and electricity by.
They clearly understand that.
Speaker Change: Any arrangement that they can make.
Speaker Change: That does not impact the local ratepayer.
Speaker Change: Is not only a nice thing to do but a necessary thing to do if they wanted to locate their new data centers and in your neighborhood.
Speaker Change: And our solution becomes extremely useful for.
Speaker Change: The regulators and policymakers, it's very clear to them if they don't if they do not allow.
Speaker Change: A structure.
Speaker Change: There.
Speaker Change: Without affecting the ratepayer. They can also provide electricity to these big data centers. Those data centers are not going to be located in their neighborhood and theyre going to lose economic development.
K. R. Sridhar: Those data centers are not gonna be located in their neighborhood, and they're gonna lose economic development. So the interests are all aligned out here. Our customers see it that way. These are temporary blips in any transition that goes on where the technology and the market. is always slightly ahead of regulators. Regulators are catching up.
Speaker Change: The interests are all aligned out here, our customers see it that way.
Speaker Change: These are temporary blips in any transition that goes on there the technology in the market.
Speaker Change: As always slightly ahead of regulators regulators are catching up.
Speaker Change: And your next question comes from the line of Chris Joe with Wolfe Research Chris. Please go ahead.
Chris Chung: And your next question comes from the line of Chris Chung with Wolf Research. Chris, please go ahead.
Speaker Change: Hi.
Chris Chung: Hi, KR, Dan, good luck on your future endeavors.
Speaker Change: Good luck on your future endeavors.
K. R. Sridhar: I wanted to just ask, what's the size of the backlog at the end of Q1, and can you help frame the typical size within that backlog? You know, we only give backlog comments once a year, that is our policy, and we don't change that. We clearly, I think I've said this implicitly a couple of times and explicitly once, is that when we give, when we reiterate our guidance on the year, it means that we are very confident about the strong commercial pipeline that we have and our confidence in being able to convert that. So you should take that as a positive signal, but in terms of numbers and commentary, it's once a year.
Speaker Change: I wanted to just ask what's the size of the backlog at the end of Q1 and can you help frame the typical size within that backlog.
Speaker Change: Yes.
Speaker Change: We only give backlog comments once a year that is that is our policy and we don't change that.
Speaker Change: Clearly I think I've said this.
Speaker Change: Implicitly couple of times and explicitly one says that.
Speaker Change: When we give.
Speaker Change: When we reiterate our guidance on the year. It means that we are very confident about the strong.
Commercial pipeline that we have.
Speaker Change: Our confidence in being able to kind of let that so you should take that as a.
Speaker Change: As a positive signal, but in terms of numbers in commentary, it's once a year. Thank.
K. R. Sridhar: Thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Alright. Thank you and then maybe just based on current conversations do you see the next potential deal coming from utility or perhaps an end user.
K. R. Sridhar: All right, thank you. And then maybe just based on current conversations, do you see the next potential deal coming from a utility or perhaps an end user? Hopefully both.
Speaker Change: Hopefully both.
K. R. Sridhar: Okay.
K. R. Sridhar: All right.
Speaker Change: Okay.
K. R. Sridhar: Thank you.
Speaker Change: Alright. Thanks.
Speaker Change: And your next question comes from the line of Amit <unk> with BMO capital markets. Amit. Please go ahead.
Ameet Thakkar: And your next question comes from the line of Ameet Thakkar with BMO Capital Markets.
K. R. Sridhar: Ameet, please go ahead. Hi, thanks for taking our questions, and Dan, I just want to echo everybody else's sentiments and wish you all the best. Thanks for all the patience over the last year. You guys have been very clear on your lack of exposure to, I guess, kind of Chinese or disputed supply chains. Your prior disclosures did used to highlight the use of scandium in your fuel cell ink coatings. I was just wondering if you could kind of share with us where are you sourcing that if it's not from China, given kind of their large percentage of that.
Speaker Change: Hi.
Speaker Change: For taking our questions Dan just want to echo everybody else's sentiments.
Speaker Change: You all the best Thanks for all the patients over the last year.
Speaker Change: You guys have done we've been very clear.
Speaker Change: Lots of exposure to I guess kind of Chinese or disputed supply chain.
Speaker Change: Our disclosures did used to highlight the use of scandium and your fuel cell Inca coatings.
Speaker Change: Wondering if you could kind of share with us.
Speaker Change: Where are you sourcing that if it's not from China given kind of.
Speaker Change: Kind of a large percentage of that and then I guess the second question for US. Our follow up question is I was wondering if you could kind of level set us on the kind of the megawatts you've got deployed at the end of <unk>.
K. R. Sridhar: And then I guess the second question for us, or our follow-up question is, I was wondering if you could kind of level set us on the kind of the megawatts you've got deployed at the end of last year and kind of where you are today.
Speaker Change: Last year and kind of where you are today. Thanks.
K. R. Sridhar: Thanks. So let me address the, you know, like, let me address the... I'm going to scan your question first, and I'll have Dan explain why we changed metrics and how we changed metrics right after that. So the first thing for you to know is, you know, like number one, We are not dependent on China for Scandia. I can state that very clearly, okay? Number one. Number two, we get this from multiple geographies and multiple continents. Number three, knowing that we would be. the world's largest consumer. You know, this was in 2007-8. when we were barely shipping units.
Speaker Change: So.
Speaker Change: Let me address the.
Speaker Change: Let me address the.
Speaker Change: Skandia question.
Speaker Change: First and I'll have Dan explain why retain metrics and how we can metrics laid out for that.
Speaker Change: So the.
Speaker Change: First thing for you to know is it like.
Speaker Change: Number one.
Speaker Change: We are not dependent on China for Sandy I can I can state that very good okay.
Speaker Change: Number one number two we get this from multiple geographies and multiple continents.
Speaker Change: Number three knowing that.
Speaker Change: We would be.
Speaker Change: It was largest consumer.
Speaker Change: This was in 2007 eight.
Speaker Change: When we were barely shipping units.
K. R. Sridhar: to today when we actually are the largest consumer of that material. We have complete confidence that We have that supply. to grow as fast as we need to. for the foreseeable future, from multiple sources. We don't reveal those sources and methods. That's part of our IP.
Speaker Change: Today, when we actually are the largest consumer of that material.
Speaker Change: We have.
Speaker Change: Fleet confidence.
Speaker Change: That.
Speaker Change: We have that supply.
Speaker Change: To grow as fast as we need to.
Speaker Change: For the foreseeable future from multiple sources.
Speaker Change: We don't reveal those sources.
Speaker Change: That's part of our IP.
Dan Berenbaum: Thank you. Yes, and this is a reminder, you know, we stopped talking about megawatts shipped in specific periods because it's, we feel like, number one, it's not how we run the business and we feel like it's less useful information because every megawatt is not the same cost and price depends on configuration, whether it's sort of base load only grid interconnected, whether it's islanded microgrid with AI data center load following capabilities. So we feel like it's much less useful information. It's not really apples to apples. You know, we did give a little color in my script again around mix supporting gross margin a little bit in Q1.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Just as a reminder, we stopped talking about megawatts shipped in specific periods, because we feel like it number one it's not how we run the business.
Speaker Change: We feel like it's less useful information because every megawatt is not the same.
Speaker Change: Cost and price depends on configuration, whether it's sort of base load on the grid interconnected whether its island microgrid with AI data center load following capabilities. So we feel like it's much less useful information, it's not really apples to apples, we did give a little color in my script again.
Speaker Change: Round mixed supporting gross margin a little bit in Q1, so it will.
Dan Berenbaum: So we'll, you know, expect to get more information on that. That megawatt information just it's not how we think about the business. We think about the overall economics of each individual deal and the portfolio of deals that we have as we manage the overall.
Speaker Change: Back to you more.
Speaker Change: That megawatt information just.
How we think about the business, we think about the overall economics of each individual deal and the portfolio of the deals that we have as we manage the overall business.
Speaker Change: And your next question comes from the line of Sherri Mcgratty with BTG. Please go ahead.
Sherif Elmaghrabi: And your next question comes from the line of Sherif Elmaghrabi with BTIG. Sherif, please go ahead. Hey, good afternoon. Thanks for taking my questions. One of the advantages of energy servers is that they can tap the existing gas network. You've talked about this earlier on the call.
Sherri Mcgratty: Hey, good afternoon, thanks for taking my questions.
Sherri Mcgratty: One of the advantages of energy services that they can tap the existing gas network you've talked about this earlier on the call but for larger.
K. R. Sridhar: But for larger agreements with utilities like the one you signed with AEP, is there a new gas grid infrastructure that needs to be put in place? And, you know, if you can characterize the timing around that. Very good question. Look, I think the main trunks and where the gas flows, there is plenty of flow, but the secondary trunks that go from the high-pressure lines to the medium-pressure lines is where it depends on where the location is. So it is very location-specific, and there is not a single answer to that question. You can be thinking anywhere from a couple months to How that flows, though, Sherif, it's by the time.
Sherri Mcgratty: <unk> utilities like the one you signed with AEP is their new gas grid infrastructure that needs to be put in place and if you can characterize the timing around that.
Sherri Mcgratty: Very good question look I think the main trunks and where the gas flows there is plenty of flow, but the secondary trucks that go from the high pressure lines to the medium pressure Lyons is there it depends on where the location is so it is very location specific and there is not.
Sherri Mcgratty: A single single answer to that question.
Sherri Mcgratty: You can be thinking anywhere from a couple of months too.
Sherri Mcgratty: Six to nine months, depending on where that where that location is in order to be able to get that level of gas and if you think about how that flows though.
Sherri Mcgratty: It's <unk>.
Sherri Mcgratty: By that time.
K. R. Sridhar: A customer decides, like a large data center, that they want to install something and facilitate it. It takes that amount of time for them to facilitate it. So, as long as they understand that that power is needed for them, and they place the orders, and they are building that data center, this should not be the long pole in the tent. And that is typically what we have seen so far in terms of the data centers and how they go. And it's very telling, right? It's very telling that people are getting tuned to this.
Sherri Mcgratty: A customer designs like a large data center that they want to install something in facilities that it takes that amount of time for them to facilitate that so as long as they understand.
Sherri Mcgratty: That that power is needed for them and they place the orders and they are building that data center. This should not be the long pole in the event and that is typically what we have seen so far.
Sherri Mcgratty: In terms of the data centers and how they go and.
Speaker Change: And it's very telling right.
Sherri Mcgratty: It's very telling that people are getting tune to this.
K. R. Sridhar: The large data center operators know this, but if it is not explicit, I thought in the GTC keynote, Jensen Wang from NVIDIA, on March 18th, made a beautiful statement. It went something like, your revenues are power limited. He was talking to his customers. Your revenues are power limited. You could figure out what your revenues will be. based on the power you have to work. Okay, so these three, so when they procure the chips. They know it has to get facilitized, and that's where it's going to go. So gas is available. Is it available in the specific location where the data center is, that extension of gas pipeline?
Sherri Mcgratty: The large data center operators know this but if it is not explicit I thought yes.
Sherri Mcgratty: The GTC keynote.
Jensen Huang: Jensen Huang from Nvidia.
Jensen Huang: March 18th made a beautiful statement had been something like your revenues are power limited he was talking to his customers.
Jensen Huang: Your revenues are power limited you could figure out what your revenues will be.
Jensen Huang: Based on the power you have to work with.
Jensen Huang: Yes.
Okay. So.
Jensen Huang: So when they procure the chips.
Jensen Huang: It has to get systematized and Thats, where its going to go so.
Jensen Huang: Gas is available.
Jensen Huang: Is it available in a specific location, where the data centers that extension of gas pipeline in certain geographies.
K. R. Sridhar: In certain geographies, I think it took longer to permit. My guess would be, again, this is my guess. Given the understanding of the need to win the AI race, and given the current administration's propensity to make sure they make this happen, and again, let me quote Secretary of Energy Chris Wright, right? He said, this is the Manhattan Project of our time. If that's the case, I think these gas lines are going to come much faster than their centers are going to get built.
Jensen Huang: It took longer to permit.
Jensen Huang: My guess would be again this is my guess.
Jensen Huang: Given the understanding of the need to win the AI.
Jensen Huang: And given the current administration's propensity to make sure. They make this happen and again, let me court.
Speaker Change: Currently of energy, Chris right right. He said this is the Manhattan project of our time.
Speaker Change: If thats the case I think these gas lines are going to come much faster than data centers are going to get built.
K. R. Sridhar: That's really great color, thanks.
Speaker Change: That's really great color. Thanks.
Speaker Change: The second question.
K. R. Sridhar: Second question, there's a ConAgra contract announced at the beginning of the month. It's not the biggest, but it's interesting because of its duration. Can you remind us how long energy servers typically last, and to the extent that you can, maybe some specifics about why they were willing to commit to 15 years? So, very good question. We have a lot of contracts, the range is being anywhere from five years. to 20 years. A lot of our South Korea contracts are 20 years. Many of our PPAs that we do are 15 or 20 years. So what happens in that cycle, though, is most of our equipment have operating lifetime as certified by independent engineers to be much longer than that, but the fuel itself gets replaced, and that is the hot box or the fuel replacement units that we talk about, and we recycle all those parts and put them back on.
Speaker Change: Theres, a conagra contract announced at the beginning of the month, if not the biggest but it's interesting because of its duration.
Speaker Change: Can you remind us how long energy service typically last added to the extent that you can maybe some specifics about why they were willing to commit to 15 years.
Speaker Change: So.
Speaker Change: Very good question.
Speaker Change: Have a lot of contracts the ranges being anywhere from five years.
Speaker Change: To 20 years.
Speaker Change: A lot of our South Korea contracts for 20 years.
Speaker Change: Many of our Ppas that we do but 15 or 20 years. So what happens in that cycle, though is most of our equipment have operating lifetime as certified by independent engineers to be much longer than that but the fuel cell itself gets it.
Speaker Change: <unk> and that is the hard blocks of the field replacement units that we talked about and we recycle all of those spots and put them back on today, an average life of those units how are somewhere in the five year range. So in the contact contract What'll happen is their service pricing will allow us to keep replacing.
K. R. Sridhar: Today an average life of those units hovers somewhere in the five-year range. So, in the ConAgra contract, what will happen is their service pricing will allow us to keep replacing these units, assuming that the five years is the number we're talking about in a 15-year contract, two times through the life of that contract to be able to fulfill the entire contract while the rest of the system will continue to operate. And the good news about this, right, five years from now when they get the next hot box, it will be the latest and greatest technology of that time, which will even be better than what we put out there.
Speaker Change: These units assuming that the five years the number we're talking about and the 15 year contract two times through the life of that contract.
Speaker Change: To be able to fulfill the entire contract while the rest of the system will continue to operate and the good news about this slide five years from now when they get the next hotbox it'll be the latest and greatest technology of that time, which will even be better than what we put out today.
Speaker Change: Okay.
Speaker Change: Okay.
Noel Parks: And your next question comes from the line of Noel Parks with Dewey Brothers. Noel, please go ahead. Hi, good afternoon. You know, I heard you mention earlier that the alternative to a bloom solution The easy button alternative would be combined cycle gas turbines, and I was sort of surprised because I don't think of those as sort of playing with the same customers or projects, that you would be just on the lead time to, you know, for the ordering of those turbines. So are those realistically competition for your projects, your time to power projects?
Speaker Change: And your next question comes from the line Noel Parks with Tuohy Brothers. Please go ahead.
Noel Parks: Hi, good afternoon.
Speaker Change: Yeah.
Speaker Change: I heard you mentioned earlier that.
Speaker Change: The alternative to a balloon solution.
Speaker Change: The easy button, all tomorrow it would be.
Speaker Change: Combined cycle gas turbines and.
Speaker Change: It was sort of surprised I don't think of those as sort of playing in the with the same customers or projects.
Speaker Change: You would be just on the lead time to for the ordering of those turbines. So.
Speaker Change: Are those realistically competition for you or you can't.
Speaker Change: To follow up on that.
K. R. Sridhar: For more information visit www.fema.gov Noel, very good question. Thank you for asking me to clarify that. When I said combustion turbines, I should have been very clear. I was talking about the microturbines, the aeroderivative turbines that are in the 50 megawatt class, 30 megawatt class, not a combined cycle gas turbine. There are many, many reasons why CCGT will not be a good choice for situations like this if they are not connected to the grid for them to load follow. And even if they're not connected to the grid, remember, they have to be maintained. They have to be shut down.
Speaker Change: No no very good question.
Speaker Change: And thank you for asking me to clarify that and then ice that Congress can turbines I should have been very clear I was talking about.
Speaker Change: Microtel events. The edited of turbines that are in the 15 megawatts 30 megawatts flat not a combined cycle gas turbine. There are many many reasons why <unk> will not be a good choice for situations like this.
Speaker Change: If they are not connected to the grid for them to load follow.
Speaker Change: And even if they are not connected to the grid remember they have to be maintained there has to be shut down you cannot have a monolithic failure of one unit. So if you have the two of those to back it up all of those become super expensive. So so most of these 100 megawatt 200 megawatt.
K. R. Sridhar: You cannot have a monolithic failure of one unit. So, if you build two of those to back it up, all those become super expensive. So, most of these 100 megawatt, 200 megawatt solutions you're looking at today, it is tens of microturbines or tens of reciprocating engines that are clustered together is what that solution is. And that is the true competition. A combined cycle gas turbine at a gigawatt scale, there are very few projects. And like you correctly identified, it'll take a very long time to put that together. And unless there is grid connection, backing that up becomes a real issue.
Speaker Change: Since you are looking at today eases.
Speaker Change: Tens of micro turbines or tens of this implicating engines that are clustered together is what that solution is and that is the true competition.
Speaker Change: Combined cycle gas turbine that a gigawatt scale very few projects and like you correctly identified it will take a very long time to put that together and unless there is a grid connection.
Speaker Change: Backing that up becomes a real issue. So that's what I meant hopefully that clarifies for you and in that both on a cost basis performance basis total cost of ownership basis.
K. R. Sridhar: So, that's what I meant.
K. R. Sridhar: Hopefully, that clarifies for you. And in that, both on a cost basis, performance basis, total cost of ownership basis, reliability basis, time to power basis, and an environmental impact basis, and noise, water use, air pollution, global warming. Great. Thanks a lot. It totally clarifies it.
Speaker Change: Reliability basis time to power basis.
Speaker Change: And mind mental impact basis.
Speaker Change: Nice water use air pollution.
Speaker Change: Millwork.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Totally clarify is it and I'm just thinking for data center customers.
K. R. Sridhar: And I'm just thinking for data center customers, you know, for onsite expansions versus, you know, Greenfield, new data centers, and I'm thinking of your, you know, asking you to deliver 100 megawatts in an acre. Is there any difference in sort of the decisiveness or the sales cycle, say, for a cloud vendor who's pursuing one type of project versus another? You know, right now, that's a very good question. I think the within months and quarters. The answer that I would give to you is going to change. Okay, that is my true belief, and let me explain to you why, right?
Speaker Change: For on site expansions versus Greenfield, new data centers and I'm thinking of here.
Speaker Change: Fascinated deliver 100 megawatts in an acre.
Speaker Change: Is there any difference in sort of the <unk>.
Speaker Change: Spices nurse or the sales cycle safer a cloud vendor who is pursuing one type of project versus another.
Speaker Change: Right now that's a very good question.
Speaker Change: I think the.
Speaker Change: Within months and quarters.
Speaker Change: The answer that I would give to you is going to change.
Speaker Change: Okay.
Speaker Change: It is my true belief and let me explain to you why.
Speaker Change: Right.
K. R. Sridhar: As we are speaking, as we are on this call, right, MEDA is having their earnings call, and what did they say out there? They are upping their amount of infrastructure spending. even from the $60 billion to a higher number. That's going to come from the Magnificent Seven, right? The Tech Seven that's building what they build. Add to that. the national imperative that was announced in the White House and what they're going to do with Stargate and things like that. You're looking at 600 to 700 billion dollars worth of spend that that is being committed to for 2025.
Speaker Change: Speaking as we're on this call right.
Speaker Change: And that is having their earnings call and what did they say out there they are upping their amount of infrastructure spend.
Speaker Change: Even from the $60 billion to a higher number.
Speaker Change: That's going to that's going to come from.
Speaker Change: The magnificent seven right.
Speaker Change: Seven Thats building what they build.
Speaker Change: Add to that.
Speaker Change: The national imperative that was announced in the White house, and what Theyre going to do whats target and things like that.
Speaker Change: Looking at $600 billion to $700 billion worth of spend that is being committed to for 2025.
K. R. Sridhar: That translates to more than 15 gigawatts of power that you're going to need, right? So everybody is crouching for whatever power they can get from the utility backups, things like that. and as they saturate. You're not buying these chips. at a premium to keep them in cold storage or for safety stock. You have to deploy them. And that's when I think the demand is going to, the cycles are going to shrink. So I think it's an indirect way to answer your question saying the decision cycles. and the need for implementation cycles have to necessarily shrink if you believe that AI and media and everybody is going to grow.
Speaker Change: That translates to more than 15 gigawatts of power that you're going to need right.
Speaker Change: Everybody is counting for whatever power they can get from the utility backups things like that.
Speaker Change: And as they saturate.
Youre not buying these chips.
Speaker Change: At a premium to.
Speaker Change: To keep them in cold storage for safety stock.
Speaker Change: You have to deploy them.
Speaker Change: And that's when I think.
Speaker Change: The demand is going to.
Speaker Change: Cycles are going to shrink so.
Speaker Change: I think it's an indirect way to answer your question, saying.
Speaker Change: The decision cycles.
And the need for implementation cycles has couldn't necessarily shrink.
Speaker Change: <unk> believe that AI, and then media and everybody is going to grow.
K. R. Sridhar: Right? Those are two correlated statements. One cannot be right and the other one can't be right.
Speaker Change: Alright. Those are those are two correlated statements one cannot be right and the other one drop.
K. R. Sridhar: Does that make sense?
Speaker Change: That makes sense.
Speaker Change: Okay.
Speaker Change: And our final question comes from the line of my Hapeman Louie with Mizuho Securities.
Mahib Mandlui: And our final question comes from the line of Mahib Mandlui with Missoula Securities. Mahib, please go ahead. Hey, thanks for taking your questions. And nice to talk to you again. Just one question on the tariff impact, I presume your guidance of the 100 business point of impact you talked about is more on the 10% tariff right now. Just curious to look how to think about the impact of these reciprocal tariffs go back to the levels talked about initially by President Trump. Yeah. So Great question. So what we have done is done a thorough, detailed portfolio analysis.
Speaker Change: Please go ahead.
Speaker Change: Hey.
Speaker Change: Thanks for taking my questions.
Speaker Change: Talk to you again.
Speaker Change: Just one question on the tariff impact.
Speaker Change: You in your guidance or the under business wanted to come back to talk about is more on the 10% tariff right now the students look how to think about.
Speaker Change: The impact that these vessel Brooklyn tons go back to the levels the bulk of which are in the progress in trouble here.
Speaker Change: So.
Speaker Change: No great question. So what we have done is done a thorough detailed portfolio analysis.
K. R. Sridhar: of all our U.S. suppliers, what we procure, how much we procure, what the dollar value cost is. are U.S. manufacturing. The two plans make everything for us, you know, those don't get impacted. Then we have taken into account what countries we procure from and what flexibility we have of moving temporarily from one place to another to optimize for where we need to go. So it is through that detailed analysis, rolling it up to material cost versus other cost, and then looking at that impact, and then totally translating it, that to gross margin. So it's a very detailed analysis based on which we have come up with that number, and that's the 100 basis points.
Speaker Change: Of.
Speaker Change: All our U S suppliers, what we procure how much we procure what the what the dollar value clusters.
Speaker Change: Our U S manufacturing.
Speaker Change: Yes.
Speaker Change: Plans make everything for us.
Speaker Change: Those don't get impacted then we have taken into account what countries, we procure from and what flexibility we have of moving temporarily from one place to another to.
Speaker Change: Optimized for where we need to go.
Speaker Change: It is true that detailed analysis rolling it up to material costs versus other costs and then looking at that impact and then totally translating at that debt to gross margin. So it's a very detailed analysis based on which we have come up with that number.
Speaker Change: And that's the 100 basis points and this is not a.
K. R. Sridhar: And this is not a, you know, we're not taking a wild-ass guess at it. It is really thought-through process. This is what we think it will be, and again, we are working very hard to mitigate it. That's why, as a team, we are committing to keeping our guidance.
Speaker Change: Sure.
Speaker Change: We are not taking a wild <expletive> guess Saturday.
Speaker Change: It is really thoughtful process. This is what we think it will be and again, we are working very hard to mitigate it that's why.
Speaker Change: As a team we are committing to keeping our guidance.
K. R. Sridhar: Thank you very much for that question and looking at the clock, I just want to again thank you all for joining us out here. We're off to a great start in 2025. Our momentum is strong. and what you need to think about as you're thinking about Bloom today. It's very simple. The sale on on-site power being necessary, that briefcase is closed. Large customers completely understand they need on-site power. So unlike in the past where we had to ask what's our value proposition vis-a-vis the grid. Today. The real question that you should be asking when you are looking at Bloom is what is our value proposition when it comes to customers absolutely needing on-site power?
Speaker Change: Thank you very much for that question and looking at the clock I just want to again. Thank you all for joining us out here, we are off to a great start in 2025, our momentum is strong.
Speaker Change: And what you need to think about as you're thinking about bloom today.
Speaker Change: Very simple.
Speaker Change: The sale on on site power being necessary that briefcase was closed.
Speaker Change: Large customers completely understand they need on site power.
Speaker Change: So unlike in the past, where we had to ask what's our value proposition vis vis the grid.
Speaker Change: Today.
The real question that you should be asking when you are looking at Bloom is what is our value proposition.
Speaker Change: When it comes to customers absolutely needing onsite power.
K. R. Sridhar: You shouldn't be asking, do they need on-site power? That answer is very... So you then look at all the attributes that Bloom brings. and compare it against the attributes. of the alternatives for on-site power. It is not solar. It is not wind, not for those sites. because you can't transmit those elections. You're left with a combustion engine. mature, saturated technology whose costs are actually going up if you just look at it. That's what the customers are saying. The prices have actually gone up. And we can compete against that. We can compete with a better product, more reliable, faster, quieter, cleaner.
Speaker Change: You shouldnt be asking do they need on site.
Speaker Change: The answer is very clear.
Speaker Change: So you then look at all the attributes that blume brings.
Speaker Change: And compared it against the attributes.
Speaker Change: Off the Alternators for onsite power. It is not so it does not we're not for those sites.
Speaker Change: Because you can transmit those electrons.
Speaker Change: You had lifted combustion engines.
Speaker Change: Mature saturated technology.
Speaker Change: Costs are actually going up if you just look at it that's what the customers are saying the prices have actually gone up.
Speaker Change: And we can compete against that.
Speaker Change: Can compete with a better product more reliable faster quieter.
Speaker Change: Cleaner and so that's the way to think about Bloom.
K. R. Sridhar: And so that's the way to think about Bloom. They're super excited about what the future holds for us. And we thank you for believing in us and being with us. This is a great time to be an onsite power business. That's all I can say.
Speaker Change: Super excited about what the future holds for us and we thank you for believing in us and being with US. This is a great time to be an onsite power business. That's all I can say thank you all good night.
Operator: Thank you all. Good night.
Speaker Change: Okay.
Speaker Change: So as today's call you may now disconnect.
Operator: Please study this call. You may now disconnect.
Operator: Please wait, the conference will begin shortly. .
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: Yes.
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Okay.
Speaker Change: [music].
Speaker Change: Thanks.