Q2 2025 Plug Power Inc Earnings Call
Speaker #3: Greetings and welcome to the Plug Power second quarter earnings conference call and webcast. At this time, all participants are in the listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
Speaker #3: A question and answer session will follow the formal presentation, and you may be placed into question queue at time by pressing star one on your telephone keypad.
Speaker #3: As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Teal Hoyos, Vice President, Marketing and Communications for Plug Power.
Speaker #3: Please go ahead, Teal.
Speaker #4: Thank ou. Welcome to 2025 second quarter earnings call. This call will include forward-looking statements. These forward-looking statements contain projections of our future results of operations, or of our financial position, or of our other forward-looking information.
Speaker #4: We intend these forward-looking statements to be covered by the Safe Harbor Provisions for forward-looking statements, contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Speaker #4: We believe it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward-looking statements and such statements should not be read or understood as a guarantee of future performance or results.
Speaker #4: Such statements are subject to risks and uncertainties that could use actual results or performance to differ materially from those discussed as a result of various factors.
Speaker #4: Including but not limited to risks and uncertainties discussed under item 1A risk factors in our annual report on form 10K for the fiscal year ending December 31st, 2024.
Speaker #4: Our quarterly report on form 10Q for the quarter ending March 31st, 2025 as well as other reports we file from time to time with the SEC.
Speaker #4: These forward-looking statements speak only as of the day on which the statements are made, and we do not undertake or intend to update any forward-looking statements after this call or as a result of new information.
Speaker #4: At this point, I would like to turn the call over to Plug's CEO, Andy Marsh.
Speaker #5: Good afternoon, and thank you for joining us. As we begin, I want to reaffirm the business priorities we set forth under Project Quantum Leap, priorities that continue to guide every decision we make.
Speaker #5: Item one, drive gross margin improvements, through operational efficiencies, cost reductions, and improve pricing discipline. Two, streamline our operations by consolidating facilities, optimizing our manufacturing footprint, and accelerating productivity gains.
Speaker #5: Three: strengthen the reliability and performance of our service business, combining unit-level improvements with better pricing models. Four: expand our hydrogen generation network while improving the cost structure of hydrogen supply. Five: advance our electrolyzer business by building a robust sales funnel and securing early-stage agreements ahead of customers' final investment decisions. And six: maintain strict cash discipline to bridge to positive EBITDA in Q4 2026.
Speaker #5: This quarter marks another important step forward in delivering on these commitments, both operationally and financially. Our team continues to execute with discipline, and the results we're sharing today reflect meaningful progress toward the long-term goals we've outlined.
Speaker #5: We close the second quarter with $174 million in revenue, up 21% year over year, driven by strong demand across our GenDrive, GenFuel, and GenEcho platforms.
Speaker #5: Electrolyzer sales more than tripled from a year ago, reaching roughly $45 million in the quarter. This underscores the growing role of GenEcho as the preferred choice for industrial-scale applications.
Speaker #5: Gross margins improved dramatically, moving from negative 92% in Q2 of last year to negative 31% this quarter. The improvement is a result of deliberate action.
Speaker #5: Better service execution, competitive hydrogen pricing, and product cost reductions. Service performance is being driven by a combination of unit-level improvements and pricing adjustments, and we see a clear path for continual progress in the quarters ahead.
Speaker #5: Project quantum leap remains central to these gains, as we streamline our operations, consolidate facilities, and drive efficiencies across the business. We remain on track for gross margin neutrality by Q4, with tangible steps in place to get there.
Speaker #5: Our hydrogen plants in Georgia and Louisiana are performing well, and a recently executed hydrogen supply agreement will deliver substantial and certain cost savings in the second half of the year.
Speaker #5: Pricing adjustments particularly in service are adding resilience to our margin profile, while maintaining strong customer relationships. When the sales front, we were on pace for approximately $700 million in revenue this year.
Speaker #5: Looking further ahead, our electrolyzer pipeline is robust. Some additional deals are expected to close this year, while several major contracts are moving toward final investment decisions in 2026.
Speaker #5: We are also actively pursuing pre-FID agreements to secure value earlier in the process. In material handling, we added new customer sites this quarter, and our refreshed value proposition is more compelling than ever.
Speaker #5: A little-known fact: we have already removed the equivalent of a medium-sized power plant from the grid, as customers have transitioned to hydrogen. Many applications today require significant electrical power, such as a large-scale refrigeration system, and our solution succeeds in either removing that demand from the grid entirely or time-shifting it to periods when the grid is less stressed.
Speaker #5: This not only lowers operational costs from customers but also enhances energy reliability and sustainability. From a policy standpoint, recent congressional legislation has provided long-term clarity on the 45V production tax credit, and the 48E investment tax credit.
Speaker #5: This is a meaningful tailwind that aligns perfectly with our strategy to expand hydrogen production and leverage tax credit monetization to improve capital efficiencies. When the DOE loan, we continue to work constructively with the loan program office to align with evolving priorities.
Speaker #5: We remain confident in our ability to begin construction on DOE-supported projects before the end of the year. Accelerating the expansion of our hydrogen generation network.
Speaker #5: We've also maintained strong cash discipline in the quarter. Net cash in operating and investing activities declined over 40% year over year. We ended the quarter with over $140 million in cash, and have access to more than $300 million in additional debt capacity.
Speaker #5: Stepping back, Plug today is executing with focus, delivering measurable results, and building the foundation for profitable growth. Our product portfolio, from electrolyzers to fuel cells to our hydrogen network, positions us as a leader in a hydrogen economy that is gaining real momentum.
Speaker #5: The work we're doing now isn't just about meeting quarterly targets. It's about ensuring Plug is the premier hydrogen solution provider for years to come.
Speaker #5: I have with me Paul, Sanjay, and Jose, and we're now open to take questions.
Speaker #6: Thank you. And I'll be conducting a question-and-answer session. If you'd like to be placing the question queue, please press *1 on your telephone keypad.
Speaker #6: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your estion from the queue.
Speaker #6: Once again, that's star one to be placing the question queue. Our first question is coming from Colin Rush from Oppenheimer. Your line is now live.
Speaker #7: Thanks so much, guys. Now, can you talk about the electrolyzer pipeline? You know, certainly there's been a lot of interest around green hydrogen, but I'm curious how quickly products are moving forward and how those sales are moving through your pipeline, and how we should think about that cadence going forward.
Speaker #8: Colin, I'm going like Jose take that question.
Speaker #9: Hi, Colin. thank you for your question. So we have a very strong fund, on the electrolyzer side. mainly driven by opportunities in, regions like, Europe.
Speaker #9: We discussed this in the last, earnings call. We see some projects closing before the end of the year, and, we are also seeing some projects going FID in 2026.
Speaker #9: And they mentioned that we're working with some of those projects to try to get agreements pre-FID to secure business and position ourselves better when these projects go FID in in 2026.
Speaker #9: We're also working on many of these projects to set them up as, you know, revenue recognition over time. Which is going to allow us to accelerate a little bit when we see revenue after the booking.
Speaker #9: So again, a strong very strong, sales funnel. And we see some opportunities closing in 2025. And other opportunities going FID in 2026.
Speaker #7: Excellent. And then on the hydrogen production, of your own facilities, where can you or what can you tell us in terms uptime, yield, you know, how those are performing, relative to to, you know, design expectations, and how much you're how much leverage you're getting out of the, you know, that ramp in terms helping close some of the other, customers, whether it's on the material handling side, around security supply, or around electrolyzers?
Speaker #8: Yeah, so let me take those questions probably in reverse order, Colin. Security supply, we feel really, really good about. As you know, that was a big problem in 2023.
Speaker #8: Our ability to have hydrogen available, the network was having 40 tons of plug capacity available. It really has dramatically changed the availability questions and challenges we faced in previous years.
Speaker #8: And it is a continuing it is important that we bring taxes online. Over the next two years, to continue to make sure that there is a robust network.
Speaker #8: From a performance point of view, when I look at Georgia, what I'm really pleased with is that we can bring it up and bring it down when we like based on electricity prices.
Speaker #8: We have done a really, really good job at, the operation of Georgia. And we're a year into Georgia. And, you know, it's operating and performing as we've requested.
Speaker #8: And, so we're really, really pleased with Georgia. Louisiana has just beginning to ramp. so far, the performance and the cost out of Louisiana when we look at the, relationship we have with, Owen, is really our lowest costs, lowest cost site to support our business.
Speaker #8: So we're quite honestly pleased with how both sites are performing and expect both to improve during the coming quarters.
Speaker #7: Thanks so much, guys.
Speaker #8: Yeah. Thanks, Colin.
Speaker #6: Thank you. Next question today is coming from Craig Irwin from both Capital Partners. Your line is now live.
Speaker #10: Hi. Good evening. And thanks for taking my questions. So, Andy.
Speaker #7: Hi, Craig.
Speaker #10: I was hoping.
Speaker #7: Hey.
Speaker #10: So I was hoping tonight we could, we could just discuss, what's changed for you guys in the last couple of weeks, right? It was, it was a couple of weeks ago, we had the really nice surprise in the one big, beautiful bill, right?
Speaker #10: 45E, 48E, a lot longer life, and they're in healthy shape. for a while, right? Your
Speaker #7: Yeah.
Speaker #10: Customers would have been surprised too. I, I, I'm guessing maybe some of them lobbied for that, but most of your customers would have been surprised.
Speaker #10: Can you talk about the conversation with customers? How this has maybe shaped things or impacted plans over the last couple of years?
Speaker #8: Craig, I am going to turn that over to Jose since he talks to customers every day. Why give a shot, Jose?
Speaker #11: Thank you. Thank you, Craig. I'm a very good question. It is fairly recent, as you said; it's only a couple of weeks ago.
Speaker #11: But we have already had many conversations with customers. They are excited about it. It opens up in case of electrolyzers, with PTC, a, a, a big opportunity for customers to, number one, have more time to take advantage the PTC.
Speaker #11: And number two, make the business cases feasible. So, lots of conversations, early stage, but these are definitely reigniting a lot of the conversations, obviously mainly in the U.S.
Speaker #11: As you know, we already discussed in the prior earnings call the opportunities that we have in Europe, and those continue to be exciting. We continue talking to customers in Europe about opportunities for ELX.
Speaker #11: In the case of ITC, the Investment Tax Credit, which, as a reminder, you know, will give our customers the opportunity to take advantage of a 30% tax credit starting in January 2026.
Speaker #11: We are talking to many customers in the material handling business. We were already trying to make the, the, the business case for our customers stronger, even without the ITC, so now that we're adding the ITC, we see many of our customers quite excited about this.
Speaker #11: They see the business case even stronger than ever. And I believe that we're going to see a healthy growth in material handling in 2026 because of that.
Speaker #11: Excellent. Excellent. So my second question's about inventory liquidation, right? This quarter, you had another $35 million cash contribution from inventory. And with 45E, 48E, ITC, all these things starting to chip in your direction, and I expect Texas, you'll be making more progress on Texas pretty soon.
Speaker #11: can you talk about the, the contribution to, cash flow from inventory this year? is there anything we should specifically watch for or any large items that might move, tranches bigger than, you ow, 30, 50 million that, that, that could impact the cash flows?
Speaker #8: Do you want take that, Paul?
Speaker #12: Sure. Hey, Craig. It's Paul. How you doing?
Speaker #11: Hey.
Speaker #12: yeah. We're, we're, we're, we're targeting, targeting, at least another $100 million plus reduction in inventory this year. We obviously see it as a, a tremendous opportunity to leverage that working capital.
Speaker #12: You're starting to see it as the volume starts to pick up, you know, in the second quarter, and we'll pick up, you know, more in context to what Andy shared for the full year guidance.
Speaker #12: and, you know, we think we're pretty well positioned with the inventory. You know, largely, the inventory we need to deliver a lot of that.
Speaker #12: So we think that's very obtainable. And, you know, hopefully, and, and still leave some room, to be honest with you. We, from an operational standpoint, you know, even as we move into next year, we're targeting to go even lower.
Speaker #12: So, you know, I, I'd use that as a proxy for this year, plus or minus. And, and we see it as, as more opportunity as we go into next year.
Speaker #11: excellent. And then just another cash flow question to slip it in before I hop back in the queue. you've done a od job bringing down the, h, the PPA cash over the last couple of years.
Speaker #11: do we continue with a similar tempo, you know, roughly $200 million a year? or is there any, any reason that this could maybe accelerate or, or decelerate from there?
Speaker #8: Yeah. When you look at the portfolio, because 're not, you know, as you know, we made a, a strategic shift, but we're not offering that program.
Speaker #8: We’re now buying direct, which is better for us from a cash standpoint. You know, so we’re not adding to that portfolio.
Speaker #8: But it's scheduled to, to wind down, you know, over the three-plus years, call it. So that $200 million a year is a good proxy as we move into next year.
Speaker #8: And you're starting to get past the five-year amortization cycle. There are opportunities to potentially buy out of that early, and since it's net positive to us, to do so in context of what the corresponding obligations are. You know, it's something that we'll be pursuing aggressively.
Speaker #8: So it'll be at least 200 and could be more.
Speaker #11: That's good to hear. Thanks again for taking my questions.
Speaker #8: Thanks, Craig.
Speaker #6: Thank you. Next question today is coming from another group from UBS. Your line is now live.
Speaker #13: good afternoon. My first question is to you. about the, your confidence level in getting to, break-even gross margins by year-end, if you could talk about that.
Speaker #8: Paul, you want to take a shot at that?
Speaker #12: Sure. So, I think, you know, fortunately, when, when, well, I'd through hard work, you're seeing progress on the margin front already. And when you look at the second half, a couple of things, you know, will continue.
Speaker #12: First of all, you know, we've seen some of benefits from quantum leap on the restructuring and things starting to pay dividends in Q2. But you start to get full, more full quarter benefits of those activities because you know, as it takes some time to wind out, some of those actions.
Speaker #12: Secondly, we announced, the improvement in the, price cost pricing for the, fuel contract. That really started July 1st, and that will be a, very meaningful amount every month.
Speaker #12: And so you're going to e, tremendous leverage from that. the volume leverage that we get, out of those incremental programs, you know, with, with increased sales will be certainly beneficial.
Speaker #12: And the other thing that's really super impactful is the progress we're making on service. I, I'd say we think we're, we're really pleased, you know, with how we're seeing the cost rates come down on service, which really serves two benefits.
Speaker #12: One, it's less cash outlay to service the units, and two, puts us in a position to, you ow, really have new programs being issued at very profitable profiles.
Speaker #12: And so, you know, the, the combination of that activity really is going to continue to drive service, and we expect, you know, real traction there.
Speaker #12: So, more things to come in terms of other commercial developments and opportunities to work with customers to optimize. But those are some of the key drivers that are going to help us drive to that margin profile positive.
Speaker #11: Thank you. That's all very encouraging. My quick follow-up here is you kind of mentioned the benefits of ITC to the material handling business. I'm coming in from a different direction.
Speaker #11: Can the benefits of ITC be used by Plug to go after the backup power market where, you know, you could provide the fuel cells for more backup power and then us, ou know, companies can get ITCs for it if you could talk about the benefits of that?
Speaker #8: I, first, I'm going to have a... I've been really very focused on keeping us on the ball, really looking at markets that are real today for Plug.
Speaker #8: And that's hydrogen generation, material handling, or electrolyzers. You know, we have done a rather large deployment, as you may know, in California, which is over 8 megawatts.
Speaker #8: I think it's probably the largest stationary hydrogen deployment so far, a deployment that can leverage the ITC. I would just say that we will be very selective and thoughtful because we don't want anything to reduce the opportunity for us to achieve EBITDA break-even in 2026.
Speaker #8: As well as, course, near-term gross margin break-even. So there is an opportunity. you know, next year, we expect we will continue to grow our business.
Speaker #8: I would say when we look at near-term opportunities, that are not on the, not as, high profile, but we have been, involved in a number of very interesting deals associated with energy transition projects.
Speaker #8: Where people are looking to leverage, fuels using blue hydrogen and liquid fuels. we have about 25% of our staff, especially, a large percent of the folks who are in our liquefier business, who have rather unique skill sets in ose areas.
Speaker #8: which we have been actively pursuing. You know, I don't be surprised if we close deals which are, the size of gross margin positive and profitable deals.
Speaker #8: Which are the size of a large, 100 megawatt electrolyzer project in the coming months? And, you know, I think that's probably when you start thinking about upside opportunities.
Speaker #8: In the near term, with low risk, which aligns with the present business climate, that's really where Plug has some side focus to build the industry.
Speaker #11: Thank you.
Speaker #8: Thank you. Good question.
Speaker #6: Thank you. Next question is coming from David O'Connor from Morgan Stanley. Your line is now live.
Speaker #14: Well, y, thank you so much for taking my questions.
Speaker #8: Hi, David.
Speaker #14: You know, could you, maybe give an update on what you're seeing in terms of tariff impacts, on the business and your efforts to offset them?
Speaker #14: Where do those stand?
Speaker #8: Yeah. Let me take the first crack, Paul, and then I'll turn it over to you. I think you have to kind of separate out the three businesses.
Speaker #8: You know, our hydrogen generation business, today, has zero impact based on tariffs. the second business, our electrolyzer business, the impact is rather minimal. And you have to remember that, we have a network of integrators around the world.
Speaker #8: Who next to our stack, we will be procuring most materials locally for that business. And when we do an evaluation of the impact of tariffs, for our electrolyzer business, it's really in the range of two to three percent.
Speaker #8: Our tariffs for the material handling business are really dominated by China. Over the past, you know, if you went five years ago, the majority of our bill of materials was Chinese-based.
Speaker #8: Today, for the material handling business, it's under 15% and continues to decline. You know, we can see the tariff impacts over 10% in our cost for material handling.
Speaker #8: which, like most folks, we have to offset with price. that being said, I would say our competitors, especially when you think competitive technologies, like material handling, have certainly, you know, using material handling, using lithium batteries, certainly have a much larger overhang when it comes to tariffs.
Speaker #8: So the impact are, important. But, because of how we develop the supply chain for electrolyzers, and the improvements we've made over the years, the move away from China, you know, based on, you know, the tariff profiles that started years ago, you know, has positioned us to, mitigate a lot of those issues.
Speaker #8: Paul, do you want to add?
Speaker #12: Yeah. The only thing else I'd add, Andy, is that, you know, this is one time we're having a lot of that inventory has been helpful that, you know, 's allowed us to defer where there are some benefits, impacts that, as we leverage that inventory base that we already had paid for and procured, it generates cash, but it also defers, some of those, tariff impacts, which gives us more time to do things like, you know, co-source in other locations that, that don't, that aren't subject to the tariff.
Speaker #12: So, you know, that's actually been beneficial.
Speaker #11: Got it. Yeah, that makes sense. That's helpful. And so it sounds like this wouldn't throw you off from your gross margin target this year. Did I hear correctly that it's more on the pricing side of things that you'd be able to offset that?
Speaker #8: Yes. And, and, and David, on the material handling side, it's really not problematic for either electrolyzer or hydrogen production.
Speaker #6: Yeah. Got it. and then, would you be le to give an update your plans for the Texas, facility? and also what, you ow, what timing would be natural to consider bringing in a partner, as you start to build that out?
Speaker #8: So, we're looking to commence construction by the end of this year for Texas. You know, if you start thinking about Texas, we have a lot of... we have the power.
Speaker #8: From our 310 megawatt deal with Nextera, we had very competitive electricity prices. We've already built, we already have the water available at the site, as we worked very closely with the local community in establishing the availability of water.
Speaker #8: We have the equipment for Texas. We're working very closely with the DOE. You know, I had a, you know, I got to tell you, we met with Craig Beard, who heads the DOE loan program, and I walked away very, very impressed.
Speaker #8: With his knowledge of, the energy market and what we're looking to accomplish. you know, I think that, we're oking at, you know, you know, working with the DOE to, finalize their support for Texas.
Speaker #8: you know, with the new Trump administration, which quite honestly has been very supportive of this project. And we're looking to, you ow, a good chance we'll look to bring a partner in this by the fourth, by the, by mid-fourth quarter.
Speaker #6: Excellent.
Speaker #8: That helps, David?
Speaker #6: Yes. Perfect. Appreciate it.
Speaker #8: Okay.
Speaker #6: Thank you. Next question today is coming from Eric Stein from Craig Allen. Your line is now live.
Speaker #15: Hi, everyone. Thanks for taking the questions.
Speaker #8: Hi, Eric.
Speaker #15: Hey, so just thinking about margin improvement in our goal at the end of or exiting the end of year, can you just talk about how you kind of expect that to play out over the next, two quarters?
Speaker #15: You mentioned, you know, the three areas, you know, quantum leap, some of the steps there. Obviously, the hydrogen supply agreement is huge, and then the service side.
Speaker #15: I mean, do ou expect this to be kind of a, a gradual, from here, to that level? Or, you know, potentially a bigger, step up in improvement for Q4?
Speaker #8: Yeah. I, I, I guess I'd qualify it as a gradual, you know, that it we, we expect it certainly, in Q3, it's going to be sequentially better, you know, viously than, than prior year, but, but certainly sequentially better than, than last quarter, second quarter as well.
Speaker #8: And then we expect, you know, the real, tipping point to hit, in Q4. So,
Speaker #6: Got it.
Speaker #8: The equation's actually really simple. And Paul, correct me if I’m wrong. We have to sell more, which drops, you know, because of covering fixed costs.
Speaker #8: Drops, you ow, the contribution margins of north of 35%.
Speaker #15: Yeah.
Speaker #8: When we sell more. we have to, you know, the hydrogen improvements, we will see, you know, the supply agreements guarantees it, the performance of the plants.
Speaker #8: Very important. And the third item is continuing improvements with service, which we're, you know, I've always, Eric, that's an area where I've always been cautious.
Speaker #8: But between the price increases we've seen, as well as the improved performance of the units with our increased focus, you know, it really puts us on a pathway that I think we all feel comfortable that gross margin neutrality is achievable.
Speaker #8: And, you know, quite honestly, very easy, to understand as we operate the business. Every day.
Speaker #6: Got it. That, that is helpful and a od segue, I guess, to my, my second question, which would just be, it looks like, unless I missed it, not guiding to a specifics in terms revenue for Q3.
Speaker #6: But safe to say that, you know, with that gross margin, kind of improvement between here and the end of the year, you expect sequential growth between here and the end of the year.
Speaker #8: We expect that, the second half, and I've en, real cautious just in case a program falls one way or another. you know, we are real, we're very confident about, our revenue targets for the second half.
Speaker #8: as you know, in previous quarters, we've ran into some, quarterly issues, and we want to avoid that. But we're feeling really good about the second half.
Speaker #6: Okay. Thank ou.
Speaker #8: All right. Thanks, Eric.
Speaker #6: Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from Deshai Alani from Jeffrey.
Speaker #6: Your line is now live.
Speaker #16: Hey, guys. Thanks for ing my question. my first one is just on, the cash burn for the year. I know that, you guys have talked , inventory and winding, and, some other tailwinds.
Speaker #16: But how do you think about just the need for cash? Do you think you'll have to tap into the grid facility, or the ATM?
Speaker #16: Or are we good there?
Speaker #8: Yeah. Well, let me just, for context, you ow, the first half is down, you know, over 40% from prior year. And we knew that it would be the heavier part of the year, given the, the volume's bigger in the second half, Andy alluded to.
Speaker #8: As well as the progression of the, the, the, the, the quantum leap, savings. And so, I'm actually very, I feel very good about our, our posture as we go into the second half.
Speaker #8: You're going to see, not just reduction year over year, but you're going see, you know, we expect meaningful reduction in the burn rate, from the first half.
Speaker #8: And that puts us in a good position when you look at us ending with $140 million in cash, plus another $100 million of restriction, under, you know, the ricted cash getting released in the second half.
Speaker #8: and we do have, the credit facility available to us to help, help fund the business as well. And then we have additional initiatives, you know, we're looking at in s of monetizing assets and, and doing things.
Speaker #8: So, we've been doing a real good ob, the first half of the year, and we expect that, will continue in the second half. And the combination of our cash and the, the credit facility and other, other, you know, means in our, our disposal, we feel like 're in a really good, really good position.
Speaker #6: Got it. Thank you. And then my second one is on, with the 48E, kind of coming back, starting 2026, are you hearing any of your customers kind of delay or push out any orders?
Speaker #6: So that they can take advantage of that ITC in '26? or not really?
Speaker #8: You want to talk about that, Paul, because it's really a question of when it's commissioned.
Speaker #12: Yeah. You know, over, you know, we've been a part of billions of dollars of programs over the, you ow, my tenure here. And so, I've learned more about ITC and qualification than I ever thought I would.
Speaker #12: And, you know, so what we're working with customers on is there's a lot of customers that like to mobilize early and get equipment, get it going, and get ready for success and be ahead of it.
Hey, good afternoon. Uh, thanks for taking my questions. Uh, congrats on the good progress on the gross margin. Uh, my first question is, uh, just about that. Uh, it seems your equipment, uh, revenues, uh, sort of, uh, are flat, uh, or rather have increased, but the gross margin has not, uh, increased as much. Uh, I I know your service is driving the uh, uh, gross margin Improvement. But should we expect any Improvement in the equipment? Uh, costs.
2, do you want to take that play? Hello with me. Hello, Samir. Go ahead. Paul. Hey, hey. How are you? Yeah, the the short answer is. Yes. And you know, when you look at the Improvement, you know, service is certainly contributing. But as a percentage of Revenue, you know, PPA and Fuel and other things are contributing to uh, given the price hikes and the things that we're doing. But you know, we as Andy alluded to in the in the guidance, you know, uh you can kind of impute what that means, for volumes and and sales and stuff that can happen. And so growth helps a lot and leveraging, the fixed. The the, the overhead and fixed cost on equipment. And then I would also add that, um, a lot of the cost reductions in in Quantum Leap as we've kind of talked about, you know, you start seeing some of those benefits in Q2, but you'll see more full quarter benefits in the third and the fourth quarter. Now that those programs have been deployed and committed to. So, as an example, some of the rooftop consolidations that we've been doing, you know, we may have completed those.
Programs recently, but you don't have full quarters yet of those benefits. So, um, you know, those things will start to compound. Uh, mix helps a lot as we move into the second half and and we're constantly looking at ways to continue reducing the, the cost of that, that equipment, so volume, uh, you know, supply chain leverage Quantum, Leap benefits. All those things will drive absolutely will drive. Uh, margin enhancement on equipment in the second half.
Understood, thanks for that. And then just, uh, stepping back and looking at, uh, your, uh, future customers. Uh, you’ve mentioned, uh, renewable diesel and SAF. Uh, are you engaging with those players? Uh, what is the activity, uh, on your side on that front?
So, uh,
when you look at, uh,
Uh, activities there. Uh, there is equipment that is used in a, you know, and let me take a take a shot, uh, at a
Called a blue hydrogen plant.
for our liquifier business, specifically,
that are, you know, transferable, as well as they have worked in those areas before, uh, which we can leverage for.
Some rather large deployments, which can be revenue positive for us and gross margin positive for a Samir.
So uh, there are things like Hydro Traders and other capabilities, which we have in embedded in the business that uh, it makes a great deal of sense for us to uh, Provide support for blue hydrogen projects since uh, it's an area of expertise for us.
Got it. Thanks for that.
Thanks for taking my questions.
Thank you. Next question is coming from my car from BMO Capital Markets. Your line is now live.
Hey, good evening. Um thanks for taking my questions. Um good evening.
Thank you. Um on the 300 uh it's a million dollars of kind of the credit facilities that are still available to you all. Um my understanding is that that's kind of structured in kind of a 2 toes uh for the remaining balance um for the second tranche. Is there any sort of kind of uh I guess requirement for you to have authorization to increase your Share account?
There's no requirement to decrease. Our share count. Oh, increasing sorry. Um, no, it is as far as the your field deal. Yeah, I'm sorry, I misunderstood your question. No, there's no. The only you know there was a triggering effect on amortization, you know. Uh when when if if in if and when we we decided to to put actions in place but there's no uh requirement in order for us to access the, you know, the additional committed portion of it.
and so you could access before 10500100, like, um, tomorrow if you wanted to
Um the the 105 is available to us as part of the agreement. If you know if and when we it made sense and prudent that we wanted to assess it, it is available to us.
Great. Um, and then the 80 million dollars are restructuring charges. Um, and for, uh, I guess to become under the restructuring after it's um, with any of that accounted for and and your cogs and which they kind of, I guess, kind of a hard officially kind of depressed, your gross margins for the quarter.
Hi uh, Otto gross margins were a big Improvement as you know consequentially in year-over-year. But no they're they're they show up in restructuring and other line items in our in our p&l. So it it it wasn't the, you know, it wasn't, it wasn't showing up in cogs, but I would tell you is those actions. You know, are part of a broader Cadre of actions that we're taking that collectively or continuing to drive gross margin improvements. And so, you know, you'll see a sequential benefits in the in the, in the third quarter and in the fourth quarter and onward because of that, a lot of those actions that are that that, you know, stem, some of those charges.
Great, thanks. I'll pass it along.
Thank you. The next question is coming from Sky, Landon from Lost, Child and Company. Redbarn, your line is now live.
Hey, thanks, guys. Um, just coming back to the electrolytes of division, um, and specifically, the European electronic projects which are just closed in 2025 and 2026. I was just wondering if you could maybe elaborate on what needs to happen for these projects to actually take FID. Is it the release of subsidies? Do they need funding confirmation off take contracts, grid connections?
Um, I think it would be useful to sort of dig into what what needs to happen with those to actually kind of go ahead. Thanks.
Jose, do you want to take that?
Yeah, absolutely.
And then we have a few projects, a couple of them, for example, in the UK that we know, they have all of that they have, you know, they have the land, they have the power, they have of takers, and they have funding from Hard 1, and we believe that. And we've been told that, uh, their FID is happening, you know, at the end of Q3 or Q4, so it is it is, you know, each project is its own. But each project needs to hit all those parameters to happen. So, you know, it's it's it's different in every project and but all of them need to get those those items uh, checked to go fid.
Jose, you want to talk about Spain, too?
Specifically any project in a specifically Andy or in general, in general.
Okay. So the span is Market is, is a market where we're seeing a lot of activity. Uh, it's it's a market that the government is helping and putting a lot of effort within the, uh, within the market to push some of these projects ahead. And it's also a market where you're going to see, uh, several, uh, projects coming online based on offtake. Uh, agreements and uptake, uh, requirements in in that market, we have, uh, several gigawatts of projects that we have quoted in uh, in the in the Spanish market. And we expect that some of those are going to come to FID in 2026.
And we're going to see some business in uh in the Spanish Market. As you know we already have in that market uh pretty large project um with um you know VP in uh in Caston is a 25 megawatt project and also in the Iberian Peninsula and not not necessarily in Spain but also you know, in in the air and peninsula in Portugal, we have another project for 100 megawatts with a um, galp. So those those projects are anchored projects and we are seeing a lot of traction in in those markets, for elx projects and many of them meet in the criteria that I mentioned before.
Great, thanks.
Thank you. We reached the end of our question-and-answer session. I'll turn the floor back over to anyone for any further closing comments.
well, thank you for uh,
Joining the call today, uh, we are looking for continued focus on continual progress and our gross margin for revenue generation.
As well as for, uh, uh, continuing to, uh, improve the business for the future. Uh,
So, I really appreciate everyone taking the time today, and I look forward to talking to many of you throughout the quarter.
Thank you that does conclude today's teleconference webcast. Let me just connect your line at this time and have a wonderful day. We thank you for your participation today.