Bloom Energy Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2024

There are 15 speakers on the call.

Operator

Thank you for standing by. My name is Christa, and I will be your conference operator today. At this I would like to welcome everyone to Bloom Energy First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I will now turn the conference over to Ed Vallejo, Head of Investor Relations. Ed, you may begin your conference.

Speaker 1

Thank you, and good afternoon, everybody. Thank you for joining us for Bloom Energy's Q1 2024 earnings conference call. To supplement this conference call, we furnished our Q1 2024 earnings press release with the SEC on Form 8 ks and have posted it along with supplemental financial information that we will reference throughout this call to our Investor Relations website. During this conference call, both in our prepared remarks and in answers to your questions, we may make forward looking statements that represent our expectations regarding future events and our future financial performance. These include statements about the company's business results, products, new markets, strategy, financial position, liquidity and full year outlook for 2024.

Speaker 1

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 ks and 10 Q. We assume no obligation to revise any forward looking statements made on today's call. During this call and in our Q1 2024 earnings press release, we refer to GAAP and non GAAP financial measures. The non GAAP financial measures are not prepared in accordance with U.

Speaker 1

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 Q1 2024 earnings press release available on our Investor Relations website.

Speaker 2

Joining me on

Speaker 1

the call today are KR Sritter, Founder, Chairman and Chief Executive Officer Greg Cameron, our outgoing President and Chief Financial Officer and Dan Berenbaum, our incoming Chief Financial Officer. KR will begin with an overview of our business, and then Greg will review the operating and financial highlights of the quarter, and Dan will review outlook for the year. And after our prepared remarks, we will have time to take your questions. I will now turn the call over to Keyak.

Speaker 3

Hello everyone and thanks for joining us today. We had a good start to the year and we are seeing strong market interest, increasing momentum and robust commercial activity across diverse end markets. Q1 results are as I expected. Importantly, our strong operational performance and commercial activity augers well for the next three quarters. As I see it, our business is tracking to the plan we laid out for the year.

Speaker 3

Business leaders are increasingly recognizing the severity and singularity of the power challenges we face. They now understand that time to power is a business imperative and grid cannot meet their growing power demands. They need to turn to distributed on-site power. There is increased recognition that natural gas is the only bridge fuel at scale and affordability for a decarbonized world. And for companies looking to reduce their carbon footprint and meet their emissions targets, Bloom offers the least carbon intensive way of converting natural gas to electricity with virtually 0 air pollution.

Speaker 3

As grid prices keep rising steadily in the U. S, Bloom's value proposition is becoming attractive even on a pure cost basis alone in more new markets. Such markets include regions of Ohio, Illinois and Indiana, where demand for power is growing, natural gas is available and a well accepted fuel of choice and our solutions are highly compelling for all electric and combined heat and power or CHP applications. The grid challenges and inadequacies are aggravated by a level of AI related growth in data centers that is far beyond what anyone anticipated pre chatgpt. Bloom has his long track record of success in supporting data centers power needs with over 200 megawatts of contracted and deployed orders.

Speaker 3

In the earnings call last quarter, I talked about our healthy commercial pipeline for data center power. I also talked about our opportunities falling in 2 categories, power needs arising from expansion of existing data centers and power for greenfield data centers that are being built for future needs, primarily AI. From a deal flow perspective, the existing data centers can often be contracted and deployed relatively quickly as a supporting infrastructure is in place and generally has minor permitting and permission hurdles. Contrast that to greenfield data center opportunities with much bigger stamp sizes, permitting requirements, tenant and finance securement, grid interconnection queues, all leading to longer sales cycles, but much higher revenue potential. In this regard, Bloom's B Flexible Islanded Mode Power solution offers a greenfield data center customer the ability to commence operation of their facilities without worrying about need or delays of grid interconnection.

Speaker 3

Let me give you an example of a deal where we were able to get the contract closed faster because it's an expansion of an existing facility. We are thrilled to announce today a major win on an expansion data center opportunity. Intel has been a customer of Bloom since 2014 and we have been powering their data center in Santa Clara, California and their mission critical labs in Bangalore, India. In Santa Clara, California, Intel is adding to their existing Bloom server capacity significantly to make that location Silicon Valley's largest fuel cell powered high performance computing data center. On the larger stamp greenfield data center deals, we still expect conversion of some of these opportunities in the second half of the year.

Speaker 3

The sales pipeline is robust and growing. Bloom's opportunities from the AI revolution extend beyond the data centers. We can rapidly provide power to the AI supply chain, which has surging and growing energy needs. Since 2018, Bloom Energy has been providing clean, reliable power to Supermicro, a leading supplier of AI hardware for their rack integration facility in San Jose. Last year, Bloom Energy installed the first phase of a 10 megawatt contract for Uni Micron of Taiwan, a leading developer of hardware solutions for the AI industry.

Speaker 3

We alleviated their time to power problem and enabled them to meet their rapidly growing AI related demands. Just last month, we announced that we would power Quanta's new multi megawatt manufacturing facility in Fremont, California. Quanta is a leading global supplier of high powered compute servers for AI data centers. The local power utility could not meet its power needs in a timely manner. Blooms Power solution is an fully islanded microgrid, which will power Quanta Computers operations around the clock 20 fourseven, 365 days a year.

Speaker 3

By leveraging Bloom Energy's innovative and modular microgrid solution, Quanta is eliminating utility dependent delays and taking control of its destiny and maintain its competitive edge in the fast paced AI market. The AI revolution creates one more tailwind for Bloom as AI related players are able and prepared to pay a premium and use their leverage to procure and lock up merchant and utility power and solve their time to power issues, other industries are finding it harder and harder to get power for their growth needs. We have started seeing more customers inquiring about our products and solutions for this reason. As we look at international growth, our approach has been to find the right markets, the right partners and then scaling up with them. In Korea, we are seeing strength again after a temporary slowdown last year related to new policies being introduced.

Speaker 3

Our partner SK is confident about our future in Korea. We saw strong demand from SK in the Q1. In Italy, we are very encouraged by the momentum we are building with Cheffler, our partner for biogas based CHP solutions. We are continuing to develop other opportunities in Europe and Asia. On the personnel side, in April, we were very pleased to announce the appointment of Dan Berenbaum as Bloom's new Chief Financial Officer.

Speaker 3

Dan's financial and operational career spans more than 3 decades. In Naval Academy graduate, Dan held executive level positions at publicly traded companies, including National Instruments, Micron and Everspin. And before that, he spent 10 years on Wall Street as an analyst covering technology stocks. We are excited to have Dan on the team and know that he is the right person to help guide us in this next stage of our journey. With that, I'd also like to thank Greg Cameron for his service as Bloom's CFO.

Speaker 3

He has enabled a smooth transition as he promised and all of us wish him great success in his new chapter that he'll commence soon. And now, I'll turn the call over to both Greg and Dan.

Speaker 4

Thanks, KR. As this will be my final earnings call with Bloom Energy, I'd like to say how much I appreciate KR, the Board and the entire Bloom team for allowing me to be part of this amazing journey over the past 4 years. While we've accomplished a lot over that time, there remains more to do. While I will no longer be part of this journey, I remain excited for the opportunities for Bloom Energy and know the best days lie ahead. Now I'd like to talk about the Q1 financial performance.

Speaker 4

As we discussed on the last call, we had said that the timing of acceptances could impact our Q1 revenue. At the time, I said revenue for the quarter to be flat to down 20% on a tough comparable as we were up 40% in the Q1 of 2023. Our Q1 2024 revenues were $235,000,000 down 14.5 percent versus the Q1 of 2023 as a few acceptances that we thought could happen in the Q1 are now likely to occur in future quarters. The timing of these acceptances does not change our outlook for the full year. The product volume and the mix of acceptances impacted our gross margins.

Speaker 4

The first quarter non GAAP gross margins of 17.5 percent was down 370 basis points versus the Q1 last year. The lower volumes in the Q1 versus the prior quarter reduced manufacturing absorptions, which increased our product costs by over $160 a kilowatt, negatively impacting product margins by 500 basis points. If volumes had been similar to the Q4 2023, adjusted first quarter product costs would have been roughly the same per kilowatt as the prior quarter. As volumes grow throughout the year and we continue to drive down material costs and increased power density, I would expect product costs to be reduced to the targeted 10 plus percent down. Also in the quarter, the majority of our acceptances were TECREA.

Speaker 4

While our volume and pricing to Korea in the Q1 were similar to the prior two quarters, the percentage of the total increased as we had less shipments elsewhere. Over the past several quarters, the projects in Korea are becoming more price sensitive, resulting in a lower average selling price. Through our work on reducing product costs, we have maintained attractive product margins averaging above 30% in Korea, but the mix in the Q1 negatively affected our average selling price. I would expect an improvement in product margins as acceptances in the United States, the rest of our international business increased throughout the year. An area that improved our margins in the Q1 was our service business as we continue to grow our revenues, reduce performance payments and reduce our replacement power module costs.

Speaker 4

I would expect this trend to continue throughout the year and we expect our service business to be profitable on a non GAAP gross margin basis this year and as we've previously said, we are targeting a 20% on the same basis in 2025. We maintained our strong diligence on cost control as our operating expenses decreased approximately 21,000,000 in the Q1 versus the same period last year. While we continue to invest in our future, we are very focused on improving our profitability. Even on lower revenue and margins, our operating costs allowed us to improve non GAAP operating loss by $3,000,000 versus the Q1 of 2023. We also significantly reduced our cash usage by over half versus the Q1 last year.

Speaker 4

We're holding working capital levels roughly flat to year end. This allowed us to end the Q1 with $583,000,000 in total cash. Now I'm going to turn the call over to Dan, who will share with you a few thoughts and discuss guidance. But before I do that, I'm very glad Dan and I had time over the past few weeks for transition. I believe he's a great add to the team and he's already building meaningful connections with his experience and energy.

Speaker 4

He's joining Bloom in an exciting time. With his partnership, I expect Bloom to continue to grow to meet the demands of an evolving energy market. With that, welcome Dan and over to you.

Speaker 1

Thanks Greg and thank you KR for your earlier comments as well. I'm excited to be here and I appreciate the warm welcome I've received from across the company. I've been impressed with what I've seen so far at Bloom, the technology, the people and the drive to succeed in our mission of making clean, reliable and resilient energy available for everyone. As Greg mentioned, he and I have been working closely together over the last couple of weeks. And I appreciate his time and the attention of the entire team in getting me up to speed on the financial and operating performance in the business.

Speaker 1

It's obvious to me what an important part of the Bloom story Greg has been. I want to thank him for that and for leaving a mature competent team in place. As we move past earnings, I plan to spend time digging more deeply into the business. I'm also looking forward to meeting all of you. I'm committed to continuing to enhance our communications and our relationships with the entire financial community.

Speaker 1

I want to touch briefly on 2 things, our relationship with AWS and our outlook. As many of you know, in 2022, AWS entered into a power purchase agreement with Bloom to deploy 73 megawatts of capacity. We sold the energy servers for that project in 20222023 to our EPC partner. For site specific reasons, AWS has decided not to proceed with the original deployment location. That said, we are pleased to share that Bloom and AWS are working to deploy the Bloom servers in other AWS locations under the terms of the agreement.

Speaker 1

Consistent with the PPA, AWS is commencing payments in the current quarter. We value our partnership with AWS and we look forward to serving them well on this and other potential future transactions. As it relates to our outlook, we are reaffirming our 2024 annual guidance for revenue, margins and profitability. With our backlog, commercial pipeline and product supply, we remain confident that we can deliver $1,400,000,000 to $1,600,000,000 of annual revenue at approximately 28% non GAAP gross margin. Where we end up within the revenue range will be primarily dependent on timing of project approvals and completion.

Speaker 1

As the year progresses, we will have greater clarity on these opportunities. Consistent with prior years, second half revenue is expected to be greater than first half revenue. Gross margin could improve each quarter as we move through the remainder of the year on lower product costs and improving service performance. At this revenue and gross margin profile for the year, we should be well positioned to achieve non GAAP operating profit of $75,000,000 to $100,000,000 With that, operator, please open the line for questions.

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Andrew Percoco with Morgan Stanley. Please go ahead.

Speaker 5

Great. Thanks so much for taking the question here. And Dan, looking forward to meeting you over the coming weeks here. I guess to maybe start out with some data center questions. So first on this Intel announcement, sounds like KR, you mentioned it's a sizable increase to the existing capacity.

Speaker 5

Can you just give us any megawatt ranges and maybe timing in terms of when you expect to ship those units to Intel? And then second is just on these greenfield opportunities that you're highlighting for the second half of the year. Can you just maybe give us some additional insight into how your products will be used at some of these larger hyperscaler sites? It seems like they could be upwards of several 100 megawatts in size each. Is it going to be solely your product or is it going to be more of a microgrid solution where it's tailored or coupled with other solutions as well?

Speaker 5

Just trying to get a sense of the total megawatt opportunity from some of these greenfield sites. Thank you.

Speaker 6

Andrew,

Speaker 3

like very nice to hear from you and I know that Dan is looking forward to meeting you. And on the data center opportunities, look, we only reveal customers actual loads and capacities when we have their permission to do so. And otherwise we maintain their confidentiality. That's why we maintain it. Having said that, I think there is enough material there on how big they're building their servers and how many servers they're putting there that you all can go figure numbers out and don't ask us to either confirm or deny that.

Speaker 3

But I think it's out there. So in terms of total contracted and deployed data centers, right, we are approaching 300 megawatts. And that's a significant portion of our opportunities. And these data center opportunities will get deployed as fast as all the ecosystem conditions are available in terms of gas availability and permits and permissions and all that. They're proceeding as fast as possible and you know this extremely well.

Speaker 3

We applaud you for all your reports on highlighting how power is the most critical thing for data centers to grow. So that's on the Intel. And as you know, our largest prior to this in Silicon Valley for a data center in a single site was somewhere north of 20 megawatts is what we are facilitating. So that used to be it. This is the largest Silicon Valley data center.

Speaker 3

So now getting to your question on greenfield. The answer is all of the above in terms of how people plan to deploy. Some of them plan to deploy purely Bloom on the be flexible kind of a model that we put out for you. Some of them will use a micro grid and in that micro grid, they have all sorts of options of all your usual suspects from combustion engines to batteries to using grid as a backup. But in many cases, as you would suspect, if it's 100 of megawatts, they are willing and very seriously technology qualifying us for a standalone micro grid that's not connected to the grid.

Speaker 3

Because getting on that interconnection queue and getting that done is hard and we bring in a unique solution where because of our fault tolerant architecture and high resiliency, availability and reliability, we can be a standalone grid for them. So that is that can be a game changer for people for whom who value time to power and are willing to pay a premium for it. I think I covered your questions in terms of where we stand. Look, in most cases when we talk about our pipeline increasing and things moving within that funnel with a velocity that is consistent with what you expect for a deal of this size. For example, if you're doing a 100 Megawatt Bloom data center over a 15 year period, the contracted value is well north of $1,000,000,000 So it has to go through its own like diligence process and governance process within the companies and after they do that, they need to go seek, secure both tenant and finance agreements.

Speaker 3

Once they have all that in place, they have to negotiate a contract with a hyperscaler for whom they are purpose building it. If it's a hyperscaler, they can avoid that particular step. And all these needs to fall in place, but they do all this in parallel and then anything gets finally all aligned and signed is going to be the slowest step is going to be the rate limiting step on it. This is the reason it's taking longer and we still believe that we should be able to announce some greenfield deals by the end of the year.

Operator

Your next question comes from the line of Manav Gupta with UBS. Please go ahead.

Speaker 2

First, thank you, Greg, for all the help over the years. Welcome, Dan. My first question is on the service side. I think, Greg, you had expressed a lot of confidence that service margins will flip and they have flipped. So I'm trying to understand, can you give us some more details?

Speaker 2

What can ensure that these margins remain in the positive territory? And then what could help you get towards that 20% service margin next year? And my quick follow-up question, this is more of a modeling question I understand is, very glad to hear that the situation has worked out with AWS. From the perspective of like how we model this, should we just model it as a delay in terms of some an order which was supposed to be implemented at a particular time and then it's delayed by a few quarters? Or does that anything change with the way we are modeling this AWS for the financial statement purposes?

Speaker 2

Thank you.

Speaker 4

Hey, Manav, it's Greg. I'll take the first half of it and then pass it to Dan for the AWS side. Listen, service this time last year, we talked about being a bit behind on getting our crews out the door, our replacement power modules and that we were going to be in a situation for a few quarters where we'd be paying performance payments and making the replacement power modules. And we talked about Q2 being the high watermark. And by the end of the year, each quarter we'd be getting better and we saw a crossover point early in 2024.

Speaker 4

And it is the business has performed exactly to the roadmap that we laid out at that time. Listen, the drivers of it are we're all knowable, right? From an installation standpoint, when we achieve COO and when we begin to get service payments, that tells us how the revenue is going to grow. And you can see each quarter, our overall gross revenues have been growing. We also knew that as we increased our power module shipments, replacement power module shipments, our power output would increase and we reduce our performance payment.

Speaker 4

And that has happened each quarter exactly as we thought it would happen. Lastly, what we've really put a tremendous obligation onto the team to perform and they've done it, which is to continue to drive down that cost of those replacement power modules. And through the efforts of the engineering team and the sourcing team and the service team, they've accomplished that both on an individual basis as well as on a mixed basis. So the average cost has been coming down pulling on both of those levers. So our expectation is that the business has achieved a breakeven point here and we would expect that to continue to improve through the rest of 2024.

Speaker 4

And we remain committed to the 20% gross margin achievement by 2025, which is something that we laid out several years ago and the business has been performing again. So I would say for the team job well done. They performed and took a difficult situation and addressed it and performed exactly as they said they would and they've accomplished it. So with that, I'll pass it over to Dan on the AWS question.

Speaker 7

Thanks, Greg. So, Manav, we're not going to give specific guidance on how to model individual deals or individual customers. I think the important thing to focus on is we're reiterating our guidance for the full year that $1,400,000,000 to $1,600,000,000 at approximately 28% growth non GAAP gross margin. To give you a little bit of thought about how to model that, obviously, understand where we came in for Q1. If you look at sort of the last 5 years, the split between first half and second half has been somewhere between 40, 60, onethree, twothree.

Speaker 7

So I think just overall that might be a good way to be just to give you some thoughts for the modeling. But to be clear, we're not going to guide specific deals, how to think about them and we're not providing specific revenue guidance on a quarterly basis. We're just focused on that year and just an idea of how that year might shape out.

Speaker 3

Thank you.

Operator

Your next question comes from the line of Chris D'Anrios with RBC Capital Markets. Please go ahead.

Speaker 8

Yes. Good afternoon and congratulations on the Intel announcement. I guess maybe just to start out here and I want to focus a little bit on permitting here. Are the permits in hand for this data center expansion, I guess, both for Quanta and for Intel? And then how are you guys navigating this with your customer to hopefully, I guess, keep things out of the public light that might cause, I guess, call it disruptions?

Speaker 8

Thanks.

Speaker 3

Look, we again, we don't get into specifics of customer permits and permissions because their applications and what they do. But we absolutely see no issues with us deploying for Quanta this year, their systems and showing the speed at which we can solve a problem for them. There are no interconnection issues for Quanta because it's a completely islanded system that is not connected to the grid. And so they were able to eliminate any delays that it can potentially cause by choosing a better solution of keeping it islanded. Similarly, YIN like Santa Clara, you've heard us speak about it before.

Speaker 3

We have a very cooperative local government that works with us and we are confident that we will be able to get these systems installed and we don't see an issue with it. Thank you.

Speaker 8

Got it. Understood. And then I guess maybe just shifting gears here and I wanted to touch on the hydrogen opportunity here. So, it looks like the project with World Energy is on track for FID early 2025. And I recognize that in the past you haven't wanted to comment too much on this just given that it's not your project.

Speaker 8

But I guess could you just provide any incremental color that you might have in terms of expectations kind of moving forward there? What type of things should we be on the lookout for? Thank you.

Speaker 3

Nothing has changed with how we talk about projects. So if we have a contract, we will let you know. But until then, we don't comment on our potential customers' processes. Thank you.

Operator

Your next question comes from the line of Shareef Helmut Groovy with BTIG. Please go ahead.

Speaker 9

Hey, good afternoon and thanks for taking my questions. Sticking with Quanta for a second, did I hear correctly that you're saying that you're thinking you'll start deploying that this year? And then more generally, because I thought Islanded Solutions took a longer time, how long after receiving an Islanded order does Bloom recognize revenue?

Speaker 3

Well, our goal, again, we announced this a week, 2 weeks ago, like I go it's all blurring for me, but you can look at the date. So don't quote me on the date. But we just announced it a few days ago And we are confident that the customer will have the entire multi megawatt power available to them before we before you all ring the bell and like Times Square for 2025.

Speaker 9

That's good to know. And then second, very simply, can you guys quantify where the backlog is this quarter relative to last quarter?

Speaker 7

So, no, we're not going to provide guidance on the backlog. We will only provide guidance on the backlog or we'll provide the backlog once a year as has been our practice. Look, again, I'll just take the opportunity to say as a relative newcomer to the company as I've dug in, very confident in the commercial pipeline that we have. Obviously, that's why we feel comfortable with reiterating the guidance that we had previously provided. So we're not going to provide any specifics other than to say that me as the new CFO coming in, feel pretty comfortable with the commercial pipeline as KR discussed.

Speaker 3

Thank you.

Operator

Your next question comes from the line of Amit Tucker with BMO Capital Markets. Please go ahead.

Speaker 1

Hi, good afternoon. Thanks for taking my question.

Speaker 10

I just wanted to come back to, I guess, some additional disclosure you had around the AWS facility in Oregon in your 10 Q. It refers to other distributor and the distributor making PPA payments. Is that SK Eco plant or is that Amazon?

Speaker 3

So in this case it is our PPA agreement is with Amazon and starting April Amazon will start making the monthly payments for the PPA to Bloom as per the agreement. So that's the clarification I think you're seeking.

Speaker 10

Okay. And just one follow-up. Then the 10 Q does mention that the distributor has the ability to kind of reduce future orders or cancel existing orders until the I guess the energy servers are redeployed. That is not Amazon, correct? And how does that like since you guys booked that revenue last year, I was just wondering if you could give us a sense on what sort of cash flow impact we can expect from that this year?

Speaker 4

Yes. It's Greg. I'll take that since I was around. So listen, it was very clear KR made that the payments on the PPA are going to be made contractual as Amazon has it. Last year, in the Q4 of 2022, we sold 73 megawatts to our partner SK Eco Plant that was going to be the EPC unit on that.

Speaker 4

Our expectation is as we find new sites, as Amazon finds new sites that the units can be deployed, it would make sense that SK would deploy their units there. And that is our expectation and our preference. What we wanted to make sure we disclosed fully with in our Q and in our K previously was if for some reason SK just if Amazon had decided they didn't want the unit and we had some disagreement with Amazon around that, we wanted folks to know that we would most likely work with our partner, not contractually, but out of partnership to help them get their units placed going forward. But our expectation is that Amazon will find additional places for SK to deploy the inventory that they

Operator

have. Great. Thanks, Lakia.

Speaker 7

And again, I'll just add, we understand why folks are asking the question. One of the things that I want to make sure that people hear from me is as I've come in and I've looked at our projected cash flows, as I've looked at our projected P and L, we're very comfortable with the state of the balance sheet. We're very comfortable with the receivables that we have and our ability to collect those receivables. So we're not going to get too much into specifics with specific customers with specific partners. That's just probably not what our partners would want quite frankly.

Speaker 7

But I do think that you should hear from me that as we look at the balance sheet, as we look at our receivables, we are quite comfortable with our position.

Speaker 3

Thank you.

Operator

Your next question comes from the line of Biju Perinthirael from Susquehanna. Please go ahead.

Speaker 11

Thanks for taking my questions. Well, first of all, there's been some reports in industry publications about a sizable data center project in California that will be using solid oxide fuel cells. Can you confirm that's one of your projects? It doesn't sound like either that's Quanta or the Intel projects you're talking about today?

Speaker 3

I am sorry, Vijay, I have I don't know what specifically this is, so I can't comment on it. But to my knowledge, I don't know how many other suppliers there are for solid oxide fuel cells that can deliver megawatts worth of solid oxide fuel cells to any data center. We are the only ones that I know of, but there could be somebody I don't know, but we don't we are not aware of anybody. So if like somebody is saying they may be talking about us, but without the specifics, I cannot speak to it.

Speaker 11

Got it. And my follow-up is on your manufacturing capacity. Obviously, the demand here seems to be accelerating. So how are you positioned on the capacity front? Do you need to fast track sort of the build out that you've talked about in the past?

Speaker 3

We are extremely comfortable with being able to meet the surge demands as they come forward with our Fremont factory and our Delaware factory and what we have facilitated. And I think we have talked about it in the past with very modest investments to even further upgrades, we can keep up with the capacity as we go. And our speed to catch up 200 megawatts, 300 megawatts will be faster than the cycle time it takes for all the other systems to be in place for a greenfield data center. So we feel like we are well situated to be able to meet the demands as the demands arise for us from a capacity perspective. And today we know that we don't have a capacity constraint to meeting this year and we will make sure by the time the New Year comes, we can make the same statement about whatever our capacity needs are for 2025, all within the cash balance and everything that Greg talked about sorry, Dan talked about.

Speaker 7

And I think, Kara, well, there are a couple of important points there is, I think I did mention in the prepared remarks, the puts and takes in that $1,400,000,000 to $1,600,000,000 revenue guidance for $24,000,000 is really about timing. We have the commercial pipeline. We have the manufacturing capacity that we need. We have the supply chain preparedness that we need to be within that range. And really it's the where we end up in that range is really going to be things like timing of acceptances.

Speaker 7

And then of course, one of my priorities coming here is as we grow the company, we need to grow it profitably and we need to invest at the right time. We need to make sure that we're investing in our manufacturing capacity so that we have the capacity to meet demand, which again for 2024 clearly that's not a problem. And as we move beyond that and as we grow the company, there's going to be a focus on using our cash wisely at the right time and growing the company profitably.

Operator

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

Speaker 6

Thank you for taking my question and Greg best of luck in your future endeavors. First question, I just wanted to ask about progress in terms of development of the carbon capture technology. Could you maybe give us an update on that in conjunction with the fuel servers?

Speaker 3

Yes. So look, if you look at our pipeline both domestically and internationally, we are working with several partners and where we are at this stage on that is technology qualification. We have developed great partners who can take our gas and process it to the specifications required to put that in a pipeline to meet their standards for it to go into a Class 6 well, number 1, okay. Number 2 is PR talking to large utilities that have been playing in this field already in the U. S.

Speaker 3

And who have tried other techniques and now believe that we have the better mousetrap that we are working with. With the number of states figuring out who has domain dominance issues to getting plastics wells approved to the pipelines coming on board to everything else that needs to happen. This also has a longer sales cycle. But the way I would characterize where we are on that is most people are getting extremely comfortable our technology and saying that we would like to baseline your technology. Now it's about the next steps.

Speaker 3

It will take time, but this is a huge opportunity. And thanks for asking that question, Marty, because I want to emphasize something to you. This world cannot decarbonize by 2,050 without carbon sequestration. There is no possible way that we can. This is huge and we have one of the best available technologies anybody has shown to take natural gas and create a concentrated stream of carbon dioxide to sequester, which means if you have the dual issues of needing more power and to decarbonize, we are about as good as it comes as a solution.

Operator

Your next question comes from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Speaker 12

Hi, good afternoon.

Operator

I just had a couple.

Speaker 12

I wondered and as generally or as specifically as you feel comfortable, the Intel relationship is such a long standing one. I was wondering if you could talk a little bit about the evolution of the relationship. And I'm curious even sort of what model of the BES did they originally run and just kind of what it's been like as far as it's going through upgrade cycles and so on with such an established customer?

Speaker 3

Sure, Noel. That's a very good question. Look, we have always prided that if you look at historically, about 2 thirds of our business comes from repeat orders from customers, multi $100,000,000 orders. And to us, there is no better validation of us taking care of a customer's pain. At the end of the day, you're solving their problems.

Speaker 3

And if you solve them well, they come back to you. And that's there's no better indication. And I would like to grow even more new customers, but it's always the land and expand strategy that we have. And Intel would be a very good example of that. Our first installations for Intel there in California, both in the Bay Area and in Folsom for their facilities where they wanted to try us out.

Speaker 3

And this was in 2014. So it was our 2nd generation technology. And then I still today remember vividly the CEO at that time sitting in my conference room evaluating it and saying, if you really want to solve my pain, I'll tell you where my pain is. It's in Bangalore, India. And we are building a new building.

Speaker 3

We have no power for it. And the old building we have loses power 3 times a day. I cannot run the kind of labs and data centers I want to run-in Bangalore if I lose power 3 times a day. And I said, for the long relationship we want with you, we are happy to go try. We had never installed anything in India at that time.

Speaker 3

We had to run 3 kilometers of gas pipelines for them working with the Gas Authority of India to bring the gas and we had power for them before they finished the building. And I'm proud to say that that 2014 system that's been upgraded along the way with field replacement units, we don't drop load for them. They never have to worry about losing power. So we have a long established and proven relationship with them and we are extremely grateful for them to have taken that early step and we applaud them for being a leader. And a huge thanks to them for again trusting us and entrusting us with their expansion of their data center in Santa Clara.

Operator

Your next question comes from the line of Pavel Molchanov with Raymond James. Please go ahead.

Speaker 6

Thanks for taking the question. Let me start with a conceptual one. When you speak with data centers and they want to reconcile base load generation and sustainability targets, How often do you hear hydrogen and RNG feedstock entering that conversation?

Speaker 3

Pavel, this is a very good question. Look, they and us and everybody on the planet would love to have a 0 carbon fuel and be able to power the data center with that. We all know that that's aspirational for the foreseeable future in the short term. We all also believe that definitely in the future that renewable molecule whether it is green ammonia, green hydrogen, RNG, biogas, all of the above should become available so our children and our grandchildren can have a great planet. But don't forget, one additional option is large scale power generation from natural gas with carbon capture because mother nature does not care about renewables versus fossil, it cares about the carbon dioxide molecules in the atmosphere.

Speaker 3

They get the same effect. So with our solution, what they see is it's the best available option of anything that they can possibly do in real terms for the atmosphere. Yes, they can go and buy green credits and racks and build solar farms. That is not displacing the dirty highly power intensive power that they use, wherever they use it. Whereas here, they are actually producing power with the least amount of carbon footprint and with no air pollution.

Speaker 3

Then as these green molecules become available from 0 to small blends to 100% pure green fuel, they can use our same existing systems without stranding it. So we are future proofing them. And if as a country we figure out carbon capture and have pipelines or and sequestration available, they can use natural gas until such time and to be able to do it. With all those, they are convinced that this is a great option.

Operator

Your next question comes from the line of Colin Rusch with Oppenheimer. Please go ahead.

Speaker 6

Hi there. This is Andre Adams on for Collin. As you're quoting microgrid opportunities, can you just speak again to those customers' desire for 0 emissions versus natural gas solutions and whether you're trying to integrate additional solar, wind or chemical storage on-site?

Speaker 3

So, yes, the answer is we believe in all of the above. We are big fans of solar, we are big fans of wind and as they grow, they are going to need to store it and hydrogen is one option and you know that we have play on both sides of hydrogen, both hydrogen electrolyzer as well as using hydrogen as a fuel in our fuel cells. So we encourage people to do all of the above and obviously our customers will in their mix have as much solar and wind because that industry, especially the data center industry and information industry is in the leading edge of any other industry in terms of reducing their carbon footprint. So the great thing about Bloom is we integrate beautifully with any of those microgrids and we are firming up that base load without dirty diesel and all the air pollution associated with that.

Operator

Your next question comes from the line of Ben Kallo with Baird. Please go ahead.

Speaker 13

Hey, guys. Thanks for taking my question. Dan, just welcome. I know you got a lot of questions and kudos to you jumping on this early and starting. I'm not asking about the guidance that you guys put out there, not you, but it was out there for 26 before.

Speaker 13

But what do you since you've been here, how's your visibility look? It seems good for this year, but there was guidance out there a couple of times for 26, just as you think about all of that.

Speaker 7

Yes, Ben. So thanks for the question. It's a bit difficult for me to comment not having the full perspective on that. I will tell you that, I'm just going to reiterate, I got pretty comfortable pretty quickly in what the commercial pipeline looks like and what our revenue will look like for this year and our path to increase profitability as we talked about. I won't really talk about things beyond that.

Speaker 7

I will say that my focus is on making sure that we're ready to scale profitably. It's on obviously the first things that I've jumped into were looking at the balance sheet. Some of the concerns that I know we've heard from investors in the past, the receivables, the cash flow, we have optionality on the convert that's due in August of 2025. So that's where my focus has been more immediately to get comfortable and confident in those things. And as I say, the commercial pipeline gives me a significant amount of confidence for that.

Speaker 7

I'm going to have you're going to have to give me maybe another 90 days to be able to comment on anything further than that.

Operator

Your next question comes from the line of Jordan Levy with Truist Securities. Please go ahead.

Speaker 14

Hi, all. It's Henry on for Jordan here. Thanks for squeezing me in. Congratulations, Greg and Dan for joining the team. Just a quick one.

Speaker 14

As we look to the rest of the year, could you all provide some detail on the walk from this quarter to hitting that operating income guidance for the remainder of the year? And what we're just going to be looking at as the quarters progress?

Speaker 7

So the only real comment we made, I talked a little bit about in general terms how to think about maybe a revenue profile first half, second half. And I would just say that I would expect gross margin to

Operator

question comes from the line of Chris Tsheung with Wolfe Research. Please go ahead.

Speaker 9

Hi, thanks for taking my question. I wanted to just clarify in the prepared remarks on the product ASPs being weighed down from international sales. Are those the sales to SK Ecol Plant? And should we expect the rest of the sales under that preferred distributor agreement to reflect this ASP?

Speaker 4

Yes. Hey, it's Greg. The ASPs that we're getting from our partners in Korea this quarter were very consistent with the prior quarter. So as you look at our mix of ASPs during 2023 and you think about them for the quarter and you think about as they go forward, yes, mix worked against us a little bit on timing in the quarter, not because those were down materially versus where they've been, but just other shipments weren't there. So I would expect ASPs to continue to increase through the course of the year as we have other sources of volume moving in.

Speaker 4

And that's consistent with the way we thought about putting the framework together for the year.

Operator

That concludes our question and answer session. I will now turn the conference back over to KR for closing remarks.

Speaker 3

Thank you. Thanks everyone for your participation on the call and for your support of Bloom Energy. As I close, I just think there are 3 things I want to emphasize. The first one is, I think we laid it out to you even in the last call and we want to confirm this again to you that we are reaffirming our guidance for the year and also reminding you that we said it's going to be a heavy loaded second half of the year and not the first half of the year and that's how it's going to turn out and that's just the rhythm of the business as we see it based on the orders we have at hand and how we can prosecute. 2nd, and on that issue again, we have within that guidance where we will be on those numbers as Dan pointed out, I want to reiterate.

Speaker 3

We have the sites, we have the orders, we have the customers, we have the products we can make. It is purely about timing of when those things fall here or there is what's going to decide where on that range we fall. We'll know more as the year progresses. And we're working hard to see what we can pull in. On the second point, the Intel agreement, the Quanta agreement, continuing orders from existing customers and a strong commercial pipeline.

Speaker 3

They all are showing that we have the right product at the right time for a market that very badly needs the solution. This is what we are offering is not a product for somebody to buy, is a solution that enables them to protect their business and take care of their business and grow. The market dynamics are very clearly in our favor. People want low carbon solutions right now. They know that there is no miracle switch to a 0 carbon solution overnight.

Speaker 3

And so our low carbon solution has the right market dynamic from that perspective. People want power now and the utilities are not moving at the speed, the data center industry and the utility industry are operating on 2 different timescales. And that helps us provide either to the utility or to the customer, we are agnostic in front of the meter or behind the meter a solution so we can help businesses, the local economy and everybody. Clearly the data center and AI space not only has opened up an opportunity for us in the data center space, but the entire AI ecosystem space as you saw with the supply chain. And with all that opportunity, we have to execute and hopefully you are seeing quarter over quarter what we say and what we do.

Speaker 3

And I'll let you be the judge of figuring out are we doing what we say. I feel very good with our entire team functioning as one team at a very high level. We're adding quality people into our leadership team as well as in our employee base. They are deeply committed to the mission and I feel very good about where we are as a company. I'm excited about our future and I'm confident about our future.

Speaker 3

Thank you.

Operator

This concludes today's conference call. Thank you for your participation and you may now disconnect.

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Earnings Conference Call
Bloom Energy Q1 2024
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