Bloom Energy Corporation

Good afternoon, and welcome to the Bloom Energy first quarter 2019 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mark Messler, Vice President of Finance and Investor Relations at Bloom Energy. Please go ahead.

Thank you. Thanks for joining us on Bloom Energy's first quarter 2019 earnings conference call. To supplement this conference call, we have posted to our investor relations website our Q1 2019 shareholder letter, as well as supplemental financial information that we will periodically reference throughout this call. The matters we will be discussing today include forward-looking statements regarding future events and the future financial performance of the company. These statements are subject to risks and uncertainties that we discuss in detail in our documents filed with the SEC specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. We assume no obligation to revise any forward-looking statements made on today's call. During this call and in our Q1 2019 shareholder letter, we refer to GAAP and non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation between GAAP and non-GAAP is included as part of our Q1 2019 shareholder letter. Joining me on the call today are K.R. Sridhar, Principal Co-Founder and Chief Executive Officer, and Randy Furrer, Chief Financial Officer. K.R. and Randy will review the operating and financial highlights of the quarter, and then we will take questions. I will now turn the call over to KR.

Hello, this is KR. A good afternoon to all of you and welcome to our Q1 2019 conference call. Allow me to share my perspectives on our Q1 2019 accomplishments and financial performance. We are pleased to have delivered another record quarter with a strong diversity of acceptances across industry sectors and international markets. Our momentum in the core healthcare, data center, and retail sectors continued, and the diversification strategy we discussed last quarter also delivered results, with more new customers in tech, utility, and life sciences sectors. Overall, in Q1, we achieved 235 acceptances, a 41.6% year-over-year increase, and slightly higher than the midpoint of our estimates. We achieved $200.7 million of revenue in Q1 of FY 2019. Removing the impact of the one-time retroactive ITC benefit for FY 17 that we recognized in Q1 2018, our revenues increased 62% year-over-year. During Q1, we saw strong validation of our value proposition and also made progress in further enhancing and strengthening our competitive advantage. As a reminder, Bloom Energy delivers three key benefits to our customers. Lower and more predictable cost of power, lower emissions, and higher resiliency including the option for uninterruptible power. In our previous calls, I have talked at length about our cost reduction programs. These continue to be a strong focus. During this call, I will focus on the other two value propositions, emissions and resiliency. Let us start with an update on our lower emissions profile our strategy for decarbonization leading to zero carbon solutions. Our decarbonization strategy is multifaceted. To date, all of our customers have reduced carbon footprint when using the Bloom Energy Server fed by natural gas when compared to securing their power from the utility grid. They also reduce smog-creating pollutants and avoid consumption of water. Currently, our primary solution for zero carbon power generation is to offer customers energy service solutions running on directed biogas. Some of our well-known customers, including Apple and the retailer IKEA, have selected this path. In addition to directed biogas, It is our expectation that biogas generated from landfill, wastewater treatment plants, and plant and animal waste will be converted on site to electricity using our technology. In the directed biogas case, biomethane produced from biomass is purified to pipe gas standards injected into the gas pipeline and transported pipe gas is used by Bloom Energy servers to generate electricity. In the case of onsite generation, biomethane produced from biomass goes through a relatively inexpensive and minimal cleaning process before it is fed directly to a Bloom Energy server located onsite. Then the electricity produced from the biomethane is transported via the electrical grid to our customer. The on-site biomethane method is more efficient energetically, has lower capital costs, and lower carbon footprint than even the directed biogas program. In California alone, there is sufficient biomass to generate and deliver as much electricity as 4 million solar panels or a nuclear power plant. This type of on-site biogas powered electricity generation will play a meaningful role as a source of renewable, always-on power, helping to stabilize the grid as penetration of intermittent renewables increases. Legacy power generation has not been able to offer a method for biogas-powered electricity generation that is highly efficient, distributed, highly reliable, and cost-effectively removes moisture, sulfur, siloxanes, and other contaminants from biogas prior to utilization. We believe we have the answers to those problems. By Q1, we demonstrated the increasing commercial readiness of our biogas solution to a pilot with a utility. We commenced the pilot at a landfill facility in January of 2019. We began by conditioning biomethane from the landfill and then feeding it to our onsite biogas-powered system in February. The 50 kilowatt Bloom Energy Server with integrated biogas cleanup module has since operated and delivered 100% clean and renewable baseload power into the local grid. We are excited to have delivered this first demonstration and expect to have commercial onsite biogas deployments in the future. Now let me move to the second topic on our value proposition I wanted to discuss. which is resiliency solutions. According to the Eaton Blackout Tracker, there were more than 3,500 utility outages in the US in 2017 alone. A recent study by the EIA highlighted that the duration of electric power outages in the US has doubled in the past two years with an increase in extreme weather systems being the main cause. Estimates suggest that the total annual cost of power interruptions to the US economy is around $200 billion. With outages increasing in frequency and duration, it seems likely that cost will soar in the future. With the US economy ever more dependent on electricity for its digital and high-tech industry. It should come as no surprise that demand for resilient power solutions is on the rise. Microgrid projects in particular are surging with almost 500 new projects developed in the past six months, more of them in North America than anywhere else. Bloom Energy, is a beneficiary of this trend. Our systems have now been deployed in more than 80 microgrids, with 65% of those deployed in the past three years. We define a microgrid as an electrical infrastructure that has sufficient supply and intelligence to operate independently of the utility grid to meet the demand of a specific site or locality. This electrical infrastructure will operate symbiotically with the larger grid in normal mode. However, it is also able to isolate from the utility grid and provide always-on power to the site or locality when the larger utility grid is out of service for any duration of time. During Q1, we announced several microgrid customers These wins underscore the important role we play in elevating power resiliency for our customers in a post-climate change world and how we help them accelerate time to power when the grid is under strain and utilities are unable to meet fast-growing demand. Let me tell you about two customers. Our microgrid deployment at the headquarters of Extreme Networks aptly describes how we are helping customers solve grid reliability problems. Xtreme experienced three separate power outages to its San Jose offices in the summer of 2018. The outages impacted critical engineering and IT functions. Thereafter, Xtreme deployed a Bloom Energy Server microgrid to provide an electricity supply to its headquarters that will be uninterrupted even if the grid fails. Additionally, Xtreme is reducing its cost of electricity by 25% and reducing carbon dioxide emissions by 20%. Lower cost, lower emissions, and higher reliability. That's a triple win. Let me talk about another microgrid we deployed in Q1 at a New Jersey manufacturing location of engineered materials and optoelectronics components maker, 2-6. The 2-6 microgrid illustrates how we can help businesses remain agile and responsive to growth opportunities when utilities are unable to meet growing power needs in a timely manner. has ramped up production at its Warren facility in the past year to meet demand for its 3D sensing technology. However, it hit a roadblock when the local electric utility was unable to supply power quickly enough to keep up with its growth. This led 2-6 to seek an onsite grid-independent power solution. 2-6 selected Bloom to build a 2.5 megawatt microgrid power system. The microgrid was up and running within nine months of the two companies starting to work together. TwoSix is also reducing CO2 emissions by 15 million pounds per year relative to the power it would have bought from the New Jersey grid. The Bloom solution enabled timely growth, greener growth, and greater reliability for TwoSix. As demand for power from EV adoption and edge data center proliferation increases. The aging grid will become ever more stressed and we anticipate robust demand from microgrid solutions. Finally, moving on to our overall ability to execute our business plan, I'm delighted to share news of two appointments to our leadership team. Former Sunmina president and contact holding CEO Hari Pillai has joined us as executive vice president overseeing the customer installations group. This is the first time we have made a dedicated executive appointment to this position, reflecting our strategic focus to make the install process even more predictable and scalable while reducing the cycle time. Hari is an extremely accomplished electronics and logistics industry veteran, and I'm delighted he has joined our team. We also welcomed Sonia Wilkerson to Bloom Energy as Executive Vice President and Chief People Officer this quarter. David Barber, our previous Chief People Officer, made an indelible mark on Bloom Energy, and it has been incredibly important for us to find the right successor following his sudden passing last year. Sonia is an incredible talent with an impressive HR leadership track record at Cisco, HP, and Infinera, and she is the right cultural fit for us. Her appointment reflects our continued commitment to recruiting, retaining, and developing our talent as we continue to grow. With that perspective, I would like to invite Randy Furr, our Chief Financial Officer, to walk you through our operating results for Q1 and estimates for Q2 2019. Over to you, Randy.