Bloom Energy Corporation

Good afternoon and welcome to the Bloom Energy second quarter 2020 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. Good afternoon all. We appreciate you joining us on Bloom Energy's second quarter 2020 earnings conference call. To supplement this conference with our Q2 2020 shareholder letter and earnings release with the SEC and have posted it along with supplemental information that we will periodically reference throughout this call to our investor relations website. 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 discussed 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, including those related to the COVID-19 pandemic that could cause actual results to differ materially from those contained in the forward-looking statements. These include statements about the effects of COVID-19 on the company's business results, financial position, liquidity, demand for our energy server and new applications, finding of new applications, and the supporting market ecosystem and outlook. We assume no obligation to revise any forward-looking statements made on today's call. During this call, in our Q220 shareholder letter, we refer to GAAP and non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between the GAAP and non-GAAP financial measures is included in our Q2 2020 shareholder letter. Joining me on the call today are K.R. Sridhar, Principal Co-Founder and Chief Executive Officer, and Greg Cameron, Bloom's Chief Financial Officer. K.R. and Greg will review the operating and financial highlights of the quarter, and then we will take questions. I would also like to note that we are all dialed into this call remotely, so we apologize in advance for any audio issues that may occur. I will now turn the call over to Kaof.

Good day, and thank you for joining us. We'll talk about our business performance and strategy, and then turn it over to Greg to walk through our financial performance, followed by Q&A. When we last spoke on our first quarter earnings call, We were in the early stages of the COVID-19 pandemic and were uncertain about the length of the lockdown, the stress our public health system would face, the effect on our economy, and the implications for our business. Fast forward one quarter, and COVID-19 remains a significant public health crisis in the U.S. and the rest of the world. This is a fluid, challenging, and uncertain time for all of us. We send our prayers to people at home and around the world who have been affected by COVID-19. We convey our gratitude to the frontline workers who are working tirelessly to serve all of us. In times like this, all businesses and all of their employees are being tested. Bloom Energy is no different. I'm exceptionally proud of how the Bloom Energy team is rising up to the challenge. The team has demonstrated grit, resiliency, resourcefulness, and a deep commitment to excellence. At the height of the crisis, Bloom refurbished and supplied over 1,200 ventilators and rapidly deployed two hospital microgrids. We implemented new COVID-19 workflows and protocols at our factories and installation sites, prioritizing the safety of our employees. Over the last few months, our engineering team developed an affordable and innovative splitter device that can service four patients with one ventilator and obtained FDA approval for it. Our goal? is to provide it at cost to the people and places that need it. We think it could be a lifesaving innovation for the emerging nations where COVID-19 is on the rise. Our community response to COVID-19, combined with our strong second quarter performance and the new products and collaborations we announced, speak to our culture and the kind of spirit, focus, and determination that characterize the Bloom Energy workforce. I'm humbled by their dedication and my heartfelt gratitude goes out to the team. Now I want to offer some commentary on the highlights and achievements in the second quarter. Our manufacturing operations, maintenance, and service functions, and field installation teams have continued to operate and sustained our core business throughout this crisis. As we announced earlier this month, we installed 306 systems in Q2, which is 20% higher than the first quarter of this year and significantly better than we anticipated heading into April. Considering the restrictions and uncertainties in the macro environment, and that our installation process encountered many COVID-related delays. This is a truly remarkable achievement. In the second quarter, we have further strengthened our relationships with our public utility partners by expanding our relationship with Duke Energy and adding a new financing partner, Nextera. The two transactions were for 28.75 megawatts, and we look forward to many more such transactions with them. In addition to installing systems for U.S. commercial and industrial customers, we built three sites for U.S. utility partners. One was a four-story tall, six-megawatt power tower in New York for the Long Island Power Authority. Two other sites are always on microgrids in Los Angeles for Southern California gas companies. These onsite microgrids will provide clean, affordable, and resilient energy to key facilities and enable SoCalGas to provide safe and reliable service to their 22 million customers. Bloom Energy, at its core, is a technology company transforming the energy sector. We are a global leader in our field. The Bloom Energy platform enables us to commercialize new features with low capital costs and adapt to new market requirements rapidly. We develop these new features for applications with large market sizes. In commercializing these new applications, we have forged win-win partnerships with industry-leading partners who co-invest in our commercialization and assist us in opening up new markets. These partnerships follow a similar approach to our existing partnership with SK in the South Korean market, which has already resulted in sales of 120 megawatts of fuel cells in South Korea and generated over $1 billion in equipment and future service revenue. Partners can add great value by bringing strong regional expertise in the areas of sales and marketing, installation, financing, and service. Our partners recognize that Bloom's technology is critical for them to maintain market competitiveness. To that end, I'm excited to discuss two very important developments that we recently announced. First, the shipping industry has a substantial opportunity and a real need to reduce emissions and improve air quality on seas and at ports across the world. To serve this need and capitalize on this commercial business opportunity, In late June, we announced a joint development agreement with Samsung Heavy Industries of South Korea to develop fuel cell-powered ships using Bloom Energy servers. Samsung has set a goal to replace all existing main engines and generator engines with our highly efficient solid oxide fuel cells. With this move, Samsung has the potential to lead the industry in helping their customers meet the International Maritime Organization's 2030 and 2050 environmental requirements. Because the fuel cells create electricity through an electrochemical reaction without combusting fuel, these ships would be able to improve air quality by reducing particulate emissions, NOx and SOx, by more than 99%. they will also reduce carbon emissions. Our target is to present the design to potential customers in 2022. Based on market analysis, both our companies anticipate that the Bloom Energy servers on Samsung ships will grow to 300 megawatts annually once we have reached commercial production. Next, I'd like to talk about hydrogen. As some of you may recall, in June 2019, we announced that our fuel cells could operate with hydrogen as a fuel. Just two weeks ago, we announced that we are entering the commercial hydrogen market by introducing two products. One, hydrogen-powered fuel cells that can produce zero carbon electricity. And two, electrolyzers that produce renewable hydrogen. We will introduce both products in South Korea first. We chose our market entry to deepen our highly successful partnership with SKENC and to meet the South Korean government's mandate for building a hydrogen economy. requires the construction of 15,000 megawatts of hydrogen fuel cells and 1,200 hydrogen fueling stations for 6.2 million cars by 2040. By the end of 2020, we expect to ship a 100 kilowatt pilot hydrogen server to South Korea to power an SKENC facility in early 2021. The second phase, a one megawatt hydrogen server installation is targeted for a 2022 deployment. SK estimates our market opportunity for fuel cells in South Korea will be 400 megawatts per year in the future. The second aspect of our entry to the hydrogen market is our electrolyzers. It is a back-to-the-future moment for Bloom to run the platform in Mars mode. The company's origins can be traced to the NASA Mars Electrolyzer project. Bloom is capitalizing on its leadership in commercial solid-site technology and reversing the process it uses for fuel cell power generation. Operated in reverse, The product is called an electrolyzer, and it takes terrestrial renewable power and produces hydrogen from water. The renewable hydrogen, when produced in this manner, can fuel cars, power resilient always on microgrid, or be injected into natural gas pipelines to reduce carbon emissions. Since 2002, Bloom has been awarded 19 patents for its solid oxide electrolyzer technology. The rapidly reducing cost of bulk solar and wind intermittent power should help the hydrogen generated with Bloom electrolyzers reach the U.S. Department of Energy's goal of gasoline price parity faster than other technologies. I would like to now talk about transitions in the Bloom leadership team. We welcome Carl Gardino in the newly created role of Executive Vice President, Government Affairs and Policy, effective August 3rd. Carl comes to us from the Silicon Valley Leadership Group, a prominent public policy trade association that represents more than 350 of Silicon Valley's most respected companies. In his role as president and CEO, he has championed public policy at the local, state, and federal level for more than three decades. Known throughout the Bay Area as a highly successful consensus builder, Carl will focus on engaging policymakers and key stakeholders to help us build an energy resilient post-COVID world. Our chief marketing officer, Matt Ross, will retire from Bloom for medical reasons and focus on his health. All of us at Bloom will miss Matt's daily presence and send our prayers for his well-being. Matt, we are extremely grateful for your amazing contributions to the company. and for your help in building our amazing Bloom culture. Thank you. Sherilyn Moore will be joining Bloom Energy as Executive Vice President and Chief Marketing Officer on August 3rd. She previously served as Senior Vice President of Network Solutions at ITRON, where she had P&L responsibility for ITRON's largest business segment. In addition, Sherilyn has responsibility for ITRON's smart city strategy and business. Sherilyn brings more than two decades of experience in the energy and technology sectors and a very strong background in all aspects of marketing. We are delighted to welcome her to the leadership team. With that, I will turn it over to Greg.