Bloom Energy Corporation

Good evening, ladies and gentlemen. Thank you for attending today's Bloom Energy Q4 2022 earnings conference call. My name is Tia and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. Please limit yourself to one question. Once you ask your question, please mute your mic. If you have a follow-up question, please queue up again. I would now like to pass the conference over to your host, Ed Blejo, Vice President of Investor Relations. Please proceed.

Thank you, and good afternoon, everybody. Thank you for joining us for Bloom Energy's fourth quarter 2022 earnings conference call. To supplement this conference call, we furnished our fourth quarter 2022 earnings press release with the SEC on Form 8K and have posted it. along with supplemental financial information that we will reference throughout this call to our investor relations website. 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 market, strategy, financial position, liquidity, and full-year outlook for 2023. These statements are predictions based upon our expectations, estimates, and assumptions. However, as these statements deal with future events, they are subject to numerous known and unknown risks and uncertainties as discussed in detail in our documents filed with the SEC, including our most recently filed forms 10-K and 10-Q. We assume no obligation to revise any forward-looking statements made on today's call. During this call and in our fourth quarter 2022 earnings press release, we referred to GAAP and non-GAAP financial measures. The non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between the GAAP and non-GAAP financial measures is included in our fourth quarter 2022 earnings press release available in our investor relations website. Joining me on the call today are K.R. Schroeder, founder, chairman, and chief executive officer, and Greg Cameron, our chief financial officer. K.R. will begin with an overview of our business, then Greg will review the operating and financial highlights of the quarter, as well as the outlook for 2023. And after our prepared remarks, we will have time to take your questions. I will now turn the call over to K.R.

Thank you, Ed. Good day, everyone. Bloom Energy finished 2022 in a very strong position as our resilient and sustainable energy solutions experienced wider adoption and we were aided by good tailwinds. We expect this trend to continue in 2023 and beyond. Our revenues and gross margins, the records for the fourth quarter and for the full year, and we closed 2022 with a $10 billion backlog, the strongest order book in Bloom's history. We continue to innovate at a rapid pace to further strengthen our technology leadership and competitive advantage. In 2022, We demonstrated record-breaking efficiencies for hydrogen production using our electrolyzers and successfully lab tested our highly promising carbon capture technology. We released a combined heat and power offering that we are very excited about. This offering has wide-ranging applications, including in the European markets we are now entering and for industries that can use the heat. We successfully deployed our marine product on schedule. Bloom has also invested in operations and doubled our manufacturing capacity. I'm proud of our team for all we have accomplished in 2022. We are excited about 2023 and are looking forward to building on the momentum we have generated. We are establishing ourselves. as the energy company that offers our customers practical and purposeful solutions. We call it the power of and. When it comes to energy, we need security and sustainability, reliability and resiliency, affordability and availability. Simply put, when it comes to energy, a resource that is foundational to our well-being or should not be an option the bloom energy technology platform delivers on the power of and the future looks very bright for growing our electricity and hydrogen solutions both domestically and internationally we are very pleased with the quality and composition of our 10 billion dollar order book it offers predictability and visibility we have talked to you in the past about the issue of time to power. Utilities are not able to meet the growing need of commercial and industrial customers for additional power. Let me elaborate on this. Businesses are expanding and many are reshoring their operations. Digital transformation is driving steep growth in data center loads. Vehicles and appliances are being electrified. All these trends are causing a surge in energy demand. At the same time, geopolitics, climate concerns, and NIMBYism are making a very difficult global energy transition even harder. There is long-term policy uncertainty, permitting chaos, erroneous political decisions to shut down or not allow infrastructure growth based on unrealistic transition timelines, all of which have significantly stunted growth of energy supply. Many jurisdictions have turned to dirty and unreliable sources of energy to cope with the situation. California has spent billions of dollars on dirty diesel generators and antiquated power plants to keep the lights on during the summer. The Northeast is heating homes this winter with carbon-intensive heavy oil due to the lack of cleaner gas. And Europe has been forced to reopen coal power plants. we see this acute supply-demand mismatch globally. This imbalance has seriously threatened energy availability, security, and affordability. It has also compromised the health of people and businesses around the world. Furthermore, it has set the world back on its sustainability goals. The biannual EPA e-grid numbers came out last week, and they show that marginal and average CO2 emissions have gone up in the last couple years in many geographies. Additionally, the prolonged power outages experienced repeatedly in places like the U.S. Gulf states speak to the fragility of the grid. Commercial and industrial consumers of energy are alarmed by the lack of secure, affordable, and reliable energy options from their utilities. They are increasingly wanting to take control of their own energy destinies. Many of them are turning to Bloom for behind the meter solutions in these situations. It should be no surprise to you then that we have booked over 100 megawatts of orders from customers in the US to solve their time to power issue. Also, as Greg will cover in his remarks, we have made great progress operationally. We will leverage our technology advances increased manufacturing scale, and other efficiencies to drive improvements in our margin profile. The cost down program is a cornerstone value for Bloom and is part of our DNA. Lowering our cost of goods should enable us to enjoy both growth and profitability. Bloom is now a predictable growth company. We offer the world a unique, mature, and proven platform solution at scale, a solution that can be deployed today with a clear pathway to a net zero future. With that, let me turn it over to Greg to discuss our financial performance. Greg?

Thanks, K.R. This past year, we achieved strong commercial, operational, and financial results that position us to be a leader in the global energy transition. Let me begin with a few highlights. We had record revenues. For the fourth quarter, product and service revenue was up over 41%, and total revenue increased more than 35% versus a robust fourth quarter 2021. For the year, product and service revenue was over $1 billion, and total revenue was $1.2 billion. Our margins improved. Fourth quarter non-GAAP gross margins surpassed 30%, resulting in 23% for the year, up 130 basis points versus prior year. Our backlogs for systems and service has reached $10 billion, the largest in Bloom history. We completed the first phase of our Fremont factory, adding 300 megawatts of stack manufacturing capacity, which doubled our capacity from the beginning of the year. And we built two gigawatts of electrolyzer assembly capacity in Delaware. We are providing a 2023 framework consistent with our long-term guidance built on strong growth and margin expansion. With those as highlights, let me provide some additional context to our performance. The value proposition for our energy servers and electrolyzers is robust. Our customers need resilient power that reduces their carbon intensity while providing optionality to move to onsite net zero solutions like hydrogen in the future. Our time to power value proposition is particularly meaningful for manufacturers and data centers. especially when the local utility is unable to provide the additional power to support their growth. For our electrolyzer, we are engaged with large-scale developers of hydrogen and green ammonia projects. They clearly value the efficiency advantages of our solid oxide technology and our manufacturing readiness. We are also partnering with developers for significant opportunities in waste to energy. In some instances, We are providing power solutions to enable low-carbon intensity renewable fuels, and in other cases, we're providing solutions to use biogas for resilient power across dairies, landfills, and wastewater treatment facilities. Opportunities are progressing with a sense of urgency, aided by the United States Inflation Reduction Act and similar incentives in Canada and Europe. The system backlog for our 24-7 always-on energy server is $2.8 billion, up 16% versus prior year. When combined with the revenue that should be earned on service contracts, we have a total backlog of $10 billion, up 17% versus year-end 2021. When comparing year-over-year growth and backlog, it's important to remember that in 2022, It was the first year of a three-year take or pay contract with SK Ecoplant that was included in our 2021 backlog. When adjusting comparisons to reflect SK Ecoplant's 2022 deliveries, our system contract value backlog has increased 41% versus prior year. Our fourth quarter non-GAAP gross margins of 30% improved 9.2 points versus the fourth quarter 2021. The margin increase was driven by improved pricing mix on our fourth quarter acceptances, unit cost reductions, ITC benefits, PPA4 repowering, and product revenue being a larger percentage of the total revenue. We benefited by a convergence of these events in the past quarter, and we would not expect this margin rate to be our new baseline. The PPA4 repowering was similar to the PPA3A repowering in the second quarter. We executed the sale of a previously consolidated PPA entity, and by doing so, we eliminated 70.8 million of non-recourse debt, enhanced current margins on higher ASPs, and simplified our financial reporting. As part of this transaction, we recorded 73 million of charges through our electricity segment operating expenses, and other expense that were removed as pro forma adjustments from our non-GAAP reporting. We have one remaining consolidated entity, PPA5, that we may repower in late 2023 or early 2024 with a similar approach. Our supply chain and manufacturing teams are successfully navigating the current environment. We completed the first phase of our Fremont facility expansion which doubled our stack manufacturing capacity from the beginning of the year from 300 megawatts to 600 megawatts. As the number of builds increased, we saw a decrease in our unit costs quarter over quarter. To reduce costs in 2023, we are increasing the power density of our energy server, identifying material savings, securing supply chain deflation, automating manufacturing processes, and benefiting from operating leverage. We fully expect to return to our annual product cost reductions of 10% to 15%. We ended the year with more than $500 million in cash balances. These balances do not yet include the $310 million from the SK Ecoplant equity investment, which is expected to close in the first quarter, subject to remaining regulatory approvals. Last quarter, Given the rising interest rates, we elected not to factor over 160 million in eligible receivables. Had we factored these receivables, cash flow from operations usage in 2022 would have been only 31.7 million, roughly half of our 2021 usage of 60.7 million. In 2023, we expect strong revenue growth and expanding margins consistent with our long-term guidance provided last February. As we do less installations and reduce our electricity segment, the more meaningful measure of our growth, product and service revenue, is expected to grow 20 to 30 percent to $1.25 billion to $1.35 billion. We expect total revenues to reach $1.4 billion to $1.5 billion, up 17 to 25 percent for the year. This year, we plan to reduce our product costs over 10 percent and expect our non-GAAP gross margins to improve 200 basis points to roughly 25% for the year. With these revenues and margins, we would expect non-GAAP operating income and cash flow from operations to be positive in 2023. Our business is delivering. For the first quarter 2023, based on likely acceptances, I would expect product and service revenue growth to be in line with the total year growth targets. Non-GAAP gross margins should be up 200 to 300 basis points versus the first quarter last year as three-month startup costs do not repeat. As in previous years, we expect 40% of our revenue in the first half and 60% in the second half of the year, driven by the seasonality of acceptances. As such, our second half margins tend to be higher as a creative product margin is a greater percentage of the total. In summary, we had a strong operational year in our building momentum with the demand for abundant, clean, and resilient energy. We believe the company can build upon our mature solid oxide platform, solid record of accomplishments, and robust growth roadmap. We are extremely excited about our future, and I look forward to showcasing the team at our investor conference on May 23rd at the New York Stock Exchange. With that, operator, please open up the line for questions.

Absolutely. We will now begin the QA session. If you would like to ask a question, please press star followed by one on your touchtone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. Please limit yourself to one question. Once you ask your question, please mute your mic. If you have a follow-up question, please queue up again. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We'll pause here briefly to allow questions to generate in queue.

The first question is from the line of Maneet Gupta with UBS.

Please proceed.

Hey, guys. Congrats on a strong quarter. My question here is, I was just listening to the Dolph Kleeman's presentation from the World Bank, and he was saying that if the world has to decarbonize, we need 200 gigawatts of electrolyzer capacity every year between now and 2050. And so when you look at Bloom, you have shown immense capital discipline, but if some of these growth numbers by these world agencies are right, is there a point where Bloom takes a look and says, Maybe we can be a little more aggressive and press harder on the gas where one gigawatt of capacity every two years is just not enough. And I'll leave it there. Thank you.

Manish, thank you so much for covering this. This is KR. And here is what I would say. We are super excited about hydrogen because that is the abundant clean power the world is craving for. We are not in the business of guessing when that hockey stick is going to take off, but we are extremely prepared. What I mean by that is we don't need to do a gigawatt a year. We can do copy exact lines in gigawatt lines across the world wherever we need to do it. And what we have shown you with the doubling of our capacity, is within a year we can recoup that capital there is not too many factories that i know of that can do that and technologies that can do that we intentionally did that so when this hockey stick happens we are there to meet the moment and not say why we can't grow so we are prepared ready gearing to go the world needs to step up and actually make it happen uh we we have the plows somebody needs to now start digging those gold Thank you so much.

Thank you. The next question comes from the line of Julian Dumoulin Smith with Bank of America. Please proceed.

Hey, good afternoon. Congrats on the results, Dave. Hey, so just coming back to the hydrogen conversation, I'll start there. Just what's included in 23 guidance here? I just want to understand what's in, what's out, and specifically as it relates to hydrogen. How many projects or what can you discuss with regards to what's assumed in 23 as well as hydrogen in the incremental backlog that's being disclosed here if you can?

Yeah. Hey, Julian, it's Greg. So one of the reasons I highlighted our backlog being around the natural gas server, our 24-7 energy servers, that's the vast, vast majority of what is in our backlog today. The team is very excited about the opportunity. We've got a number of projects that Rick and the team are working through And we're really excited about the commercial momentum and the sense of urgency that the team has. So as you look at the backlog, it is predominantly the server with no electrolyzer in there. If you look at the 2023 framework, as we talked about, as we get orders for the electrolyzers, the deliveries in those are likely to be late 24, 25, before you see any commercial momentum out of them. So as you think about the 2023 guidance that we've put out for revenue, it's really around our core product today that we're selling on the energy server in the U.S., in Korea, and other parts where Tim has made a lot of progress on the international side. So really excited about that market, but it's not yet contributing to the overall framework or backlog at this point.

Thank you. The next question comes from Delana Michael Bloom with Wells Fargo.

Please proceed.

Thank you. Good afternoon, everybody. I wanted to stay on the backlog for a second. It's obviously up quite a bit, which is pretty encouraging. I'm wondering if you could just speak to the profile of the customers who are behind that backlog and maybe give us a flavor for geography and then how many years out is that backlog representing now?

Yeah, so it's on our backlog, right? In order for a contract or a project to make it in our backlog, it's fairly stringent on the approach that we use here. So it has to be a firm contract, there has to be skin in the game for both of us, and there has to be a firm delivery on it. So in order for that project to be in our backlog, it's got to have those things. As you look at the projects that we have, our USC&I business has really had a strong 2022. And if you look at the types of projects that they are seeing, they are in the larger size scale than they were seeing pre-pandemic, meaning of size in the 25 megawatts and above type size. You're seeing them in the time to power area and resiliency both together, either separately or together, meaning it is a large project that's meaningful for that customer around their ability to perform their operations today or to bring additional operations online so they can meet their growth prospects. So those, I'd say, is what we're seeing in the U.S. Korea tends to be, what we're seeing is still very much the take-or-pay contract. And the comment I was trying to make was we had three years of take-or-pay last year. We now have just two years. And that's why I did that adjustment math for you. And then broadly, you saw the announcements that Tim's team has been able to do in Italy and in Taiwan on good-sized projects in the 10 megawatt starting on the relationship side. So we're getting some good scale and making sure that where we plant flags we can support not only our core originations, but our service business once we land those units. So I feel like we've got some really strong diversity that we're building into our backlog. And in the markets we're in, we're gaining both number of deals and size of deals, which is really encouraging.

Thank you. The next question comes from the line of Martin Malone with Judson Rice & Company. Please proceed.

Good afternoon. Thank you for taking my question. I wanted to ask about EV infrastructure and if you're seeing demand for the energy servers in conjunction with building out commercial-sized EV infrastructure.

That's a great question, Martin, and yes, we are. What we are hearing from our corporate customers is when they talk to us about their loads, They are not just talking about their factory industry loads or their data center loads or their corporate loads, but they're simultaneously saying, if we have a fleet of vehicles and they are going to be EVs for the last mile, how do we power them? How do we keep them going? We are also hearing from utilities that are beginning to talk to us about the EV load being in the middle of congested cities where the last mile problem is going to be a big nightmare for them unless they have some generation right on site. So these are the two places where we are beginning to see traction. And I would imagine in the next few months, this is only going to get even better given that the IRA has given such a strong incentive for chargers and fleets to get charged and more and more vehicles are showing up in the market as EVs.

Thank you. The next question comes from the line of Jordan Levy with Truist Securities.

Please proceed.

Afternoon, all, and thanks for taking my question. I just wanted to hit quickly on the new application. You all put a press release out on the combined heat and power, and maybe just talk a little more detail on that.

Yeah. So, look, the new look at – sorry, repeat the question one more time so it's fully clear to me before I answer it?

Sure, yeah. I was just wondering if we could get more details on the combined heat and power application that you all discussed with heat capture.

Absolutely. So look, as the world is marching forward, the molecule of fuel, whether it's hydrogen, whether it is natural gas, renewable natural gas, that molecule becomes more and more precious. Decarbonization is going to happen a lot more quickly than that molecule can be used to its utmost efficiency. And the end-use customers are beginning to understand that. And more and more customers are saying, how can you give us more juice out of the same molecule that's coming in? And a way to extract more juice out of that molecule as useful energy is not only our very high electrical efficiency, one of the best in the business, but on top of that, to be able to extract some heat and provide that heat, and especially in the European markets with the incentives being set the way they are, it is very, very attractive for customers to do that. They will align their incentives with decarbonization and efficiency. Industries more and more are now looking at the cost of energy and wanting to extract as much as they can. And so this offering of combined heat and power is going to be extremely valuable. The difference between legacy combined heat and power and us is that the legacy gives you a lot less of electricity, which is the higher value commodity, and a lot more of the heat. With Bloom, you get the exact opposite. more of electricity, which is a high-value commodity and needed more, and less of the heat, nevertheless a very valuable resource. And that combination should get us knocking at the doors of 90% efficiency with our roadmap, and that is very, very attractive.

Thank you. The next question comes from the line of Colin Roosh with Oppenheimer. Please proceed.

Thanks so much, guys. You know, Greg, with the cost that you're talking about this year, could you give us a sense of where those things are coming from? And then with the margin guidance, it suggests that prices are going to come down a little bit. Can you talk a little bit about if that's coming on a mixed basis, internationally versus domestic, or what the real drivers are around that price down as well?

Yeah. So on the cost down, Colin, you know, whether it was, The pandemic itself and where our engineers were working via Zoom and not together, or the supply chain issues that we were having globally and the inflation that it caused there, or just quite frankly, doubling our capacity last year and the ramp that we were going through and the inefficiencies of running a factory not at full output. Our costs, frankly, were not where they wanted to be. When we got to the end of the year, this is, I think, the first time in Bloom history our costs were up, small but still up year over year. which is not something that is normal for us. So as we looked in the middle part, later part of the year, and said, okay, what is our path going forward? There was a number of areas that we've been identifying. One is just the power density of our machine. It is one of the things that we've levered over the years to increase the output and reduce at the same build cost and reducing our cost per kilowatt. So we had some increases that we've been able to get out of our current design, and there's more to come there. The second thing we've been able to do is really help to work with our supply base, look at our key components, look at their manufacturing processes, and ultimately improve on what their operational efficiencies are. And we're seeing some good material price deflation that's coming down. At the same time, we've engaged our engineering team to really go in and look at the core of our product and look for how we design it, the parts that we source, and elimination of pieces and simplification of the product that they're able to do, and that's really contributing to the cost up. And then lastly, not only on the components that we buy, but once we bring them in-house and how we build the machines, we're seeing some nice operating leverage as Fremont is getting up to its full line capacity. And at the same time, we're seeing a lot of improvements in the process that we're able to make around automation. For us, automation is all about our ability to scale in this market. It is not something that we're looking to reduce our headcount on. It's really making sure that for our direct labor output, direct labor, we're able to get a lot more output out of. So when we look at the plan going into this year, in the framework it's about 10% that we've built in for cost down into our margin guidance for the year. And I will tell you our internal targets are more aggressive around that. And we're going to push the teams hard to deliver on that 10%. And if it gets better, then that would be a good thing. On price going forward year over year, when I strip out some of the unusual, so if I strip out the repowerings and I strip out some of the other things and look at core on the product, prices remain relatively flat over the last three years, both on a mix-adjusted basis and a non-mix basis. We don't have a lot of mix on our pricing, meaning that when we make decisions around where we want to put our units, whether it is here or in Asia or in Europe, the decisions we're making is really where can we get the most amount of growth and the best returns on margins. That tends to solve us to having very similar selling prices across the globe. So as we look into 2023, the couple hundred basis margin improvement that we're expecting is really going to come from us holding our ASPs flat after eliminating some one-timers for this year on a core basis and then taking our product costs down And we think we've got a pretty robust plan to get back to that cost down and continue to expand on our margins.

Thank you. The next question comes from the line of Sam Burrell with Jefferies. Please proceed.

Hey, good afternoon, guys. Wanted to hit on the backlog once more from a slightly different angle. I mean, obviously, very impressive growth and the color you've given us so far is very helpful. But the footnote on it saying that it reflects anticipated ITC and other tax incentives as applicable. Just curious for a little bit more color on that. Is that as simple as the ITC being effectively renewed and that was a boon for customer orders? Or is it actually embedded in the backlog number in a different way? And then just one more thing on the ITC. As I understand it, it's due to convert to the new clean energy investment credit after 2024. So as things stand now, do you foresee that changing any dynamics between you and your customers?

Yeah. So Sam, on the way it naturally works within the business is most of our sales are through a PPA structure where we're selling to the customer a cost of electricity over a period of time. And then with that, with our financier, we then take the cash flows associated with that and we calculate what our selling price of the machine is going to be, what the service costs are going to be, what the install costs are going to be. So as you calculate your selling price, whether it's in the U.S. and in an ITC or in another country, another jurisdiction that has some other type of incentive, we incorporate that incentive into the overall cash flows as we calculate what we will be selling the product to the end customer through the SPV. So we just want to make sure we're very clear that Each year, depending upon what the incentives are for our backlog, we use that as part of our analysis to calculate what we perceive to be, what we assume to be will be the selling price of that contract. Listen, on the sunsetting of the ITC, not something that is new for us, right? Every two years or so, we've been through this process before. Generally, what happens is we get an extension for about this period of time. We move forward on it. and then depending upon where we're sitting as a global economy on decarbonization and resiliency, that incentive gets renewed. If you think of it from a practical standpoint, yeah, it may be only two years, but through Safe Harbor and other parts of the contract, we're able to get about three years' benefit out of it. So it feels like we're only about six months into the current one, which is early days, but we've obviously taken that in the forecast to us. Because at the end of the day, our goal here is to continue to drive down the cost of our product and make sure that we're prepared for able to compete at some point where these incentives don't exist. But I would say there's a high probability in our view that there will be an extension in the future and that we wouldn't be dependent upon it, but it would be a part of it. I don't care if I've got it.

And if you just add to that, right, a fraction of our business and as we grow internationally, a shrinking fraction of our business will depend on ITC, and ITC at even 30%, if we are doing double-digit cost reductions every year, three years from now, we should be able to offer our customers what we need to offer. So we focus more on what's in our control and push that hard, and we are confident that we can run a business with or without subsidies.

Better said. Thanks, Sam. Thanks for reading the footnotes.

Thank you. The next question comes from the line of Biju Kershaw with Susquehanna. Please proceed.

Hi. Thanks for taking my question. I want to touch on the services margin. Can you give us some additional color there? When do you expect to get to break even there? And also, can you touch on sort of the time or the length now for module life when you do the change outs?

Oh, sure. The service margins, right, that business is impacted by the same costs that we've had on the product side. 60% to 70% of our service costs is around that replacement module that happens generally in the four or five or six years, and we've seen an extension of that each time. So as we look at our service margins for this year, they're not where we wanted them to be. There's more work that we need to do on that portfolio But I would tell you that the most significant contributor of being off where we expect it to be is really around the first product cost translating over into the replacement power module. As we do the work on the cost down that I was talking to Colin earlier for the product, that's going to translate into the service margins and get us back to where we need to be going forward. Our expectation is still that we're pricing our new deals all at 20%, and we expect in the middle part of this decade, around 2025, we should be at that 20% service margin. That's still our expectation for that business going forward. In particular, on the replacement of the power modules, remember, we're replacing power modules not when they're at end of life. We're replacing the power module within the service contract when it economically makes sense in order to do that. So we've seen an extension of that every year. And what we're shipping today has a much longer life than what we would have shipped four or five years ago. And as part of overall on our cost down and why we're so confident in this business as being a really good annuity as we go forward on it having a sizable growth as well as a really attractive margin.

Thank you. The next question comes from the line of Casey Harrison with Piper Sandler. Please proceed.

Good afternoon. Thank you for taking the questions. Apologies if I missed this somewhere in one of the releases, but how many acceptances do you expect during 2023? And how should we think about the geographic mix for your revenues or shipments during 2023? Thank you. Yeah.

So we didn't get guidance on acceptances, nor do we really want to. It's not something I'm going to focus on going forward. And the reason is this. As we introduce different applications on our current platform, the power rating associated with that is going to be different. So where two or three years ago I could have told you we shipped 188 megawatts of revenue because we were shipping all natural gas servers globally, as you go forward and you begin to think about deliveries of electrolyzers, marine, other things, the power ratings with those are going to be different. Microgrids. Microgrids. All of those things are going to get out going forward. So I would say... As you looked at my revenue growth projections for next year and you look at product and service, you can estimate from that what you think volumes are going to be if price is going to be constant over the period. Did I miss the second part of his question yet? Good.

Thank you. The next question comes from the line of Noel Parks with Tilley Brothers. Please proceed.

Hi, good afternoon. You know, You know, something that you've talked about in the past is just the time lag between when you win new business and when the product is actually delivered just because of the degree to which you're sold out in advance of your production. And can you give a little insight into sort of with the current backlog and with what will translate into revenue recognized this year, what sort of era or horizon of pricing is going to be being booked, being realized this year? Just to kind of clarify me on sort of there may still be upside on pricing that you're getting in the marketplace now that is still going to take a while to make its way into revenues.

Yeah. Yeah.

So, Noel, I would tell you that even over the course of the three years that I've been here, the timeframe between when we identify an opportunity to when we contract to ultimately when we deliver continues to shrink. I would say our impatience is always that it's too long, too complicated, and from a process capability standpoint, we want to continue to lean that out and make that much more predictable. So what we're seeing today and what we'd expect where traditionally almost all of the backlog would be translated to revenue in the following year, we're seeing opportunities that book early in the year and may lead to power, especially in the time to power space, much sooner contracting that time period that we've seen historically. So on the pricing side, we like where we're seeing in the market right now. We're able to provide a value product to our customer at a premium in a lot of places to where other types of technologies would be at. and we expect to continue to provide a lot of value for our customers and continue to look to make sure that our margins are met while they're meeting their economic objectives on it forward. It's a fancy way for me to say I don't expect a lot of price compression here as we move forward. People still recognize the value of our product, and we've been holding our price, and as we take costs down, that should expand our margins.

Thank you. The next question comes from the line of Abhi Sinha with Northland Capital Markets. Please proceed.

Yeah, hi. Thanks for taking my question. Just if you could tell us a little bit more about your international versus domestic revenue breakdown going forward, how should we look at that? If you could just give some color, like, compare and contrast the two, like, you know, what applications are being used, what the drivers, what the margins, how should we look at the two, compare and contrast the two?

Yeah.

So listen, for the year, right, we went in, I kept saying we were doing a lot of our Korea shipments earlier in the year because we were capacity constrained. We wanted to make sure we met our contractual obligations to get to them, to their volume for the year. And I told you by the end of the year, we'd get it back to our historical levels. We're about where we were a year ago on our international versus our domestic shipments. Listen, going forward, I would expect that as a percentage, the U.S. will be smaller. Not that we don't expect to grow very aggressively within the U.S., but we are very focused on growing and to continue to grow in Korea and to grow in Europe and other parts of Asia. So my expectation as we go forward that you'll begin to see more and more of that bar be international versus domestic while the size of the overall bar increases and the domestic component continues to increase at a really healthy clip. What we're seeing today for returns is We really are not interested in entering a country today that does not provide us both components of an opportunity to grow, meaning they value our product and there is a need for it and we can sell it and get a healthy return for the shareholder in that growth. So when we compare opportunities back and forth, it's really just that. Where do we want to put our precious resources? Where do we want to apply our capacity for and how do we make sure that we're driving the most profitable growth as we go forward? And if a country is not ready for us yet or a territory is not ready for us yet, either because they don't value the product or they don't have an incentive or we just not yet met their price point, then that's okay. We'll wait and we'll enter that market in the future. There's more than much opportunity for us to grow. We're not going to reduce our profit margins or our expectations on growth just to simply enter a new territory.

Thank you.

The next question comes from the line of Amit Taka with BMO Capital Market. Please proceed.

Hey, good afternoon, guys. Congratulations on the quarter. I know KRN is kind of, initial remarks mentioned, kind of 100 megawatts of time to power projects. I was wondering, like, does that include, and does your backlog reflect, I think you guys are working on like 70 megawatts, 75 megawatt project in Oregon with Amazon?

um yes uh we have we have three stamps somewhere close to 75 megawatts contracted with amazon web services and the details of that in terms of commercial agreements like any other commercial agreements we will not discuss but i think it paints a larger picture if you just step back and think about this right the data center market along with the data transmission network operators put together are somewhere in the neighborhood of 600 terawatt hours of power consumption and growing at a rapid rate. If the two put together were, you know, as a fraction of the total global power consumption would be somewhere near, you know, nearing 4% of global power consumption. It's a huge opportunity. and we are engaged with both sectors data centers as well as data transmission network operators and we see this is an amazing market now if you just look at them growing at that clip and consuming almost four percent of electricity there is no industrial sector that is more responsible and cleaner than they are if you take the entire global ppas for renewable energy, roughly 30 gigawatts in 2021. 15 gigawatts of that 30 gigawatts, one half, came from Amazon, Microsoft, Meta, and Google for hyperscalers. These hyperscalers do everything they can to procure every electron of renewable energy that's available. And this is the power of and. They need reliable energy right where they need it. And they come to us for that reliable 24-7 energy, not only today with the fuel that's available, but for the future because we can transition them to a greener fuel when they need it. So we're super excited about the opportunity. The 100 megawatts includes that.

Thank you.

The next question comes from the line of Alex Kania with Wolf Research. Please proceed.

Hi, thanks for taking my question. Maybe just a question just on evolution of policy. You know, you've had, you know, four or five months to think about the IRA a little bit. Has there been any kind of evolution of thinking of the opportunities that are embedded in there or any kind of fundamental questions that need to be need to be answered, and then maybe tie it in with the hydrogen hubs that have been narrowed down, I guess. Just what sort of role has Bloom kind of been envisioned in participating in the ones that at least we know that you're associated with?

It's Greg. So let me start. Listen, we're as excited as the first day that the inflation reduction came out on how it applies to a number of parts of our business, whether it was the ITC conversation we were having before, a hydrogen PTC credit, carbon capture around 45Q on size and scale, and a lot of different things.

Biogas.

And biogas and the whole waste energy space. So we're extremely bullish on it in the U.S. And then as you travel the globe and go to different countries, they are very excited that the United States has taken a leadership position on this, and they're anxious to get incentives to help them compete in their economies and globally globally. So it's definitely bringing the rest of the world along and accelerating their incentives to make sure that it happens. So we're as bullish as we were on day one and we're excited about it and how it plays through. Really at this point it's just making sure that we're driving through all the questions that need to get answered going forward as we take that law and change it into practicality. The Treasury Department and the IRS is very busy making laws and rules based on that. So they came out somewhere around with ITC at the end of the year. We're excited around learning more about the Made in America and the energy economies, disadvantaged economies that move forward areas and get those rules made. There's some rules around transferability of tax benefits and refundability, those types of things. So we're really excited about it, and kind of within my world, it is all just making sure that we're able to maximize those benefits as incentives for our customers as we grow. So we're really excited about it remaining, and we think, as it translates, it's accelerating, like we said, the commercial velocity of the funnel.

And, you know... It is not if, right? It is when and how soon when the hydrogen economy really takes off. We have the double play. We have the best device to convert that hydrogen to electricity. We have the best device to take heat coming from a waste heat to be able to use and provide and generate cheaper hydrogen. And if it's a pure play electricity, we still are a lot more efficient than any other technology out there. So we are super excited. No matter which direction the world decides to go, we are ready to take the challenge on.

Thank you. The next question comes from the line of Pavel Malacho with Raymond James. Please proceed.

Tad Piper- Thanks for taking the question in the context of other jurisdictions, following the US lead and driving clean tech manufacturing, the European Union is talking about this green industrial plan. Tad Piper- Based on that, do you have any appetite to establish a manufacturing footprint in Europe, either for fuel cells or electrolyzers.

At this point, what we do and how we think about where we set up our factories and what we do depends on where the market develops. What we did in Korea is do the final assembly of our products for that market and any neighboring markets in Korea because they created a huge market for us. We will do something very similar in Europe. when the timing is right, but it has to get to a certain scale. You know, this is not a field of dreams. You don't build it hoping they come. We actually have a factory with which we can supply, and then when the actual market is there, we can put the factory to be able to serve it even better. That's our approach.

Thank you. The next question comes from Dalat.

the line of Mahip Mandela with credit sleeves. Please proceed.

I'm sitting in for Mahip. We have a question. As you guys ship different product types and sizes into different markets, how should we think about capacity utilization at the factories this year?

Listen, we've got two factories today, right? And then we have the joint venture for assembly in Korea. But The vast majority of our stack manufacturing capacity is here in California. We had 300 megawatts with our Sunnyvale facility. That remains. We've added 300 megawatts in the first phase of our Fremont facility. That brings us to 600 megawatts. And we have the opportunity to add another 600 megawatts in Fremont as part of the initial part of our build-out here. We'll decide later on whether or not it's economical to build more in Fremont, but our initial plan was to take it to a gigawatt to start. That gives us a gigawatt or 1.3 gigawatts total of fuel cell capacity. And if you convert that to electrolyzer capacity, you're knocking on the door of three gigawatts at that point. In our assembly operations in Delaware, we have the opportunity to build gigawatts of capacity in our fuel cells. Then last year, we announced that we also have an assembly line there for our electrolyzers on it. So we are ready to go. We have about another $40 to $60 million to invest in Fremont to get us to those levels. And as KR spoke before, the payback on that is less than a year fully utilized. So we have the ability to scale very quickly in order to meet demand. And then from there, we'll look how we add more capacity going forward, but that should take us through at least for the framework for this year and the next year without needing to add any additional staff capacity.

Thank you. The next question comes from the line of Jeff Osborne with Cowan.

Please proceed.

Good afternoon, Greg. Two quick ones. I might have missed this, but I was wondering, could you give us the percent of the $2.8 billion in systems backlog that is from SK as part of the taker pay? And then, you know, the second question is on the gross margin. Could you give us a walk between Q3 and Q4, the strong performance, other than price? Was there any other factors that led to the gross margin result that you just printed?

Yeah.

So, Jeff, so last year we talked about the three-year taker pay being 1.5 billion or 500 megawatts of capacity. We shipped one year of that. So out of what we shipped, it gives us about two years left. It's not quite a third, a third, a third. So if we shipped 120 megawatts or so this year to Ecoplant, meaning 22, the remainder of that is in the backlog going forward. On the walk from the third quarter to fourth quarter, there was a lot of opportunity on price, and we talked about that coming into the quarter. Not only did we have the opportunity with PPA4 and the repowering there that we were able to do at Nice Pricing, we also talked about having an opportunity where we were just frankly prioritizing transactions and opportunities that were to the right of the mean. We like the mean on our overall gross margins in our backlog, but we definitely prioritized to make sure that we were able to get to our commitments for the year. And then on top of that is Fremont coming in. If you look and do a comparison, and you could do this based off the supplementals we provided for third quarter and fourth quarter, you can see that we were able to bring down the cost per kilowatt of our machines just shy of a couple hundred dollars. Price was obviously a big impact as well as cost coming down, and then you can isolate the other components of it.

Thank you. The next question comes from the line of Noel Parks with Tooley Brothers. Please proceed.

Hi. I just wanted to follow up to get some additional thoughts for you specifically on biogas. I'm just interested in... biogas-driven projects and if you're seeing any trends in either deal structure or financing or ownership particular to those. I was wondering if there are any projects you could talk about in general terms that come to mind that seem sort of novel or innovative in that space.

Good.

Hey, thanks, Noel. It's great. Gary, I'm going to pass this one over to you. This is the last question, so just end with your final comments after waste to energy. Thank you, Greg.

Thanks for that question. Let me give you an example. There are two ways to think about waste to energy for us. One is the traditional, what we have talked about before, of generating biogas and being able to use that biogas on site, whether it is using animal waste. whether it is using landfill waste and or, you know, like water treatment plants. But then the really interesting opportunity that we are seeing, and these are fairly good sized opportunities being developed across the country, and they're all being developed to meet the LCFS standards and provide a biofuel as well as for SAF. And this is for the aviation fuel. And here, They command a premium, and the premium they command increases exponentially as your carbon intensity of the fuel you produce goes down. So it's inversely proportional. In most places where they find it attractive to make either SAF or this LCFS fuel, say, in the middle of Iowa to be able to ship it to California, they have the choice of a really carbon-intensive grid electricity at reasonable prices or bloom at a premium to that reasonable price in that state, but the opportunity they have to put bloom and capture significant value on the other side for the fuel based on the carbon intensity is very high. So this has become a very attractive value proposition for developers that want to do it. In addition, because they can capture all the carbon dioxide and the heat coming off our systems and pipe that into their biofuel processing refineries, that becomes a game changer. And so the novel attractive thing is bloom for that synthetic fuel is a source of almost zero carbon electricity because they use the carbon capture. It is the use of electricity, which now is zero carbon, and then the use of heat. So that's a huge one. And with that, let me conclude by saying, look, you are seeing a company that is firing on all cylinders. Our top line growth has been phenomenal this last year, and we are not only happy with the volume that we booked, but the quality and the diversity of that pipeline that we have from a geography perspective, from an applications perspective, and from the industries we serve and the growth opportunities we see in each of those markets and segments and industries and customers. If you look at how the team has performed internally within the company, we're extremely happy with how we navigated a very difficult environment and delivered on the promise of doubling our capacity on time. We couldn't have reached our Q4 revenues if the factory was delayed by a quarter, for example. So you're looking at a company that's firing on all cylinders, and we really think this is just the beginning of a great journey, and the timing on the market is fabulous. And this didn't happen by accident. This is a company that's been building and waiting for this moment for the last 20 years. Now the externalities have aligned to both accept and value the innovation we bring, which is for both success and significance. So thank you for being part of the journey, and we really appreciate it.

That concludes today's conference call.

Yes, that concludes today's conference call. Thank you. You may now disconnect.