Plug Power Inc. (NASDAQ:PLUG) Q2 2023 Earnings Call Transcript

Plug Power Inc. (NASDAQ:PLUG) Q2 2023 Earnings Call Transcript August 9, 2023

Plug Power Inc. misses on earnings expectations. Reported EPS is $-0.35 EPS, expectations were $-0.28.

Operator: Greeting, and welcome to the Plug Power Q2 Call [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Teal Hoyos, Senior Director of Marketing and Communications. Thank you, Teal. You may begin.

Teal Hoyos: Thank you. Welcome to the 2023 second quarter earnings call. This call will include forward-looking statements. These forward-looking statements contain projections of future results of operations or of our financial position or other forward-looking information. We intend these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward-looking statements, and such statements should not be read or understood as a guarantee of future performance or results.

Photo by Juan Fernandez on Unsplash

Such statements are based upon the current expectations, estimates, forecasts and projections, as well as the current beliefs and assumptions of management and are subject to significant risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including, but not limited to, the risks and uncertainties discussed under Item 1A Risk Factors in our annual report on Form 10-K for the fiscal year ending December 31, 2022, quarterly results on Form 10-Q and other results we file from time-to-time with the Securities and Exchange Commission. These forward-looking statements speak only of the day in which the statements are made, and we do not undertake or intend to update any forward-looking statements after this call or as a result of new information.

At this point, I would like to turn the call over to Plug’s CEO, Andy Marsh.

Andy Marsh: Thank you, Teal. And thank you everyone for joining the Plug’s second quarter conference call. Plug is in the process of developing an unparalleled hydrogen fuel cell platform. This encompasses our diverse array of products, extensive international collaborations, backing from government and entities, financial partners and our robust infrastructure. Our second quarter outcome reveals noticeable growth in several of our recently launched products, particularly in our cryogenics sector, which garnered $69 million in revenue making a more than threefold rise over the previous year. Our international collaborations are yielding positive results as well. Through our joint venture with Renault, the initial product from HYVIA garnered positive reviews.

Kilometres magazine, a renowned authority in the realm of commercial vehicles in France, bestowed the heavy commercial vehicle of the year 2023 award upon the HYVIA Fuel Cell Electric Vehicle Master van. Through our partnership with SK, our joint venture Hyverse achieved a significant milestone as the first megawatt scaled electrolyzer to be certified in Korea. Our strong governmental backing spans across key global capitals from Washington DC to Brussels, Helsinki, Paris and Seoul, Plug has cultivated robust connections with government authorities. Given the vital intersection of energy and climate change with governmental policies, we have proven ourselves as trustworthy experts capable of offering insights and impartial analysis on the path towards a carbon neutral world.

This strategic policy alignment is reaping rewards in the present. As an American manufacturing company, Plug generated a $10 million increase in gross margin dollars during the second quarter attributed to the provisions promoting American made products under the IRA. We anticipate further advances as we tack into manufacturing incentives within the IRA along with the production tax credit for hydrogen. The IRA is starting to pay dividends to Plug. Furthermore, we have actively secured multiple sources of non-dilutive capital as we diligently expand our global green hydrogen generation network. Presently, Plug is in the final stages of the second round of due diligence with the DOE’s Loan Program office for $1 billion dollar project financing facility.

We have a term sheet, term sheet framework and we’re working through final processes to get this structure approved and [Indiscernible]. Simultaneously, we’re assessing various options, including corporate debt facilities for major financial institutions, alternative infrastructure, project financing and solutions for ITC project financings. Lastly, the unmatched nature of our manufacturing infrastructure that substantiates not only by our internal evaluation but also by feedback from customers and potential clients. Initially designed to support 2.5 gigawatts of MEAs, our Rochester facility now boasts a scalable potential of upto 7.5 gigawatts as we advance the production process. I’ve had the privilege of personally touring our Vista facility, our 400,000 square foot integration factory with a customer this past Tuesday, and quite honestly they were astonished because they’ve been at everybody else’s facilities.

Additionally, our hydrogen plant in Georgia for which we’re hosting an Investor Day on August 23rd, stand as the largest green hydrogen plant in North America. Navigating the process of scaling our business presents its own set of challenges and our ability to surmount these challenges serve as a distinct advantage for Plug. One’s been our gross margin challenge. What’s not readily apparent is that excluding one-time charges, our margins in the second quarter would’ve been minus 12%, over 20% better than Q1. Throughout the rest of 2023, we will see continual margin expansion. An industry leader shared with me recently the endeavor is truly valuable when it comes with its share of challenges, and this in the end provides a differential advantage.

The journey of mastering the construction of hydrogen plants, expanding factory capabilities, developing customers and concurrently introducing array of new products has undoubtedly been demanding. However, we firmly believe that the efforts investing in these undertakings will yield substantial benefits for all those invested in Plug’s success. At this point, Paul, Sanjay and I are prepared to address any questions you may have. And I think we’re open for questions.

See also 15 Most Important Medical Discoveries in History and 20 Countries With The Most Airports.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Bill Peterson with JP Morgan.

Bill Peterson: Lot to digest in release, so forgive me if we miss some things here, but I wanted to talk about the upcoming guidance from the US Treasury related to the IRA. And I know you’ve expressed confidence in the past, and it seems like there may be some positive news forthcoming. But first of all, when should we get some resolution on the additionality and matching things? And I guess if it was going to be unfavorable, I guess without this PTC, how would the economics compare between a US hydrogen plant and a plant in Europe?

Andy Marsh: And if I was going to — let me answer the first part of your question. It’s our assessment and it’s the assessment of many people that we will see guidance in September. And I think that from what we can tell from the guidance, there was a good article by Bloomberg, which is consistent with discussions we’ve had with many senators, with people in the White House, that I think that the regulations will be I think very reasonable in the end. We look at these plants today, so there are differences between the energy cost in Europe versus the energy cost in the US. So if you take, for example, green hydrogen itself, if you think about it, and I’m going to talk about generation without liquefacation, transportation. I think at $0.03 a kilowatt hour, you’re talking probably around $2.50 in the US to generate at a spot like Texas.

If you think about Europe — and that would include the cost of production and the cost of depreciation, Bill, would not include the cost of liquefacation or transportation. So liquefication probably adds to that facility $0.75, just to kind of give you a gauge. In Europe, with the PTC, obviously, the PTC was structured to make sure that hydrogen was cost competitive with natural gas. So when you start adding on liquefacation, transportation, you’re really probably talking about cost around, call it, $4.50 to $5 at a customer site for the best case, which will be Texas, which really puts hydrogen in the realm of natural gas. And I think that’s the goal of the IRA. If you look at Europe, the support will be different. It’s really more geared to — if you really look at the total dollars that Europe is putting towards hydrogen fuel cells, we think those numbers sit around $870 billion, but much more how you work the government grant process.

That’s why our international collaborations is real important, because — I know this is a long answer, Bill. But if you take, for example, our JV with HYVIA, we’ve been able to leverage over EUR200 million in government grants to support the development of that business. Does that help, Bill?

Bill Peterson: Yes. No, that’s super helpful. Maybe the second question from me is — it sounds like you’re moving in and that got some potential good promising outcome maybe with the DOE Loan Program office. But I guess what remains to be done? It sounds like you’re in the second stage of due diligence. And what would be the timing assuming you successfully passed that bar?

Andy Marsh: I’m going to hand that off to Paul, Bill.