Good afternoon, and welcome to the Bloom Energy First 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 Mesler, Vice President of Finance and Investor Relations at Bloom Energy. Please go ahead.

Thank you, operator. Good afternoon all, and thank you for joining us on Bloom Energy's first quarter 2020 earnings conference call. To supplement this conference call, we have filed our Q1 2020 shareholder letter and earnings release with the SEC and have posted it along with supplemental financial 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 and outlook. We assume no obligation to revise any forward-looking statements made on today's call. During this call and in our Q1 2020 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 Q1 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 new 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 K. R.

Good day. Thank you, Mark, and thanks to all of you for joining this call. These are unprecedented times, and on behalf of all of us at Bloom, I send out prayers to those gravely impacted by COVID-19. We sincerely thank the heroes on the frontline, who have been relentlessly fighting the virus. I hope that those of you joining us today and your loved ones are staying safe. I want to start by talking about COVID-19 and its effect on our business and the marketplace. Then I'll talk about our results and accomplishments this quarter. I will then turn it over to Greg Cameron, our new CFO, to talk about the financial results, our balance sheet, steps we have been taking to de-risk our business, and our outlook. I'll close with a few summary comments. Bloom Energy has continued to operate as an essential business throughout this crisis. Our manufacturing operations, maintenance and service functions, and field installation teams have continued to work and sustain our core business. Above and beyond maintaining the continuity of our core business, the Bloom team answered a call to refurbish ventilators and delivered over 1,200 of them in working conditions to hospitals at a time of national need. As importantly, we powered two pop-up field hospitals during this crisis with clean, reliable electricity using Bloom servers. In one case, we went from a standing start to powering the hospital in five days, showcasing the time-to-power capability of our solution. In another example, we upgraded an existing grid parallel installation with our always-on microgrid option and routed secure power to a field hospital in just three days, demonstrating the speed, flexibility and adaptability of our solution to meet the changing needs of our customers. I want to thank all of our Bloom employees for their passion, dedication, and perseverance, and for keeping our core business running while at the same time stepping up to go above and beyond to help fight this battle. I'm immensely proud of the efforts and commitment, and my heartfelt gratitude goes out to them. I have four specific observations about COVID-19 and its effect on our business. First, this crisis has crystallized how globally interdependent we are and just how vulnerable society is to disruptions that affect our global supply chain and impact the production and distribution of goods and services. Communities now understand that they must be locally resilient to survive such crises. Reliable localized power is at the core of such self-reliance. It will be upon local and state government to enact policies that promote resiliency. Second, a significant number of our customers we serve are essential businesses. These are hospitals, telecom providers, food service retailers, warehouses, data centers, and manufacturing facilities. At a global level, the importance of power has become acutely clear to them. COVID-19 has made them aware of the need for reliable, safe, clean, cost-effective, and localized energy solutions. In other words, we are an essential service to the essential businesses. Let me repeat, we are an essential service to essential businesses. Third, the shelter-in-place orders around the world present stark satellite images of clean, smart urban areas around the globe. This has evolved the sustainability discussion from one that only focuses on carbon footprint to include the importance of air quality. Even after life returns to normal, clean air quality is achievable if we use smart and clean emissions. There is no doubt there will be millions of people around the world who will suffer from compromised respiratory systems as a result of the virus. Cleaner air will be essential to their safety. We should expect there to be a greater appreciation for and desire to have power sources that emit no spots. Our particular Bloom Systems do just that, even when natural gas is used as a fuel. So while our focus on resilience delivers safety and business continuity at lower costs for our customers and the communities we serve, our systems will also deliver better air quality, and that will be important. Fourth, we know that nature is going to do what nature is going to do, whether it's wildfires, hurricanes, earthquakes, heat waves, or ice storms. We are not going to get a pass on a natural disaster because of the pandemic. If anything, we are worse prepared for the upcoming natural disaster season because of COVID-related constraints. In light of this, it is particularly important that we secure our critical facilities with resilient infrastructure. Now let me discuss some highlights from the year thus far. Our first-quarter results were in line with our estimates; more on that soon from our CFO. In the U.S. commercial and industrial markets in Q1, we powered 37 microgrids during 155 grid outages, resulting in hundreds of hours of safe productivity for businesses. We have seen a noticeable increase in interest in our sales pipeline for our always-on microgrid product offerings. Internationally, South Korea continues to be an important market for us. At the beginning of 2020, South Korea was one of the first countries heavily impacted by COVID. Since then, the country has been remarkably successful in combating the virus, and business there is returning to a new normal. We have continued to install systems in South Korea. In fact, 198 system installations have been constructed this year and will go online imminently. A picture of that site is on slide one of the earnings deck. We and our partner, SK, are very optimistic about this market for the rest of the year and going forward. We have reimagined and retooled our factories to operate safely and reliably, even if the restricted workplace requirements were to stay in place for a long time. Our entire manufacturing process line now ensures social distancing at each station, and no two people have to be within six feet of each other. Onsite nurses are monitoring employee health, and our new deep clean and wipe-down procedures are in place as additional precautions. We know these COVID-related work adjustments will add some expenses to our operation, but it is of utmost importance to ensure employee safety and business continuity. Our service business is operating as normal. On the U.S. installation side, we were able to complete the projects we were planning to expect for Q1, as evidenced by our revenue. In Q2, we have had slight delays on a few construction projects because of local moratoriums on permits and constructions. We are beginning to see construction resume and are hopeful this trend will continue. It is worth noting that we came into the year with a backlog of over $1 billion in contracted projects. We have not had one cancellation of this healthy backlog. There have been no requests to delay the installation of our systems. In addition, our installed fleet has more than $2.1 billion of service revenue, and the contracted systems in backlog have the potential for an additional $1.1 billion in service revenue. The service revenue is paid by our customers, such as AT&T, Kaiser Permanente, Medtronic, Gilead, Walmart, Costco, Apple, and Intel. Now, I want to introduce our new CFO, Greg Cameron, and welcome him to the Bloom team. Greg comes to us from GE and has a strong background in operation, financial services, and the capital markets. Greg will discuss our Q1 results and provide some highlights for the quarter. Many of you may have already met Greg virtually, and we are excited to have him with us. He hit the ground running and has already made a significant impact, helping us secure our recent debt extension and raise at the end of the quarter, which he will speak to in more detail. Greg?

Thanks, K.R. First, let me begin by saying I'm very excited to take on the CFO role at such a category-creating growth company. I'm here because I sincerely believe in this company's mission and the basic societal need for the power it provides. I recognize the ability of our technology to transform how power is produced, delivered, and consumed around the globe. No doubt, it's an interesting time to join a company. But what has really struck me is the deep belief of everyone in the mission of this organization and a desire to achieve real results for our partners, customers, and shareholders. And I'm looking forward to bringing my experience in finance and operations, as well as GE rigor and best practices to bear on behalf of Bloom. I officially became a Bloom employee on April 1st. Prior to joining, I spent time learning about the business, industry, and customers. I was also involved, as K.R. mentioned, at the tail end of the debt refinancing and had the opportunity to work with our finance team and partners to reach an agreement. I'm very impressed with our team. Over the past few weeks, I've also enjoyed meeting, either by phone or video calls, with sell-side analysts and connecting with some of our investors to hear their feedback. My guiding principle here at Bloom is to be open and transparent with the financial community. And over time, I look forward to simplifying our financial reporting and making it easier for you to understand and evaluate our financial health. Now, let's turn to the financials for the quarter. For your reference, we provided a summary of key financials along with a summary P&L and balance sheet. I don't plan to walk through each slide. But I do want to emphasize that we delivered what we said we would for the quarter, just as Randy had projected in the last earnings call. We provided a range on revenue of $140 million to $160 million. We achieved $156.7 million, up 6.6% year-over-year, and an increase of 8.9% in system acceptances. Our non-GAAP operating expenses, we provided a range of $48 million to $51 million. We came in at $48.8 million. We delivered an adjusted EBITDA loss of $9.8 million, which was better than our range of a loss of $25 million to $15 million. And we ended the quarter with $353.9 million in consolidated cash and short-term investments. Our cash balance excluding PPA and restricted cash is $180.3 million. This balance decreased $22.5 million over the quarter, driven primarily by pre-building systems that would be installed later in the year. As we've discussed on previous calls, our business has some seasonality, and we plan for a surge in our system acceptances in the second half of the year. So to meet second-half demand at our current manufacturing capacity, we would be building in advance. This is one of the reasons we raised an additional $30 million in capital in the first quarter, which is an added benefit of this approach, given the current operating environment. This allows us to have a buffer of finished goods, ensuring that we can take care of customer obligations even if there's a short-term disruption in our operations. We think this is prudent and reflects the concept of de-risking, which I will touch on in more detail shortly. At the end of the first quarter, we announced amendments to our debt. Specifically, we've refinanced and extended approximately $260 million of our outstanding 5% and 6% convertible notes. We also announced that we have now closed an additional $100 million in new financing, using a majority of the proceeds to refinance existing convertible notes. I want to sincerely thank our investors and noteholders for their commitment to Bloom's future. Accomplishing this transaction during the peak of uncertainty in a major crisis speaks to the strength of Bloom Energy and our strong investor relationships. Now that we have the convertible notes extended, we have time to access the capital markets when conditions are more favorable. While we are encouraged by the trend in recent convertible debt deals, given the overall economic conditions, I do not want to set arbitrary expectations on the timing for us to access the capital markets. We have the time to be pragmatic in addressing our capital structure and find partners that can bring resources across our value chain. K.R. spoke of our relationships with SK in South Korea. We also have partnerships with large public utilities that have strong balance sheets and financing capabilities. Partnerships like these provide the opportunity for us to not only find the right investors but also access global markets and distribution channels through them. We continue to expand our origination capability in the United States as it is a large and important market. When combined with global distribution, it provides the scale we need to drive significant growth. As the coronavirus continues to create uncertainty around the world, like many businesses, we've taken steps to protect our business. We've implemented measures to preserve cash and streamline our operations by causing some capital investments, reducing operating expenditures, and deferring planned increases in production. We outlined those savings on Slide 7 in the deck. On server production, we will keep capacity roughly at our current levels and avoid a $40 million ramp in material purchases, which will bring us cash flow neutrality sooner for the year. As K.R. referenced, we've been impacted by local building ordinances that have created timing risks on the completion of our server installation and acceptance. While we received the majority of the cash as we build and ship the servers, we do not recognize revenue or receive final payment until they are accepted by the customer. Once we have additional confidence on the abatement of installation risk, we can quickly flex up production capability by over 50% with a 90-day lead time. To reiterate, we have ample backlog to absorb these units and customers waiting to be powered by us. We previously discussed that for 2020, we expected the cadence to be similar to 2019, and that we would be building momentum on acceptances and revenue throughout the year. Thus, our second half would be stronger than our first. Our current server build plan and inventory levels support revenue similar to last year, with an opportunity to flex up production in the second half as visibility improves. It's important to remember that in our long-cycle business, 100% of our 2020 projects have been identified, and all of our U.S. commercial and industrial projects are currently in our backlog. The impact of local building restrictions on the timing of installations in our U.S. commercial and industrial business is our largest risk, as the timing of revenue recognition may move between quarters. Again, to be clear, this is a timing-related matter, and when the product revenue is recognized, there's no lost revenue. It may just get pushed out to the next quarter. This risk creates enough uncertainty that we're unable to provide guidance for the second quarter or full year 2020. As we update throughout the year, we should have better clarity on our installations, and we'll adjust our production levels accordingly. Let me now turn it back over to K.R. for some closing comments.

Thank you, Greg. I'd like to close by emphasizing the following. One, amid the COVID-19 pandemic, we delivered on our financial and operational guidance for the first quarter, and we successfully refinanced our debt and strengthened our balance sheet. Number two, we entered the year with a backlog of over $1 billion worth of systems that remained solid throughout this crisis. Those contracted systems have the potential for an additional $1.1 billion in service revenue from high-quality established customers. Our installed fleet has more than $2.1 billion of service revenue to be recognized in the future. Number three, this backlog combined with our demonstrated ability to operate as an essential business, the reopening in South Korea, signs of progress in California and the Northeast give us optimism about our prospects for the rest of the year and beyond. Number four, we have a leadership team and board that is seasoned in crisis management. We have taken steps to de-risk our business by managing our costs and preserving cash. We have done so while affording ourselves the flexibility and optionality to ramp up our business quickly as we emerge from this crisis. We are also ensuring that we are preserving and protecting our innovative edge. This will allow us to further cement our leadership position and emerge even stronger in the future. Number five, the situation around the world underscored that reliable, clean, safe, cost-effective, localized power is a critical need for all people. As we emerge from this crisis, we expect air quality related to power generation to be an important topic as a result of COVID-19. As we return to a more normalized operation post-COVID, we intend to work to help businesses and communities that are increasingly taking their energy needs into their own hands in order to deal with major disruptions and challenges. I could not be prouder of our team's efforts during this challenging time. Thank you again, with that, we will now take your questions.

Your first question comes from Stephen Byrd from Morgan Stanley.

Hey, good afternoon. I hope you all are doing well.

Hey, Stephen, we're doing well. Thanks for asking, and I hope you and your family and all of Morgan Stanley staff are doing well too.

Thank you very much, and Greg, congratulations on the new role. I look forward to working with you. I wanted to just touch on the first point about 2Q guidance. And Greg and K.R, I think your commentary was clear as I understand it. Just given the uncertainty of acceptances given restrictions like building access driven by the shelter-in-place rules, it's challenging to be able to give second-quarter guidance because acceptances of course are driven by installations, and I think I understand that. As you think about states starting to gradually relax their shelter-in-place requirements, I'm just not familiar enough with how that would impact specifically, customer acceptances on-site. How quickly can that come back, or is that potentially going to be a little bit lagging because you need permitting offices to be restaffed and other things that could take a little bit longer to actually get back in place? I'm just not familiar with how that sort of restarts.

So, that's a very good question, Stephen. If you remember our cycle, the first six months, since we have an order to install an order, is when we go to permits with the local cities. We go to with permission to build. And then we do the design working with our customer and any upgrades that are needed at the customer site. The actual installation process itself can be a matter of weeks to two to three months depending for most projects. There are some projects that fall either side of the spectrum, but that’s just a spectrum for you. So it is very easy for us when things are moving forward, especially when you look at projects that are to be accepted this quarter. You have something installed if you get a go-ahead already even a few weeks prior to the end of the quarter, you should be able to install and have access to it. So, it is going to purely depend for this quarter, which is your question. We should be able to pull in some sites, many sites, if we have been given access and permission in the next couple of weeks, next three weeks, so to say. And we are seeing signs of that. We are optimistic. But as you very well know, it is extremely difficult to handicap that on a day-to-day basis sitting in this chair.

Understood. And so with that, it's just difficult because you just can't predict the behavior of customers in terms of their staffing or their facilities, their final sign off to accept and allow delivery and that's driven by a lack of availability of people on-site. And I guess other issues like that.

And one thing we have seen, though, that I have to emphasize is the customers realize the importance and need for our product, especially at this time. Many of them are essential businesses. The last thing they want is to not have power, and they clearly understand it. Basically, hospitals understand the need for this clean power. They want to get it done sooner. So we have not seen customers asking for us to delay the installation of their projects. As soon as we have local jurisdiction permissions to move forward in certain places, we should be able to move. And we have seen in California, for example, we are being given permission to do those things. So we are optimistic that will happen in the Northeast too.

Understood. And then just as a follow-up, your system installed costs went down quite a bit, which is very encouraging. I think from about $4,500 down to about a little over $3,500. Would you mind just talking to the outlook for product costs? And I guess certainly COVID, I guess can have some impact on cost. But just on maybe a more normalized level, where do you see product costs trending? We're obviously seeing some improvement there, and I'm curious what the outlook is.

So, what we would tell you is look for the long-term trend because when you include both the product cost and the install cost, it'll purely depend on the mix of the product. So depending on what kind of an install it is, you can have a spectrum of install costs. However, here is the most important thing: Bloom's product cost per kilowatt continues to drop even in our 5.0 platform at that roughly 20% a year numbers that you've seen before. And we are continuing to bring down the cost of the current platform, which is doing extremely well for us. You're absolutely right to point that out. And we are again on the install side, looking at every best practice there is to bring those costs down so that ultimately we give our customers a great price on electricity and we get a good margin for flow. So we are continuing to do that. Greg, would you add anything to that?

No, I would just emphasize the point around the mix of products of projects that we're doing. While overall for sure the long-term trend around product cost continues to decrease. A quarter-over-quarter change, either this quarter or in the future could be more driven by the mix of projects that we have and the installation type that's there. So our focus is definitely to drive that down over time. But if you get any more complex, more difficult installation, it may drive up a cost on a particular project. So on average, it may increase, but overall the trend will continue to go down.

So Stephen, I would summarize it as the following. Don't look at the weather; look at the climate. Quarter-to-quarter would be your weather pricing. But here's what the climate is. Since they introduced this 5.0 product, we have achieved amazing cost reductions repeatedly, and the product is performing better in the field. Now we are working on the install costs coming down, and service costs coming down. That combination, along with the electricity prices going up in the utility sector, creates a very good opportunity for both customers to get a value proposition and for us to maintain margins.

That's helpful and fair point. The selling price went down by $500 per kilowatt, and part of that, I presume can be mix, but the cost went down by $1,000. So, I guess the climate result is a higher profit per kilowatt, which I guess is the ultimate goal. Thanks very much. I'm going to let others ask questions. Thank you very much.

Your next question comes from the line of Paul Coster from JPMorgan.

Yes, thanks very much for taking my questions. Greg, welcome to the fray. And I've got a few quick ones. First up if you look at the backlog, and you look at accounts receivables and so on. Do you see any credit risks or industry-specific risks, hospitality this brings to mind, some education facilities where we should be focused? Thank you.

Yes. I'll take that one, Paul, and thank you for the welcome. It's an interesting time, as I said, to join a company and to meet a new team. Listen, on the backlog as well as our installed base, we monitor that very closely, given the service component as well as our future installations. We have a very strong list of customers that is there today. We have not had any issues and will continue to monitor that going forward. On the accounts receivable side, there's very little trade receivables that we carry at any particular quarter. So, other than to note that nothing material related to revenue, we haven't had any pressure on our AR given the current environment.

Okay. Quick follow-up on your point about inventory. I was just trying to decipher what you said the inventory level supports revenue similar to last year in the second half of this year, but what was the point of that? Because obviously there's risk of, well that's not going to happen, right?

Yes. So, listen, I think part of it comes in is how we came into the year, right? The team had a very strong finish to the year in the third and especially into the fourth quarter around taking orders that we would expect to install in the second half of this year. So as they looked at the forecast and looked at the amount of capacity we had to deliver those units from a manufacturing standpoint, we made the decision— the team made a decision early on—to pre-build those systems and leave those in inventory. And we would have those to meet the surgeon acceptances in the second half. I just really wanted to make sure I highlighted that. Now if you look at the inventory balance on our balance sheet, that may stay flat year-over-year, and you got to dig a bit into our footnotes and see that we increase the amount of finished goods in our inventory balance. So more finished versus work-in-process or raw. And then as well, there are other places on the balance sheet that we can point out to you on where we may have shipped units ahead of time based on the type of contractor that’s there. So, as we get in through the rest of the year, we're going to hold our manufacturing capacity about the same as acceptances grow, and we hope to work our way through the risks that we talked about from a revenue recognition standpoint. As we continue to ship more units, that inventory will move out to the conference site and hopefully it will actually become acceptances and we'll have that inventory to support a larger number of acceptances in the second half than the first half.

Okay. So, coming into the year, you started to ramp up some expenses in readiness for the next generation server, right? And now I've got inventory, finished goods inventory included sitting there, I'm assuming, on current generation servers. Is there anything in this scenario that delays the transition to the 7.5 server? And what does this also mean in terms of customer bookings, customers' readiness for that server, or some of them hanging back until they see what it delivers?

Well, that's a great question. This is K.R. Good afternoon to you, and I hope you and your family are staying safe. So look, here's the beauty of our business, right? Our customers, more than 90%, somewhere in the 90% range, pretty much buy electricity that comes from our servers. They don't buy a particular model of a device. It is not like a cell phone business where if you went out and said, I'm coming out with a new model, somebody is going to wait to buy, not buy the old model till the new model comes. None of our contracts—the $1 billion plus and whatever else is in the pipeline—specify that the customer wants this particular model server or not. So the first thing you need to understand is this: neither with our backlog, nor with our prospective customers, nor ordinary sales outreach, does the timing of a new product impair our ability to sell. That's the first point. The second one is our 5.0 product continues to do and bring the cost down continuously, even better than what we were originally planning. So that’s number two. Number three on 7.5, I'm very happy to report to you that our prototypes—we have built now multiples of these power modules and put them together in a system with lots of operating types—and they are performing to technical specs and doing extremely well. Not to be surprised. This is the first time this team is bringing out that next-generation product, and every single time, they have knocked it out of the park. This is no different. What we are doing right now is taking this extra time that we have to further reduce the cost because the team is able to see even further improvements to performance and further improvements in cost compared to the prototypes that they've done. We're going to do that, so when we launch the product, it will even be a better product for us financially and a better product for the customer. And in doing so, we can use our existing resources, our existing engineers to be doing that with the inventory we have. We don't have to ramp up on that inventory right now. So it helps us in multiple ways. Number one, it makes us launch the product even better. Number two, it helps us be prudent with cash at this point in time, which is the right thing to do.

Got it. Thanks. I've got one last question. I do apologize for the flurry of questions here, the sales team and their effectiveness. Is COVID-19 gaining in the way of finding customers developing the pipeline, closing deals, and getting bookings?

Very good question, Paul. And what we are seeing is an increased interest from the sectors that you would expect: essential businesses. The fact that we did these two pop-up hospitals, the fact that we were doing ventilators, created quite a bit of awareness within the hospital sector for us. On top of that, when we were doing the pop-up hospitals, there has been strong interest from the hospital sector. So we're getting inbound calls asking can we provide this power to them. That should make sense: How can a hospital that's trying to cure people of a respiratory illness have backup generators that emit dirty chemicals that affect the respiratory health of a patient as their backup? That just absolutely makes no sense. We have a great option. So we are finding inbound calls coming in from the hospital sector, from the manufacturing sector, and from food services, which now understands why they need to stay operational no matter what. So, the funnel is robust. The sales team is extremely busy. The sales team is also working on some strategic channels and partnerships in very early stages. So, they are extremely busy. However, I think what you pointed out, the signature cycles that are required at the very large last stage from the executives, given that they are dealing with the immediate tactical issues of saving their businesses, those closings of the orders will get pushed out a little bit. But given our long sales cycle and that these orders are not required for us to fulfill for a while, it is not impacting our business at all.

Great, thank you.

And your next question comes from the line of Michael Weinstein from Credit Suisse.

Hi guys. I just wanted to say congratulations again to Greg. And also, good work on the ventilators in California. Hey, I wanted to ask you a little bit more about the profit per kilowatt and the ASP and TISC statistics that you put out. Looks like there's a big change from the way it was presented in the Q4 release and the Q1 release, especially if you look at the Q4 '19 numbers; they look pretty different in this latest release. Can you explain that a little bit?

Yes, I can take it first, and then Mark can add more details since he has worked in the fourth quarter. As we have gone through the process of cleaning up our statement and working through it, there may have been some issues in just presentation and what our '19 numbers are to what our '20 numbers are. But anything that we're putting out now should be on a consistent basis and be able to drop these off. I'm looking at Mark on the video, making sure that I stated that correctly, and he's giving me the thumbs up.

I guess what I'm going to assume is that maybe now you pulled out the leases that you're not allowed to account for that as COVID.

Yeah, I'm getting the number back, Michael and make sure that's the case and circle back to you if it's not. But overall, the trend is presented now should be on the same basis.

A related question is you have a pretty big increase there, $651 profit per kilowatt going up to $1,055 quarter sequentially. But the gross margins are pretty consistent going from the 15% range up to 16.2% or so in this quarter. Is that because one includes leases and one does not? What's the main reason why that—what is the difference there?

No, I think they're both going to be presented in the same way, and revenue is going to be recognized the way we recognize it, and we have it in our revenue and EBITDA all on the same basis. So I think for doing any comparison on a quarter-to-quarter basis, whether it's on ASP or on profit, you have a little bit of just what the mix is on the revenue and in the variables there. I talked a little bit before about the installation costs being a little bit different than—and that would drive an increase in revenue but not an increase in margin if that passes through to our customers. But you also have the geographical location of our customer, the type of solutions that we're providing to that and the complexity of the install. So all that would be included in those numbers and drive the variances on a quarter-over-quarter basis.

So, what's the thing that you think is different between those two data sets though or those two tables? What's included in one and not included in the other?

Yeah. I mean, what we presented last year versus this year, that difference would be the changes that we implemented at the end of Q4.

Not just that, the difference on a per-kilowatt basis versus an overall gross margin number.

Yes. Other than mix, Michael, I'd have to sit down with you and go through it.

Okay, fair enough. And can you maybe kind of give us a preview of how the second half will differ from the first half in terms of gross margin percent improvements? And where do you think costs TISC will go and ASP might go in the second half as you ramp up on acceptances?

Yeah, I think our overall… K.R., you want to take it...

Michael, you're asking for some forward-looking numbers which we don't present. Were you trying to make the new GAAP model? So I was trying to make sure that Greg doesn't answer that question before I had a chance, and I would follow there. If we were in the room, I would've said I'm taking this, but this is the problem of... But anyways, look, like I said, our material costs continue to come down quarter-over-quarter. We are making good progress, so you should be seeing an impact relating to that. Number two, we are knowing that we are in this regime; there's a slide up there that then goes through. We are trying to be as conservative as we can with our cash. That should also have an impact on what you see in terms of margins. Now separately, what you would have seen in 2017, 2018, 2019, this is where I can walk you through—is in the second half has had greater volume and is more robust than the first half. Because of that, the absorption numbers get better, the overhead numbers get absorbed better, and you see a benefit coming from that. Assuming 2020 is that way, and I gave you the reasons why we should be optimistic that it is that way, we should be able to see very similar trends there also. Those are, if you're asking me what the drivers are, those are the drivers. At this point in time, we're trending well in all those drivers.

Okay. One last question: California wildfire season starts in May typically. That's right about now. Are you guys seeing preparing for any kind of major uptick in sales interest in California as a result of that?

Look, I think there is a significant opportunity there. A lot of our customers have been asking us, will you be able to install in a very short notice if we need you to install, and we are preparing ourselves. I want to make a point up here, Michael, that you would have seen in the deck, I mentioned it, but it's worth mentioning. On this one project, we had the cooperation of the state, the local utilities, the local government, and our customer. From the day we got a green light to the day we installed was five days. We have told you our typical install cycle is 9 months to 15 months, that 9 months to 15 months got shrunk in five days when the need was there. So in a pandemic war, if you have to shelter-in-place, evacuation is not an option. So microgrids for critical infrastructure is the way to go. We can do this rapidly with what we have today. We will be reaching out— you can believe that— we will be reaching out to local governments and saying why don't you allow us to do that.

Very interesting complement to the disasters that save the state. Thank you very much and have a good night, guys.

Thanks, Michael.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.