Good evening Ladies and Gentlemen. Thank you for attending today’s Bloom Energy Q4 2022 Earnings Conference Call. My name is Pierre 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.

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 8-K 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 markets, 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 refer to GAAP and non-GAAP financial measures. The non-GAAP financial measures are not prepared in accordance with US 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. Sridhar, 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 output 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 reached 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're 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. Here we are establishing ourselves as the energy company that offers our customers practical and purposeful solutions. We call it the power of end. 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 should not be an option. The Bloom Energy Technology Platform delivers on the power of end. 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 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 of 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 destiny. 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 U.S. 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 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.

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%. In 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 margin 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's 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 energy servers in electrolyzers is robust. Our customers need resilient power that reduces their carbon intensity while providing optionality to move to on-site 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 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 million, 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 ecoplants that was included in our 2021 backlog. When adjusting comparisons to reflect SK ecoplants' 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, PPA for repowering and Product Revenue being a larger percentage of the total revenue. We benefited from a convergence of these events in the past quarter, and we would not expect this margin rate to be our new baseline. The PPA for repowering was similar to the PPA 3A 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 nonrecourse 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 expenses that were removed as pro forma adjustments from our non-GAAP reporting. We have one remaining consolidated entity, PPA 5, 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 fewer installations and reduce our electricity segment, the more meaningful measure of our growth, product and service revenue is expected to grow 20% to 30% 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% for the year. This year, we plan to reduce our product costs over 10% 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 basis points to 300 basis points versus the first quarter last year as three months of start-up 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 accretive 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, a solid record of accomplishments, and a robust growth roadmap. We are extremely excited about our future. And I look forward to showcasing the team at our investor conference on May 23 at the New York Stock Exchange. With that, operator, please open up the line for questions.

Absolutely. The first question is from the line of Manav Gupta with UBS. Please proceed.

Hey, guys, congrats on a strong quarter. My question is, I was just listening to the recent 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 we 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 that 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? I'll leave it there. Thank you.

Manav, thank you so much for that question. And here's 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 that within a year, we can recoup that capital. There are not too many factories that I know of that can do that and technologies that can do that. We intentionally did that so that when this hockey stick happens, we are there to meet the moment and not say why we can grow. So we are prepared, ready to go. The world needs to step up and make it happen. We have the plugs; somebody needs to start digging those holes.

Thank you so much.

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

Good afternoon. Congrats on the results team. Coming back to the hydrogen conversation, what's included in the 2023 guidance? Specifically, as it relates to hydrogen. How many projects or what can you discuss with regards to what's assumed in 2023, as well as hydrogen in the incremental backlog that's being disclosed here if you can?

Yes. Hey, Julien, it's Greg. One of the reasons I highlighted our backlog being around the natural gas server or 24/7 Energy servers, that's the 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. As you look at the backlog, it is predominantly the server with no electrolyzer in there. If you look at the 2023 framework, we talked about as we get orders for the electrolyzers, deliveries in those are likely to be late 2024 or 2025 before you see any commercial momentum from them. So as you think about the 2023 guidance that we 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 the line of Michael Blum with Wells Fargo. Please proceed.

Thank you. Good afternoon, everybody. Wanted to stay on the backlog for a second. It's obviously up quite a bit, which is pretty encouraging. Why don't you 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?

Yes, our backlog, in order for a contract or a project to make it in our backlog, it’s fairly stringent in the approach that we use here. It has to be a firm contract; there has to be skin in the game for both of us. And it has to be an affirmed 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 U.S. C&I business has really had a strong 2022. And if you look at the types of projects they are seeing, they are in larger sizes than they were seeing pre-pandemic, meaning of size in the 25 megawatts and above type range. 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 are, I'd say, 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. The comment I was trying to make was we had three years of take-or-pay last year; we now have just two years. That’s why I did that adjustment math for you. And then broadly, you saw the announcements that the team has been able to do in Italy and Taiwan, with good-sized projects; the 10-megawatt is 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 the number of deals and the size of deals, which is really encouraging.

Thank you. The next question comes from demand Martin Malloy with Johnson Rice & Company. Please proceed.

Good afternoon. Thank you for taking my question. 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 month. 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 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 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. 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?

Absolutely. 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 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. Especially in the European market, with the incentives being set the way they are, it is very, very attractive for customers to do that. And 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. 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 electricity, which is the higher value commodity, and a lot more of heat. With Bloom, you get the exact opposite: more electricity, which is a high-value commodity and needed more, and less of the heat, nevertheless, a very valuable resource. 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 Rusch with Oppenheimer. Please proceed.

Thanks so much, guys. Greg, with the costs that you're talking about this year, can you give us a sense of where those things are coming from? And then with the margin guidance suggesting that prices are going to come down a little bit, can you talk a little bit about if that's coming on next basis, internationally versus domestically, or what the real drivers are around that price down as well?

Yes, so on the cost down, Colin, 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 are, quite frankly, doubling our capacity last year in 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. As we looked in the middle part later part of the year and said, okay, what is our path going forward? There were a number of areas 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 the build cost while keeping our cost per kilowatt down. 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, look at how we design it, the parts that we source, and the simplification of the product that they're able to do really contributes to the cost down. Lastly, not only on the components that we buy, but once we bring them in-house and see how we build the machines, we're seeing some nice operating leverage as Fremont is getting up to its full line capacity. 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 about ensuring that for our direct labor output, we're able to get a lot more output. 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 team's hard to deliver on that 10%. If it gets better than that, 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 repowering, and I strip out some of the other things and look at core on the product, prices have remained 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 here, in Asia or Europe, the decisions we're making really center on where we can get the most amount of growth in the best return on margins; that tends to solve us to having very similar selling prices across the globe. 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 while eliminating some of the one-time factors for this year on core basis and taking our product cost down, and we think we’ve got a 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 Burwell with Jefferies. Please proceed.

Hey, good afternoon, guys wanted to hit on the backlog once more from a slightly different angle, and obviously, very impressive growth. The color you've given us so far is very helpful. But the footnote says 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? 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?

Yes. So Sam, the way it naturally works within the business is most of our sales are through the PPA structure where we're selling to the customer a cost of electricity over a period of time. With that, with our financier, we then take the cash flows associated with that, and we calculate what we believe to be the selling price of the machine, what the service costs are going to be, and what the install costs are going to be. So as you calculate your selling price, whether in the U.S. with an ITC, or in 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. We just wanted 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 the selling price of that contract. 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. Generally what happens is we get an extension for about this period of time we move forward on it. Depending upon where we are sitting as a global economy on decarbonization and resiliency, that incentive gets renewed. If you take it from a practical standpoint, it may be only two years, but there through Safe Harbor and other parts of the contract, we're able to get about three years of benefit out of it. So it feels like we're only about six months into the current one, which is still early days, but we’ve obviously taken that in the forecast to us. 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 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.

And if you just add to that, right, it's a fraction of our business. And as we grow internationally, this is shrinking fraction of our business that will depend on ITC. Even at 30%, if we are doing double-digit cost reductions every year, two 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.

Thanks, Sam. Thanks for being the footnote.

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

Hi, thanks for taking my question. 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 can you touch on sort of the time or the length now for module life when you do the change out?

Sure. So Biju, the service margin is impacted by the same costs that we've had on the product side. 60% to 70% of our service costs are around that replacement module. That happens generally in the four, five, or six-year window. We've seen an extension of that each time. As we look at our service margins, for this year, they're not where we wanted them to be—there's more work 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 and I was talking to Colin earlier, 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%. We expect, in the middle part of this decade around 2025, we should be at that 20% product margin or rather service margin; that's still our expectation for that business going forward. And particularly 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's economically sensible to do that. We've seen an extension of that every year. What we're shipping today has a much longer life than what we would have shipped four or five years ago, as part of the work we're doing on our cost down and why we're so confident in this business being basically a really good annuity moving forward.

Thank you. The next question comes from the line of Kashy 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.

Yes, I don’t think we got guidance on acceptances. Nor do we really want to; it's not something I'm going to focus on going forward. The reason is this: as we introduce different applications on our current platform, the power rating associated with that’s going to be different. 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, all of those things are going to get out for moving 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; prices are going to be constant over the period.

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

Hi, good afternoon. Something that you've talked about in the past is just the time lag between when you win new business and when the profit is actually delivered? Just because of the degree to which you're sold out in advance of your production? Can you give a little insight into sort of with the current backlog and how and with what will translate into revenue recognized this year? What sort of era or horizon of pricing is going to be booked and realized this year? Just to clarify if there still may 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 revenue?

Yes. So Noel, I would tell you that over 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. Our impatience is always that it's too long, too complicated. From a process capability standpoint, we continue to lean that out and make that much more predictable. What we're seeing today, and what we expect is that traditionally, almost all of the backlog would be translated to revenue in the following year, but we're seeing opportunities that are booked early in the year and may lead to power, especially in the time to power space, much sooner contracting than what we've seen historically. 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, and many places where other technologies would be at. We expect to continue to provide a lot of value for our customers and keep making sure that our margins are met while they’re meeting their economic objectives. So I don’t foresee 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. As we take costs down, that should expand our margins.

Thank you. The next question comes from Abhishek Sinha with Northland Capital Markets. Please proceed.

Yes. Hi, thanks for taking the 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 to compare and contrast that to applications being used? What are the drivers? What the margins? How should we look at the two compare and contrast the two?

So, Abhishek, for the year, 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 ensure we met our contractual obligations to get to their volume for the year. By the end of the year, we'd get it back to our historical levels. I’d 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’re focused on growing and continuing to grow in Korea and grow in Europe and other parts of Asia. My expectation is as we go forward that you'll begin to see more of that bar be international versus domestic, while the overall size of the bar increases, and the domestic component continues to increase at a really healthy clip. What we're seeing today for returns is we really work—we're 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 our shareholders in that growth. 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? How do we make sure that we're driving the most profitable growth as we go forward? If a country is not ready for us, or a territory is not ready for us, either because they don’t value the product, or they don't have an incentive, or we just have not yet met their price point, then that's okay. We'll wait and we'll enter that market in the future. There's much opportunity for us to grow. We're not going to reduce our profit margins or expectations on growth just to simply enter a new territory.

Thank you. The next question comes from the line of Ameet Thakkar with BMO Capital Markets. Please proceed.

Hey, good afternoon, guys. Congratulations on the quarter. KR in his remarks mentioned 100 megawatts of time to power projects. I was wondering, does that include the backlog reflecting? I think you guys are working on 70 megawatts, 75 megawatts project in Oregon with Amazon.

Yes, we have somewhere close to 75 megawatts contracted with Amazon Web Services. The details of that in terms of commercial agreements, like any other commercial agreements, we will not discuss. It paints a larger picture if you just step back and think about this: 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 rapidly. If the two put together were, as a fraction of the total global power consumption, nearing 4% of global power consumption, it’s a huge opportunity. We are engaged with both sectors—data centers as well as data transmission network operators—and these fields present an amazing market. If you just look at them growing at that clip and consuming almost 4% 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 came from Amazon, Microsoft, Meta, and Google for hyper-scalars. These hyper-scalars do everything they can to procure every electron of renewable energy that's available. This is the power of and they need reliable energy right where they need it. 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 Wolfe Research. Please proceed.

Hi, thanks for taking my question. Maybe just a question on the evolution of policy. You've had four or five months to think about the IRA a little bit. Has there been any kind of evolution in your thinking of the opportunities that are embedded in there or any kind of fundamental questions that need to be addressed? And then tying it in with the hydrogen hubs that have been narrowed down, I guess. Just what sort of role has Bloom envisioned in participating in the ones that you know 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 the ITC we’re having the conversation we were having before, the hydrogen PTC credit, carbon capture on 45Q, on size and scale and a lot of different biogas and the whole waste energy space. We’re extremely bullish on it in the U.S. As you travel the globe and go to different countries, they are very excited that the United States is taking a leadership position on this, and they're anxious to get incentives to help them compete in their economies and globally. So it's definitely bringing the rest of the world along, accelerating their incentives to make sure that happens. 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 be answered going forward as we take that law and change it into practicality. So the treasury department, the IRS is very busy making laws and rules based on that. They came out with some around the 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 are some rules around transferability of tax benefits and refundability; those types of things. So we're really excited about it.

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 waste heat to be able to use and provide and generate cheaper hydrogen. 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 that challenge on.

Thank you. The next question comes from Pavel Molchanov with Raymond James. Please proceed.

Thank you for taking the question. In the context of other jurisdictions following the U.S. lead and driving CleanTech manufacturing, the European Union is talking about this green industrial plan. Based on that, do you have any appetite to establish a manufacturing footprint in Europe for either 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 was 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 reach a certain scale. This is not a field of dreams; you don't build it hoping they come. We have a factory which we can supply. When the market is there, we can build a factory to serve it even better. That's our approach.

Thank you. The next question comes from the line of Maheep Mandloi with Credit Suisse. Please proceed.

I 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?

We have two factories today, and 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. We have the opportunity to add another 600 megawatts in Fremont as part of the initial part of our build-out here. We will decide later on whether or not it's economical to build more in Fremont. Our initial plan was to take it to a gigawatt to start, which gives us a gigawatt or 1.3 gigawatts total of fuel cell capacity. 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. We are ready to go. We have about another $40 million to $60 million to invest in Fremont to get us through those levels. As KR spoke before, the payback on that is less than a year if fully utilized. We have the ability to scale very quickly to meet demand. From there, we'll look at how we add more capacity going forward, but that should take us through at least for the framework for this year and next year without needing to add any additional staff capacity.

Thank you. The next question comes from the line of Jeff Osborne with Cowen. Please proceed.

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

Yes. So Jeff, last year, we talked about the three-year take-or-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. So if we shipped about 120 megawatts or so this year to SK ecoplant, meaning 2022, the remainder of that is in the backlog going forward. To walk from the third quarter to fourth quarter, there was a lot of opportunities on price, and we talked about that coming into the quarter. Not only did we have the opportunity with PPA 4 in the repowering there that we were able to do at a nice pricing, but we also prioritized 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 wanted to prioritize to make sure that we were able to get to our commitments for the year. On top of that, it’s Fremont coming in. If you look and do a comparison, you could do this based on the supplementals we provided for the third quarter and fourth quarter; you can see we were able to bring down the cost per kilowatt of our machines just shy of a couple of hundred. Price was obviously a big impact as well as cost coming down, and you can isolate the other components of it.

Thank you. The next question comes from the line of Noel Parks with Tuohy 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. Are you seeing any trends in either deal structure, your financing, or ownership, particularly those as wondering if there are any projects that come to mind that seem novel or innovative in that space?

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

Thank you, Greg. So Noel, thanks for that question. Here’s, let me give you an example. There are two ways to think about waste energy for us. One is the traditional we have talked about before of generating biogas and being able to use that biogas on site, whether it is using animal waste, landfill waste, or wastewater treatment plants. The really interesting opportunity we are seeing, being developed across the country, are fairly good sized opportunities being developed to meet the LCFS standards, which provide a biofuel as well as SaaS and aviation fuel. 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, they find it attractive to make either SaaS 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 is to put Bloom and capture significant value on the other side for the fuel based on carbon intensity is 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. 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. With that, let me conclude by saying, Look, you're seeing a company that is firing on all cylinders. Our top line growth has been phenomenal this last year. We are not only happy with the volume that we've 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. 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 in the market is fabulous. This didn't happen by accident. This is a company that has 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. Thank you. You may now disconnect your line.