Ladies and gentlemen, thank you for standing by. I would like to welcome everyone to the Bloom Energy Q4 2023 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I will now hand the call over to Ed Vallejo, Vice President of Investor Relations. You may begin your conference.

Thank you, and good afternoon, everybody. Thank you for joining us for Bloom Energy's fourth quarter 2023 earnings conference call. To supplement this conference call, we furnished our fourth quarter 2023 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 2024. 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 conference call and in our fourth quarter 2023 earnings press release, we refer to GAAP and non-GAAP financial measures. The non-GAAP financial measures are not prepared in accordance with U.S. Generally Accepted Accounting Principles, and are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between the GAAP and non-GAAP financial measures is included in our fourth quarter 2023 earnings press release available on our Investor Relations website. Joining me on the call today are KR Sridhar, Founder, Chairman and Chief Executive Officer; Greg Cameron, our President and Chief Financial Officer; and Aman Joshi, our Chief Commercial Officer. KR will begin with an overview of our business, then Greg will review the operating and financial highlights of the quarter as well as the outlook for 2024. And after our prepared remarks, we will have time to take your questions. I will now turn the call over to KR.

Hello, everyone, and thanks for joining us today. Let me start by thanking the Bloom Energy team for relentlessly working on our top objective of 2023: making the company profitable. Together, we achieved profitability by maintaining price discipline, reducing product costs, improving service margins, and reducing operating costs. What a huge milestone for our company. Now, our goal for 2024 is to increase profitability on a year-over-year basis. In addition to record revenue, significantly improved margins and record annual operating income, we introduced innovative products and offerings, including one just this week. More on that later. Now, let me address the macros in the energy market. Digital transformation, AI, electric vehicles, onshoring of manufacturing and electrification of everything are all increasing demand for electricity at a rate never seen before. All these factors can drive demand for electricity up to 10 times more than the 0.5% average demand growth rate the utility industry is accustomed to for the last four decades. Can a slow-moving industry and the failing grid meet this unprecedented demand challenge? Let's start with electricity generation. Even breakneck speeds of renewable expansion can at best address a very small fraction of this demand growth. In the last 10 years, all the new renewable capacity installed in the U.S. produces less electrical energy than the deficit created by retired coal and nuclear power plants. New nuclear power will not be online in a meaningful way during the next decade. We have to rely on more natural gas to meet electricity demand. Once power is generated in faraway locations, it has to be transported to the demand centers by high-voltage transmission lines. While the National Renewable Energy Laboratory estimates that 90,000 miles of high-voltage transmission lines are needed to meet this growth, we have built less than 700 miles in 2022. All this suggests that as a nation, we will imminently face severe and huge power shortages that will last a couple of decades. This situation will be the same in many of the population centers and economic hubs around the world. In the past few months, as I speak to CEOs and business leaders, energy security and power availability are top-of-mind issues for them and their Boards. Most management teams today view the future supply and availability of electricity as a key enterprise risk. Unlike even five years ago, when most of the conversations were around the cost of power, today, it is about the opportunity cost and business risk of not having power. So, how have these macros played out for Bloom Energy on our commercial side? Let me start with data centers, particularly AI data centers. For the last few months, my team and I have been engaged deeply with several leading companies in the AI space, from CEOs to working-level technical teams. The sales funnel for this sector alone is massive, not in megawatts but in gigawatts. The funnel is composed of several A-list companies with credible growth projections who are told by their utility companies to not rely on them for additional power. They love Bloom's technology, our rapid deployment capability, and the flexibility and optionality of our solution. They are actively working with us on design configurations and implementation scenarios. In these interactions, our prospective customers tell us that in the absence of reliable and timely power from the grid, the Bloom Energy solution would be their best alternative. Unlike our sales funnels in other sectors in the past that had mostly single-digit megawatt opportunities, this sector offers tens and hundreds of megawatts per opportunity. Most of the opportunities we are pursuing today are for greenfield data centers, in contrast to the past where we offered a cleaner and more reliable power upgrade for existing data center facilities. Greenfield opportunities inherently have elongated sales and implementation cycles. The market in this sector is rapidly evolving, and we will have better visibility on timing as the year progresses. Over the coming years, I'm very excited about the Bloom solution for data center power and particularly AI data centers, as I see it as the single biggest segment for our growth in the next decade. This opportunity, I highlighted for data centers, carries over to other energy-intensive industries and service operations that require reliable power, such as semiconductor manufacturing, electric charging of bus, van and car fleets, and environmentally controlled warehouses. We are in various stages of commercial engagement with prospective customers, and I see great potential to convert some of this interest to bookings this coming year. Let me now comment on our innovative product offerings. In the second half of last year, we announced our combined heat and power (CHP) offering. This product can provide net-zero steam to process industries that are looking to lower their carbon intensity. Alternatively, using this steam to create net-zero cooling will be a huge economic and environmental benefit to data centers. We are seeing strong interest in our CHP offering in Europe. Earlier this week, we announced the Be Flexible offering. This offering has transformed our base load solution to meet a customer's varying load. For utilities that need reserve power or for data centers whose power usage varies, the Be Flexible offering provides up to 50% cost savings, a 50% carbon reduction at reduced load, and more than five times faster power ramp than legacy solutions such as diesel generators and gas turbines. My team is working with several power companies to use the Be Flexible solution in front of the meter. On the international side, let me take a moment to talk about Korea. Five years ago, we started in Korea with our partners SK ecoplant and SK D&D. We had a shared sense of purpose and goals. We knew that together we could grow and build a great business in Korea. In the last five years, Bloom has sold over $4 billion of products and services to the Korean market and established Bloom SK as the market leader in fuel cell power generation. We are positioning ourselves to sell over $4 billion of products and services in the coming four years. We are engaged as partners in the demonstration and deployment of hydrogen-based energy servers and hydrogen electrolyzers in Korea. They are also partnering with us to open new markets in other countries. In 2023, we had to pause deployments to adapt to the new policy and procurement rules that the Korean government enforced in the middle of the year. While that created a lowering of our sales to Korea in the second half of 2023 and a slow start in the first half of 2024, they are back on track, and we expect a strong business in Korea in the second half of 2024 and in the future. For us, Korea is a model and global leader of energy policy progress and commercial adoption. We are bullish about our future in the Korean market. We hope to replicate it in other markets around the world. Outside of Korea, under Tim Schweikert's leadership, we have opened five international markets and have our pilot programs going. He and his team are building a strong pipeline in those countries and are confident of opening at least two new global markets. Based on the quality and quantity of the pipeline, we expect our international market to have strong booking growth in 2024. At the core of everything we do is our people. We are constantly working to both develop our existing talent and upgrade by adding new talent. Just last week, our CTO, Dr. Ravi Prasher, was elected to the prestigious National Academy of Engineering. It's a huge honor and well-deserved recognition. Congratulations, Ravi. In January, we were thrilled to welcome Aman Joshi as part of our Bloom leadership team. He joined as our Chief Commercial Officer after a long career in power generation sales. Aman will be responsible for growing our robust sales pipeline with a special focus on converting opportunities to orders with urgency. Aman, welcome, and over to you for a few remarks.

Thank you, KR. It's great to be speaking with you all today. I just want to say a few words. First, I could not be more excited to join Bloom and be part of the amazing things happening in this company. The pace of innovation and the confidence in our company's future is palpable among the employees as I walk the floors. In my prior role, I spent over 20 years at General Electric, most recently focusing on gas turbines and power generation. In the past two years, I sold more than 5 gigawatts of generation capacity. At GE, our focus was on doing large-scale projects that were complex and incredibly important. As we advance along the energy transition, it started becoming clear that natural gas and hydrogen are going to play a big role in helping decarbonize the world, both in energy and industrial sectors in the coming decade. Gas turbines and reciprocating engines are far less efficient when burning 100% hydrogen. In addition, when they combust hydrogen, there are challenges around NOx emissions. Bloom's solid oxide fuel cell can solve the hydrogen challenge today and generate zero carbon, zero SOx, and zero NOx. This is a game changer. I decided to come to Bloom after seeing the product and realizing that it had arrived at an inflection in its ability to function at scale and be a solution for large, complicated, important and timely projects. Bloom is no longer just about potential, but it's real now and at scale. Bloom's energy servers can address the most pressing needs of customers across industries, including data centers, utilities, and industrial processes. I'm excited about the pace of innovation here and the flexibility of the product suite. Bloom is the kind of company that can move quickly to develop an application and deliver it to the market. Think about what KR said on CHP and the Be Flexible load-following product. The speed from idea to concept to product at Bloom is remarkable. Its product leads the industry. Just look at the Bloom electrolyzer, which tests have proven to be the best and most efficient in the market. Bloom can solve the big problems that I know exist in the market, and I'm very pleased to now have an opportunity to sell these solutions to the customers that need them. I look forward to speaking with you all further in the Q&A. For now, I'll turn it over to our CFO, Greg Cameron.

Thanks, KR, and welcome, Aman. Let me begin with a few highlights about our strong execution in 2023. In the fourth quarter, we achieved revenue of $357 million, non-GAAP gross margins of 27.4%, non-GAAP operating income of $27.4 million, and positive CFOA of $122 million. These quarterly results accumulated into strong performance for the full year 2023. We had record revenue of just over $1.33 billion, up 11% versus last year. Our non-GAAP gross margins were roughly 26%, up 280 basis points versus 2022. We delivered on our milestone of positive non-GAAP operating income of $19 million, up nearly $53 million from the prior year. Our backlog for product and service is now over $12 billion, up 21% versus year-end 2022. We entered 2024 with over $745 million in total cash. With those highlights, let me provide some additional context for our performance. In the fourth quarter, we signed a 500-megawatt volume agreement with SK ecoplant. This is a recommitment of 250 megawatts under our 2021 agreement and a commitment for an incremental 250 megawatts. Under the new agreement, the 500 megawatts will be accepted through 2027, providing visibility for nearly $1.5 billion in product revenue over the next four years and $3 billion in service revenue over the next 20 years. The prior agreement was amended to reflect the implementation of the clean hydrogen portfolio standards in Korea. The new agreement adjusted the timing of deliveries, which reduced 2023 revenue by roughly $160 million versus the prior agreement's 2023 volume commitment. These deliveries and revenue are incorporated into the $1.5 billion that is expected to be recognized through 2027. As KR shared, global power demand is being driven by electrification, EVs, and AI data centers. The world's current generation, transmission and distribution capacity will be incapable of meeting additional electricity needs. Our fuel-flexible energy server with enhanced combined heat and power capability, carbon capture, and load following is uniquely positioned to meet today's needs while providing optionality through the energy transition. Clearly, the macro trends are in Bloom's favor. I'm very encouraged by Aman's addition to the team. He brings a wealth of experience in the distributed power generation market and a rigorous commercial process mindset. Even after just a few weeks in the role, he's already making significant impacts. Bloom remains committed to the 2025 targets for product margin, service margin, and profitability, as well as our long-term revenue growth rate. As we move through the decade, most of the long-term growth will be driven by our power generation solutions. Our electrolyzer and marine products will contribute as those markets evolve. Our 2023 non-GAAP gross margins of 25.8% improved 280 basis points versus 2022. The margin improvement was driven by a 13% reduction in our unit product costs, offsetting a small reduction from pricing mix, resulting in over a 10% increase in our unit product profit. Clearly, our efforts to lower material costs, coupled with automation and increased power output are driving down product costs. In every quarter in 2023, we achieved double-digit cost reductions versus the prior year, and we exceeded our 2023 product cost down target. As we move into 2024, we expect to maintain our double-digit cost reductions. As expected, our fourth quarter results in service improved versus prior quarters as revenues grew, performance payments declined, and replacement power module costs reduced. We remain committed to our service business achieving 20% non-GAAP gross margins by 2025. We expect our service non-GAAP gross margins to continue to improve and will be a key driver of increasing our overall non-GAAP gross margins in 2024 and beyond. In the fourth quarter, we had positive CFOA of roughly $122 million, building our total cash balance to over $745 million. In 2023, we made investments in increasing inventory that I would not expect to repeat in 2024. Additionally, I would expect our accounts receivable aging to reduce as we collect from a partner on a large project that has experienced delays. In the fourth quarter, we completed our targeted proactive restructurings. These were focused on managing costs, driving efficiencies, and optimizing our performance to ensure that as we grow revenue, our margins can improve and we can generate free cash flow and profitability. As we move into 2024, we've consolidated our California stack manufacturing and reduced our operating expenses by 19% versus the first half of 2023. A restructuring charge of roughly $7 million was recorded in the fourth quarter that has a pro forma adjustment to our non-GAAP reporting. As we look forward to 2024, we expect to continue to grow our revenues and expand our margins. Based on our backlog and pipeline, we are targeting revenue of $1.4 billion to $1.6 billion. We expect an additional 200 basis points improvement in our non-GAAP gross margins to about 28%. Based on these targeted revenue and margin performance, I would expect our non-GAAP operating profit to be between $75 million to $100 million. Consistent with prior years, second-half revenue should be greater than the first half, driven by the timing of Korea shipments and some large acceptances. For the first half, I would expect revenue to be up mid-single digits, with improving profitability versus last year. For the first quarter, the range is a bit broad as we have projects that could be accepted in either the first or second quarter. First quarter revenue could be flat to down 20% on a tough comparison as the first quarter 2023 was up nearly 40%. Finally, let me spend a few minutes on my departure from Bloom Energy. The last four years have been an amazing professional journey. I want to thank KR, the Board, and the entire Bloom family for their support in allowing me to contribute to Bloom's success. I'm proud of how we've worked together to position Bloom for the future. We've doubled revenues, improved margins, strengthened our balance sheet, doubled manufacturing capacity, and assembled a strong operating team. The world needs Bloom's solutions, and I'm confident the Bloom team is poised to continue to deliver. This has been a very hard decision for me, but I look forward to enjoying more time closer to my family. While there's rarely a perfect time for a transition, waiting for one often comes with a personal cost. In the near term, I'll be focused on ensuring a smooth CFO transition. I am confident in KR and the Board to find the right person to enable Bloom's continued success. I remain very excited for Bloom's future. With that, operator, please open the line for questions.

Thank you. Our first question comes from the line of Andrew Percoco of Morgan Stanley. Please go ahead.

Hi. Thank you for taking my question. Greg, first of all, I wish you the best in your next pursuit, and I appreciate the partnership we’ve had over the past few years. It has been a great experience. To start with, regarding the AI data center topic, the concerns about power shortages and bottlenecks seem to be gaining traction, and you’ve mentioned that your technology is a key solution for that market. KR, it appears you’re in many discussions with tech companies focused on AI. However, considering these power limitations, I would have expected the pace of development on some of these agreements to be quicker. Could you provide an update on where these discussions stand and what outstanding items need to be addressed to move things forward? Also, as a separate follow-up, you mentioned delays in the South Korea market impacting your 2023 revenue target. Can you clarify what is planned for 2024 regarding South Korea and how you are managing the regulatory changes? Thank you.

Thank you, Andrew. I will address the AI data centers, and Greg will discuss the Korea markets so we can provide additional insights. Over the past three days, including two days of Board meetings and today’s earnings call, I have also had four meetings with key players in large data centers at the C-suite level. These discussions have centered around greenfield data centers, and collectively, these opportunities represent a pipeline interest exceeding 0.5 gigawatt. This is based on what our customers are communicating to us. When considering the projections from major chip companies, including TSMC and their facilities, and factoring in their power requirements, these figures are significant. However, it’s important to note that these are for greenfield data centers. Our conversations with customers indicate they are in the process of securing land, financing, offtakes, and permits, leading to an elongated timeline. We anticipate that the second half of the year will be stronger than the first half based on current trends. Although we could have pursued other traditional sectors to build our pipeline and achieved a decent first half, we have chosen to be fiscally disciplined and focus on real opportunities. We remain very optimistic about our prospects in this area. Greg, would you like to discuss Korea?

Yeah, sure. Andrew, thank you for your kind words. I've enjoyed the partnership as well. So, on Korea, as the change came in with the clean hydrogen portfolio standard, it was known all the way back to 2021 that this change was coming, and we didn't know exactly how it was going to impact the market. But our partners indicated that if this did impact timing, then we were going to have to come back to the table, which we did. I think going forward, looking at the bidding process, our partners there have a pretty good understanding of how the market is going to play out. One of the changes we made to the agreement is we now have quarterly minimums in place. Before, we had annual minimums and it left us with some uncertainty. We now have quarterly minimums where we can ensure we're on track for the year. So I think that was a good change. If I look forward in the market out two, three, four, five, six years, that market is going to continue to expand, and the technologies are actually going to come together. You won't have separate swim lanes for fuel cells versus combustion versus other things. That market is going to continue to grow, both for natural gas as it transitions to hydrogen. I feel very good about Bloom's products on both the fuel cell side as well as the electrolyzer to do really well in Korea. I'm really encouraged by that market.

Thank you. Our next question comes from the line of Manav Gupta of UBS. Please go ahead.

Good morning, guys. My quick question here is the 2024 is a range. Help us understand what could push you towards the top end of the range of $1.6 billion in revenue? And also just a quick clarification. You are very capital disciplined. So, with $75 million to $100 million in operating profit, would that imply a minimum cash burn and very small needs, if any, for any external financing, if you could address those issues? Thank you.

Yeah, sure, Manav. It's Greg. So, listen, when we pulled the plan together for this year, and we looked at it, I talked about being up kind of mid-single digits for where I think the company will be at the midpoint in the year, which gives us the way we've looked at it before, where 35% to 40% of our revenue is earned in the first half versus the second half. What's going to drive us from the lower end of the guide to the higher end is really going to be a list of projects that we see in the U.S., broadly international, and in Korea. I expect that as we go through the year, we're going to get more clarity on the timing of those projects. I am very bullish that we're going to win our fair share of those projects, and they're either going to fall in late 2024 or early 2025. My expectation is that as we move through the year, it's not so much whether we will have the projects, it will be the timing of those projects. But our full expectation is that Bloom will leave 2024 with a bunch of commercial momentum, both in winning deals and delivering on systems, which would drive us to the higher end of the range, I'm hopeful. Regarding cash burn, the metric I look at is the EBITDA metric. That shows whether the company is burning cash on running itself. We've been positive on EBITDA over the last couple of years. Our CFOA usage has been more around investing in inventories and preparing for the growth in those systems. I do not expect to change the view on the inventory levels year-over-year, where we grew those significantly from '22 to '23. I would not expect a similar level of growth next year. That would say you have more opportunity to generate cash in that CFOA bucket than not because you're not investing in working capital. As I think about the capital needs for the company, one thing that will be out there is the 2025 $220 million convertible note will come due in August 2025. That will be something the company can be opportunistic around when it chooses to address that. With our cash balances and that value of $220 million, we could easily pay that off if we chose. The company has many options on when and how it addresses those capital needs.

Thank you. Our next question comes from the line of Dushyant Ailani of Jefferies. Please go ahead.

Thank you for taking my questions. I wanted to quickly just talk about thoughts on electrolyzer sales going into 2025. I know that you guys mentioned you're optimistic on that. But I think just given some delays in Final Investment Decisions, I wanted to get your thoughts there.

So, this is KR, and I'll have Greg add additional comments to that. Look, we have shown '26 and beyond as there is going to be meaningful electrolyzer revenue. We think that's still a possibility. Let me walk you through the few things we are looking at. As we have publicly mentioned in four of the seven hubs, we're working with some other hubs too, but let's just talk about the four hubs. These projects are in the pre-FEED engineering right now as we speak, and Bloom is supporting those projects as an OEM. However, winning the money for the hub on an 80-20 rule is the 20 side. The 80% of whether these go to FEED and beyond is going to depend on the regulations that come on the production tax credit from the DOE. That's what's going to drive it. We are ready, able and willing to support those things. If you look outside the U.S. right now, we are in pre-FEED studies in multiple geographies, including Europe, the Middle East, and Australia, and we are working on those. As for our project demonstrating with a nuclear power plant with Xcel Prairie Island, we have already shipped our unit. Now, it's with the customer who is going to integrate it and start running it. For our INL project with Idaho National Lab, they can't stop saying enough good things about us. That unit we shipped out there is working extremely well, not just performing but exceeding expectations. So that's a summary of our electrolyzer program.

I think here's what I'd add: in addition to that, our technology is the most efficient on the market today, and we have over 2 gigawatts of capacity. What you get with Bloom is optionality. So we see in the near term, and we've always talked about this regarding our long-term growth rates, the bulk of the short-term growth will be driven by our core power generation projects. Now, what's great about that is we are building out all of the manufacturing capacity, the supply chain, the automation, and driving down the cost around our stacks and columns, and it's the same product, whether we put it in as a fuel cell or as an electrolyzer. We are learning every day on how to drive that cost curve down, and we are not waiting for that. Additionally, every day, we get 1 billion data points coming in on how those stacks and columns are performing in the field. While we wait for the market to evolve, and it will evolve, when it does, we think we have a great product that will have high efficiencies, and we will be ready to manufacture it for our customers. But in the meantime, with Bloom, what you get is amazing optionality because we are not waiting for that market to develop. We still have a company last year that generated $1.33 billion in revenue as we built out the business.

Thank you. Our next question comes from the line of Pavel Molchanov of Raymond James. Please go ahead.

Thanks for taking the question. I guess it was about a year ago, you entered the European market for the first time, and it is Europe where some of the green hydrogen projects are moving forward. So, I know you've sold some fuel cells in the UK and elsewhere. Are you making any progress with the electrolyzer product in Europe?

We are in pre-FEED studies with a few potential customers in Europe as we speak. But let's dial in for a second on the green hydrogen story. Andrew started by talking about the power shortage and what we do. Power is electricity, and it's that electricity that makes the molecule. The fact that there's a shortage of that electricity even when it's being made is going to stress making a molecule with that electricity. That's the macro that we need to understand, and then say, if you're going to make that molecule with that precious electricity, obviously, the technology that uses less of that electricity is what's going to win. We're very confident in Europe that we'll be able to get there. We are talking to several customers right now. However, it seems to us that the pace of implementation is going to be slower than what all of us want. However, as Greg rightly pointed out, having the optionality and not being a pure play on electrolyzers is a significant competitive advantage for us, and I can't overemphasize that.

Thank you. Our next question comes from the line of Ben Kallo of Baird. Please go ahead.

Hey. Thank you, guys. And, Greg, sorry to see you leave. Just thinking about this year, can we talk a little bit, KR, maybe about the Fremont factory ramp-up? If we should see a margin impact at different times because of the ramp-up? And then there's some confusion about the different servers that you sell. Could you update us on what servers you're selling now and how that impacts sales? And I'll follow-up.

Hey, Ben, it's Greg. I'll take the question on Fremont. At the end of last year, we had a major milestone in that we exited our previous factory in Sunnyvale, and we've now consolidated all of our manufacturing capacity in Fremont there. All the tooling has moved over, and we've kept it just shy of that 700 megawatts of capacity given all that tooling. I believe we can at least double, if not more, based on the size commitments and our ability to drive more automation and density in that space. From a cost standpoint, there's dollars that we're going to save between rent and utilities and indirect labor by operating both factories, which is going to improve our product costs year-over-year. I would also say that we're going to find hidden efficiencies by running two factories within driving distance of each other, which is going to continue to take costs out. We set a target for the team of at least double digits, 10% down, but they know very well that their target is higher internally than the one I'm giving externally, and I think they have ample room to continue to drive not only material costs down, but increased automation and ensure they are contributing to our margin improvement this year as they did last year. They overachieved by 100 basis points. We achieved a 13% reduction versus our target of 12%. So, I have full confidence that they'll overachieve again.

Thank you. Our next question comes from the line of Colin Rusch of Oppenheimer. Please go ahead.

Thanks so much. You gave us some color a little bit on the customers and the backlog for the year. But could you talk a little bit about the sales cycle and whether that's accelerating or decelerating at all with some of these bigger projects? And with the mix and incremental backlog moving aggressively into the service revenue, just understanding what the dynamic is there?

Sure. Let me start with the service revenue dynamics. Remember that each year in our backlog, we absorb only one year of service into revenue out of the backlog, in addition to the service revenue on the deals we booked. When we have a high-performance commitment, like in Korea, the service payments there are high, and that's what drives the differences, where you see mid-single digits on product and over 20% on service in relation to how their math ticks together. I will comment on the sales cycle: I'm very encouraged with Aman coming in. He has experience selling in this space before. Though we didn't overlap directly, we both have the same training and bring an incredible mindset around process. He knows the space very well. I think the combination of process and his commercial acumen will continue to make sure we accelerate some of these larger transactions.

Colin, I would add to that the following: these are much bigger projects, which means you would expect a slightly more elongated cycle. There are more greenfield projects compared to brownfield projects, leading to this elongated cycle. However, the macro of lack of power is going to make people take decisions faster because they don't have a choice. There's a forcing function not coming from us in the selling side, but from the customer needing that solution. We are a solution that the customer needs. Additionally, Aman joining us, as Greg correctly pointed out, has sold 5 gigawatts worth of power globally in the last two years. So, he knows a thing or two about taking complex deals and shrinking the cycle. That's what we expect him to do.

Thank you. Our next question comes from the line of Michael Blum of Wells Fargo. Please go ahead.

Thanks, Greg, for all your help over the years, and I wish you the best of luck. In your prepared remarks, you reiterated the long-term targets primarily driven by the core power generation business. You've addressed the electrolyzers to some extent, but you seemed a bit less optimistic about the marine segment. I would like to know more about both of those areas, particularly the marine segment—any updates and what's your latest outlook there?

I'll start by addressing it, and KR has been closely involved with that market recently. As we established our long-range targets for the decade, we always anticipated that the marine segment would begin to contribute in the latter part of the decade. As I evaluate our overall framework, the timing aligns with my expectations. For 2024 and 2025, our focus is on delivering our power generation equipment with all its enhancements, which is central to our long-term framework based on the market outlook. As other markets develop, it will boost our growth rates. Everything is still on track. I believe this will strengthen our power generation business as we progress further into this decade.

Let me take marine and expand that to shipping as a whole. The reason to do that is when we talked to you first, we talked about cargo ships, now container ships. The opportunity with cruise ships and yachts is very interesting, and we have several customers extremely interested in this. You heard about our MSC Europa, and we are working with the likes of Royal Caribbean on this. We are forming a consortium of these key players in this field to give us a common set of requirements so that we can develop a product that spans across the entire industry. But the second part where we are seeing pain points is when they get to port, having enough power at the port. This is our bread and butter business, and we need to customize using our Be Flexible platform to be able to provide port power. This is something we continue to work on. As Greg mentioned, the expectation is that this will be created as a revenue stream in '26 and beyond, but we think this is a very important area for us and we are continuing to work.

Thank you. Our next question comes from the line of Jordan Levy of Truist Securities. Please go ahead.

Thank you all for your comments, and Greg, I appreciate everything you've done. I want to repeat what others have expressed. I don't want to dwell too much on average selling prices, but I did notice a slight decline in the fourth quarter. I understand that this can vary from quarter to quarter, so could you provide some insights on that?

It's primarily a straightforward situation, mostly a mix. If you compare the third quarter to the fourth quarter, we had the repowering in the third quarter as we transitioned to the fourth quarter. We focus on the average selling price without distinguishing between microgrids, grid parallel, or other components. Overall, it has substantially surpassed our cost reductions, which is the key indicator we want to highlight in those figures. Last year, there was a 10-point increase in the average selling price relative to cost reductions.

Based on where utility costs are going and given the shortage of power, we don't see pricing pressure as we look forward.

Thank you. Our next question comes from the line of Noel Parks of Tuohy Brothers. Please go ahead.

Hi, good afternoon. I wanted to mention that the data center example is a compelling illustration of the outlook for demand growth. Could you discuss which other business lines or verticals you see being most impacted by grid insufficiency and likely to engage with you as potential new or expanded customers?

That's a great question, Noel. Let me try and answer that. The first area I would highlight is continuous manufacturing. We're bringing a significant amount of manufacturing back to this country, particularly in semiconductor chips and large power-intensive companies that need substantial power while striving for a cleaner footprint. The second area is electric vehicle charging. With the need for charging fleets, including delivery trucks, metro buses, and fleet cars, if we consider even half of the projections for EV adoption in the next five years, the power requirements and the source of that last-mile power become highly appealing for us. The third area involves utilities facing congestion in their distribution networks and struggling to serve their customers. We are in discussions with several utilities about this, which is a new opportunity for us and represents a significant portion of our pipeline.

Thank you. Our next question comes from the line of Biju Perincheril of FSG. Please go ahead.

Yeah. Hi. Thanks for taking my question. Two questions on data centers. As we think about how the data center operators are looking at fuel cells to power their facilities, are they looking at fuel cells to power their entire facility or smaller portions, some critical parts of those facilities? And then related to that, how challenging is it getting natural gas to these facilities? And is that something that Bloom is going to be doing or are you partnering with someone to do that?

Most data centers that are talking to us today are asking us to be the standalone solution, where we are able to provide complete power for them. This is where we stand. The reason is not that they don't want the utility; the utility is saying they cannot provide them power. Unlike that, the gas pipeline and the medium-pressure pipelines are very available, and we don't have to do anything specific other than have our customer tap into those lines and coordinate with the gas companies to get that. We don't take the fuel risk, as you know, but we facilitate bringing the fuel to the customer.

Thank you. Our next question comes from the line of Sherif Elmaghrabi of BTIG. Please go ahead.

Hi, thank you for taking my question. You mentioned the upcoming power shortage, which indicates that electricity prices could rise in the medium term. Do you see a possibility of increasing prices this year to help achieve the higher end of the guidance, or will growth in acceptances be the main factor? Additionally, what kind of uptake are you observing for the Series 10 offering?

On the guidance, it's volume driven, and the value we sell to the customer will always make sure we're pricing based on value against alternatives. But in the short term, the volume metric will drive different parts of the guide.

Thank you. Our next question comes from the line of Jeff Osborne of TD Cowen. Please go ahead.

I think the prior person asked on the Series 10, it would be great to get an answer on that one as well. But the two ones I had were on the backlog coverage. Can you talk about the visibility to the low end of the guide? Are you fully booked for that, or do you need the pipeline to convert? And I was curious, Greg, if you can discuss the carbon intensity score for the ITC in 2025? As that starts, do you anticipate a wave of bookings in '24 ahead of that, that then, I believe you have a year to complete the project?

On the ITC, we are at a critical point where based on current legislation, what we've seen in the past is it does drive commercial activity around ensuring orders come in, allowing customers to safe harbor and continue enjoying benefits through 2025. Based on everything I'm hearing from our team in D.C., they are making tremendous progress around underpinning the case that Bloom technology is required and should be part of the long-term solution going forward. It is certainly not new; I believe I see this process go through every few years. As far as the backlog, I would say the product backlog is significantly larger than where the guide would stand for the year. Some of that backlog may be for future years. Our execution and delivery on projects can create movements in the guide either above or below. Historically, we've seen this happen before.

On Series 10, if you look at what I said about our transition from single megawatts to tens of megawatts and hundreds of megawatts, you can consider Series 10 and Series 100 as the way we're approaching our entire pipeline. The fact that we created a nicely packaged solution for understanding and beginning to work with us helps with commercial momentum. This is a great step forward for us and is integral to how we are prosecuting future orders.

Thanks, Jeff.

Thank you. Our next question comes from the line of Kashy Harrison of Piper Sandler. Please go ahead.

Good afternoon, and thank you for the questions. I would like to follow up on the previous inquiry. Could you provide insight into how much of the guidance is secured through the backlog, and what additional bookings and shipments are required this year? Additionally, I noticed in the K, there was mention of the Amazon deal and a delay due to a permit issue. When do you anticipate receiving those permits? How should we assess the risk of cancellations mentioned in the K? What is the likelihood of those cancellations occurring?

I'll let the K speak for itself on that project. We outlined it quite well. We're ready to deliver on that Amazon project and are currently working with them on the next steps and the path forward. As for the backlog, the product backlog is significantly larger than where the guide would be for the year. Some of that backlog may be for future years, and we are actively pursuing new projects that could fall into or out of our projections based on customer needs over the year.

Thank you all for the tremendous interest and great questions. I want to take this opportunity to thank Greg for his partnership and invaluable help in driving better financial and operating performance at the company. We will miss him here, and I wish him the best of luck going forward. I want to close now by saying we are in a great position to continue our growth and success. We are excited about the quality and quantity of our sales funnel. We are confident in our long-term growth rate and projected targets. We remain focused on operating the business in a financially responsible way, managing costs, and driving cash flow and profitability. We are confident about a bright future for us.

Thank you. Thanks, KR.

This concludes today's conference call. We thank you for participating, and you may now disconnect.