Greetings and welcome to PLUG's Fourth Quarter and Year-End 2022 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to our hosts Teal Hoyos, Senior Director of Marketing and Communication. Thank you, you may begin.

Thank you. Welcome to the 2022 fourth quarter and year-end earnings call. This call will include forward-looking statements that contain projections of our future results of operations, or fiscal position, or other forward-looking information. We intend these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on these forward-looking statements, and these should not be read or understood as a guarantee of future performance or results. These statements are based upon current expectations, estimates, forecasts, and projections, as well as current beliefs and assumptions of management and are subject to significant risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including but not limited to the risks and uncertainties discussed under item 1A risk factor in the annual report on Form 10-K for the fiscal year ending December 31, 2021, subsequent quarterly reports on Form 10-Q, and other reports we file from time to time with the Securities and Exchange Commission. These forward-looking statements speak only as of the day in which they are made, and we do not undertake or intend to update any forward-looking statements after this call or as a result of new information. At this point, I would like to turn the call over to PLUG's CEO Andy Marsh.

Thank you, Teal, and welcome to all those who have joined us on the call today. Our shareholder letter was made public 30 minutes ago, and as previously discussed in January, our performance did not meet our expectations. We attribute this primarily to three factors: obstacles we encountered while introducing new products, delays in constructing our hydrogen plant, and macroeconomic conditions that affected the cost of natural gas, resulting in a significant increase in the cost of our hydrogen. Despite the difficulties we faced this past year, I firmly believe our efforts in 2022 will serve as the foundation for PLUG's success over the next five years. Allow me to take a few minutes to explain how all the pieces fit together. PLUG is actively pursuing every aspect of the hydrogen economy, including expanding the hydrogen ecosystem and establishing top-tier manufacturing and supply chain capabilities. One of our major advantages is the distinguished list of customers, including Amazon, Walmart, New Fortress Energy, and great partners like SK and Renault. Furthermore, our growth plans are supported by a policy environment that promotes renewables, such as the USA’s IRA Legislation and REPower Europe. We anticipate that our broad efforts across the hydrogen ecosystem will become apparent this year. For instance, our hydrogen generation facilities will play a crucial role in this effort. Our first green hydrogen plant in Georgia is set to begin hydrogen production early this year. However, this is just the start of our plan to expand our production to 500 tons per day across the United States by 2025. We're also building green plants in Europe, including projects in the port of Antwerp-Bruges and in collaboration with our partner ACCIONA in Spain. Our plants will utilize PLUG electrolyzers and cryogenic equipment to produce and deliver liquid hydrogen via PLUG trailers. As part of our aggressive strategy, we also will provide products such as our electrolyzer platforms, stationary products for EV charging, and peaker plants. We're also developing on-road vehicles through our JV partner Renault. All of these products will be marketed and sold by our JV partner SK. We believe that our manufacturing supply chain capabilities are crucial differentiators in our industry. The state-of-the-art facility we have in Albany is unrivaled in the sector. Additionally, we have formed valuable partnerships with partners such as Johnson Matthey, which grants us access to invaluable product development and manufacturing expertise, as well as essential elements that are crucial to scaling the industry. At Plug, we place a high priority on the advantage of large-scale manufacturing, which we believe will accelerate our business growth and drive profitability. While some may doubt our capacity to achieve all these tasks simultaneously, we have confidence that our 4,000 global employees and partnerships can make it possible. Moreover, the favorable business environment for sustainable solutions will benefit all PLUG's stakeholders. By the end of 2023, we aim to generate $1.4 billion in revenue, commission more than 200 tonnes of liquid green hydrogen plants, become the largest global player, exceed $400 million in electrolyzer sales, and deploy 30 megawatts of stationary power products, which will serve as a substantial source of recurring revenue for Plug and finally clearly demonstrate the path to profitability for all our investors. I do want to ensure complete transparency by acknowledging the potential challenges that may arise during our business activities throughout the year. Launching new product platforms and building first-of-a-kind hydrogen plants involves taking account design and manufacturing learnings, especially for complex products like our electrolyzers and stationary products. Based on my experience, design issues that were not initially considered often arise within the first six months, and supply chain and manufacturing challenges tend to emerge during the first year. As someone who has been involved in introducing new platforms for many years, I can confidently say that it's unrealistic to expect flawless product launches. However, we believe that our plans are achievable and have built some buffer into our projections for 2023. Finally, I believe that by the end of 2023, no one will question PLUG's ability to scale the hydrogen economy. By 2026, we expect to generate $5 billion in revenue and $20 billion by 2030. We are committed to achieving our vision of being the leader in the hydrogen economy and will continue to build and dream accordingly. Paul, Sanjay, and I are now open to taking your questions.

Thank you. Ladies and gentlemen, at this time, we will conduct the question-and-answer session. Our first question comes from James West with Evercore ISI. Please state your question.

Hey, good afternoon, guys.

Good afternoon, James.

So Andy, I like what you're doing in Europe here. You're getting more aggressive. I know you guys started kind of the U.S. build-out, but now with Antwerp, and especially with the JV partner in Iberia, it seems like that could accelerate into many more plants in that area of the world. Is that a fair assumption to make?

That is a fair assumption to make, James. Our team has been particularly focused on the Nordic regions. When we think about hydrogen generation in Europe, those are really the two areas - that southern portion of Europe, such as Spain, as well as the Nordic region where you have accessible hydropower and wind power, which we think makes a lot of sense.

Right. Okay. Got it. And then on the EV charging front, this has been emerging. Could you characterize kind of where you're seeing that demand and maybe the level of demand that you're seeing?

What we're observing is that there are challenges in establishing transmission lines to support fleets of electric vehicles. We have some major customers planning to deploy EVs, starting with last-mile delivery for charging, as it's more feasible to transport hydrogen to a facility 70 miles away to produce fuel and utilize our stationary power products to charge the vehicles. Additionally, our investors can expect announcements in the upcoming months concerning first-generation peaker plants, where we'll be installing electrolyzers in the range of 8 to 10 megawatts initially, supported by our stationary products. This is a key area of focus right now, and the synergy between these two initiatives will facilitate the 30 megawatts.

Got you. Okay, perfect. Thanks, Andy.

You're welcome, James.

Our next question comes from Manav Gupta with UBS. Please state your question.

Guys, you recently announced a long-term strategic partnership with Johnson Matthey. Help us understand what they bring to the table, why this partnership is important to you? Does it help ensure that future supply chain issues do not arise? Just help us walk through that, please?

Sure, Manav. Thank you for the question. We really believe when we take a look, Johnson Matthey has great capabilities in sourcing precious metals, which is really critical in this industry, but they have also been deeply involved in what we think are really interesting product development work in MEAs, and we use their technology today. We believe that combining Plug's strengths in applications as well as MEA developments with Johnson Matthey gives us a much stronger product development platform for both our electrolyzers and fuel cell business. We also believe that, again, thinking of scale manufacturing, we're looking at putting a 10-gigawatt plant here in the U.S. with Johnson Matthey, much like something that looks like the Tesla plant in Nevada. We think that's an added strength. Furthermore, when you consider recycling precious metals, no one is better in the world than Johnson Matthey. This provides PLUG with a unique technical and manufacturing advantage while addressing some of the larger concerns in the industry about the availability of precious metals.

Thank you. My very quick follow-up is you sometimes don't get enough credit for your materials handling business, and we're looking at just basically to add about 80 new material handling sites in 2023, so if you could quickly talk about that.

Sure. You're right; it often gets overlooked. We've got an ambitious plan this year with some of our traditional clients, like Walmart. Additionally, over the past year, we introduced three new pedestal customers. These customers, including Gastar, are preparing to deploy at scale, which is beneficial not only in North America but also for enhancing our capabilities in Europe. Yes, it does get overshadowed, and it is expected to account for about half of our business in the upcoming year, which marks a significant increase from last year.

Thank you for your very eager responses.

Our next question comes from Alex Kania with Wolfe Research. Please state your question.

Thanks, good afternoon. I noticed in the discussion on the sales funnel for electrolyzers that a pretty substantial proportion is related to, I guess, green hydrogen/green ammonia. We've certainly seen a lot of new hydrogen announcements in the last few weeks. I'm just kind of wondering, it sounds like there's a lot of demand for green ammonia, but just what's your sense in terms of the timing of when we are going to see larger types of announcements?

I will let Sanjay take that because I know Sanjay has been deeply engaged in that activity over the past month. So Sanjay, maybe you can provide some insight.

Sure. Happy to do that. Again, Alex, as you know, we've talked about it before. When you think about our funnel, it's well in excess of $30 billion. When you break it down, almost 50% of that is really related to e-fuels, including green ammonia-type opportunities. We have some real meaningful activities going on here in North America. In terms of the timing of when we might be able to talk about that, I believe that we'll be able to share something incremental with you all during 2023. These range from multiple sizes of projects, some being fully substantial opportunities in sort of the Panhandle Texas area. Just give us some time; there's a lot going on behind the scenes, and we really look forward to talking much more about it in North America as we approach the second half of 2023.

Great. Thank you. And then just a follow-up on your discussion on SK and expectations of the stationary power, which I think was like 400 megawatts by 2025. How do you characterize that? Is that fully contracted? Or is it kind of more just some understanding? Just kind of curious about how you see those deliveries.

That's a good question. So 2023 should be a pivotal year. We have a good deal of business activity, which will occur with SK this year, including supporting electrolyzers in South Korea, bus fleets, and fueling stations. Currently, we have quite a bit of business in fueling stations that will be seen as revenue this year as this business begins to grow. This year is really a testing and verification of our stationary products. Once that is complete, we will lock in the 200 megawatts and 400 megawatts worth of products. Simultaneously, which should provide investors a little more confidence, we are also working on the details of the MEA manufacturing plant in South Korea to support those deployment sizes between 2025 and 2040. There's a lot of development and manufacturing coordination going on between PLUG and SK, and I hope that's helpful.

Great. Thank you very much.

Okay.

The next question comes from P.J. Juvekar with Citi. Please state your question.

Hey, Andy. And everyone, good afternoon. My question is that given the delays you had in 2022 in building these hydrogen plants, you haven't changed the 200 tons per day number for 2023. Wondering what gives you confidence to keep that guidance the same. Maybe Sanjay, can you talk about that?

Sure. Happy to jump in here. So PJ, a couple of things. You must have seen the update in the slide we provided in the shareholder letter even versus the one we had before. As you can see, there's a check mark in Georgia from a commissioning standpoint. We are talking about getting Georgia starting to produce by the end of this quarter and in early Q2 from a full production standpoint. There's been tremendous learning in Georgia; let’s not forget, it's a first-of-a-kind green hydrogen liquid plant in the world that has not been built in the past. With that learning, we can take that knowledge into our plants in Texas and New York. We're also able to leverage a lot of that learning. In Texas, it will be our electrolyzer, our liquefier, and we're now able to do turnkey EPC contracts for some of that execution capability. In New York, we've spent a lot of time looking at the design analysis, and substation work is moving ahead. So reconsidering all these factors and projects, we're confident that 200-ton commissioning will be achieved by the end of the year, and by the middle of 2024, more than 200 tons will be producing at full capacity.

Great. Thank you. And Andy, I do want to talk to you about the IRA benefit you get. How much of that will the producers keep, and how much of that will they pass on to their customers? Different answers from different people. Just wondering what your overall views are on that topic.

PJ, what it is in 2025 will be different from 2030-2032. Initially, the producer will be able to capture a higher percentage of the production tax credit, circling in the 70% range. I think as time goes on and with more competition, the ability for the producer to capture that level declines. If I were to predict in 2028-2029, you're probably talking around 30%. During that time, especially for plants that are already online, you'll have already paid back for those plants. This is how I think it will play out.

That's fair. So you think there is an advantage to being the first mover in the space?

I feel very strongly about that based on contracts we've already signed.

Our next question comes from Amit Dayal with H.C. Wainwright. Please state your question.

Thank you, guys. Appreciate you taking questions.

Hi, Amit. Nice to talk to you.

Hi, Andy. Thank you. Same here. Just with respect to the questions from the recent caller, the 200 tons that have been commissioned by the end of the year and then getting commercialized fully by mid-2024. In that context, how do we bridge this $1.4 billion revenue target for 2023? If you could just break out the segments between material handling, fuel electrolyzers, I think that would be helpful to listen.

Sure. Paul, do you want to take that question?

I think first of all, material handling will be a meaningful part of our sales, somewhere between 55%. Electrolyzers is going to be a significant part as we're talking about that, probably roughly 30%-plus. The stationary products will also play a significant role this year. I've publicly mentioned a target of up to $100 million of sales in that product line. Lastly, fuel will probably make up the rest; in the fuel category, I include other cryogenic equipment and liquefiers and tankers. The real growth will be seen as we turn on those plants this year and ramp into next year, causing fuel to become increasingly more meaningful.

Thank you, Paul, appreciate it. And last one for me, guys, with respect to the green hydrogen network coming up now, are the offtake agreements for this already in place? Or are you working on those? And then what type of contracts might you be setting up, monthly contracts? Any color on how this will play out?

Sanjay, do you want to take that one for Amit?

Sure. Happy to do that. As we briefly mentioned in the shareholder letter, we have almost 200 tons of offtake agreements in place between our pedestal customers like Amazon, Walmart, and others. These are done from a portfolio perspective, so there's some situations where an offtake agreement is from one particular plant and a meaningful amount of that. In other situations, it's actually the network where they allocate a certain amount of capacity from plant A, B, C, and D. From a structuring standpoint, we have contracts as long as seven years on a take-or-pay basis, and others are around five years. We are also negotiating discussions regarding some swap agreements and with some specialty gas players who do not currently have hydrogen in a significant amount today. We're engaged in discussions with folks like that, but from a contracting standpoint, that's where we stand right now.

Wonderful. Thank you, Sanjay, appreciate it. That's all I have, guys. Thank you.

Okay, thanks Amit.

Our next question comes from Eric Stine with Craig-Hallum. Please state your question.

Hi, everyone.

Hey, Eric. How are you today?

I'm doing okay. Thanks. So maybe just on gross margin. Can you maybe just talk about some of the signposts we should look for in 2023 to judge progress towards long-term goals? And then in '23, can you just talk about the progression? The low natural gas prices now, what maybe impact the linearity throughout the year?

Paul, do you want to address that one? And Sanjay, feel free to jump in.

Sure. A couple of things, Eric. There are some near-term events that are important milestones for us. Sanjay talked about turning on the Georgia plant and starting to scale that up. That’s a significant milestone to show, and it will start being accretive very quickly. As we move through the year, additional facilities will also become incrementally accretive. Another significant milestone is scaling up the electrolyzer production; we've already seen a substantial improvement in output. As mentioned in the letter, moving up to 100 megawatts per month in the next month or six weeks will be another major milestone. Finally, the large-scale stationary product; we're going to be shipping the first large-scale systems in Q2. These near-term milestones are very important for us because shipping more product will contribute significantly to what we're going to do this year and leverage through volume and changes to costs as natural gas prices also improve. While we still see the seasonal sales phenomenon, you'll definitely see progression and improvement in Q1 and moving throughout the year given these improvements and natural gas cost reductions. As the year progresses, we expect Q4 to be a significant quarter for us and a big year in terms of profitability.

Got it.

Sanjay, do you want to comment on natural gas at all? Because I know there is a slight delay.

Right. Eric, as you recall, there's about a quarter delay before we see the benefits of the decrease in natural gas prices flowing into our cost structure. In terms of our margin cadence for the fuel business, we think natural gas will be around $4 an MMBtu by the end of the year. Clearly, the numbers are much lower than that, and if this trend holds, that would be very helpful.

Absolutely, thank you for that. To follow up on a previous question, when considering the credit and the 70% capture rate you mentioned, it appears that would translate to approximately $350 million a year as an incremental figure. If I think about your plan to double green hydrogen production over the next three to four years post-2025, it seems that your capture rate could reduce to a little more than half, which suggests that this figure could remain fairly stable on an annual basis.

Sanjay, want to comment? Let me make one comment before handing it off to you, Sanjay. That’s assuming that our plans for what we build stay flat, which I think we will continue to build more plants; go ahead, Sanjay.

Yeah. Eric, math-wise, you're absolutely right. That’s 500 tons at a 70% capture rate, that's the metric. But as Andy mentioned, obviously, 500 tons is a number at a point in time. Given how big this hydrogen economy and ecosystem is going to be, those numbers will go up as we continue to grow beyond that time frame. If the capture rate stays similar, then that steady cash flow number only increases.

Yeah, okay. Thank you.

Thanks, Eric.

Our next question comes from Sam Burwell with Jefferies. Please state your question.

Doing well, on the top line in the quarter came in a little light when compared to what guidance you gave a month ago. The guide down at the business update was due to operational issues related to the electrolyzer ramp and rollout. So curious what caused the numbers to come in light and if those issues have been resolved. Just how to think about how electrolyzers should ramp up through the year and how that impacts top line gross margins?

There are actually two questions there, Sam. I'll let Paul tackle why the quarter was a little light and Sanjay can talk about the ramp of the electrolyzer business. So Paul.

I think a combination of some of the issues that we shared and talked about previously, in addition to, it was a meaningful chunk of activity associated with our acquisitions. When you move effectively private companies into public space and deal with all their processes, it was prudent to error towards moving some of that into 2023 until we get all those finalized processes. The good news is the volume and the sales are there. It's really just a timing issue; it’s not that the volume wasn't there. Continuing to improve will lead to a stronger and more predictable process moving forward. That was kind of the final piece in working through the numbers. High-class problem, but meaningful regarding the volume, which is a good problem.

Happy to jump in again. The way we are managing our electrolyzer business focuses on our project business and product business. With our project business, we can draw synergies from our internal project and externally for customers like New Fortress Energy. From a product standpoint, especially with our 5-megawatt Turnkey product, this is really making green hydrogen easy for our customers; all they need is land, water, and access to power. Installation timing and revenue recognition will get meaningful in Q3 and Q4. We're looking at electrolyzers being about 30% of our overall revenue in 2023. That's how you should approach it.

Okay. Really helpful, especially delineating between project and product. This sort of begs my follow-up. I'm trying to reconcile the sales funnel with the order backlog. It sounds like the response to the IRA has been underwhelming; however, it is confirmed that it's very new, and there's a lot to digest. Do you think your customers are still digesting the details on the nuances of the PTC and any other IR implications before converting their inbound to a firm order?

Sam, let me take that one. I think how businesses respond may seem slow to you and investors, but for these large companies, it's actually quite fast. The uncertainty does play a role. We mentioned in the shareholder letter we booked 30 of these 5-megawatt systems in the last two to three months of last year, indicating some uptake. That being said, we expect the Treasury to finalize guidance in July. I suspect that guidance will provide greater momentum for these companies to finalize their business cases. Look, for Plug, that $1.4 billion this year is fair traction with the IRA, but I do understand how investors may perceive the pace.

Got it. Thanks.

Okay, Sam.

Our next question comes from Biju Perincheril with Susquehanna. Please state your question.

Hi. A quick question on the cryo equipment business. Can you talk about how big this could be for third-party sales? Are you looking at this mostly to serve your internal needs? Any color you can give there on the potential to ramp?

I'm sorry, Biju. I missed the product to start. I heard the other part of your question.

The cryo equipment?

Absolutely. When we look at the cryo equipment, we've got substantial growth expected. Considering our hydrogen trailers are best suited for 15-ton plants needing seven trailers for each plant, we know that there's significant demand. Our plans are to build out our facility in Houston to support that demand. On liquefiers, we are firm believers that over the next decade, liquid hydrogen will be the most cost-effective means of transporting hydrogen over distances. We're optimistic that our cryo business could yield around $150 to $200 million this year.

Very helpful. Thank you.

Thank you. And our next question comes from Kashy Harrison with Piper Sandler. Please state your question.

Hi, Andy, I wanted to dig into the Q4 results just one more time. Looking at the fuel cell systems and infrastructure line, that's been a consistent 20% gross margin business, but it dipped in Q4. Could you expand on what the drivers were there? And then a similar question for services and the loss provision line that increased a bit in Q4. Maybe just walk us through what happened there and what drives the confidence that those should start to improve starting in Q1 and Q2?

Go ahead, Paul.

Sure. In the equipment line, it now reflects all equipment across the company. In Q4, there was a substantial investment in new product and new manufacturing facilities. We talked extensively about launching two large-scale facilities, one here in Latham and one in Rochester. These are just coming online and starting to ramp. The unfavorable leverage at the initial phases of operations and launching new products is what you're seeing negatively affect equipment margin. As we roll into 2023, expect a major change and leverage from those facilities; it's a significant volume benefit in addition to resolving initial issues with those products. From the service line, last year was affected partially by supply chain challenges that we discussed; we are gaining access to parts and collaboration with customers to support rollout much faster in '23. The first half will be crucial to show that progress, and we're already seeing early signs of it.

Thanks for the detail, Paul. Really appreciate it. Just had one quick follow-up on liquidity and cash. We observed about $1.4 billion of cash used. I was wondering if you could speak to your expectations on cash usage in 2023. Also, discuss the timing and size of the DOE loan, if there have been any evolution in your expectations there?

When I look at cash, I consider the total pool of equity investments, short-term securities; we try to maximize returns. Short-term rates have increased, and you will see that reflected more this year. Collectively, I'm sitting with close to $3 billion in total cash liquidity, even with restricted cash, that releases at about 20%-25% a year. So it helps fund our business moving forward. Our balance sheet remains unleveraged. We paid off some debt, as the small portion of converts has a high conversion value. So we are in a strong position to fund our pipeline this year. The DOE is a process; they're going through due diligence actively, utilizing industrial engineers to oversee our plants, conducting financial diligence, which is extensive. We’re aligned on a concept for a contract of about $1 billion. This is a very viable opportunity. As we progress, you'll see either something in the DOE space or other programs, and I'm optimistic about the DOE program.

Thank you.

Our next question comes from Bill Peterson with JPMorgan. Please state your question.

Hi, good afternoon. Sorry, I am in the airport; my first question is to production costs. In the presentation, you talked about near-term production costs about $4 per kilogram. Just want to make sure that's still right as we approach the Georgia startup period. Your confidence level regarding that, and how would it compare against competitors coming online later than '24?

Sanjay, do you want to take that?

Yes, Bill, that $4 number is absolutely correct. That’s what we’ve talked about; we feel confident about that. The first 15 tons in Georgia may exceed that, but we have other plants with lower electricity rates that will achieve slightly lower costs. So that should hold as we push on driving the capital costs down, impacting depreciation and overall hydrogen cost.

Okay, great. My second one is more related to heavy-duty trucks. We talked about it in the past; you did announce Nikola as an offtake and they'll be buying trucks. But I'm curious about the strategy given your experience with HYVIA. How are you thinking about heavy-duty trucking partnerships, JVs, or just potentially offtake agreements?

Bill, we have much discussion at the board level regarding heavy-duty vehicles. First and foremost, we are quite keen on offtake agreements like the one with Nikola. However, we grapple with whether the margin harmonizes with our broader company goals. A heavy-duty trucking company is not part of our strategy. We look at and explore potential JVs thoughtfully, focusing on the long-term margin profile. We’ll sell hydrogen to any heavy-duty vehicle industry player, and we could explore JVs. That’s a possible route, too, but we won’t take on the entire responsibility.

Thank you. Our next question comes from Sherif Elmaghrabi with BTIG. Please state your question.

Hi. Can you hear me now?

Yes, we can hear you.

All right. Sorry about that. I wanted to follow up on material handling. Last quarter, you mentioned that about 35% of the material handling business was small and midsize. How is that trending given your target for a handful of new pedestal customer sites this year?

That's a good question. I think that as we look to the deployments over the next six to seven months, it will be mixed. The mix is likely 75% to 80% large sites in the first half of the year and then probably would return to the 35% from small and medium in the second half.

That's helpful. Thank you.

Thank you.

And our next question comes from Ameet Thakkar with BMO Capital Markets. Please state your question.

Hi, how are you? Thanks for squeezing me in. Just on the GenDrive units sold for the year. It looked like around 1,800, which is lower than last year. I was just wondering if you could provide a little color on what's driving smaller numbers than expected this year?

Yeah, that’s driven by earlier discussions regarding construction delays at customer sites due to supply chain issues. This year, we expect the number of sites will double; we know where they're going. So the decline was very much related to customer site issues.

Got it. One quick housekeeping issue. I think you reaffirmed '23 revenue and gross margins, but the operating income margins target was minus 24% for '23, but that's still unchanged, right?

I'll let Paul answer that, Ameet, to ensure you get the correct answer.

We’re still targeting $1.4 billion, with 10% gross margins. What I've discussed is a $125 million per quarter OpEx rate as a proxy. That provides the math for the minus 24% operating margin target being negative—that remains in that range.

Thanks so much for that.

Thank you. Our final question comes from Craig Shere with Tuohy Brothers. Please state your question.

Hi, Craig.

Hi, good afternoon, Andy, Sanjay, and Paul. To clarify, with the DOE loan, do you not need to back lever and recycle capital in the green hydrogen network?

Paul?

Yes, there’s a chance we could do both. When you have a $5 billion balance sheet, you could leverage that while back leveraging individual facilities in isolation. Everything continues to be in the mix, and we'll assess the best decision for Plug. I’m very optimistic about the DOE program; it’s a potentially exciting opportunity for us, but good to be expanding capital options as time goes on.

Got it. This ties into my second question. Let’s say we fast forward nine months from now, and your green hydrogen network and your Olin JV is performing better than expected. With lower gas prices persisting, might it make sense to buy out some of these money-losing third-party industrial gas contracts given the liquidity you have?

Craig, that’s a very interesting idea.

Okay. Thank you both.

Thank you.

And our next question comes from Michael Blum with Wells Fargo. Please state your question.

Thanks, good evening everyone. Just two quick questions. I wanted to check on the cost for the hydrogen plant. Is that $8 million to $9 million per ton per day still holding steady? How do you expect that to trend over time? And I was also curious about CapEx for '23 and '24?

Sanjay, would you like to take the first question? Paul, do you want to address the second part?

Yes, Michael, we have no reason to change that view; the integrated green hydrogen plant is higher, while the feedstock hydrogen plant—the JV with Olin—is lower CapEx.

We’re still targeting $1 billion in CapEx this year. As timing clarifies over the course of the year, we're pushing to accelerate programs while thinking creatively to defer payments.

Thank you.

And there are no further questions at this time. I'll hand the floor back to Andy Marsh for closing remarks.

Thank you, everyone. Many of us from Plug will be in Houston for CERAWeek next week. Please come up and talk to us. I know Sanjay will be there, I'll be there, and many other members of the Plug team will be available. We're always interested in talking to investors and analysts. Thank you, everyone. Talk to you soon. Bye now.

Thank you. And with that, we conclude today's conference. All parties may disconnect. Have a great evening.