Thank you. Welcome to the Plug Power Q1 Earnings Call. This call will include forward-looking statements. These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments and other matters that are not historical facts. 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 to not unduly rely on forward-looking statements, and such statements should not be read or understood as a guarantee of future performance or results. Such statements are based upon the current expectations, estimates, forecasts and projections as well as the current beliefs and assumptions of management and are subject to significant risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including, but not limited to, the risks and uncertainties discussed under Item 1A Risk Factors in our annual report on Form 10-K for the fiscal year ending December 31, 2023, 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 of the date in which the statements are made, and we do not undertake or intend to update any forward-looking statements after this call or as a result of new information.

Thank you, Meryl, and good morning, everyone. Thank you for joining us today. This quarter has been pivotal for Plug. As we continue to execute on our mission to drive the green hydrogen economy, we are focused intensely on enhancing our cash management strategies and accelerating sales growth. These efforts are crucial as we navigate through the recalibrations necessary for long-term sustainable growth. Our strategic decisions this quarter are designed to solidify our leadership in the green hydrogen economy. We've made significant strides in scaling up our operations. Our hydrogen generation network has seen substantial growth. The production facilities in Georgia and Tennessee are currently performing at full capacity, and we're eagerly anticipating the completion of our new plant in Louisiana. This addition will not only boost our production capacity by 15 tons per day but also significantly reduce our dependency on third-party hydrogen suppliers. Building on this momentum, we are planning the development of up to 6 additional hydrogen plants across the United States. This expansion is critical for meeting the demand for green hydrogen as industry and transport sectors seek sustainable energy solutions. The strategic placements of these plants will help mitigate logistical challenges, reducing the cost of hydrogen delivery and enhancing our competitive edge in the market. Plug continues to advance the pending loan guarantee from the Department of Energy and awaits the conditional commitment approval announcement. This program is expected to bolster the build-out of Plug's liquid hydrogen facilities throughout the United States. Commensurately, the company has started a process with advisers to complement our anticipated DOE projects with project equity investors and project finance partners to finance the build-out of the plants. Our strategy, expanding partnerships and securing new deals has continued to bear fruit this quarter. The extension of our partnership with Uline and securing a substantial deal with a top U.S. automotive manufacturer are a testament to our robust business model and our ability to deliver comprehensive hydrogen solutions that meet diverse customers' needs. These partnerships not only demonstrate our market leadership but also reinforce the trust that major industrial players place in Plug to support their transition to sustainable energy practices. In Europe, our significant expansion efforts are highlighted by the commissioning of 20 PEM electrolyzer systems at sites throughout the continent, representing the largest build-out of its kind in the Western world. This is a key part of our strategy to meet the rapidly growing demand for our products globally. A pivotal component of our strategy for electrolyzers is the basic engineering and design package, which currently encompasses projects totaling approximately 4.5 gigawatts. These BEDP contracts are not just a testament to our technology and market leadership; they represent potential future sales that could be transformative for Plug. By facilitating our customers' journey to final investment decisions, these packages can significantly shorten the sales cycle and enhance our ability to lock in substantial long-term contracts. As we continue to advance our technology and increase our project capabilities, Plug is enhancing its footprint, not just in the U.S. but globally. This strategic expansion aligns perfectly with our mission to lead in the green hydrogen economy, ensuring that we remain at the forefront of delivering innovative and sustainable energy solutions. Despite our successes, we have faced challenges, particularly this quarter with equipment margins due to strategic inventory reductions and this quarter's product sales. In response, we've implemented a series of restructuring measures aimed at reducing costs and improving efficiencies. This includes headcount reductions and operational considerations, which are difficult but necessary decisions to enhance our long-term sustainability and profitability. Looking to the future, Plug is poised for significant growth. The foundations we are building today through operational excellence, strategic expansion, and a real focus on robust financial health are designed to solidify our leadership in the hydrogen market. As the world continues to turn to sustainable solutions, Plug will be ready to meet and exceed the demands of the growing industry. To conclude, we remain deeply committed to our strategic goals and are optimistic about the opportunities ahead. Now Paul, Sanjay, and I are ready to take your questions and provide further insights into our journey.

Our first questions come from James West with Evercore ISI.

So we're a few more months into your pricing strategy adjustments, and I'm curious, initially, how that went, how it's going now? I suspect your customers will kind of understand the pricing needed to be adjusted. But I'd love to hear your thoughts or views on how that process has gone so far and what we should expect over the next several quarters?

Our main focus has been to increase both the price of hydrogen and the price of service. Among our top eight customers, we've finalized contractual agreements with six, while negotiations with the remaining two are in the final stages. We anticipate that the hydrogen business will reach gross margin breakeven by the fourth quarter, which we consider a significant achievement. Throughout this process, particularly in the material handling market, we've gained valuable insights about the value we provide to customers. I expect to see a rebound in equipment sales in the coming three quarters, with clear expectations for the second quarter after our recalibration. Additionally, in the electrolyzer business, we've successfully increased prices by 10% to 15% as we negotiate with customers. Overall, although it has been a challenging learning journey, it has ultimately been beneficial for the long-term success of our business.

Okay. Got it. And then just a follow-up for me. With Georgia, Tennessee online and Louisiana coming online soon, and I think the focus probably shifts to Texas next. But as we think about as we're getting towards maybe now or the end of the year, how much of your current hydrogen, I guess, green hydrogen supply that you're providing to customers are you now and going to be satisfying by year-end with your own production versus buying from third parties?

Yes. James, I would expect we'll be in the 65% range because of growth this year. So today, we're about at 50 tons per day. I expect we'll be closer to 65 tons per day by year-end. We'll have about 45 tons of our own capacity. And you're right, the next big event after that is bringing Texas online, and that should be late in '25, which would bring 45 tons per day of hydrogen.

Our next questions come from the line of Eric Stine with Craig Hallum.

So you called out the cost savings measures taken in the quarter, I know previously you had talked about targeting $75 million in annual cost savings. So just curious what you just disclosed for 1Q, is that above and beyond the $75 million? And maybe just some thoughts on given this path you're going down margins profitability, where those cost savings can go all in?

I'm going to turn that over to Paul.

Yes. So a couple of things, Eric. One, we've made really good progress. A lot of the actions that we had announced and thought about have been completed, and you're starting to see that in the rates. You'll see a full quarter benefit of that in Q2 because it was mid-quarter when some of those were taken. There's also actions that are underway. So some things like rooftop consolidations, some we're able to do fairly quickly, and some will be completed in Q2. And so you'll see some of those benefits start to manifest in Q2 and progress on into Q3. We've come out of the gate laser-focused on cash management. And across this organization, everybody understands that cost curtailment and cost downs are critically important. So I'm absolutely optimistic and excited that I'm sure there's more opportunities as we progress through the year that we're going to continue to find and look to reduce the cost. So some things are pretty clear, and we're able to act on those pretty quickly. And some things just take some time to work through to figure out what those best actions and activities are. So I think we're in a great position in terms of what we announced and in a great position of what we can do incrementally.

All right. That's good color. And maybe just a follow-up. The DOE loan, I know you've had confidence in that all along, but it does seem like your commentary this morning would maybe take that up another notch, maybe just current thoughts on timing and next steps.

I believe you are absolutely right, Eric. We are making progress with the Department of Energy and are eagerly waiting for the announcement of the committed approval. We are very focused on this matter.

Got it. And the amount, I mean, no changes there. It's just consistent with what you've talked about in the past?

It is consistent with what we talked about in the past.

Our next questions come from the line of Manav Gupta with UBS.

It looks like during the quarter, the equipment margins came under particular pressure. There were some improvements in other gross margin, but this is an area where you saw some pressure. But just trying to understand the outlook of it. Do you expect this to improve based on some of the other commentary you have made? But generally, what's your outlook for the equipment margins? And do you genuinely believe that like 1Q could be the bottom here in equipment margins?

Yes, absolutely. We've been consistent in stating that scale and volume have a significant impact. When we assess the equipment sales in Q1, we see that it was a lower level, which doesn't allow for the most advantageous leverage on labor and overhead. We possess the facilities and capacity to produce considerably more than our current shipments, indicating nothing but potential for growth. Typically, Q1 is our lowest quarter of the year, accounting for about 10% to 12% of our annual sales. This suggests that we will be shipping significantly more and recognizing increased revenue for the remainder of the year. Therefore, simply increasing volume is beneficial. Additionally, the cost reduction initiatives we announced in Q1, particularly in terms of operational efficiencies like rooftop consolidations and headcount reductions, will yield positive results as the year progresses and we begin to see their full impact. So, there is definite potential for growth from this point forward.

Okay. But the second question is your outlook for your electrolyzer business. And do you think once the government absolutely finalizes the 45-week guidance, there will be more people who would know exactly what the guidance has looked like. So they'll be more comfortable placing those electrolyzer orders. So just trying to understand what's your outlook for the sales of electrolyzers for the rest of the year?

I'm going to hand it over to Sanjay, but I want to emphasize that we are currently commissioning 50 megawatts in Europe. This activity in Europe is set to expand significantly. If I were to predict, we might provide some preliminary guidance in June or July, with final guidance expected at the end of the year. I will let Sanjay discuss his expectations for the business in 2024.

Sure. So Manav, I think you should absolutely expect meaningful sequential growth, as Andy just talked about it, right? We have over 20 systems that are going through site acceptance tests as well as final commissioning that will start to show up in Q2 and will start to show up in Q3. And by the way, for 2024, our electrolyzer business is really about executing on a pretty substantial backlog that we already have. Having said that, what you're going to see here is, Andy touched on our basic engineering design packet, where we have about 4.5 gigawatt of that basic engineering design packet. Some of that is in the U.S. A lot of that is in Europe. We also have a pretty big opportunity on that basic engineering design packet in Asia Pac. And many of these customers, some of them are going into final investment decisions by the end of this year and some of them are going into the final investment decision by early 2025, and you will start to see the basic engineering design packet convert into backlog. And the good thing for us with that is it normally provides us with substantial growth as you start to look beyond this year and into '25 and '26. It also makes this business very, very predictable. We can manage costs. We can manage working capital. We're working off of a very substantial backlog. So when you look at that and then think about also a pulse from a cost reduction perspective, right, facility consolidation, things we are doing to reduce the overall cost of our stack. So as you go into the end of this year, you should see pretty substantial change in the margin profile for that electrolyzer business. And that trend will only go to the right and keeps getting better as you go to '25 and beyond. That's how we should think about it.

Our next questions come from the line of Bill Peterson with JPMorgan.

We'd like to talk about the full year and also the first quarter. It did come in light. You did reiterate 1/3 in first half, 2/3 in the second half. I believe you had previously expected to drive year-on-year growth for your overall business in 2024, perhaps even double-digit growth. And I think that you were expecting originally maybe about 15% of full year revenue would land in the first quarter. That would for the quarter was lighter than expectations. So I guess, first off, do you still expect to be able to drive year-year growth this year for the business overall? If that's the case, that implies a pretty large step-up in 2Q revenues in a 1/3, 2/3 scenario, maybe some of which is driven by what Sanjay just said. But were some of the revenues in the first quarter that didn't show up and they're showing up in the second quarter? What's driving the step up in the second quarter? And more importantly, what's driving the step-up in the back half of the year if you can parse by applications and energy and so forth that would be helpful.

Sure. Bill, let me take a step back and pass it to Paul. We do expect growth this year, as I mentioned in the last call. By the first quarter and into the second quarter, we expect to see about 33%. The analysts' projections seem to align well with our own revenue expectations for the second quarter. Paul, you can discuss the commission of the electrolyzers, which has shifted from the first to the second quarter. Also, there's a material handling customer at three sites that has pushed into this quarter, and you might want to elaborate on that.

Yes. If we look at the numbers and assume Q1 is around 11% to 12% and the full year is expected to be in the range of 10% to 12%, it clearly indicates that the full year will grow compared to last year. Additionally, as Andy mentioned, we're really enthusiastic about the deployment of the 5-megawatt system and the progress we’re making with our pipeline and backlog. This momentum as we get customers onboard helps us learn and accelerate future deployments throughout the year. We anticipate more activity in Q2, especially with significant developments expected in the second half. Historically, two-thirds of our sales occur during this time, along with typical seasonality in material handling, plus the added benefit of scaling our new initiatives like electrolyzers and electrification, along with our new cryogenic hydrogen products that are gaining traction. These factors are crucial for driving positive results in the second half, and we are optimistic about both Q2 and the entire year.

Sanjay, maybe you can describe the electrolyzer business because you have the backlog there as well as the most of your cryogenic business. Maybe you can touch on that, and I'll touch a little on application.

Absolutely. I believe one of the significant factors affecting Q1, as Paul mentioned, is the commissioning of our 5-megawatt system. Revenue recognition occurs after a full site acceptance test, which involves both our efforts and those of our customers, along with various factors to navigate. We have managed to handle those challenges. Now, as we move into Q2, you can expect to see many of these systems completed. Given the number of systems we are working on, we anticipate a substantial increase in revenue from Q1 to Q2 and then to Q3, which will significantly benefit our energy business sales. Additionally, in our cryogenic sector, I want to highlight two aspects. For the second half of the year in our cryo business, we anticipate notable growth in our mobile refueler segment and in our liquid hydrogen trailer business, which not only has a higher price point but also offers better margins. This should result in a much stronger performance in the second half compared to the first half. Lastly, on the liquefaction front, we expect new significant awards, as these also represent substantial revenue opportunities. Therefore, it's essential to understand that the meaningful revenue contributions will primarily occur in the second half of the year, which aligns with our expectation of achieving a high-level growth target for the full year. Andy?

Our next questions come from the line of Chris Dendrinos with RBC Capital Markets.

I guess I wanted to start out here just on the cash burn a little bit. And there is some decent sequential improvement as far as limiting the cash flow from operations. So any color you can give around the cadence for the rest of the year? Should we expect kind of continued improvement from where we sit today? Just how should we think about that?

Yes, we are very excited about the nearly 40% reduction year-over-year in the first quarter. We have indicated that we expect a total reduction of about 70% for the full year, which suggests an even larger reduction in the second half. This is due to several factors. First, our capital expenditures will decrease overall year-over-year. While the planned capital expenditures for this year are more concentrated in the first half, we anticipate a significant easing in the second half. Second, we are seeing improvements in working capital, particularly in inventory management, and we expect even greater leverage opportunities in the upcoming quarters, especially in the second half. This is a key contributor to our outlook. Additionally, we are focused on enhancing margins and cash flows, and as two-thirds of our sales occur in the second half, scale will play a significant role. Furthermore, the cost reductions we are implementing will start yielding benefits, with some of the actions from the first quarter and those completed in the second quarter coming into play. The impact of fuel price increases and the activation of our facilities will also contribute positively, particularly in the second quarter and even more in the third and fourth quarters. These are the primary drivers we are concentrating on to realize our goals, and we remain optimistic about achieving that 70% year-over-year reduction, leading to ongoing progress throughout the year.

Got it. Shifting gears to the BEDP 4.5 gigawatts of opportunity, you have previously mentioned that the conversion rate for that type of activity is very high. My question is, what portion of those projects should we expect to move forward? Historically, what has the conversion rate been for those projects actually advancing into development?

I think it's important to note that we need to spend some more time assessing the situation. When we create a basic engineering design packet, it helps the customer reach a point where they can make a final investment decision, which is crucial. The key factor in making this decision is the entire facility. We are heavily involved in the feed work related to the electrolyzer and collaborating with the customer on the design architecture. Ultimately, it will come down to their power source and the product they are producing from hydrogen derivatives. As we evaluate our engineering design packet funnel, we feel positive about several projects reaching the final investment decision this year, while many are likely to do so in 2025. It's about building a solid business base and backlog this year and next, putting us in a position for substantial growth not only for a couple of years but for many years ahead, with visibility extending until the end of this decade. Instead of trying to predict specific percentages of projects moving forward, we are focused on working closely with customers to ensure they can make their final investment decisions, which will enable us to transition from the engineering design packet phase to new award bookings and grow our backlog to support our business expansion.

One of the items, Sanjay, that why I see it is so positive because it really is part of the sales cycle and you have the customer paying you to work with you, which shows a level of seriousness about their plans going forward. And that's probably from a business point of view, is one of the real values, I think, we're getting from these engagements.

Our next questions come from the line of Craig Irwin with ROTH.

So most of my questions have actually been answered. So I want to step back into the bigger picture, right? You have some really exciting pedestal customers in the materials handling market, people using hydrogen forklifts. I guess, more than 40% of the groceries in America move around on your hydrogen forklifts. And I assume that there are several other companies of similar character to your pedestal customers that are evaluating the technology, maybe have small implementations and represent interesting longer-term opportunities. Can you maybe sort of scope out for us what you're saying to those customers now with your repositioning of this business? Do you feel that you will be adding pedestal customers over the next few years? And anything else that you think would be useful for us to understand the longer-term trajectory after we get through this short-term repositioning?

So Craig, this is Andy. First and foremost, the answer to your question is yes. To elevate the discussion, I want to share that we are currently deploying solutions with two new customers this quarter, each with 150 warehouses and distribution centers, marking our first engagement with them. There is significant sales activity happening, and we anticipate the material handling business returning to normal in the second quarter and continuing throughout the year. At the Molex material handling show, we experienced a high level of interest from new customers, which is encouraging. Although we had to navigate through adjustments earlier, we expect to announce new partnerships in the upcoming year. So yes, Craig, our outlook is positive. If we take a broader view of our business, Sanjay's work on electrolyzers is likely to become our primary focus by 2025. Considering the growth rate and ongoing initiatives, material handling will continue to be a major part of our business and a key driver for our hydrogen sector. As mentioned earlier, we expect to utilize 30% more hydrogen by the end of the year compared to last year, indicating growth. The challenges we've faced have solidified our value proposition. We project that with hydrogen, we will approach breakeven by the year's end, supporting significant business expansion.

Excellent. And then just 2 quick questions around green hydrogen. Do you maybe have a cumulative tons or some other metric that you can share on the production from Georgia and Tennessee? That would be really helpful for people to frame out how that ramp has gone. And then on green hydrogen, $18 a kilogram, I've talked to different people in the market, and there are suggestions that you can get quite a lot more than that for green hydrogen. So there may still be a little bit of an arbitrage if you can sell that in the open market. Can you maybe...

I'm going to take the first part, and I'm going to let the analysts here beside me take the second part of that one. As an operations guy, we're running Tennessee and Georgia at about 80% to 85% at the moment. Looking at our progress, we haven't been able to reach 100% capacity. Logistically, from an optimization and delivery standpoint, we will likely be operating at around 85% to nearly 90% for the entire quarter. That's our outlook. We're not aiming for 100% capacity. However, based on the data from the last three to four weeks, that seems to be our current status. So, Sanjay, perhaps you can discuss the arbitrage opportunity and your perspective on that?

So Craig, you're absolutely right about that, especially considering what we've accomplished in Georgia. Our mission has always been to ensure that we drive the price of hydrogen to a level where it provides a great value for our end customers, rather than being overly opportunistic. Nonetheless, given our production capacity and the ongoing discussions, there is definitely an opportunity for us to engage in spot sales. We're currently in active discussions with various industry players, especially now that Georgia has reached the capacity Andy mentioned. Tennessee is operating at about 80% to 85% capacity, and we're bringing Louisiana online. We are aware of our internal needs and what's available, and those discussions are in progress. Your reasoning is definitely correct. There is an arbitrage opportunity, which should significantly benefit us, particularly as we approach Q4 this year, enhancing margins, growth, revenue, and everything for our fuel business.

Our next questions come from the line of Chris Sung with Wolfe Research.

I wanted to just follow up, Andy, on a previous question clarifying the DOE loan. You don't need an equity investor for conditional commitment. But would you need investors or partners to reach a financial close?

No.

Yes. No, that's helpful. And then can you perhaps remind us on the timing for receipt of proceeds from the DOE loan on receipt of the conditional commitment?

Chris, I want to keep you well informed about what's happening and the exciting developments ahead. It's important to acknowledge that we have been making ongoing progress as we've been collaborating effectively with the DOE. As I mentioned earlier, we have strong forward momentum, and we hope to share more information soon.

All right. Fair enough. And I guess my final question is on the volumes or spot volumes that you could probably sell into once Louisiana comes along. Can you perhaps quantify how much you would be able to sell?

Maybe take a shot at that, Sanjay?

Based on our ongoing discussion right now, we anticipate it could be somewhere in that 10 tons per day kind of neighborhood.

Our next questions come from the line of Jordan Levy with Truist Securities.

Appreciate all the details. Maybe for Sanjay here. On the electrolyzer sales side, I think you touched on this, and I appreciate there's a lot of complexity in the sales process and shipment process there. But maybe just to take a step back, given some of the commissioning delays and that sort of thing. Can you just comment on sort of the overall visibility of that segment? And what might give you confidence in that visibility improving through the next quarter and the remainder of the year?

I mean, Jordan, as we touched on this a bit, right, for 2024, this is really about executing on our existing backlog, right? So we are executing on over 25 5-megawatt systems. We have over 25 1-megawatt systems. We are executing on multiple 100-megawatt large-scale projects. So it's really execute, execute and execute again, right? So that's the theme for the electrolyzer business for 2024. Now another piece here also is, look, I mean, we are doing a lot of installation. We're operating in so many different countries and continent, if you would. And specification, requirements, all the different things that go on from the site acceptance tests tend to vary from location to location. And this is something we're learning along with our customers. And frankly speaking, as we're launching the product, getting into this rapid ramp mode, there's been a lot of learnings and some of these have taken a bit longer than we anticipated, which is why we've got the Q1. Some of that is shifting into Q2. Some of the Q2 likely goes also into Q3. But as we get enough systems installed here in Q2, this also helps us from being able to actually do a transfer of the title to the customer even before we complete the entire site acceptance test, makes it even easier from the revenue recognition perspective, right? So that's why from a cadence standpoint, we feel pretty good about it. Look, there's a lot of work that the entire team is doing, we're very proud of everything they do on an everyday basis to make sure that this is all happening. You should expect that there's going to be a pretty big sequential growth in Q2 and another one in Q3, and it should really be a pretty meaningful year for our electrolyzer business in 2024. Beyond that, you should also expect based on this BEDP new bookings materializing, setting the stage for '25, '26 and beyond as all this BEDP work that we're doing with our customers working hand-in-hand gets into that final investment decision.

Our next questions come from the line with BMO Capital Markets.

I was wondering if you could provide an update on the current cash balance. Additionally, are you planning to offer an interim update on the issuance under the ATM program since the last update at the end of February? I’m curious if you have utilized any of it in this current quarter.

Yes, we are filing our Q today, which will include 100 pages of detailed information. In summary, we raised approximately $150 million, as mentioned in the Q. Currently, we are very focused on finding debt solutions and have been in discussions for some time. We have connected with a couple of parties that we are closer to than ever before, negotiating terms that we find meaningful and beneficial for our direction. We feel confident in these parties and have conducted thorough diligence. We aim to see if these discussions lead to a conclusion. My main priority remains sourcing debt solutions to cover the remainder of our expenditures. Given the context of a 70% reduction from last year, we are more than halfway towards sourcing the necessary capital, which should lessen our need significantly. The progress we are making is placing us in a better position for capital sourcing. I hope this provides clarity on our approach.

Our next questions come from the line of Andrew Percoco with Morgan Stanley.

I guess my first question is a little bit higher level and coming back to I think Colin's question before on just power procurement strategies. And I think I've asked this before, but the market seems to be evolving pretty quickly. AI power demand, there's a lot of demand for clean power. It seems like we're pretty constricted in terms of how much supply we can bring to market, at least in the U.S. And your business is very much dependent on low PPA prices. So that supply-demand imbalance has been pushing up PPA prices, at least in the U.S. I'm just curious, can you just provide a little bit more context in terms of how you're thinking about power procurement for your additional green hydrogen facilities in the U.S. beyond Texas and New York, which obviously already have offtake agreements signed?

Go ahead, Sanjay.

We've discussed this in our previous call. It's a crucial part of our strategy to identify locations, and it will vary from region to region regarding where to allocate and build plants. When we consider developing our green hydrogen generation network in North America, we aim to partner with existing players that can supply us green electricity at an economical price. This includes sourcing from solar, wind, nuclear, and hydro resources. Currently, prices in Georgia are quite favorable, and we're receiving significant hydro allocations in New York. Additionally, I'm pleased with the PPA we've signed in Texas based on your comments. We are looking at the West Coast for hydro and solar options for our next plant, and we're also considering opportunities in the central U.S. for low-cost nuclear power. There’s potential for more plants in Texas and for expanding our presence in Georgia as well. Regarding power pricing, while there might be inflationary pressures, as the supply chain stabilizes, the levelized cost of electricity could trend downward despite short-term disruptions. This is a long-term endeavor. If power prices rise over the next six months, we would likely wait for normalization before progressing further. For now, we're exploring multiple locations and do not see a need to change our strategy. Would you like to add anything?

Yes. I would just say that when considering Craig's comments and the prices we are paying in Georgia, Texas, and the prices we will pay in New York, I believe we have an incredible advantage with the contracts we already have in place for our future expansions over the next couple of years. So I actually feel pretty good about it.

Yes, this is one of the key benefits of being a first mover.

Got it. Understood. I guess just to follow up on that, do you have any excess power supply kind of bank already or transmission access bank already or for additional projects beyond Texas and New York or would you be kind of starting from scratch on those additional facilities?

So we've been in this development journey now for over 3 years, Andrew, right? So nothing is really for us in terms of what we're thinking about the new build and the new opportunities starting from scratch, right? Now having said that, have we secured a PPA for opportunity in the West Coast? Look, I mean, this depends on what kind of power you're looking to get. What kind of opportunity you're looking to get, right? You can think about California, you can think about Arizona, right. Arizona is probably the likely location where we're really trying to figure out what's the best model that works. So like in case of Georgia, we already have additional power allocation if we wanted to expand that capacity. Texas, you know very well. There are reasons in Texas where you can still get fully attractive renewable electricity, right? So nothing is from scratch, but in that, the level of activity, I wouldn't say is completely buttoned up, but it's far along enough that it really gives us a view on multiple new plans, where we think what our input cost is going to look like that really gives us that arbitrage and the profit margin opportunity while continuing to drive the cost of hydrogen down.

Our next questions come from the line of Amit Dayal with H.C. Wainwright.

Yes. I mean, just have some adjacent questions to things already discussed. Starting with maybe the sales mix for this year. Excluding fuels and other services, just on the equipment side, material handling versus other hardware offerings for '24, what the sales mix would look like? And then how that changes in '25 and '26?

So Paul, I'll take an initial shot at this, and I'll let you answer. I would expect about 1/3 of our business or 35% will be material handling, probably about 30% will be electrolyzers, probably 10% to 15% hydrogen and the remaining will be associated with liquefaction and other cryogenic business.

Understood. And does this remain similar in 2025? Or do you see sort of other parts of the business outside material handling like ramping more aggressively?

Yes. I think, Amit, we think electrolyzers will be the biggest part of our business come 2025. And that I would expect our liquefaction business to grow in '25 to be a larger percentage.

Our operating expense run rate is expected to decrease this year compared to last year for several reasons, with cost reductions being a major factor. Many of the initiatives implemented in the first quarter will contribute to this. I would estimate the quarterly run rate to be around $120 million to $125 million for the remainder of the year.

Our next questions come from the line of Skye Landon with Redburn Atlantic.

Firstly, we recently had the results from the EU Hydrogen bank auction where we saw what were lower-than-expected winning bids. I'd be interested to hear your thoughts on the results because on one hand, it's great to have a low figure as this kind of provides higher electrolyzer capacities. But on the other end of things, potentially adds more risk to projects reaching FID. So do you think the subsidy is enough? Or would you actually prefer to see a higher subsidy level but with less capacity awarded? And then related to this, if you could provide any commentary on your involvement with any of the winning bids and projects there, that would be great as well.

I would just say, Skye, yes, we would have liked to see the prices higher. Sanjay, you've been involved and maybe you can talk about our customers. I know some of our customers were successful.

Some of our customers have, but I think, Andy, this is still an evolving process. So I think look, we'd love to talk, as you rightfully pointed out, I think this is an evolving process. Look, I think like an energy industry, subsidies should be fair to every piece of the energy industry. So we want to see how it all unfolds and maybe not get into the customer specifically at this point in time.

Yes, I believe that is likely helpful. I understand it may not be exactly what you need, but Skye, I think that reflects the general viewpoint within the hydrogen industry.

Fair enough. No. That's good color. And then maybe on the 20 electrolyzer systems that you're currently, I guess, commissioning. Are you able to put a capacity figure on this? And then also, while I'm sure there's differences on a project-by-project basis, can you share a little bit more about the process involved to kind of get the site acceptance and the process that needs to go through in order to actually reach revenue recognition? Just so that we can get a bit more clarity around exactly how this works.

Absolutely. This is something we've been focusing on a lot, and that's a very fair question. The commissioning efforts include over 20 systems, each with a capacity of 5 megawatts, along with more than 20 additional systems with a 1-megawatt capacity. It's important to note that this work spans the entire year, not just the second quarter. Additionally, there are several large-scale projects that remain in the fabrication stage, which includes components like rectifiers. To explain the process, it starts with a factory acceptance test when the system leaves the factory. The amount of hydrogen produced during this test varies based on whether it's a 1-megawatt or 5-megawatt system. A crucial step towards completing the site acceptance test is ensuring staff performance is aligned with the required turndown of the stack and that all compliance documentation is prepared. Ultimately, the critical factor is whether enough hydrogen has been produced that meets the specification for the site. This is the final step before we can officially complete the site acceptance test and proceed with the handover.

Just a follow-up on that. Would it be fair to say that some of the delays in commissioning are on the customer side as well, not just on Plug Power's side?

Look, we always work hand-in-hand with customers, right? But the customer's site also has to be ready. It's not just our commissioning team and everything we do. You're absolutely right about that. And look, there are some situations where some of those sites could end up in Q3 rather than Q2, but we have tremendous activities going on where the customer is also ready. And the team is really working hand-in-hand with them to make sure that we can do the handover and get the site acceptance tests done. But you are right. In some cases, there are things that customers need to do as well.

So, I'm going to close it out. I want to thank everyone for joining us today. I look forward to discussions with our analysts throughout the quarter. And look, the foundations, I walked Georgia, I walked Louisiana. I have over of our factories with one of our key partners to help us build these hydrogen plants in Rochester, and no one has the infrastructure, the customer relationships, the vision for this industry that I believe that Plug has. I think it's a real differential advantage. It's been a tough 4 or 5 months. But we're moving in the right direction. So I look forward to our engagements throughout the quarter and throughout the year. So thank you, everyone, for joining the call.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.