Hello and welcome to the Plug Power Second Quarter 2024 Earnings Call and Webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Meryl Fritz, Marketing and Communications Manager. Please go ahead, Meryl.

Thank you. Welcome to the Plug Power Q2 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 day 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. At this point, I would like to turn the call over to Plug Power’s CEO, Andy Marsh.

Thank you, Meryl, and good morning everyone, and thank you for joining us today. I'm here to share the progress and strategic developments Plug has achieved in the second quarter of 2024. This quarter marks a crucial phase in Plug Power's journey, as we continue to build our leadership position in the hydrogen economy for the long-term, while remaining focused on operational improvements in the short-term. In the second quarter, we successfully reached the final commissioning stage of 55 megawatts of electrolyzers, representing an expected $70 million in revenue. We weren't able to recognize much of that revenue, but much of that future revenue we've already received the cash for. We're on track to deploy an additional 100 megawatts of electrolyzers by the end of the year, reinforcing our leadership position in the hydrogen industry and supporting the global shift towards renewable energy power sources. This deployment reflects the growing customer demand and our ability to deliver cutting-edge solutions. Our partnership with Olin Corporation is progressing well, with our new hydrogen plant in Louisiana expected to begin producing liquid hydrogen in the fourth quarter. This project exemplifies our capacity to enhance hydrogen production capabilities and accelerate the adoption of clean energy solutions across various sectors. From a future point of view, we've also secured 7.5 gigawatts in basic design and engineering package contracts, specifically 3 gigawatts with green ammonia in Australia. This collaboration underscores our technology prowess and ability to support sustainable projects worldwide. Our electrolyzer technology is among the best-performing products we've developed, offering the company a competitive advantage. The hydrogen fuel cell market has not progressed as rapidly as we expected. Plug remains committed to strengthening our leadership position and focusing on operational improvements. Market development has been slow due to government policy ambiguity impacting the timing of customer decision-making processes. Despite these challenges, we are confident that our strategic initiatives will ensure profitable growth as the market develops. We see it happening now. The government policies are maturing and will support increased adoption and market penetration of hydrogen. For example, the electrolyzer market in Europe is starting to show demand, and final investment decisions are coming along. When you're working on these final investment decisions for projects that are over billions of dollars, you have to do significant due diligence in engineering. We're actively engaging with partners to navigate these complexities and ensure the successful deployment of our solutions. Even if only one-quarter of the activity leads to revenue from that 7.5 gigawatts, that could exceed $1.5 billion of revenue over time, highlighting the substantial potential of this market. We are committed to strengthening our cash management practices and ensure profitable growth. We have exceeded our expectations in raising prices due to our strong relationships and seamless integration with many of our customers’ operations, making them willing to accept the price increase. We are laser-focused on cash management, profitable sales, operational efficiency, and reducing operational expenses. I want to highlight the appointment of Dean Fullerton as our COO. He brings an exceptional track record from Amazon and successfully led global engineering services and spearheaded hydrogen economy initiatives at Amazon. His extensive expertise and leadership will be instrumental in advancing our operational efficiency, driving profitability, and executing our strategic goals. With that, I would like to give Dean a few minutes to share a high-level overview of his goals and plans for driving our success forward.

Thank you, Andy. Thank you everybody for joining the call. I came into this position eyes wide open and know the challenges we are facing and the areas I want to focus on. My focus is around cost efficiency and cost management. I want to identify opportunities to reduce costs and drive those initiatives to completion. My focus will also be on building the green hydrogen plants, ensuring we do it safely, on time, under budget, and with a high level of quality. Additionally, I want to focus on reducing our inventory levels, as they are currently too high, and we need to get that cost down as well. My immediate focus is on reaching profitability, and I believe that we will achieve that.

Thanks, Andy. A few comments from the finance team here. The first half at Plug reflects a critical inflection point in the ongoing transformation of the company. We've embarked on a journey to broaden our solutions in the hydrogen economy and vertically integrate our hydrogen supply, based on green hydrogen. Given the multiple market dynamics that have tempered growth in 2024, we have continued to nurture these offerings while optimizing operations and cash management. In the first half of 2024, we scaled up numerous product offerings, culminating in meaningful deployments and sales into the market. We commissioned and scaled up the first green hydrogen plant, providing us with significant capacity which has made great progress on our third facility in Louisiana that will add more capacity by year-end. We focused heavily on optimizing our workforce, reducing the global workforce by over 15% and adjusting pricing across many equipment, fuel, and service platforms. We expect meaningful reductions in the second half as sales ramp, which will provide a meaningful source of liquidity. Another significant accomplishment in the first half is the remediation of the material weakness, reflected in our second quarter 10-Q filing. We've made substantial investments in resources and systems to improve our controls and accounting processes, enabling us to resolve those issues. We've made progress on our sales, cost reduction, and cash management initiatives, particularly for electrolyzers deployed, representing a clear inflection point. We've transferred titles and collected most cash via milestones, but timing on revenue recognition presents challenges. We expect the cash burn rate to improve in the second half as we continue to enhance sales and margins. Our plan involves expanding our hydrogen network and leveraging existing facilities while driving down costs with further workforce optimization and additional price increases.

James, I'll let Paul take the first question, and I'll provide insight into the second question.

If I'm reading the financials correctly, it looks like approximately $50 million of electrolyzer sales were not recognized in revenue during the quarter despite being delivered. Can you confirm this? Regarding hydrogen fuel sales, the margin saw a significant improvement. How should we think about those margins as we move into the second half of the year?

Yes, your math is right. It's just over $50 million, which reflects a significant change in the deployment of electrolyzers. This will be included in the Q2 numbers and recognized in the second half.

One important item there is that these systems are producing hydrogen. We wanted to ensure the final documentation and training process are completed. I think you're going to see continuous improvement in margins driven by the price increases and increased output from our facilities.

As you've seen the timeline adjust for some industry growth, can you discuss what's happening with your suppliers and the supply chain, particularly if any of them are backing away from commitments?

I see the challenges more on the fuel cell side. It's not that suppliers are backing away yet, but it has been challenging for everyone. On the electrolyzer side, the market is expanding, geared toward industrial applications. People believe the fuel cell market is coming, but we are managing investments based on speed due to the uncertainty.

Can you elaborate on the diversity of customers you are working with and demand trends?

Our primary objective is to drive hydrogen costs down for our existing customers. Once we reach sufficient production capacity, we plan to engage with industrial gas customers and explore mobility applications. We're focused on structuring off-take agreements to ensure these become more bankable, which will support financing for new plant construction.

Can you discuss the PTC for Georgia and other plants that may be eligible?

For Georgia, we have worked diligently to think through how we can leverage renewable energy credits. The PTC amounts to about $2.60 per kilogram. As for our other plants, we are optimistic about their eligibility for the PTC as regulations evolve.

Can you talk about the $950 million in restricted cash on the balance sheet and any flexibility there?

I think about liquidity every day. That $950 million is a significant pool, and leveraging it effectively is crucial. We could explore factoring that receivable in the future, and as our growth continues, we will approach institutions about reducing their requirements for coverage on that exposure.

What could drive you towards the top end of your revenue guidance range this year?

Three items could drive us: the electrolyzer business, ensuring timely contract fulfillment; the liquefier business, where the timing of orders significantly impacts revenue; and the material handling industry, where we've shifted to working with leasing partners to facilitate growth.

Regarding liquefiers, we feel strong about our energy efficiency and pricing, and our activity across different projects positions us favorably, although it depends on final investment decisions.

Can you elaborate on the performance of your core materials handling business?

The environment has presented challenges due to price increases and related concerns. Despite this, we expect the second half of the year for material handling to be significantly better, with the opportunity for low-cost hydrogen helping improve our value proposition.

Dean, can you discuss low-hanging fruit for cost efficiency and expectations for margin cadence?

It’s early to provide specifics, but I'm focusing on cost structures across manufacturing and optimizing production efficiency to achieve profitability while identifying opportunities for cost reduction.

Historically, we've seen a trend where 2/3 of sales occur in the second half of the year, which we expect to see this year as well. This, along with launched efficiencies, will positively impact margins.

Can you detail hydrogen production distribution in Louisiana and potential margin benefits?

It’s a 50-50 joint venture with Olin, but Plug is responsible for marketing all hydrogen, allowing us to control pricing and marketing strategy effectively. We're anticipating cost benefits aligned with purifying hydrogen before liquefaction.

Are there plans for capacity reservations agreements with electrolyzer developers or updates on participating in launched hydrogen hubs?

We are having discussions about capacity reservations related to mega projects and participating in all U.S. hydrogen hubs. We're working closely with decision-makers to ensure Plug is actively involved. The government's PTC and DOE loans are short-term strategies, while hubs will build crucial long-term infrastructure for hydrogen production. Thank you all for your attention. The short-term goal is to advance operational efficiency but the long-term objectives regarding technical advancements in electrolyzers and fuel cells remain critical. We continue to make improvements and look forward to your participation in our future events.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.