Plug Power Inc. Price & Performance (PLUG)

Welcome to the twenty twenty four fourth quarter and year end earnings call. This call will include forward looking statements. These forward looking statements contain projections of our future results of operations, or a financial 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 forward looking statements. And such statements should not be read or understood as a guarantee of future performance or results Such statements are subject to risks and uncertainties that could cause actual results results or performance to differ materially from those discussed as a result of various factors, including, but not limited to, risks and uncertainties discussed under Item 1A, Risk Factors in our annual report on Form 10 ks for the fiscal year ending 12/31/2024. As well as other reports we file from time to time with the SEC. These forward looking statements speak only as of the day in which the statements are made.

And we do not undertake our intent 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.

Good morning. And thank you for joining our fourth quarter conference call. Last night, we announced significant structural change to streamline our cost base through Project Quantum Leap, Over the coming months, we'll be reducing staff, refining our product focus and consolidating facilities. These measures are targeted to generate annualized cost savings of $150,000,000 to $200,000,000 These decisions are not easy but they are necessary. The slower they anticipate development of the hydrogen markets has been influenced by multiple factors including the pace of policy implementation global energy and security driven by geopolitical conflicts, the higher cost of project execution and passover enthusiasm [indiscernible] However, we remain confident that hydrogen will play a critical role in the future energy mix with many experts projecting it will eventually contribute 10% to 20% of the world's energy supplies. The projects that will progress the fastest are those with a clear value proposition strong policy support, and a well integrated value chain. As we assess our businesses our primary focus moving forward will be on three key areas material handling, electrolyzers, and hydrogen generation to support material handling It's a like they aligned best with these attributes. In Material Handling, we deliver a compelling value proposition by helping customers move goods more efficiently.

Plug benefits from three revenue streams in this business. Products, services and hydrogen. In 2024, we have made significant improvements in improving margins for service and potashogen expanding them by approximately $120,000,000 compared to 2023 excluding the impact of customer warrant charges. Product margins however are tied to sales, and factory utilization. Last year sales were slower as we worked through price renegotiations with major customers, and the transition from PPA to direct sales. That process is now complete and we expect increased deployment this year from both existing and new customers. Which will improve our facility utilization and drive positive gross margin. Additionally, hydrogen margins will continue improving with the launch of our new joint venture facility in Louisiana this month, while service is on track to reach profitability by year's end, Hydrogen production costs are a critical driver of both our profitability and the broader market development for fuel sales. By the end of this month, Plugg will have 39 tons per day of capacity while customer demand stands at approximately 55 tons per day. The DOE approval for our limestone plant in Texas a project creating jobs in a deeply conservative district was secured in January. We've already have the necessary equipment to cover our equity project are finalizing discussions with an external investors to complete the funding structure.

Given the change in administration we now anticipate a later start in 2025 with project completion expected eighteen to twenty four months from the start date. Importantly, we do not plan to contribute additional plug equity to complete the project and anticipate retaining a 70% to 80% ownership stake once operation. Our electrolyzer business is essential to both our near term and long term growth.

The primary applications involve replacing grey hydrogen in sectors like refining, green ammonia, and methanol production. Global demand remains strong and we expect significant growth in both sales and bookings this year Notably, we're executing large scale projects including the 100 megawatt deployment with Gap. Here's why it's and this is really important. Here's why I see tremendous potential in this market for Plug. Unlike some hydrogen fuel cell market, that face challenges across the value chain, such as infrastructure [indiscernible] hurdles for on road vehicles The replacement of gray hydrogen with green hydrogen is a much simpler transition. Customers can blend green hydrogen to existing processes without major operational changes. Which accelerates deployments, speeds uptime markets and you deliver immediate benefits. As we move forward from this restructuring, and market adjustments, Plug will prioritize material handling, hydrogen production supporting material handling Electrolyzer sales alongside profitable cash ready assets in well established markets, If the program is not tied to profitability or cash generation, Plug will not pursue the program in the near or long term. With that, I'd like to turn the call over to Sajid to review our Q4 results followed by Paul, who will provide insights into our financial outlook.

Thank you, Andy, and good morning, everyone. 2024 was a year of recalibration per plug. It included some successes and some challenges. On a positive front, fourth quarter twenty twenty four marked another quarter of meaningful reduction in cash burn, continued gross margin expansion and another step change in growth of our electrolyzer business. Cash burn for the quarter was down year over 70% year over year and gross profit improved year over year when you exclude the non cash charges of customer warrant and inventory adjustment. It is important to highlight that this margin expansion was accomplished despite Now in terms of challenges, market growth, as Andy touched on it, has been slower than anticipated. Reported revenue for Q4 twenty twenty four came in at $191,000,000 and full year revenue of $629,000,000 We are disappointed with this continuous sluggish revenue despite significant improvement in sales of the electrolyzer business We believe it is important to highlight a few key items that negatively impacted revenue in the quarter and for the full year 2024. As we highlighted in our press release issued last night, our application business revenue was impacted by a higher than usual warrant charge of $22,700,000 and we had another $8,000,000 of revenue in Taka pushed out related to a specific customer program in our Material Handling business.

In our Cryogenic Tanker and Trailer business, we actually made a strategic decision not to ship multiple mobile refueler product to a customer in Class eight truck space given their financial position, which negatively impacted revenue by about $16,000,000 in the quarter. In addition, we also had some production delays on few key product line in our cryogenic business that had an impact of about $12,000,000 of revenue in the quarter. Just to reconfirm, this production impact has been already mitigated and will show up as revenue in the first half of twenty twenty five. Despite delivering almost sixfold revenue growth in the fourth quarter twenty twenty twenty four versus fourth quarter of twenty twenty three. Our electrolyzer business in the fourth quarter was negatively impacted by multiple factors which represented revenue impact of as much as $68,000,000 We expect some of this revenue to materialize in Q1 of twenty twenty five Majority of this is related to customer delays, site readiness, with some of the projects actually getting pushed to Q2 and Q3 of this year. And frankly, this revenue fluctuation on a quarterly basis in our opinion reflects the early stage of the industry growth as both supplier and customers learn to work together and keep moving projects forward.

These factors had a total impact of over $120,000,000 of revenue in Q4 of twenty twenty four. Just to reiterate, we believe some of the electrolyzer opportunity will contribute to revenue in Q1 twenty twenty five majority of the customer push out will be revenue opportunities in Q2 and Q3 of this Production related delays in our cryogenic business have already been addressed and will contribute to revenue opportunity in the first half of twenty twenty five. We also expect the revenue push out from Q4 'twenty four in our Material Handling business to contribute to revenue in Q1 of twenty twenty five. Based on all these items that impacted Q4 twenty twenty four, overall seasonality in the first half of our business and overall macro environment, we believe our Q1 twenty twenty five revenue will be in the range of $125,000,000 to $140,000,000 You should expect to see continued gross margin improvement We believe the year of 2025 is set up to be a year of meaningful bookings in electrolyzer business As Andy highlighted, given the current macro environment, we remain focused on driving costs down expanding margin reducing our cash burn. With that, let me turn the call over to Paul to discuss the financial outlook in some more detail.

Thank you, Sanjay.

As Andy addressed some of the broader market issues and Sanjay talked about revenues and margins for As conveyed in our filings yesterday, Plug recorded non cash charges in the quarter of approximately $971,000,000 for asset impairments and bad debt and OpEx, and approximately $104,000,000 in COGS for inventory valuation adjustment.

These stem from multiple factors, including the decision to temper focus on certain that are more mid term opportunities and overall market conditions resulting in slower growth of the industry than anticipated.

In terms of impairments, relates to property, plant, equipment intangible assets, non marketable equity investments, and assets associated with power purchase agreements and fuel. As a result of these impairments, it will reduce future amortization and depreciation. Including a reduction of $55,000,000 to $60,000,000 in 2025. In regard to cash burn, we were laser focused on margin and cash flow improvement in 2024. And we saw benefits throughout the year and in particular in Q4 'twenty four. These actions included targeted price increases, labor optimization rooftop consolidations, improvement in production costs, and leveraging our hydrogen platform with our new green hydrogen plant in Georgia coming We expect in 2025 to include a full year benefit from these activities undertaken during 2024. In addition, we expect initiatives and product Project Quantum Leap to provide meaningful incremental improvement in margins and cash flows. Starting in Q2 of twenty twenty five and building throughout the year. These additional measures will be complemented with the strategic efforts such as our new hydrogen Louisiana plant coming online in Q2 to '25. We continue to be laser focused on driving to positive margins and cash flows in near term. Terms of liquidity, we ended 2024 with more cash on hand than we anticipated with over $200,000,000 in unrestricted cash.

We recently closed our first ITC transfer sale for the $30,000,000 benefit associated with the liquefier plant liquefier at our Georgia Green Hydrogen plant illustrating opportunities to leverage additional ITC assets. We have an effectively unleveraged balance sheet and we are currently working with existing partner on varied capital solutions. These factors coupled with the focus on improvement in margins and cash flows put us in a strong position to achieve our near and midterm financial goals. And fund the company with the most prudent cost efficient capital solutions. I'll now turn it back over to Andy.

Okay.

I guess opening for Q and A. Steel.

Thank you. We will now be conducting a question and answer session. Our first question has come from the line of Colin Rusch with Oppenheimer. Please proceed with your questions. Thanks so much guys. Can you talk about the maturity of the financing for a number of the projects that you're talking about in that pipeline. The project financing oftentimes is key keeper, but just want to get a sense of cash flow supporting all of those products at this point?

Why don't you take that, Jaysh? So Colin, are you referring to some of the opportunities Yes. Yes.

Exactly in the electrolyzers. [indiscernible] So again, we are looking at two very large projects here in the near term. One is in Europe and one is in North America. And the project in Europe actually is going to final investment decision here by the end of quarter. And look, it's a fully funded project, right, backed by a very large financial institution. So financing and the opportunity to set up this project should not be a challenge. And next project in North America is actually related to big methanol opportunity. Again, there was already an offtake for that methanol opportunity. So in light of that, Colin, the biggest thing this space, right, is before you get to FID, you got to secure that offtake, really get the financing structure looking a lot like solar and wind from an offtake standpoint Both of the projects that we're looking at here in the first half of the year have that attribute. So we're really not concerned from an overall financing standpoint just want to make sure that we land the project. We've already done the basic engineering design package in this cases and looking forward to moving ahead with the customer.

Thanks so much. And then on the material handling side, obviously there was a lull in some of the spending in warehouse automation and some of the capacity getting digested in the warehouse space. Can you talk a little bit about what you're seeing from early indications? You saw some green shoots late in 2024. Folks starting to spend again. But any material change in some of the spending patterns that you guys are seeing with some of those customers?

I think I'll give you one indicator, Colin. One of my largest customers put down money to be able to qualify under the old 48 to support $200,000,000 worth of business.

I think that's A strong statement about their anticipated growth and expansion We have both what we see and we announced as you may remember in the fourth quarter expansion with BMW, In Germany, just to name a few of the larger customers. I can tell you that this announcement last night helps us with our customers. I checked in with some of our sales folks who I asked to reach out after market closed to let them know what we were planning to do What I heard was We're happy you're going to take the steps to reach profitability We're glad you're focusing our segment and it makes it easier to do business in the future. [indiscernible] So it's a these are very, very difficult decisions but in the material handling market, we expect that this will be well, well received. I mean, if you take a look back and if you take a look back, Cohen, Owen, I was just sitting here thinking about Paul mentioned you start thinking about the income statement level, Depreciation was going to reduce $60,000,000 We're reducing our realized cost between $150,000,000 and $200,000,000 there are big steps to reaching profitability.

Super helpful guys. Appreciate it.

Okay. Thank you. Our next question is come from the line of Craig Irwin with ROTH Capital Partners. Please proceed with your questions. Thank you for taking my questions.

So, Andy, I wanted to ask about the DOE right, your loan package with the DOE.

There's a lot of investors skepticism out there. And nobody is going to know, but you guys about what's actually being discussed with DOE and what the changes are. Can you maybe share with us any content of communications with DOE over the last few weeks? Do you expect this team to continue to support the loan package the way it was written? Are there any changes or updates that you might want to share with us around the loan package? That would help investors understand the opportunity?

Craig, there has been discussions with the DOE And we're pleased at a working level The individuals we have been dealing with have remained at the DOE. So we're not going through the process of reeducating I think that's a big positive. I know there's lots of noise, but I could tell you when I became CEO of Plug, the first thing I did was step back and try to figure out everything that was going on. We have had Regular conversations with the DOE over the past month I personally will be spending time with them this week. So from an engagement point of view and look, we're red districts. We're in Texas where we're looking to build this. I can tell you the local political teams political folks in that region are strong supporters of this and are reaching out to make sure that this [indiscernible] is executed on [indiscernible] Executed on the deal that we came to.

Look, Obviously, things which are associated with for social oriented issues, will be downplayed During the call, I mentioned during the opening statement, Craig, I mentioned our portion of the equity we already have with equipment We do have a few funds who want to play side by side with us. I would expect that construction of this project will most likely happen in the fourth quarter. And that you can say eighteen to twenty four months before it's completed. And I know you didn't ask this question, but I do want to highlight We learned a lot from building Georgia, how to build a plant. And I can tell you that Louisiana was much, much simpler. [indiscernible] We actually have learned a lot and I don't I think the learnings we have as well as the cost reductions will bring to will be really beneficial long term.

Excellent, excellent. Then you touched on this in your response and it was going to be my second question. So outside investors for the Texas project, you've already obviously attracted some pretty pretty interesting attention and orders from groups like Fortescue for their Gibson Island project. Can you maybe frame out for us the character of outside some global funds that are pretty active in evaluating this offer opportunity, that really want the opportunity to invest in hydrogen. But are we looking more at private equity or other institutional investors as probable partners on the Texas project.

We are looking at an Sanjay and Paul jump in. I would define most of the folks looking at [indiscernible] looking to invest And look, looking to invest in a new segment there's growth potential. [indiscernible] we have a process that's going on We've identified two or three folks that we've been talking to. [indiscernible] I think that think you'll be hearing more about it during the coming months. Look, I think your first question Craig is important to this discussion. Look, people want clarity what's going on with the DOE. That's part of the process in making sure that we close these funds. Close with these funds in a timely fashion.

Thank you for that, Andy, and congratulations on the strong progress with your cash use. It's really pretty dramatic, the changes in this last year. Yes.

Thank you, Craig.

And we're looking we're going to continue to drive more to make sure We have a strong financial position. Thank you. Our next question has come from the line of Samya Jain with UBS.

Hey guys, good morning. Yes, so how are you looking at data center backup power generation? How do you see plug benefiting from that in 2025?

To be direct I don't see it as a benefit in 2025. Our view is that When it comes to hydrogen, one of the biggest challenges to make sure that you can support long duration outages.

And that requires a great deal of hydrogen storage on-site We think that business opportunity is a 2829 opportunity Really to be successful, we really think you need hydrogen pipelines that you can store hydrogen in And there are some data centers in Europe that could make sense in the future. But I would not expect revenue from that segment of any size over the next two to three years.

Got it. Thank you.

Thank you. Our next question comes from the line of Bill Peterson with JPMorgan. Please proceed with your questions. Yes. Hi. Good morning. [indiscernible] Wanted to maybe take the applications question more broader than just high power stationary. I think at the symposium a few months ago, I guess you thought that materials handling should probably go to 02/1930 to 30% year on year growth. And now you're kind of expecting 10% to 20 More broadly, I guess, over the next few years, what is going to drive the applications business? Is there going to be materials handed at this stage given Your comments around stationary power not or at least the high power backup maybe not viable in the next few years. And then mobility appears to be sort of challenge as well. So what's going to drive the applications business and what's the right way to think about the growth over the next few years?

This is a real important [indiscernible] I kind of touched on in my remarks, but the material handling business you have a plug established Well, call a micro infrastructure that can support the customers' needs And so the value chain is clear.

And you'd look at markets like on road mobility and stationary, There's so many other items in the value chain that have to be implemented and be successful. For those businesses to grow fast over the coming two to three years. So So material handling is one.

That we can look at and say, the pieces are in place.

It's also and you may have heard in my comments, when I talk about the electrolyzer market, It's not going to be folks who are going to dominate, who are looking to drive mobility. It is going to be people who are able to [indiscernible] the end product whether hydrogen or green ammonia or methanol or SAF directly into the value change without too much complication. I mean, I sat through about three, four months, I sat through a McKinsey presentation in DC And I sat back and listened to it and said to myself, they had a matrix of how one should think about markets. They weren't talking about hydrogen specifically, they were talking about the whole renewable world. It really was kind of a clarifier to me that you need to develop focus on value chain. And look, our business will grow As we improve if you're a customer what's your biggest concern when it comes to You have a business that improves the productivity of your operation. You have a company that We have fixed the hydrogen issues and risk our customers may have. The biggest risk is How will Plug perform financially? And the steps we've taken today will actually help us accelerate growth in the market.

And I can tell you I do know of some of our large customers They're looking to accelerate their growth If our numbers are lower today, Bill, look, we don't want to overpromise We want to make sure we deliver And so we want to set clear expectations But I think we see a healthy market and it's why we're laser focused. For material handling. And why we're going to be laser focused on electrolyzers.

Thank you. Our next questions come from the line of Eric Stine with Craig Hallum. Please proceed with your Good morning, everyone.

Good morning, Eric. Hey, so I can appreciate it sounds like [indiscernible] fiscal twenty twenty five and I know Sanjay you gave Q1 but maybe just some commentary on the year. I mean, is should we expect this to be your typical mix first half versus second half? How do you expect the year to play out so sequentially? Any details to fill that in would be helpful. That's right, Eric.

Look, I mean, as you as I kind of touched on it, so Q1, you have seasonality, right? Then we are looking at the macro environment that's got a lot of puts and takes, if you would. And there is a benefit however though of some push outs from Q4 into Q1. So when you look at this $125,000,000 to 140,000,000 in sales, typically Q1 has been $10,000,000 to 15%, but given some of the push out, you can probably imagine it's more like 15% plus in terms of the revenue mix, 15% to 20%. So in light of that, that's I think how you should think about the full year for the company at this point in time. And one other thing, we just want to make sure, as Andy touched touched on it we have the strongest visibility on is Q1 We're already obviously sitting here in the month of March. We will do the same thing when we report our Q1 earnings to give you the visibility on Q2. Are really focused on obviously driving that top line, getting the growth for the company in 2025, but the bigger focus you can appreciate hopefully is on reducing cash burn.

Expanding margin and really getting to that EBITDA breakeven territory as soon as we can as a company.

Yes, no, I totally get that.

But those details are helpful. And then maybe a good segue just on the cost reductions in your plan here in 2025, mean, you gave pretty good detail there. I'm just curious, how deep you see those? Is there more room to go if necessary? And And how do you kind of balance that between, as you said, I mean, you've got even though now you're going to be more focused, material handling, [indiscernible] still have a big growth opportunity. So how do you kind of balance your near term objectives while still being able to execute on those longer term growth plans? [indiscernible] Craig, I do believe that the learning shoot receive from deploying projects actually have large benefits to other markets. Nothing makes us better at deploying electrolyzers than the fact that we learned how to build plants ourselves. Nothing helps us better for markets that will vast in applications like stationary [indiscernible] getting our quality and of our present fuel cell products better every day.

So I think that I'm a power engineer by training and I've [indiscernible] lot like a power engineer about how things scale. But when you think about fuel cells You're really thinking about probably two, three different power levels of fuel cells. But learnings at one level translates to the next.

So we're look, [indiscernible] are making and focusing on activities that will make our financials stronger. Which in the long run will really allow us to go into these other markets as they become available.

So I guess that's being successful now will help us a great deal in being successful in the future. And that's that's the decisions we're making.

Got it. And maybe I'll just sneak in one more. Just for the $150,000,000 to $200,000,000 in targeted savings, can you just give kind of the high level mix between cost of goods and OpEx? [indiscernible] I'll take it quick and Paul correct me if you disagree. I would probably say that it's almost fifty-fifty between COGS and OpEx.

That's a good proxy. [indiscernible] Look, we haven't made obviously going through the process and I have to be respectful for our employees and others. Before I kind of say exactly Okay.

Thank you.

Thank you. Our next question has come from the line of George Giannaudakis with Canaccord Genuity. Please proceed with your questions.

Hi. Good morning and thank you for taking my questions.

Good morning, George. Good morning. I'd like to ask Andy about your view on the policy environment and wash [indiscernible] as to whether you can share any details on conversations you've had or or your view as to how the next six or twelve months will look?

So We'd say it's obviously [indiscernible] I'm going to be spending some time in DC later this week When I look at the history of fuel cells in hydrogen, So the supporters of it the last time we had a real major fuel cell only build is industry actually happened under President Trump [indiscernible] and a pure Republican Congress. I can tell you last week, There was a bill introduced by Representative Tenney She's in a very, very red district supporting fuel cells and it was her second bill that she introduced in this Congress. I think that Look, I've been pretty clear about the fact that We felt that [indiscernible] previous administration implementation of the IRA especially when it came to hydrogen tax credits, was rather disappointing [indiscernible] we kind of view the new administration as more business oriented. And hydrogen is actually supported Strongly by the oil and gas industry. [indiscernible] is beneficial I suspect there'll be ups and downs, look, I think this is real important. There is a global market for green ammonia green methanol, There's needs for hydrogen here in The United States for applications like ours. That's not going away. And this administration is looking for The U. S. To be energy dominant And to be energy dominant, you have to meet where the world sees demand.

And where the world sees new demand. SAF. It Is In Green Ammonia. It Is In Green Methanol. And That's Not Going To Change. So I Think It's Really Important For U. S. To make sure that China doesn't dominate these industries long term. And I think many, many people in the House in the Senate, as well as the DOE understand Bergman think everybody knows who's one of the biggest proponents of the hydrogen hubs. I think it just I know this is a long answer, but I think it just needs to settle [indiscernible] Maybe as a follow-up, I'd love your thoughts also on what's happening in Europe too.

Thank you. If I look at Europe, It's one of the reasons I think Sanjay is so positive about the electrolyzer market. So much of what we're working on, for example, is in the hydrogen hydrogen Valley in Spain where there's strong, strong support for build outs and deployments [indiscernible] I think that Where you're going to see I think you're going to see Germany continue to support hydrogen deployments Obviously, the geopolitical tensions at the moment makes things a little tense, But look, even long term, we have [indiscernible] analyst who helps us in Europe who was an ambassador to the EU, There could be huge, huge opportunity for projects in calm down.

So I think Europe is [indiscernible] Lots of nuances with Europe.

But you can look at Spain and can see what's going on and say, hey, this is really good for Plug Power. I think you can say the same about Australia.

And I think these are markets that going to be the heart of our electrolyzer business And look, you've heard our announcements in Portugal, for example, with Gap. What we're doing there. With what we're doing with Ibadola in Spain These are projects that are going in the ground now. To support the economy. And all of them are supported by the governments [indiscernible] Thank you.

Thank you. Our next question comes from the line of Sharif Almagrabi with BTIG.

Please proceed with your questions. Hey, good morning. Thanks for taking my question. Good morning. Good morning, Andy.

The Georgia ITC transfer is pretty interesting.

Are there other piecemeal opportunities to pull cash out of existing equipment either Georgia or elsewhere? And is there a reason you recognize the ITC on that particular liquefier rather than the entire plant?

Yes. Andy wants me to answer that one. So as Paul. The short answer on the first part is yes. We have as an example, when we turn on our plant in Louisiana, there'll be ITC credit there associated with liquefier as well. That we can take and we'll share with our joint venture partner there that could be similar size to what we recognized in Georgia. And then we have some additional assets that we've deployed last year or PPA opportunities that there's ITC benefits on that [indiscernible] in the $15,000,000 to $20,000,000 range that we're working pretty closely right now to closing in the near term on both of those opportunities. So that's meaningful and helpful. In terms of the cash. And then on the answer on Georgia is that there's a decision to make On the balance of plans as to whether you take PTC or ITC.

We've decided to take the PTC benefits. We've recognized those in our results last year and we're going to continue to do that. Any plant that we put in place, we go through a cash benefit analysis as to is it better to take the ITC or to do the PTC and it's there's many factors that fall into that. [indiscernible] but that's the choice that we have. So That's where we stand on that for the Georgia plant, Thanks, Paul. I realized I was a two parter, so thanks for taking my questions.

Welcome.

Thank you. Our next question has come from the line of Chris Sutton with Wolfe Research. Please proceed with your questions. Hey, good morning, Andy, Sanjay and Paul. Looking at your Hey, Andy. Looking at your K, are there just wanted to check, are there new conditions that you need to satisfy in order to receive the DOE loan?

I'm not sure There's not new conditions. The loan was finalized in early January. The only thing that we have to do is, and it's approved, The way it works is the loan itself is has been the paper, documented, approved, everything's there. To apply the first project, which is Texas, there's some specific things that we have to put in place In terms of like direct agreements, between the DOE and the EPC contractors, an example is just one, Mike, those are things that we're working on. We're really close. And they're not necessarily additional conditions that make it any obstacles is just really [indiscernible] the parties that work on these things that we're working with have done many other deals with the DOE. So they're used to working with the DOE on these kind of ancillary agreements. It's more just I would say, for lack of better words, the bureaucracy of just putting crossing the T's and dot in the I's and residual components in place to officially kick off Texas as a project underneath that structure.

Great. Thanks, Paul. And just for my follow-up, on that loan, how much are you requesting as part of the first down.

Did you sorry if I missed this earlier, did you say you're expecting proceeds Q4 or is that when construction is expected to restart?

So we would I would think that Q4 is my best estimate when construction would start. Maybe you can go through the process of how you pull down cash.

Yes. So the way it'll work is when we get the project approved and kick off, the effort there, which is really getting the EPC guy going EPC contractor going which as Andy said, tentatively would be or thinking would be probably in the fourth quarter In the first month, what happens is you compile all of the anticipated invoices each month that you expect to pay as part of that project. And you submit that to the DOE and then they advance money against that. So that's we're going to get credit for our equipment that we've contributed to the project. And then front money to pay the majority of the bills that we have to pay to construct that project as we move forward. So that's how practically it works.

Appreciate it. Thank you guys. Turn it over. Thanks, Chris. Thank you. Our next questions come from the line of Tim Moore with Clear Street.

Thanks for taking my questions. Good morning. Good morning. An important watch point by investors is the positive gross margin inflection point that investors have been Eagerly waiting on, you made some really good progress announcing the cost savings Plug. I think your prior guidance of the symposium was DXP expectation back then was to maybe be slightly positive gross margin exit rate for the year. I'm just wondering now with significant cost savings plans being rapidly implemented, Do you think that exit rate still holds, or do you think you could pull it off in the third quarter for maybe positive third quarter gross margin?

I mean Tim, our goal is always hopefully trying to do things sooner rather than later. But look, given everything and all puts and takes, I think it holds in terms of Q4 of twenty twenty five as a good target that we are looking to turn gross margin positive.

Great. Sounds great. That's helpful. The other question I had is on a different topic. Maybe could you speak to maybe the liquid hydrogen appetite and the sentiment, the East two hubs network rollout is a little bit behind schedule. Just if you could give any color or stories on progress there with some customers and green shoots for takeaway from your production facilities? [indiscernible] look, I think the hubs will develop I never thought the hubs would develop that fast. If you look at the funding for the hubs, It was years of study and implementation. [indiscernible] No, that was even under the previous administration. We never and I think if you even go back to previous conference calls, we never expected significant near term or even midterm revenue from the hubs.

I think Hub's implementation would help the hydrogen industry later in this decade and that's always been our view. [indiscernible] I would say this, they never really had a very fast schedule. And I don't see I don't see them being meaningful to us over the next two to three years.

But if implemented, not only is it a sales opportunity, but really helps to build out the larger hydrogen economy. So we're supportive [indiscernible] probably you're not stunned that they have not accelerate as fast. And as people may have thought, but also quite Aussie they're accelerating at a pace that the government actually laid out there.

So that's kind of our thought process there.

Great, Yandid. Thanks for that. That's it for my questions.

All right.

Thank you. Our next question is coming from the line of Samantha Ho with HSBC. Please proceed with your questions.

Hey, guys.

Good morning, Samantha. I'll bring it back to hey, Andy. You mentioned a few times about the Texas plant being a very Enthusiasm overall actually is quite palpable. Has there been a conversation in terms of Texas funding in any sort of stimulus or what type of initiatives that they can provide to get the the industry, the hydrogen industry really more competitive or is just accelerating all the developments there if the federal government does kind of pull back on their support? I have not I I will be meeting with people from the Texas delegation this week I have not seen anything We do have people in Houston I have not seen anything to date, Where the Texas delegation can help us the most and the Texas government is to help move things through the DOE quicker. As they learn. And I think you see both representatives and senators willing to help in that area. Okay.

I guess the other thing that I'm kind of curious about that is with potential monetization of the PTC. I realize that there's still a lot of questions as to what's going to happen with like a potential tax plan ultimately. But what sort of conversations are happening behind the scenes in terms of opportunities to potentially monetize those once we have greater clarity And then, I guess, what are your thoughts in terms of how quickly that could what kind of milestones should we be looking at? Like how quickly can anything on that side that should occur?

You want to take that, Paul? Yes. So I guess there's two facets. One is practically the way it works is when you file your tax return, it's a direct pay associated with that. So worst case, we file in October. [indiscernible] other corporates that are calendar years companies. And they pay from that What we are working with is the tax equity broker that we used to close the ITC sale in Georgia to see if there's parties that want to discount that. It's only a few months, but it can be meaningful to us to discount and sell it off. The good news is we have tax opinions from a reputable global tax firm and all of the analysis and things that we need to put that package together and make it a very attractive opportunity to sell it off. So And if we when we establish that, it makes it easier do that. For this year and start taking advantage of this year, monetizing this year's as well. So it's a work in process and it's still new like any new market [indiscernible] we're pretty actually encouraged with the interest level and what how we're fostered to try and possibly monetize that Thank you.

Thank you. Our next question is coming from the line of Amit Dayal with H. C. Wainwright. Please proceed with your question.

Thank you. Good morning, everyone. Good morning, Amade. Hey, Andy. Just with respect to sort of the macro environment right now and how you're providing guidance What is the sales pipeline that is built up until, say, 2024 is still valid? Can you give us a sense of how that aspect of the execution may have changed a little bit You want to take that, Sachin? Sure. Happy to. Hey, Amit. How are you? A couple of things on this, right. So our electrolyzer business in 2025 largely is executing on the existing backlog. That really hasn't changed, right? Hopeful that we might even be able to do slightly better than that. It all really comes down to executing on the backlog. And just to put this in context, I mean, electrolyzer business grew about 60 more than 60% year over year from 23% to 24%. We wouldn't be surprised if it's a similar growth rate again in 2025.

Now another piece of our business, which is largely backlog driven as well is our cryogenic tank or and trailer business. We look that business slowed down a bit year over year from 2024 largely because of some of the push out some decisions even we made on the mobile refueler space given the collection situation and things like that. That business, I think, again, will grow back up here in 2025 versus 2024 from a revenue standpoint. So short answer to your question, we really don't think there is any risk to that existing backlog. Obviously, we're going to want to book more business here. But one very important point to highlight here is we talk about potential for pretty big bookings in the electrolyzer business.

Those bookings will really have '26 and beyond not so much 2025, even the size of the project and when they move and things along those lines. But otherwise, look, we feel pretty good about the Thank you, Sanjay.

My other questions have already been discussed. I'll take my other questions offline. Thank you. Our next question has come from the line of Amit Tacker with BMO Capital Markets.

Hi. Good morning. Just one quick one for me. Given kind of your kind of path here to positive gross margins at the end of the year and the cost cutting, I was just wondering if you could kind of share with us what your plans are in terms of kind of relying on some of the facilities you have for external equity how much is kind of baked into the year for [indiscernible] So I would just say that we have not used any of that since mid November. Any of those facilities and there is a backdrop to support the business if required.

You have utilized the convertible facility, right, for like [indiscernible] two issuances of $22,500,000 and I think the first two months of the year. Is that separate from that?

That's actually just payback. Instead of selling stock, we actually executed by providing [indiscernible] Do you have anything else to comment, Paul? Yes. No, I think just sort of clarity. So the convertible that we did, the preferred convertible we did in November there's been two elements. One is we had some amortization on that and then because the stock price hit $2.9 they did convert I think it was like 10,000,000 shares. But to Andy's point, we have not used either of the ATM facility or the recent SEPA agreement with Yorkville. So We sit in a good position with ending $200,000,000 in cash and at end of the year. And things like the ITC help bring in liquidity. We also get the restricted cash at $50,000,000 a quarter that comes in March. So there's a lot of positive things that are helping us navigate this fiscal year. Thank you.

Thank you. Our next question has come from the line of Kashy Harrison with Piper Sandler. Please proceed with your questions. Good morning and thanks for taking the questions. Good morning.

Good morning. So my first question is on Georgia. You've now had it running for a year Just curious where run rate utilization is on the project and how long it took to get there.

And the same question for cost of goods sold. I think you guys were thinking about maybe $4 ish per kilo of production costs, but I'm just curious where actual results have landed relative to those expectations? Do you want to take that one Paul?

Yes. I'd say, as you ramp and commission the plant, obviously, the cost per kilogram is higher than what you'd as we've gone through the year and really worked out the bugs and figured out how to run that plant more smoothly you get the leverage on it, right? And so so I'd say we're kind of in that $5 ish kilogram range.

Before the PTC?

Before the PTC, that's right. And obviously, the PTC is super helpful Which gets it down to the two fifty type range.

Exactly. [indiscernible] that's kind of where we're sitting at the moment and we expect to take the full this year will be really good because we'll get the full year benefit of that whereas last year you only got timing of turning on the plant and the periods of time that we were ramping up that facility.

Got it. And sorry, where is utilization?

Utilization is we can run at full production.

So just based on demand. And so we need to run 15 tons a day. We will run 15 tons a day think most days are in the 11 to 12 tons per day range here.

Got it. Helpful. And then my follow-up question is just thinking about just for capacity. I think you talked about 39 tons per day of current capacity, current demand I believe, at 55 you're working on bringing Texas online, which is 45. So you'll have excess capacity once Texas comes online. Just given all the comments around the slower market development than you anticipated. Just wondering where you're envisioning sending those excess volumes to?

Not exactly wanted to provide information about who we're competing against and where looking to provide it What I would say is we have a strong sales funnel and a strong sales team working those [indiscernible] Big market already for liquid hydrogen and [indiscernible] We have opportunities for people who already buy liquid hydrogen at scale who are very, very interested in buying scale out of Texas. And then, Andy, maybe one more thing. Yes. Go ahead. As some of the players have decided they're exiting the green hydrogen space, as we bring some of these other plants online and demand for green hydrogen is a long term in nature So that I think puts us in a pretty good position as well.

Just to reiterate, as Andy said, look, we even have some discussion with existing industrial gas customers, this is swap arrangement.

It's all about if you have a plant in California, if you have a demand in the East Coast or in the Southeast, right, then that's where you end up doing a lot of swaps. So look, we work very closely together with many of them. And as Andy said, feel pretty good about demand being there even as we bring our Texas plant online.

Got it. Thank you. Thank you. Our next question is from the line of Andrew Percocca with Morgan Stanley. Please proceed with your questions.

Great. Thanks for taking the question. Good morning, guys. Good morning. Good morning, Andy. Maybe just to start out coming back to the DOE loan for a second.

Think in the press release you guys cited $400,000,000 of coverage from the DOE loan on $600,000,000 of incremental investment. Mean that implies about two thirds coverage on an advance rate. I think you guys had previously talked about 80% advance rates on the DOE loan. So just curious what the delta is there and if there's been a change in maybe the advance rate assumptions that you're having on that facility? Go ahead, Paul. Yes, there's no change. It's It's up to 80% The dynamics on each project will vary based on the size of the plant and other factors And we also have some of that is a decent amount contingency in those assumptions. And so so obviously with the learnings that we've had in Georgia and now Louisiana we hope that feel like that we're in a pretty good position that we won't use all that. So That's the, I guess, the dynamic, Andrew, in terms of how Okay. That's helpful context. And maybe just sticking with CapEx for a second.

You quote $250,000,000 that you've already spent on the project. Another $600,000,000 that you need to spend. It's at about $850,000,000 all in On a 45 ton per day plant, if I just do that conversion, it implies like $19,000,000 to $20,000,000 of CapEx per ton per day of production, which think is actually a little bit higher than Georgia. So just curious, can you just maybe walk through some of your assumptions there? I guess I would have thought it would be lower than Georgia just given some of the learnings that you guys have discussed. So any color there would be helpful.

I don't know what the math is right.

But Georgia will come in around dollars $800,000,000 with contingency. And the contingency is probably 10%, 15% And so there's built in contingency in that Texas number. So [indiscernible] Overall, I think before the contingency, it will come in around $700,000,000 Okay. Thanks, Andrew. And I think that's it for the day, Teal. Thank you everyone for joining the call. And look, We're making the tough decisions to make sure this business is successful long term. We're laser focused on material handling, [indiscernible] which will really help us grow the market Long term, we're laser focused on electrolyzers, especially those applications which can be deployed rapidly We're making some tough decisions to cut costs and make sure the company can achieve our EBITDA and gross margin goals. So thank you everyone for joining. I appreciate the [indiscernible] Bye now.

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.