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On Thursday, 13 March 2025, Plug Power Inc. (NASDAQ: PLUG) presented at the J.P. Morgan Industrials Conference, outlining its strategic priorities for the year. The company highlighted its focus on growth and cash flow breakeven, while also addressing industry challenges such as policy delays. Plug Power aims to optimize costs and expand margins, with a cautious optimism about the future of hydrogen energy.
Key Takeaways
- Plug Power aims for cash flow breakeven by 2025, with a focus on growth and margin expansion.
- The company is prioritizing material handling, electrolyzers, and hydrogen fuel.
- A cost reduction target of $150 million to $200 million annually has been set.
- Plug Power anticipates revenue of $700 million to $750 million in 2025.
- The Louisiana plant will boost hydrogen production capacity to 39 tons this month.
Financial Results
- Revenue guidance for 2025 is projected at $700 million to $750 million.
- Sequential revenue growth is expected throughout the year, with Q3 and Q4 seeing significant contributions from electrolyzer installations.
- The company plans to reduce costs by $150 million to $200 million annually, split evenly between cost of goods sold (COGS) and operating expenses (OpEx).
- Cash burn for 2025 is anticipated to be between $300 million and $400 million, including $75 million in capital expenditures (CapEx).
- Plug Power ended the previous year with $200 million in cash and aims for a positive gross margin and potential EBITDA breakeven by Q4 2025.
Operational Updates
- The electrolyzer business is expected to be the largest revenue contributor in 2025, supported by a strong backlog and the 40 MW Georgia plant.
- A 30% reduction in electrolyzer stack costs is targeted by the end of 2025.
- The material handling business will focus on existing customers and middle market expansion.
- Hydrogen fuel pricing has been increased, with positive customer feedback.
- The Louisiana plant will increase hydrogen production capacity to 39 tons, enhancing margins.
- The Texas plant may remain inactive until Q4 2025, pending policy clarity and a loan guarantee.
Future Outlook
- Plug Power is prioritizing core markets and reducing focus on less profitable ventures.
- The company seeks clarity on the Inflation Reduction Act (IRA) to boost growth in the electrolyzer segment.
- Opportunities in Europe and Australia are being explored for electrolyzer projects.
- The company is cautiously optimistic about U.S. hydrogen policy and actively pursuing a loan guarantee for the Texas plant.
- Capital solutions are being explored to fund operations until cash flow breakeven is achieved.
Q&A Highlights
- Various capital raising options, including debt and equity, are under consideration to ensure full funding until breakeven.
- The electrolyzer business is expected to continue its growth trajectory in 2025, supported by a strong backlog.
- The additional hydrogen volume from the Louisiana plant will improve logistics efficiency and reduce costs.
For a more detailed understanding, readers are encouraged to refer to the full transcript below.
Full transcript - J.P. Morgan Industrials Conference:
Bill, Analyst, JPMorgan: Good morning, and welcome to the third day of JPMorgan’s industrial conference. We’re wrapping up the conference here with really a pioneer in trying to move the hydrogen ecosystem forward, plug power. We’re really pleased to have Sanjay Streth, and I always say that I try my best on that. That’s I’m getting better every time. Really pleased to have Sanjay here, president, recently named president of, Plug Power.
And we’re going to ask him to maybe set the stage by with an intro, talking about the company’s priorities, high level strategy, maybe recap some key takeaways from recent results. And maybe specifically, can you provide context on how and why the company has chosen to focus separates on really three core areas, materials handling, which has been a core part of the business really forever, electrolyzers, which is emerging, as well as hydrogen fuel, which is also relatively new within the long context of the company.
Unidentified speaker: Great.
Sanjay Streth, President, Plug Power: Thanks, Bill. And again, it’s always great to be here. And good morning, everybody. So Bill, as we talked about in our last earnings call, look, the biggest focus for the company for 2025 really is prioritize, reduce cash burn, get to cash flow breakeven and really continue to expand margin for the company, right? And given sort of the macro environment we’re all faced with and some exciting times, some passionate comments and some, frankly speaking, volatility and uncertainty, we feel like this is the year we really need to focus on things that we’re good at, things we know we can execute on and things that are really going to give us that growth that’s much needed for the company to continue to deliver on the financial performance.
Now coming back to why we’re focused on some of these key areas, let me start out with the electrolyzer business, which will likely going to end up becoming the biggest piece of the revenue opportunity for us in 2025. And most of that is really driven by backlog, number one. Number two, we continue to gain very good traction in the electrolyzer business because we do now have the world’s largest in the Western Hemisphere at least 40 megawatt of operating PEM electrolyzer for our green hydrogen plant in Georgia, which has been running very steadily for now over twelve months. And it’s a great place to actually take your customer and showcase how well the plant is doing. We now have installation and systems of our electrolyzer running in five different continents.
We have about eight gigawatt of front log in that business. And by the way, eight out of the 10 project in that eight gigawatt opportunity is outside of The U. S. And we are the only company in the world still today to have one gigawatt or a gigawatt scale PEM electrolyzer manufacturing facility. And in that business, just to set the stage, it’s not going to be a gross margin positive out of the gate, but we’re doing a lot because we’re working through an existing backlog and the legacy contract, if you would.
But we have a very big initiative internally that is going to really help drive the cost of our electrolyzer stack down by at least 30% from the beginning of the year till the end of the year as you really go into Q4 of twenty twenty five. Now material handling has been a very core business for us, as Bill, you rightfully pointed out. We’re working with the customers, the likes of the Amazon, the Walmarts, the Home Depots. That business also does see a lot of refresh cycle, allowing us for a good visibility from a backlog perspective. And the reason why we talked about material handling is 2024, you should all think about this as a bit of a recalibration year, where we went back to our customer and talked about our pricing strategy, overall value proposition, and we were able to increase the price of hydrogen fuel.
In many cases, we’re able to increase the price of our service offering. And it was great to see that our customer were looking at it from a strategic partnership perspective than one time business transaction deal as well. It was also wonderful to see that even with the higher prices, the value proposition remain intact. So the reason why we’re focused on material handling is, well, one, we want to make sure that we’re continuing to support our pedestal customers. We want to continue to grow that business, not just in large scale, but even in the middle market, like the announcement you all saw this morning with 50 forklifts.
And look, and that business goes hand in hand with the hydrogen, which has been a big negative margin drag for us in ’twenty three, even though it improved quite a bit in 2024. That’s another big area of focus for us in terms of really driving the margin better for our hydrogen business because you don’t want to be in a situation where more hydrogen sales and more loss. We really want to turn that into more of a positive margin and at some point cash generating business for us. Georgia helps, Tennessee helps and our plant in Louisiana is coming online here this month. There’s really only one last circuit that needs to be dried up.
After that, you can actually start injecting the gaseous hydrogen into the liquefier. So we are on track to actually have that plant come online here in the month of March. And with those three plants, we’ll have about 39 tons of hydrogen production capacity. Our demand is little over 50 tons. That would really drive the blended cost of hydrogen down.
It goes hand in hand with our material handling business. And Bill, obviously, we also talked about while these things are very painful to do, we announced this restructuring plan that is also going to help reduce the cost by $150,000,000 to $200,000,000 on an annual basis with meaningful impact in Q4. That is certainly also going to help drive the margin profile for the company and continue to reduce the cash burn because look, we’re really trying to focus on core key markets rather than trying to do everything all at once. And one other piece of business, Bill, we’re going to continue to do is also our tanker and the trailer business, which is the acquisition we had made a few years ago where we make trailers for liquid oxygen, argon and things like that. And that’s $100 plus million kind of a business, profitable business.
And we do also expect that business to kind of show another sign of growth in 2025.
Bill, Analyst, JPMorgan: Great. We’ll double click on a number of these things. Maybe still staying high level. What in your view has made it such that growth really decelerated and is coming along more slowly than expected? And it’s not just you, it’s really across the hydrogen industry.
What gives you confidence that we’ve maybe close to bottom, reach the bottom and that growth could resume?
Sanjay Streth, President, Plug Power: So Bill, it’s always, I think, like any energy industry and any cyclical growth industry, right, you’re going to sort of go through these phases where there are times when there is a lot of pessimism and there are times when there’s a lot of exuberance. And they’re both probably at the extreme, kind of like the pendulum swinging to the extreme all the times. But look, I mean, I think when we think about the expectation three years ago versus how things have played out, and as you pointed out, Bill, right, I mean, the Street Desk expectation for the entire hydrogen ecosystem has been cut quite a bit. And look, and I think one of the key factors here probably is start and stop with what was potentially a landmark policy initiative here in The U. S.
With Inflation Reduction Act. And instead of being able to implement that, it got derailed. It got slowed down quite a bit, right? And I think that really derailed a lot of movement from large scale projects. And like any industry, right, scale matters.
Once you start to build scale, once you really start to get going, cost comes down, economic value proposition keeps getting better. And frankly, there’s three pillars, lack of guidance, lack of clarity really, really hurt in terms of the growth in the industry. And that actually had a big impact for the electrolyzer business. And then you got a bit of a domino effect, right? When you think about it like that, hydrogen industry and the fuel cell application largely is a function of availability of hydrogen and largely is a function of economics of that hydrogen.
Then when the industry slows down, all of a sudden, it’s not just an impact of the electrolyzer, there’s not a lot of opportunity to do liquefaction project, which has always been binary in a way because you don’t need to build a lot of liquid hydrogen plant because maybe the demand from the long haul trucking or even the stationary product is not unfolding, right? So it’s not just one piece that gets impacted. It ends up impacting everything, if you would, right? And one other thing that did hurt this industry a little bit outside of the policy is a lot of the hydrogen plant forced majority that happened in 2023, which really ended up having a pretty big negative cash flow impact to plug because we did buy a lot of hydrogen from obviously the third party and the industrial gas suppliers. That situation has really abated now.
And I’ve been frankly somewhat surprised there’s not been a single force majeure in 2024. Thank God for bringing our Georgia plant online maybe and Louisiana is going to come online as well. That’s certainly going to help. But I think, look, it’s really the broader macro policy start, stop and what was potentially such a landmark announcement to really create The U. S.
Energy independence and dominance just took a bad seat and that was very hurtful.
Bill, Analyst, JPMorgan: What’s next for policy in your crystal ball? What’s it look like? When’s it going to be resolved? And maybe what’s your thoughts on how European or other global policy may help or hinder your business?
Sanjay Streth, President, Plug Power: Well, Bill, the good and the bad of the energy business, right, is, look,
Unidentified speaker: I
Sanjay Streth, President, Plug Power: mean, I think a policy can have a major tailwind and it can actually have a huge headwind and it’s global in nature. So from our perspective, I think, look, until and unless there is a lot more clarity in The U. S, level of activity, especially for our electrolyzer business, is going to be in Europe as well as in Australia because that’s where we have some pretty tremendous opportunity that we’re looking at. Now look, I’m sure you all have seen a lot of Republicans sort of sending a letter supporting the importance of IRA. So cautiously optimistic.
I mean, frankly, Bill, don’t have a crystal ball. It’s hard to say exactly when things unfold. But one thing that gives us some level of a cautious optimism is, look, new administration is very business pro, right? So if that is the case and if you look at it from the business pro perspective, do we actually get clarity on these three pillars that has been a big issue and the challenge from the Inflation Reduction Act, right, for Section 45 implementation. And hydrogen from medium and a long term perspective has to be a part of the energy mix.
Hydrogen is already being used in the refining industry. It is already being used in the ammonia industry. It’s already being used in the methanol industry. So it’s not like hydrogen is a topic of a debate per se. It’s always had that bipartisan support.
And look, I think we just need to see some better clarity here in terms of movement on the policy. We got to make this more of a level playing field. I mean, we’re hopeful that sometime by the second half of this year, maybe there is some clarity. It’s always hard to say, which is why we have said, if we had to really put a timeline in terms of when we get remobilized in Texas, we said it’s probably not likely until Q4 of twenty twenty five. So that’s sort of the timeline we’re thinking about, Bill.
I don’t want
Bill, Analyst, JPMorgan: to dwell on maybe pick up the last point, I don’t want to dwell on too much, but maybe just give us the latest on the loan expectation, any other further work that has to get done in the background? Or just where do we stand on that?
Sanjay Streth, President, Plug Power: Again, on that too, right, look, we haven’t seen any so we haven’t seen any big red signs or anything like that, right? Look, I mean, we continue to have the conversation. Our goal also is to continue to work with the new administration and really help them understand the importance of hydrogen. So we are having continued dialogue, Bill. Look, I mean, there’s not a whole lot that really needs to be done.
Project is ready to go. It is in a place where it creates tremendous jobs. Obviously, it’s in Texas, it’s in Graham County. Graham County, I think, has 98% voted Republican, right? So from that perspective, it’s certainly in the right county.
But look, again, it’s not about red or blue, right? It’s about what’s the right thing to do from an energy policy perspective. But look, I think we’ll probably know more here in next few several months is probably what I would say. I think there is a new head of the loan guarantee program. Obviously, he’s going to have to figure out what is the right move, right things to do.
I’m sure he’s going to have to evaluate some of the puts and takes of all the loans that have been awarded and things like that. But look, given the structure that the loan guarantee we received, given where this hydrogen plant in Texas is, given that this is not only going to be the world’s largest liquid green hydrogen plant, it is actually going to be one of the largest green hydrogen plant period in the world. And economics wise, it’s very attractive. Job creation wise, it’s unbelievably attractive. We’re even using water from the wastewater treatment plant.
It’s just got all those attributes that is so attractive. So look how we feel cautiously optimistic, but it’s Bill, right now, it’s very hard to say or pinpoint exactly what is that time line.
Bill, Analyst, JPMorgan: Yes. I want to come back and talk about some of the mid- and longer term strategy, but I think we do need to spend a little bit of time just in the near term. So first quarter guidance, revenue was the new guidance is below expectations. What’s changed since you put forth your targets from the symposium back in October, like, I guess, four or five months ago at this stage?
Sanjay Streth, President, Plug Power: Sure. So that’s a very fair question, Bill. And we debated that quite a bit internally as well. Well, one thing we felt like we needed to do was take the macro environment into consideration, right? I mean, there was a headline every day.
And right or wrong, right? Macro environment is where it is.
Bill, Analyst, JPMorgan: It’s headlines every hour.
Sanjay Streth, President, Plug Power: That’s exactly right. That’s exactly right. So that’s one, right? And second goes back to the prioritization, right, which, so on a high level, there is a tremendous opportunity for us in a high power stationary product, but that product is more also about getting the hydrogen infrastructure right. And given, I think, our focus on really getting to the cash flow breakeven numbers at a much lower revenue run rate, You know, we’re sort of, you know, not prioritizing everything we could do, right?
Fuel cell application can have so many different application. We really wanted to take a step back and think about what are the core things we have to do and how do we get to our gross margin positive and EBITDA targets even at a lower revenue run rate. That’s number one. Number two, I think, look, I mean, so last three years have been tough from heading the revenue numbers and macro environment hasn’t been that accommodating. As I said, some of our energy business related liquefaction and even some of the new product that we launched, mobile refueler, has been tough because of slowdown in the long haul trucking market.
That has not been very helpful. And look, and obviously, we’re not anticipating any of those to come back. And if market environment ends up getting better than what it has been for the last three years, broadly speaking for the hydrogen industry, look, maybe the numbers are higher than what we said. But given, I think, what’s transpired here in the last three months, given our excessive focus on getting to that gross margin positive and EBITDA breakeven, frankly, we thought that it was better to let you all know in the beginning of the year rather than having that conversation in Q3, rather have a better conversation in Q3 of twenty twenty five where, hey, some of the things that we thought were not going to happen, maybe did happen, right? So maybe there is a potential for things to get better rather than worse.
And we thought it was prudent to really come out in light of this macro environment to come with the number that we thought we felt really, really good about versus maybe things going better than anticipated.
Bill, Analyst, JPMorgan: Yes. You alluded to earlier, the company has been a tough decision to streamline and rightsize pretty significant savings, dollars 150,000,000 to 200,000,000 in annual split between costs of goods sold as well as OpEx. Can you provide some examples of where the largest cost savings are coming from? And maybe at least it’s equally important is what how is that not going to impact your growth objectives over the longer term?
Sanjay Streth, President, Plug Power: Great. Yes. Again, so that’s a delicate balance, Bill, right? How when you do reach again, look, these are always the toughest, toughest decision to make because it impacts so many employees, so many people. And it’s not something you ever want to have to do.
But sadly, sometimes you have to make these tough choices, so the enterprise is in a much better position going forward. Now this is how we’re going to take a look at it, Bill. The first thing is what are the facility consolidation that we can have rooftop consolidation? Then second is look at things that are non personnel related, right? Maybe third party fees, all those so all the different kind of expenditure that you might have, right?
So you take a look at that bucket next. And then the third bucket would be, okay, if we’re actually prioritizing on some of this product line and the business opportunity, so you look at your pool of employees and say, okay, there are lots of people doing mobility work or stationary product work. It doesn’t mean that all of them are no longer part of the company. You really think about, okay, here is the talent, right? And you want to make sure that you’re maintaining, for example, while I said what I said about not having a lot of focus on stationary product in the near term, that work is going to continue to go on in the CTO office.
The person who’s running that program just goes into the CTO office rather than maybe running the entire stationary engineering effort, if you would, right? So and this is something we’ve been spending a lot of time making sure when you make moves and changes like this, I’m sure there’ll be a mistake you make, right? You correct that and you make it better going forward. And it’s never going to go exactly like you planned, but I think we’ve been trying to be very, very thoughtful about the last piece we’re going to touch is and again, look, there is going to be an impact to get the kind of the savings that we’re talking about. You go facilitate what are the things you can do before we come to the personnel?
And then after that, you take a look at if we’re going to do a lot of facility consolidation, that’s going to have an impact from a direct labor perspective. You’re going to have that’s what hits COGS, right? And then you’re going to also have to look at everything and anything, if you would, right? And every department, every situation and support staff, if you would, if there’s a lot less people, you’re going to need a lot less support,
Unidentified speaker: right,
Sanjay Streth, President, Plug Power: from legal, IT, finance, every perspective. So that’s what’s going to hit in the OpEx, right? So we think it’s 50% COGS, 50% OpEx, very painful thing to do, but it’s necessary to build a stronger and more of a robust enterprise to keep moving this hydrogen economy forward. That’s I think is how everybody should think about it.
Bill, Analyst, JPMorgan: It’s a little further down the list, but I think it just dovetails well.
Sanjay Streth, President, Plug Power: Go for it.
Bill, Analyst, JPMorgan: Maybe just can you walk us through the financial setup with this in mind for the year in terms of the underlying assumptions that are getting you to your target of turning gross margin positive, which you alluded to some of those already, but maybe tying the other aspects to it.
Sanjay Streth, President, Plug Power: Yes. So I think so if you just sort of think about what we provided in Q1 guidance, right? And then you really think about we said 15% to 20% is how you should think about representation of Q1 for the full year. So that kind of keeps you at like $700,000,000 to $750,000,000 kind of a revenue number for the year, if you would, right? And then so you should see sequential growth from Q1 to Q2.
Again, another sequential growth from Q3 as well as also into Q4. There is going to be some of that seasonality piece still. More than seasonality piece, this year, the reason why you’re still going to have a bigger Q3 and Q4 has a lot to do with timing of some of the five megawatt electrolyzer installation and revenue recognition, right? That’s another piece. So then most of electrolyzer will be the biggest piece of the revenue, followed by material handling and service, then followed by our hydrogen fuel cells, hydrogen fuel that we sell to our third party supporting the material handling business, followed by our cryo business.
Another piece of business which we think could provide some incremental opportunity and upside is we do do some energy transition work. It’s not new. So for example, we sell a lot of tanks for non hydrogen related customers, right? Actually, the industrial gas companies are our customers to buy these tanks. We can also do some non hydrogen related skid packaging business with the skill set and the know how that we have in our liquefaction business.
And some of that also will show up in the second half of the year, which is why I think that’s the cadence right now. What so that’s the revenue cadence, if you would. How do you then get the margin cadence, right, and the cash flow benefit that we’re talking about? Cash flow is likely going to be front end loaded simply because of finishing Louisiana catch up payments on things that we have done in 2024, and that number will continue to go down in the second half of the year. Now from a margin standpoint, so there are a few items, right?
So as Louisiana comes online, that will immediately help hydrogen margin. That’s piece number one for hydrogen margin expansion. Second item for hydrogen margin expansion also comes from improving our system level efficiency, and there’s a lot of effort going on in that. Q4 was good. We really improved efficiency quite a bit.
And there’s a lot of discussion going on with also our industrial gas supplier to figure out how to improve that hydrogen efficiency as well. Then on our service business, you should absolutely see margin continue to expand throughout the year for two reasons. One, we’ve increased pricing and we’re very supportive of the customer support on that. And second, there is a team just focused on driving service cost down. You will see a step change in that service cost even from Q4 of last year to Q1 of this year, okay?
And then finally, on the margin expansion front, Electrolyzer team, there is again a dedicated team focused on reducing the cost of our Electrolyzer stack by 30%, get a weekly update from these guys, how is that progressing. So we’ll feel pretty good about the fact that we should be able to reduce our stack cost by at least 30% from Q4 of last year to Q4 of twenty twenty five, and that’s what should help your margin expansion with lower burn rate. There is a scenario here you can see in that revenue mix that Q4, are we looking at potentially a cash flow and an EBITDA breakeven quarter? By the way, that’s not what we said during the symposium. We told you all EBITDA breakeven is Q2 of twenty twenty six.
We just want to make sure that we don’t miss any of those targets.
Bill, Analyst, JPMorgan: Yes. I want to dive deeper into the various markets, but I might just pause and just see if there’s any questions before we move on. All right. I think we’re none right now. So let’s dive deeper and let’s first talk with the fuel cell business and I guess maybe more specific on material handling in a moment.
But we’ve heard I just wanted to before going to material handling, which is a clear focus and I get it, but
Unidentified speaker: what would
Bill, Analyst, JPMorgan: you say happened with some of the stationary opportunities that were discussed over the last few years? And I guess maybe when could that actually move the needle assuming you get past a lot of these near term challenges and things you’re focused on this year?
Sanjay Streth, President, Plug Power: Yes. I mean, Bill, I think stationary product is more about the two critical things on the stationary product side. One is how you’re thinking about life of your stack, right? Your cost of your overall system, value proposition from that you know, we need to make sure that the life of the stack continues to go up. And that’s going to continue to happen, right?
That’s nothing new. We’ve been focused on that. We’re going to continue to do that. And regardless of what we just said about that might not contributing high power stationery to revenue here in the near term. Now stationary product is a lot more about hydrogen than about just the fuel cell application, right?
So depending on how you run the product, you know, if you run a forklift 20 fourseven, it’s consuming one kilogram of hydrogen a day, right? Your stationary product, one megawatt running 20 fourseven consumes 1,400 kilograms of hydrogen a day. Obviously, we’ve done some projects with the likes of Microsoft. We’re doing some of the stationary project with some of the other existing customers. And they all find the product to be quite attractive from a data center market perspective and electric vehicle charging perspective.
So this product has tremendous, tremendous potential. But the question really is, how do you balance the opportunity in that business with cost and availability of hydrogen? Because what we don’t want happening is you sell a lot of stationary product, and then you got to buy hydrogen at dollar x and sell it at x minus some percent, right? Then you can’t afford that hydrogen loss in that business. So Texas plant coming online, having that additional hydrogen would be very valuable.
And Bill, I think, if I may now take a little longer term view, right, which I think is important here. So in the Gulf Coast, you already have an existing pipeline infrastructure for hydrogen to support hydrogen needs by the different refining companies. So I think the way we should all think about as to how this plays out, which is why the value proposition of hydrogen remains so meaningful from the energy industry perspective is think about leveraging low cost renewable in Wyoming, hydrogen being moved via pipeline, long duration storage, grid stabilization and that pipeline then supporting a 100 megawatt plug built PEM stationery product supporting one of the hyperscaler, that’s where the industry has to go, right? Hydrogen yes, you can store that amount of hydrogen on-site. And how do you manage the logistics?
How do you manage the delivery? As this opportunity set gets bigger, you really need to think about the delivery of the hydrogen infrastructure. And that’s where, right, this is probably on the one to 10 megawatt side. This is probably more of a three to five year type of an opportunity, more like five, frankly. But this is a big prize, but it’s probably another five to ten years away because we got to really think about the delivery and the logistics of hydrogen availability.
Yes.
Bill, Analyst, JPMorgan: No, it all makes sense. They’re all interconnected, as
Unidentified speaker: you
Sanjay Streth, President, Plug Power: pointed out. Exactly.
Bill, Analyst, JPMorgan: Maybe coming back more near term in materials handling, which is it’s always been a core part of the business. But yet demand still remains kind of muted relative to some recent historical levels. And I think it’s some of this may be obvious like warehouse builds may be slowing and post the COVID boom or things like that. But I guess not my words but yours, what led you to revise the material handling growth expectations lower to 10% to 20% versus prior expectations of 20% to 30%? And maybe how should we think about potential green shoots, maybe additional customers or other applications that could drive your recovery?
Sanjay Streth, President, Plug Power: Yes. I mean, there are some existing customers even that we’re having very positive conversation with, number one. And Bill, don’t forget, we did go to the customers and increase the hydrogen prices the way we did.
Bill, Analyst, JPMorgan: Well, maybe you can tie in the TCO advantage if it’s still
Sanjay Streth, President, Plug Power: there or not. Oh, 100% there, right? I think given where the hydrogen price is, where our service price is and from a lump sum turnkey perspective, it seems to be clear that there was still the TCO benefit. That’s not a question. Now one another piece though, look, I think we do expect what we’ve tried to do from a guidance standpoint here, Bill, is maybe some level of conservatism baked in.
We looked at our existing backlog. We looked at all the potential that we have in the pipeline, and we didn’t say we’re going to actually kind of go and win. We put a lot of lower probability of win, if you would, right? And now can that be higher? Potentially.
But there is also a little bit of an uncertainty surrounding investment tax credit, right? And we do believe that this tech neutral Section 48E actually puts plug in a much more of a unique and a strong position than other players because it needs electrolytic green hydrogen. We’re really the only company that have that. So that’s an added benefit. But look, I think there also needs to be some additional clarity, and we’re having some of those conversation with customers.
There are some big deals that we’re negotiating working on. But frankly, Bill, given I think how ’twenty three and ’twenty four has played out, we’re just trying to take a view. Let’s talk about things that we feel like are really pretty robust, pretty clear, very low risk rather than go down and say these are the additional things we could do rather be in a position to really be able to take that up rather than have to take it down. And that’s really why we took that posture. It has nothing to do with value proposition changing.
It has nothing to do with this is a very good growth opportunity for Plug. That thesis hasn’t changed. If anything, we’re even able to expand the market opportunity of material handling from large distribution center to the middle market opportunity as well, right? So because of how we’ve been able to continue to drive the cost down. So that’s really what I would say, Bill.
There’s some conservatism baked in. There is some policy clarity that we’re looking for from the investment tax credit perspective. And hopefully, it’s better than what we thought. But given how last two years have unfolded, we thought it was prudent to approach it from that basis.
Bill, Analyst, JPMorgan: This question, but can you wait for the microphone, please? Right here in the middle.
Unidentified speaker: Thanks. Can you just talk about your expectations for cash burn for this year and how you’re going to fund that? How much out of existing cash balances or appetite for more equity sales? I know you have the ATM program.
Sanjay Streth, President, Plug Power: So we talked about it in our last earnings call. For the full year of 2025, our cash burn is expected to be between $300,000,000 to $400,000,000 And in that, we’re talking about $75,000,000 in CapEx. And anything we do with our plant in Texas, we will bring in a third party preferred equity investors for any additional capital needed outside of the DOE. I mean, we’re literally neck deep right now trying to figure out what is that optimal solution from a capital perspective for this year. We did end last year with about $200,000,000 of cash.
Right? And until we reported our quarter, we hadn’t touched the ATM, if you would, right? So look, I think this is where this comes down to a discussion surrounding cost of capital, right? And we do have a lot of menu of option, if you would. And one of the debate candidly is do you go and address this right away in one shot, right?
And there’s obviously, we have $1,000,000,000 in ATM. So it’s not about access to capital. It’s really about the what is that right capital solution. And look, and I think now that Georgia has been running for twelve months, we can certainly actually have capital on Georgia, right? That is obviously non dilutive in nature and somewhat of a back leverage kind of a situation.
Can you get $125,000,000 of capital from Georgia? Yes, probably, right? There is things like that. So I don’t want to give you a precise answer here today because we’re really evaluating what is the best thing to do. And but I think what we’re trying to do here is we want to make sure that the business is fully funded until we get to cash flow and EBITDA breakeven.
That is our focus. Now do you fully fund that with what kind of debt debt solution
Unidentified speaker: is available?
Sanjay Streth, President, Plug Power: What kind of back leverage solution is available? What are the things you can do from a non dilutive perspective? But at the end of the day, it really comes down to cost of capital, right? So it’s because somebody wants to give you a debt and if the cost of that debt is 20%, probably you’re better off going and doing equity, right? So give us some time.
I think we do want to we recognize this is something very much top of our mind that we want to address. And look, we believe that the steps that we’re taking is really going to lead to much better results here in the second half of the year. And we feel like we’ve really put the company in a position that I think outlook is probably much better than looking backwards, if you would, and taking all the necessary steps to really minimize that burn even at the lower revenue run rate, right? So we didn’t come back to you all and said, hey, given the world, we’re not going to be doing eight fifty or nine fifty this year. Instead, maybe it’s seven hundred, seven fifty, but the burn doesn’t change.
Margin expectation doesn’t change, and that’s what we’re trying to do.
Bill, Analyst, JPMorgan: You got to repeat the question. Got to repeat the question. Yes.
Sanjay Streth, President, Plug Power: So I’m sorry, can you Do
Unidentified speaker: you think that you’ll articulate the capital raising plan next quarter? Or do you need more time? Do you want to see how the second half or third quarter goes?
Sanjay Streth, President, Plug Power: All I can Do I need to repeat that?
Unidentified speaker: No. No.
Bill, Analyst, JPMorgan: No. Okay. Just if you want to share the microphone for the webcast. Got it.
Sanjay Streth, President, Plug Power: So look, give us some time, right? I think I hear you. I understand why you asked that question and fully aware of why you would ask that question. So I don’t want to give you a time line of when we’re going to articulate what we’re going to do. All I can say is this is something that is absolutely in the top of our mind.
We have lots of menu of options. We have a lot of people that have reached out to us. And we just want to make sure look, I think we want to solve it, right, obviously. But we don’t want to solve it in a rushed manner and do something that is that’s going to solve your next twelve months, but maybe hurt you next thirty six months. You don’t want to do that, right?
So that’s really what we’re trying to decide here. So I don’t want to give you that. We’re going to give you an update in Q1 or Q2 of this year. This is something that we’re going to solve sooner rather than later. And if we don’t solve that, right, we obviously have that option with there is other options that’s already available in the market for us to tackle that as well.
But the goal is to solve
Bill, Analyst, JPMorgan: electrolyzers and hydrogen fuel, but maybe you can just kind of summarize your vision and outlook for your electrolyzer and fuels business for the remaining time.
Sanjay Streth, President, Plug Power: Electrolyzer will have a nice growth in ’twenty five, similar, maybe even slightly better than the growth from ’twenty three to ’twenty four. All of that is really backlog driven. I just came back from Sarah Week meeting with a lot of customers there as well. And level of activity and the reception that we’re getting in that business makes you feel good about having done the right thing. And on the hydrogen fuel side, Bill, Louisiana comes online.
Texas, we will see when the DOE loan guarantee program moves back up again. That’s when we’re going to make a decision on exact movement on that plant. We’re not going to spend any more dollars until then. I think it’s a prudent capital decision from our perspective. So as Louisiana comes online, that will again reduce the overall blended cost of hydrogen.
Unidentified speaker: And with that additional volume, we’re also able to improve our logistics efficiency that will reduce the logistics
Sanjay Streth, President, Plug Power: cost and potentially also efficiency from a system level, what we call gen fuel system, right? So that also every 1% improvement in that gen fuel efficiency actually saves our cost by $1,500,000 if you’re going to believe that is a pretty substantial improvement. So I think you should see hydrogen margin continue to improve throughout 2025. Electrolyzer business, not only this growth, you should also expect continued margin improvement in that business because of what I just talked about from a stat cost perspective.
Bill, Analyst, JPMorgan: Yes. Well, probably could have gone a full hour, but unfortunately, we’ve gone through our thirty five minutes and then some. But Sanjay, look, really appreciate you sharing the insights. We look forward to following the progress and really wish the company the best in terms of the execution you have in front of you.
Sanjay Streth, President, Plug Power: Thank you, Bill. And it’s always great to be here. Really appreciate it. Thanks.
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