Greetings, and welcome to the Plug Power Inc. Third Quarter 2021 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded. It's Tuesday, 9 November 2021. I would now like to turn the conference over to Teal Hoyos, Director of Marketing and Communications. Please go ahead. Thank you. Welcome to the 2021 Third Quarter Update Call. This call will include forward-looking statements. These forward-looking statements contain projections of our future results of operations or our financial position or state 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 future expectations to investors. However, investors are cautioned not to unduly rely on forward-looking statements, and such statements should not be read as a guarantee of future performance or results, as such statements are subject to risks and uncertainties that cause actual results or performance to differ materially from those disclosed 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-K for the fiscal year ending 31 December 2020, as well as other reports we file from time to time with the SEC. These forward-looking statements speak only as of the day on which the statements are made, and we do not intend or undertake 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 CEO, Andy Marsh. Well, thank you, Teal, and welcome everyone to Plug's Third Quarter Conference Call. My opening will be brief since details are provided in our investor letter. I was at COP26 last week in Glasgow, and hydrogen was front and center at the event. It really reiterates Plug's belief that our first-mover advantage will be a definite benefit as we advance our business. We plan to remain the leader in building out the global hydrogen economy. We're aggressive on all fronts and have the vision of building out the hydrogen ecosystem today. Let me emphasize today, and this is one of the reasons we are building out the first green hydrogen network in the United States. We view green hydrogen as a great accelerator of all fuel cell applications, many of which will be provided by Plug Power. We don't believe we can do this alone. We've done this via successful acquisitions such as American Fuel Cell to provide us with leading-edge MEA technology. We are doing this with joint ventures with leaders such as SK, Renault, Fortescue and ACCIONA. Also through partnerships with companies such as Airbus and Lhyfe. Acquisitions and partnerships have provided us both technology and access to market. You'll continue to see Plug travel down this path as we aggressively stake our claim in the potential market of $10 trillion. The acquisition of Frames provides Plug multiple benefits. Let me just name a few. Frames is used to executing on large projects and has worked with Plug for a number of years. They provide us with integration capabilities to address large-scale gigawatt electrolyzer plants. This matches with their global supply chain reach, provides us a unique capability when we match this with Plug's leading-edge stack and electrolyzer technology. Now, let me just divert a second. I mean, just yesterday I was in London working on a 750 MW deal. Being able to do large-scale plants is really, really critical. On the technology front, Frames brings in expertise in water management, which is critical in the electrolyzer industry. We're now in a better position to address waste and ocean water to provide ourselves and our customers a better, more cost-effective, environmentally friendly solution. We are thinking a great deal about offshore electrolyzers and between Frames' water management expertise and offshore platforms expertise, this is real value. Additionally, their ability to manage gases such as drying hydrogen is a critical capability that Frames brings to the table. Also, it makes us very European. Of the pure play hydrogen fuel cell companies, we will have one of the largest employee footprints in the industry with operations in France, the Netherlands and Germany. They also provide us 150 employees in India to provide back office engineering support for both our electrolyzers and stationary products. Finally, they have a long-term relationships throughout the world with companies that have net zero carbon goals. We believe this acquisitions provides us the strongest technical and operational team in the electrolyzer industry. Also, finally, I'd like to comment on Applied Cryo Technologies announcement that may have been lost in all the activity around the Plug Symposium. Today, liquid hydrogen is the only practical means for storing and delivering hydrogen to most customers based on the high volumetric density versus gaseous hydrogen. We believe the future storage and delivery of hydrogen will be a mixture of gaseous hydrogen delivered by pipeline, salt caverns, and liquid hydrogen. We believe liquid hydrogen will be a necessity in storage for mobility and stationary application even when hydrogen is delivered to a depot via pipelines. We believe Applied Cryo Technologies provides us with the following, a liquid hydrogen delivery network and fleet, liquid hydrogen storage, and a real cool one, hydrogen mobility fueling, which is particularly important for ports. As you know, that hydrogen will be exclusively green. Again, Applied Cryo Technologies was a company known by Plug. When we analyzed our need for the next few hydrogen trailers for the coming four years and recognized the cash savings associated with this transaction, paid for the acquisitions. They also bring us markets and technologies. We are also aggressively pursuing increasing the sales for Applied Cryo Technologies, with some of our announced partners. These acquisitions allowed us to increase our guidance to $900 million-$925 million in 2022. Finally, I'd like to discuss gross margins, especially hydrogen service. We are the largest user of liquid hydrogen in the world and are building a green hydrogen network that is resilient and is not burdened by fluctuating commodity pricing. We have taken the burden managing the hydrogen network, so our customers always have hydrogen. You know, our competition is electricity, and for large customers as electricity is always there, and with long-term contracts, pricing is consistent. With our green hydrogen network across the U.S., we can be the same. Our green hydrogen network will eliminate price variability and simplify logistics. In the short term, we're taking the burden so that green hydrogen is viewed as a dependable source of energy. This activity, as our network comes online, will become quite profitable for Plug Power. The service business Plug has demonstrated over 50 sites that we have the right equation to have a cost-effective service offering. We'll now roll these changes out across our network. In our shareholder letter, we said we expect a 30% savings by the end of 2022 and 45% by the end of 2023 in our service business. We also see even more advances with our next generation product. Now let me turn the phone over to questions. I have three members of our team with me today, Paul Middleton, our CFO, Sanjay Shrestha, who's the GM of our hydrogen energy business, as well as Jose Crespo, GM of our material handling business. We're now ready to take your questions. All right. Thank you. Everyone, if you'd like to register a question, please press the one followed by the four on your telephone. You'll hear a three-tone prompt acknowledging your request. If your question has been answered and you'd like to withdraw your registration, please press the one followed by the three. Once again, for any questions, please press one, four on your telephone. Our first question comes from the line of Colin Rusch with Oppenheimer. Please go ahead. Thanks so much, guys. Andy, just to join the- Hey, Colin. You're talking about. How are you doing? Okay. Just so I understand, you're talking about developing, you know, electrolyzer assets offshore and piping hydrogen, you know, back on land. Did I hear that right, or did I misunderstand something? Yeah, that is it. Yeah, let me be clear, Colin. They bring that capability to the table. I don't see that as critical for the next three-four years. We'll have demonstration projects in the coming years, you know, at a small scale doing that. You know, I see a couple advantages to that. The advantages of moving hydrogen versus electricity for the same price in a pipe, you can deliver 15x more energy. It just makes a lot of sense if you can do it in the ocean. If you look at the build-outs, for example, in Long Island, it's a large opportunity. You know, Frames though, let me be clear, Colin, in the next three-four years, you know, we have plants that we're working with customers on, which are more than a gigawatt in size. They're used to executing on large projects. They've been working with us and have been developing have been working with us on the system, you know, with over 30%-35% of our system integration. I thought it was time to make them part of the Plug team. They, you know, they additionally, when you look at some of these large bids and proposals, just to give you a feel, one bid and proposal was over 750 pages long. You know, it's really detailed, and the capability in India really adds that to the equation so that we can respond to customers rapidly. The level of activity in electrolyzers can't be understated. You see a lot of activity going on, with green ammonia, with methanization, with green hydrogen of course. Quite honestly, you know, I've been beginning to think about we have our grand opening of the Gigafactory on Friday. I've actually began thinking about I need to expand really quick because the opportunity set is so large. That's super helpful, Andy. I guess maybe the second question is for Sanjay. You know, it's really about you know, preparation of the supply chain to support the build-out of electrolyzer capacity with all the consumables, you know, not just the CapEx here, but just all of the different elements that go into the full process and you know, the preparation of those folks to you know, kind of march lockstep with you guys in this scale-up. Yeah. Again, Colin, how are you? Good to hear from you, Sanjay. Indeed. Look, I think this is something we spend a lot of time thinking about, right? Not just that, this, if anything, is one of the key competitive advantage and the differentiation that we have because we're the company that actually is controlling how, where, and how do you do the electrolyzer stack, how do you take the cost down, how do you think about the balance of plant, right? That's one aspect of it, which I think really makes us very unique, puts us in a very, very strong position to be able to really execute on all this green hydrogen generation plant that we're building. Second thing, right, as Andy talked about, all the bids and activity that's happening in the electrolyzer space also puts us in a position where we are our own customer, becomes a huge reference for the third-party customers as well, right? Obviously, look, from a supply chain perspective, we have a Gigafactory. We've been adding a lot of resources, a lot of talent to make sure that we have all the components that we need. We have a detailed timeline, Colin, right? When we think about exactly when the electrolyzer needs to show up, you know, for example, in our plant in Georgia, for example, for our plant in New York, you know. We have actually mapped that out. We know exactly when the manufacturing is going to happen in our Gigafactory, when do we get the electrolyzers showing up at the site, when do we get the liquefier and the cold box showing up at the site. We obviously, there's a lot of planning and the detailed work that has gone on that gives us the level of confidence when we talk about, you know, for example, Georgia, the plant is being up and running in the summer of next year, which by the way, is almost like 12 months and less than even 12 months since we broke the ground, right? We feel pretty good about what we're doing, how we're managing the supply chain. Being able to control it ourselves really puts us in a position to be able to execute on this strategy. Anything you wanna add, Andy? I think you hit it, Sanjay. Thanks, guys. Okay. All right. Thank you. Our next question comes from the line of Craig Irwin with ROTH Capital Partners. Please go ahead. Hey, Craig. Hey, Andy. Hey, everybody. Andy, I should say congratulations. You know, I've known you and Sanjay and George McNamee, your chairman, for 20 years, or more than 20 years. I would say this last year, I think there's been more progress and more changes at Plug than the prior two decades. That is tremendous. I have a confession, right? My head is spinning, right? I have followed this company forever. I know a lot of your partners, a lot of the key people in the supply chain. You know, when I talk to investors, there's a lot of different directions they're looking and they're. People are sometimes just a little bit confused. With that context, when I step back, I see green hydrogen as the most important strategic initiative at Plug Power right now because that's what allows the carbon footprint that everybody wants to achieve by adopting fuel cell technology. You know, with that fundamental baseline, I look at the shareholder letter and the fact that you're looking at margins improving by, you know, five percentage points for hydrogen in the first quarter to as much as 20% exiting the fourth quarter. There's clearly something seismic going on, right, something really fundamental. Can you maybe bridge the gross margin improvement for us as far as, you know, what's going on with this hydrogen strategy, what's really working, and how the benefit rolls on over the next four quarters? Craig, I am gonna let Sanjay answer that, but let me just add that I agree with you. I kind of view green hydrogen as kind of the iPhone that enables all these apps for fuel cells as well as for chemical processes to allow people to turn green. Sanjay, why don't you talk about the gross margin- Yeah. growth? Sure. Ha ha, happy to do that, Andy. Hey, Craig, good to hear from you. Look, I think you picked on something really interesting here, right? As Andy mentioned it during his prepared remarks, what has been our big focus in 2021, even though we're paying more for the hydrogen, we're trying to make sure that none of our customer ever run into any challenge from the availability of hydrogen to run their mission-critical application. That is by far the most important thing for us and our primary focus. As you go into 2022, and when you go from Q4 to Q1, right, first thing, we will actually have our Tennessee plant that is now, instead of being 6.4 tons, it's gonna be at 10 tons, right? That expansion has happened. That will contribute to reduction in the cost. Number one, from a blended cost perspective. Second thing that will happen as you go into the second quarter of 2022, we also have some additional supply from other industrial gas customer that we're able to secure. That is also going to reduce the blended cost of hydrogen as well when you go into the second quarter. More importantly, what really happens, Craig, as you talked about that seismic shift, is in the second half of 2022, as some of our green hydrogen plants come online in the summer of that year, towards the end of that year, that's really what dramatically drives the cost of that blended hydrogen when you go into the second half of the year. That's the reason why not just 2022, we talked about what happens in 2023, right? This fuel business goes from being a negative margin business to starting to approach breakeven. As you start to think about 2024, now you're talking about 30% kind of a gross margin numbers, right? That is all driven by what we expect the cost of our green hydrogen production is going to be, which we've shared with you all, and you've actually also seen it in the shareholder letter. That number is below $4 a kilogram. You all know, you know, you all can back into what the ASP is to our end customers, and that's why we feel quite good about, you know, look, 2021 has been tough. Margins will improve in 2022, especially as you look at the second half of the year. It's gonna continue to improve as you go into 2023 and dramatically even improves as you go into 2024 as we build this first of a kind force majeure resilient green hydrogen generation network in North America. Craig, I think one of the things that's really important to note here, right? Is when we build this green hydrogen generation network, it of course helps our margin, right? It of course helps from a sustainability perspective. It is a must, as you highlighted in the energy transition, right? What this also does is this helps the entire hydrogen economy. This actually creates a situation where our customer gets more comfortable, but even other hydrogen players in this industry will also get that resilient supply that allows them to even mitigate and manage through some of the force majeure that they have seen in the past, right? That's how we see it unfolding. Couldn't agree more with you with your assessment here. Thank you for that, Sanjay and Andy. My next question is obviously, you know, the big one is guidance, right? You are clearly seeing acceleration across the board. Abundant initiatives that are being incredibly well received by your customer base, where you're adding new verticals almost every month. You know, aviation is gonna be really exciting to watch. What can you say- Absolutely. What can you say is surprising you the most or is has made the much faster progress than you would have expected maybe at this time last year? Craig, I think without a doubt it's the electrolyzer business. I am, and I say this in a good way, I am consumed by meetings with chairmen and chief executive officers. You know, I'll give you example. I was in Scotland on Friday, and a chairman of a company in the, you know, ammonia space, you know, asked me to come and stay in London for the weekend to discuss huge opportunities. That happened. I had that meeting. I ended up leaving London last night around nine o'clock or six o'clock. That's really commonplace. I had another worldwide large utility, leadership grab me on the phone today, this morning, to want to talk to me for an hour. It is constant where the inflow for electrolyzers never stops. It's why we made the Frames acquisition. It's also... You know, I think one of the real advantages we'll have is we're gonna be the person with capacity that can actually build electrolyzer plants. I think folks are recognizing it. The company I was with Monday highlighted the fact that, they've been looking at this space for two years, and they've concluded we had the best technologies, the best products, and the best manufacturing capabilities when it came to PEM technologies. Really we're the only ones who could execute and help them meet their needs and help them meet their net zero goals. I didn't expect that a year ago. I think somewhere in 2023, electrolyzers will be bigger than material handling. I think sometime in 2024, green hydrogen will be bigger than material handling. Love it. Thank you. I'll hop back to you. Okay. All right. Thank you very much. Our next question comes from the line of P.J. Juvekar with Citi. Please go ahead. Yeah. Good morning, Andy and Sanjay. Sorry. Good morning, P.J. Where are you? It's been a long day. Good evening. Where are you? I'm based in New York here. Gotcha. Good evening. Clearly, your margins and business has been hurt within hydrogen with purchased hydrogen costs going up. It started going up in second quarter and, you know, what was the impact in third quarter? We look at your gross margins goal of 30% in fuels by 2024. What are the main risks in achieving that number in your mind? Good. I'll let San- Is it renewable energy prices, electrolyzer costs, transportation costs? Can you just walk us through that? I'll let Sanjay talk about that, P. J. Yes. Hey, P.J., how are you? Good to hear from you. Again, look, I think, P.J., you obviously know the industrial gas market quite well, right? You know what kind of pricing you're seeing in this market, right? If anything, you know, if we were to just extrapolate and say the green hydrogen pricing should be very similar to what the gray hydrogen pricing in the market is right now, based on what you see we're paying for it today, if anything, I think that 30% margin ends up being conservative, right? Our goal here is to really make sure that we're providing our customer with green hydrogen at prices that are arguably better than what we have to pay for gray hydrogen in the market today. Our goal, as you know, is to grow the size of this pie, not trying to go after existing pie and take a small piece of the pie, right? We wanna make sure green hydrogen is economical, ubiquitous, so that there's more and more applications that becomes available. Now, more specifically to your question on what are the risks, look, there's always things that can happen that is not anticipated. As you know, from a renewable pricing perspective, we buy renewable power on a long-term basis, right? That's something we can control. We know what that is. There are some areas where we gotta manage the demand charge and things like that, but we know how to do that. We know how to contain the cost of renewable electricity, and that's an area where we've spent a tremendous amount of time. Second, electrolyzer. Look, this is something we control, right? That, again, is a huge differentiation and competitive advantage we as Plug Power have. Another thing, as you know, is from a liquefaction perspective, I just touched on how we've already expanded our facility in Tennessee to 10 tons a day. We know how to run liquefiers. Now, one another thing that we're doing that I think is gonna be tremendously helpful, if anything gonna help both the logistics cost as well as the delivery network for us and for the entire industry, is once this North American network is built out, if anything, you can actually optimize how do you transport hydrogen to various end customers, right? There are always things that can happen that are unanticipated. Look, as we sit here right now, given that, you know, renewable cost is the biggest chunk of the variable cost in terms of producing green hydrogen, we control the electrolyzer. We're sitting here feeling pretty good about heads down, execute, and get these plants built. Great. Sanjay, thank you. Thank you, P.J. My second question is on the Gigafactory. If that ramps up, you know, you have the order book in front of you with electrolyzers needed for your own hydrogen plants, your fuel cell stacking capability needed for materials handling business. As the Gigafactory ramps up, you know, that operating leverage should translate into significant incremental margins. I was just wondering if you can just, you know, has that been taken into account in your guidance, and when does the real inflection point come? I'll let Paul take that, P.J. Yeah. Good afternoon, P.J. Good to hear from you again. You know, it's going to have a significant effect next year. I mean, it's turning on as we speak. We're gonna be ramping production out of that facility. You know, I would just broaden your comment by saying, when you look at the next 12 months, it really is amazing what's gonna happen in that time period. We're turning on the green hydrogen platform, which is gonna have a substantial impact. We're scaling the Gigafactory and turning it on and gonna have a full year of production out of that. We're scaling the new products. I mean, Andy talked about the growth of electrolyzer. With our internal use as well as external sales, that's gonna grow tenfold for next year. We've got other new products in EV and stationary scaling next year. We've got the joint venture scaling next year. We've got two acquisitions we've just made that are meaningful both in terms of sales and margin and synergies on our existing spend of products and CapEx. We've got all the service improvements that we've been talking about. You know, it's really. We're scaling the material handling business. You know, it's gonna be growing over 30%-40% next year. The next 12 months are gonna be another, you know. Craig mentioned a few minutes ago how big last year was. I think the next 12 months are gonna be equally exciting and big in terms of the growth of the company. You know, we're guiding over 80% growth over this year. Then you tack on all of these margin initiatives that are gonna have meaningful impact. You know, those are all baked into our guidance and why we're extremely excited about the projections and how we're gonna get to that 30% run rate in the midterm strategic planning horizon. Great. Thank you, and I'll pass along. Great. Thanks, P.J. Our next question comes from the line of Eric Stine with Craig-Hallum. Please go ahead. Hi, everyone. Good evening, Eric. Good evening. Just as we think about the 2022 guidance, I mean, obviously, you characterize your business as accelerating. Just curious if you're able to break down maybe the impact of the Frames acquisition, how much of it is just, you know, ongoing acceleration in your business. You know, as we think about Frames, you know, how do you kind of prioritize that internal initiatives versus going after what, you know, is arguably a very sizable market opportunity? Sure. If you look at it, the internal business, organic growth is $825 next year, Craig. We're looking at Frames and Applied Cryo Technologies to move it up into the $925 range. You know, that's kinda how I think about it. What was the second part of the question? I'm sorry, Craig, I was just jotting some. What was that, son? What was the second part of your question, Craig? Oh, yeah. It was simply, you know, just prioritizing. Obviously you're acquiring this because of what it means for your internal business. Yeah. You've also got a big pipeline. I mean, in how do you prioritize those two? Well, it's actually why, you know, one of the biggest challenges, as you know, for companies that are growing is employees. You know, having the right staff and the right number of people. You know, by year-end, we'll have 2,500 people. You know, pre-COVID, I was under 700. You know, I've had this massive increase. Look, we've been hiring skilled individuals. We've been acquiring, you know, companies to help us really ramp and reach the needs. When we look at prioritization, Sanjay has his whole organization. You know, I was reviewing over the weekend with the team the layout of the plant New York. That was developed by his team exclusively. He has the skill sets integrated into his business unit. This was a key decision we made as an organization that we're gonna make these business units very, very self-sufficient. Sanjay has the team, and really, Sanjay, I don't think you need additional resources to execute on our present plans. Oli's team in electrolyzers, you know, frames will primarily support that activity. You know, obviously we'll help when we can with Sanjay, but that's really how, you know, we really have these business units, be it Jose's material handling business or Keith's new markets business, we try to keep them as self-sufficient as possible. You know, obviously there are certain areas of platform development for technology, which is centralized, finance and legal, government affairs, but that's really how we go about managing the business. You know, these GMs we've put in place, quite honestly, all of them are very, very strong and, you know, you know, our goal is that they will be the drivers to make sure these businesses are successful. Paul, would you like to add to that? I think that covers it, Andy. Yeah. Okay. Maybe this is last one for me, just on the stack upgrades. I know you mentioned that you're going to do those at the 10 largest users. You know, just thoughts on what the cost of that may be and then, you know, thoughts on is this something that we should view as kind of an ongoing initiative and to do that more broadly across your customer footprint? Sure. I'm gonna let Paul take that one. I didn't get the context of the question. We're talking about, Paul, the service costs associated with the upgrade of the- Yeah products. Sorry, I missed that. Yeah, I think, you know, we’ve launched a new stack system. We launched it last year. We’ve seen how that’s performed in the new units that we’ve launched since that time. We’ve put a number of new units into the field. It’s tracking incredibly well. It’s actually tracking better than what we anticipated. As we continue to roll that back into our existing, you know, fleets, which we can fairly easily retrofit, it has a meaningful step function change and stack life, which is obviously the biggest cost and impact on our service costs. We’re, you know, really... Along the way this year, we've actually added a number of new resources and then people to help focus go forward reliability and improve that curve even faster, and that's paying dividends in what we're doing. I think you're gonna see those benefits roll out fairly quickly. Paul, we have a lot of that cost already accrued for. Yeah, exactly. We have it baked into our cost accruals of the increments of the overall portfolio, of what it takes to get there. Okay, thanks. Thank you. All right. Thank you. As a reminder, everyone, if you do wish to queue up for a question, please press one-four on your telephone. Our next question comes from the line of James West with Evercore ISI. Please go ahead. Hi, James. Hey, Andy. How are you? How are you doing? Okay. Andy, you've been a busy man, but I'm glad you have Sanjay and the rest of your team and Paul to help you out, given that you're the top developer. Yeah. You know, James, I was up 25 hours straight. That's not meant for young people, but I'm still energized. I'm at 25 hours now. Good. We're glad to hear it. Maybe a question probably for Paul, as we think about the 2025 guidance, and Andy, you touched on some of this, the moving parts, where you think your electrolyzers get better, bigger than materials handling and green hydrogen eventually gets bigger as well. What should the revenue mix of that, you know, $3 billion or so look like when we get to 2025? How are you guys thinking about that? Yeah. I don't have the exact numbers in front of me, but in terms of the $3 billion, you know, I think as Andy said, you know, electrolyzers are as big, if not slightly bigger than material handling. Those, you know, but that coupled with the green hydrogen are the big three chunks of the revenue. We certainly see growth in the new markets on stationary and EV as well. The majority of revenue will come from those three pillars. Okay. That's helpful. You know, James, no one's asked me this on the phone, so I'm gonna- Okay ...add it in. You know, talking about new markets, you know, one of our goals with Renault is that we do roll-out of 10 customers with roll-outs next year to demonstrate technology. They won't be big roll-outs. We already have seven customers lined up. I think you may have seen me driving the van at the Plug Symposium. Right. You know, that to me, you know, if Craig asked a question earlier, what surprised me, I think, you know, from last year, I think next year at this time, I'll be talking about what we're doing with that Renault JV. Right. Okay. Okay, good. Maybe just the last one, if I could sneak it in here. The green hydrogen sales that you're anticipating as these facilities come online, do you believe that you'll have pre-sold most of your capacity? I'm gonna let Mr. Sanjay take that. Okay. Yeah. Hey, James. Good to hear from you. Look, I mean, today we have not done your traditional way of how, you know, I think, the industry has done, right? You pre-sold the plant, then you decide to build it, right? As we sit here right now, is the plant completely sold out? No, it's not, right? Frankly, that's somewhat intentional on our part right now because of all the new applications, all the new opportunity that we see unfolding here. We wanna make sure that we're actually really reserving that capacity, right? Which is also why we've gone down the path of essentially, you know, making sure that you know we're actually building these plants with our own capital, so that way you're not having to go down the path of project financing and having to have that long-term offtake and things like that. Right. Right? You know, so again, but this is something we'll obviously shift focus on, make sure that the plants are loaded up as they come online, right? Today, that's the approach we're taking to make sure that we have that reserve capacity to support all the new apps that we anticipate unfolding over the next several years. Okay, got it. Thanks, guys. Thanks, James. All right, thank you. Our next question comes from the line of Greg Lewis with BTIG. Please go ahead. Yes, thank you and good afternoon, everybody. Hi, Greg. Yeah, I was hoping to dive in a little bit more into how we should think about, you know, the kind of buckets of what's driving the margin improvement in terms of, you know, as we think about maybe it's pricing, maybe it's, you know, an improvement in the supply chain, maybe it's economies of scale. I mean, you touched on the Frames and the ACT acquisition, maybe some of that's internal savings. Any kind of, you know, broader strokes we can think about in how we're achieving that, you know, 2022 and 2023 improvements. Yeah. I think, you know, we've been very. Why don't we let Sanjay do hydrogen. Yeah Paul, you can answer the rest. Yeah. Maybe you can. Yeah run through hydrogen first. Happy to do that, Andy. Right. So, Greg, again, I think, as I briefly mentioned to one of Craig's question on hydrogen, right? So today we're obviously, you know, buying hydrogen other than our plant in Tennessee, right? So we're paying what we're paying. That's the market price, you know, obviously impacted by various commodity price fluctuation and things along those lines, right? With the goal to make sure customers have hydrogen available all the time, so their mission-critical work and application is not impacted. As we look into 2022, you know, we see couple of things that are gonna have a meaningful impact to this margin profile. First, the Tennessee plant is no longer 6.4, it'll be 10 tons a day. That'll have an effect in the first half of the year. We're obviously working with our strategic suppliers and adding few more supply options that is gonna help us from a pricing perspective in the first half of the year. When you go to the second half of 2022, as some of these green hydrogen plants come online, that will obviously help quite a bit from the blended price perspective, and that's why we said you should expect to see that meaningful margin improvement from Q4 of this year to Q4 of 2022. As you then go into 2023, where by the end of 2022, we plan to have about four of these hydrogen plants, you know, basically being commissioned, right? By the end of 2023, we're looking at having about six hydrogen plants up and running. When you look at 2023, with all that contribution of new plants being built in the second half of 2022, you're looking at a break-even margin performance. You shift into 2024 and beyond, where we're targeting and we're looking at, which we've shared with you all multiple times, that we expect green hydrogen cost to be below $4 a kilogram. You guys can back into what our ASP is today. Obviously, that's a function of various different end markets, plus and minus, depending on which application it is, but it gives us a very good confidence and a visibility based on where we see the cost going to talk about this 30% margin that we refer to, especially in 2024 for our hydrogen business. Paul. In the letter, we included a chart there that shows, to Sanjay's point, we're reducing it by 50%. I mean, that's you know, fundamentally a step change function. I would just add to Sanjay's comment that not only are we gonna be able to produce it and sell it to our customers at a cheaper cost. Having, as Sanjay alluded to earlier, gaining greater control over the logistics and the network is incredibly impactful on the efficiencies of the systems. We have become the world expert on you know, distributing hydrogen and managing the networks for our customers. One of the incredible things that we've learned is the importance of managing that logistics network and how that can be impactful to the efficiency of the system. You know, just to step back to answer your question, it really stems from kind of three things really. One is hydrogen, which Sanjay talked about. Second is service, which we've talked about tonight in terms of a lot of things we're doing, and we expanded on the latter and improving that profile. The third is scaling the equipment programs. You know, we've already shown routinely margins on our equipment profile at 30%-35%. As we scale further material handling as well as scale these new products like electrolyzers, I mean, a tenfold increase next year in volume in that business is substantial. At a scale where it, you know, as we start leveraging the Gigafactory and other things that we're doing, it's gonna allow us to achieve, you know, that margin profile on all the equipment programs that we have. As that holistic business grows, and we're talking about total growth next year of 85%, that's very meaningful in terms of the mix and the margin impact for equipment. It's really those three fundamental things and, you know, the acquisitions and the JVs and all those things help on a global basis grow the scale of equipment sales, which allow us to drive that curve even faster. Okay, that was super helpful. Thank you for that. Just I wanted to talk a little bit more about ACT and in thinking about, you know what I mean, hey, this was a good. It's a good company, good technology, maybe a little bit undersized prior to the acquisition. I guess now that, you know, it's inside the Plug umbrella, what's the kind of the thought process? Andy, you mentioned that it's, you know, one of the harder issues is getting, you know, the right people in place to do this. As we think about, you know, the opportunity for ACT in 2022 and 2023, as you look at how Plug is gonna grow, I mean, you guys are growing like a weed. Is ACT in and of itself where it needs to be to meet your growth? Or should we be thinking about, you know, things like hydrogen trailers and everything else that ACT does, we're gonna have to continue to rely on third-party providers as well? Greg, I expect to buy most of my trailers from ACT, Applied Cryo Technologies. I also expect that we will. You know, hydrogen trailers are much more complicated than stationary hydrogen tanks. This year, I probably purchased 65 stationary hydrogen tanks. I see this as a huge margin opportunity for Plug Power as well as a potential sales opportunity. With their technology, we're going to be able to move in to even further vertically integrate the business. We look at what we have down there. We're working one shift at the moment. There's no reason we can't expand the number of shifts and expand the capability. We have the land. You know, I've already been staring and looking to see where we could add additional capability on the site. We've had a lot of outreach from some of their customers already now that Plug, with our stronger balance sheet and ability to support the effort, you know, the business is much more interesting. You know, we view that as very complementary to our vertical integration strategy, but also see that we could double or triple the size of that business in the coming years. Okay, great. Thank you all very much for the time. Okay. Thanks, Greg. Thank you. Our next question comes from the line of Bill Peterson with JP Morgan. Please go ahead. Hi, good afternoon. Hi, Bill. Andy and the team. Hope all is well there. Sounds like you might be jet-lagged. Hopefully you'll feel better soon. Well, I feel good, Bill. Talking to you guys gets me going. Okay. Well, you certainly sound excited about the electrolyzer business, you know, talking about how it could be, you know, even larger than some, you know, current businesses. I'm actually wondering about 2022. At the recent symposium you mentioned, you know, 100 MW in external sales and 300 MW for your internal use. Can there be more upside to this, or is this capacity limited? I guess, are you fully booked through 2022, and are you starting to even get booked into 2023 now? I believe that we will blow out the 2022 electrolyzer numbers that I suggested at the symposium. We are not overbooked because we've built a big factory. Knowing the deal flow and the activities we have going on, I could see us. During our update call in January for 2022, I think there's a high probability we'll be increasing that number. That's terrific. Thanks for that update. Wanna talk about EV, EVs a little bit. We didn't spend too much time on this. You know, I guess with your Renault you have obviously some light commercial duty. This is an area that seems well suited for BEVs. I guess I'm kind of curious of what you see as advantages for this fuel cell and maybe switching to more medium or heavy duty. I believe a few quarters ago you had talked about your being in negotiations for maybe some partnerships in heavy duty. I'm wondering where this stands. I think you expect to maybe make some announcements, but is this still on track? Would you take a kind of an OEM approach here or just do direct sales? I'm curious on what your activities are more in the medium and heavy duty side. There are some real good negotiations going on, Bill. Let me say that I'm not eager to be an OEM parts supplier. Ultimately, that is a low margin business. We're looking for, and we're engaged in discussions to have relationships that look very similar to the Renault model, where Plug jointly owns the vehicle. I probably agree with you that obviously heavy duty and medium duty vehicles are very interesting. When you look at work that's been done by people like DHL and you look at the European goals for delivery vans, DHL always points out if you go over 200 km, which is often needed, that fuel cell vehicles, they're essentially carrying batteries around instead of packaging. I also think that fuel cell vehicles, and I think this is understated, gives operators a great deal more flexibility to keep vehicles on the road and to use vehicles for multiple purposes. You know, as I say, kind of in this call that, you know, if this year electrolyzers surprise me, I think next year I'll be talking a lot about vehicles. Okay, great. Thanks for that. Thank you. Our next question comes from the line of Jed Dorsheimer with Canaccord Genuity. Please go ahead. Hey, Jed. Are you there, Jed? Jed, you may be muted on your side, sir. Yeah, I'm muted. Sorry, guys. Andy, hope you get some rest. Sounds like an incredible couple of days. Look forward to hearing about it. I guess. What's that? Yeah, I look forward to talking to you, Jed. Thanks. I guess first question, and I just have a couple here, but with the updated guidance, and you maybe Paul gave this already or you gave this, Andy, what's the breakdown of revenues in terms of Material Handling in the near term here? Of the $900 million-$925 million, what would that be in terms of the different end markets? You wanna take it, Paul? Yeah, I don't think we've given that out specifically, but I think Andy just kind of said, you know, $825 is our core businesses and moving to the $925 is with the acquisitions. I mean, I think, you know, what we have given has been a number I think we quoted with electrolyzer next year being around $150. You know, I think, you know, looking at material handling kind of growing in that 30%+ range next year, if not higher. That's the guidance and insights that we've kind of given so far. It'd be about material handling, about $600, $150 from electrolyzers, and I've already probably said could be more. New markets, $75. Yeah. Acquisitions, 100. I think that gets us there, Paul. That's about right. That's helpful, guys. I was wondering if you could help me a little bit just on the math because it sounds like there's a variable that I'm missing in terms of maybe a Sure You know, a big step function on the cost down on the electrolyzer or the efficiency. If I look at getting a kilo of green hydrogen, it's about 65 kWh of electricity to get that kilo in liquefied form. Is that a fairly constant number to use, or do you see that dramatically changing? I guess that's my first question. The second is, then if we apply sort of a $0.05 cost of behind the meter electricity, I still struggle to get to under $4.50 of cost. Jed, I'm paying below $0.031 pretty much everywhere. Okay. Almost approaching $0.025 at places. I think your analysis is kind of right. You know, you can kind of think about the electrolyzers as 52 kWh. You can probably think of 11-12 kWh for the liquefier today. I think you probably can start thinking about liquefiers getting down to the 8-8.5 kWh range. Probably electrolyzers, you probably can see 7%-8% improvement over the coming two years or so. Got it. That's helpful, Andy. I think. Last question. I think that Jed, you hit it on the head. It's the cost of how you negotiate the cost of electricity is the key to providing low-cost green hydrogen. As you know, Sanjay's really an expert at that. Well, Sanjay is a master negotiator, I guess now. I guess. How about that, Jed? Maybe you or Sanjay, I guess the question on that lower level of electricity pricing, particularly from renewables, is have you figured out is that really a mechanism of curtailment that you're taking into account to get those prices? Or is there anything you might be able to add other than Sanjay's negotiating skills? I'll let Sanjay answer that question. No, I mean, Jed, it's not the curtailed power, right? You do bring up a really interesting point. As you know, today, to be able to really access that curtailed electricity, given whether it's ITC or PTC, there's a lot more negotiation that has to go on, right? I think it becomes more challenging from that perspective. Going forward, that could be an interesting area where you could in fact see even a benefit from a cost of renewable electricity. Today, look, these are new plants, right? You've lived this, Jed, in the past and also still now, right? Every time you've seen the new generation of whether it's solar or wind or new capacities being built, LCOE has gone down, right, because driven by the CapEx, driven by the cost of capital. Look, I think Andy's given you some sense of what the numbers are. I don't wanna go too much more detailed than that, right? I think we do wanna preserve some of that from a competitive standpoint, but these are the numbers, and that's why we have said what we said about what we think is going to be the cost of our green hydrogen. Got it. Well, listen, it's super helpful. I'll jump back in the queue. Thanks, guys. Okay. Our next question comes from the line of Tom Curran with Seaport Research. Please go ahead. Andy, I'm still picturing you in a conference room in Seoul and almost said good morning. Oh, Tom. Returning to the North American green hydrogen generation build-out. You're expecting to exit 2022 with four plants that collectively will be producing 70 tons per day. You know, as you turn to 2023, you expect to exit there with six representing 200 tons per day. At this point, just for the exit points of 2022, 2023, Sanjay, could you share with us the percentage of that output that you expect to be looking for third-party offtake? In other words, do you already have the visibility, and if whether it's a percentage or it's a range, for how much of that 70 tons per day you'll be looking to contract by the end of 2022? You know, how much of the incremental $130 by the end of 2023? Yeah. That’s a really good question. Right. Let’s take them first on 2022. Look, as you know, right, we are obviously the largest user of liquid hydrogen in North America, and we have many new applications, right, that we’re seeing a lot of traction on. That is going to create, and some of these numbers you guys might not, you know, necessarily put together, if you would, for that incremental demand that materializes. But the typical rule of thumb, right, the way we wanna think about it, as these plants come online, we wanna make sure that the 80% or so of that capacity is called for, right? We wanna make sure that there is about 20% buffer. Why is that important, right? Maybe even 25% buffer. Given what we’ve seen here so far, right? Because there's always an event that happens in the industry. We wanna make sure that we have that excess capacity to be able to support our customer and frankly, the entire hydrogen industry, right? We'll be talking to you guys a lot more as we go into the second half of next year, how we have loaded these plants for that are coming online. We'll talk to you a lot more about it in, again, 2023. One thing that I think is really important to keep in mind, right? When you think about material handling industry, it's 1 kg per day of consumption, right? You go to light commercial vehicle, that's 6 kilogram. You go to stationary power, and if it's 24/7, it's more than a ton per day, right? The multiplier effect that you see for this hydrogen demand, given all the applications we're working on, is pretty substantial. Frankly, as we sit here right now, we're not super concerned about loading the plants. We wanna make sure that we're balancing how we load this plant so there is some buffer to be able to mitigate and deal with any type of a situation or curtailment or force majeure that the industry might face, so that we can really support the entire hydrogen economy, our customer, and frankly, even some of the other players in this market. Great. That's helpful. Then turning to new markets and one of the new markets that hasn't gotten much love yet thus far in the call, stationary power, you know, data center backup power. You know, Andy, you mentioned that you're expecting 2022 to be the inflection year for fuel cell mobility and in particular, you know, the Renault JV. What year does it look like could be the inflection year for stationary power? Good question. I think actually, I haven't thought about that way, but now you've given me a new model to talk about. I do think it's 2023 between what we're doing with SK, what we're doing with data centers, the work Keith and his team are doing to get products out the door now. You know, I think next year is a big testing year. I think 2023 is where this starts taking off. Thanks for taking my questions. Thanks. Our next question comes from the line of Pearce Hammond with Piper Sandler. Please go ahead. Yeah, good afternoon, and thanks for taking my questions. Yeah. You're patient, Pearce. Thank you, Andy. Now we're getting a call. Well, I'll try to be quick. I guess my first question, just following up on all the questions on hydrogen. This is probably more of a housekeeping question. With the customers and hydrogen delivery, do you simply pass along your hydrogen cost to the customers, or do you have to wear the hydrogen price risk or is that the customers? Pearce, with our new network, when we control everything, that issue goes away. At the moment, as Sanjay talked about, we're buffering some of this because we want the hydrogen economy to be successful. That's what we're doing. Look, let me tell you the difference between the network Plug's running and the network that you may see in California that one of the large industrial gas companies providing. We actually make sure hydrogen's at the site every day on time to keep operations going. In the end, we strongly believe our approach of having share and then being able to substitute with our green hydrogen. I can tell you the fact that we're dependable, reliable, and have provided stable pricing is going to be a great incentive in the future, and I can tell you in some discussions to displace some of the incumbents. Thanks, Andy. I appreciate the answer, and that's it for me. Okay. Thanks, Pearce. All right. Thank you. Our next question comes from the line of Joseph Spak with RBC Capital Markets. Please go ahead. Hello, Joseph. Hey, Andy. Look, I know you guys are building this business to be profitable and to sort of stand on its own. Going back to sort of the green hydrogen and bringing the molecule cost down, you know, by 20% by the end of next year, like I wanna confirm that that doesn't include, you know, any PTC. If we were to consider that, what would the cost go down to, and do you have like an internal sensitivity as what that could do to demand and profitability? Absolutely. You wanna take that, Sanjay? Sure. Happy to do that, Andy. Hey, Joe, good to hear from you as well. Look, I think first part of your question, no, we have not baked the PTC into that, right? Look, obviously, I think it's a very important policy not just for the U.S. but also for the entire hydrogen economy and as a part of the energy transition effort, right? Hydrogen has to be a part of that mix, and green hydrogen has to be a part of that mix. As we've told you that, you know, and we gave you a number of 30% gross margin, right? That is based on what the ASP is in the market today and what we expect the cost of our green hydrogen could be by 2024 timeframe. If you were to have $2 or $3 of production tax credit, depending on the structure of, is it PTC, is it cash grant, you could certainly see substantial cash generation potential out of that, right? Look, things like this are super critical, though. This is exactly what got the wind energy and LCOE to where it is right now. Investment tax credit in solar got the solar industry to be where it is right now. We see a similar benefit for the green hydrogen as well from PTC. To your question, for 2022, that margin expansion does not take that into consideration. Okay, if we did, it sounds like your 2024 or 2025 targets can be maybe pulled forward by a couple of years? I think that would probably be a fair characterization, yes. Okay. The second question is just, you know, there's as has been pointed out numerous times, a lot going on here and, you know, Plug itself is doing a lot of organic investment, a bunch of JVs, a bunch of partnerships, a bunch of M&A. I think it sometimes gets a little bit hard to judge the efficiency of maybe how you choose to sort of spend your capital. I think, Andy, your comments earlier that it doesn't make sense for you to be make some sense, but if you could just shed a little bit more light on, like, how you approach a given situation within the hydrogen economy as to sort of whether you do that organically via a venture or via an acquisition. You know, I think when you think about how we think about ventures, I think a lot about sales channels. You know, if you think about the Renault JV, you know, it provided us, you know. You know, in theory, I could have gone and did a vehicle business. You know, Renault has two distinct advantages that we could not develop over the next three-four years and even longer. One is their electric vehicle capability. The other is their long customer reach and reputation in Europe. They provide us instantaneous credibility. We have the same, you know. What we bring to the table, obviously, there is, you know, we actually know how hydrogen ecosystems work. You know, I wasn't going to walk into Europe and be European tomorrow. I wasn't going to walk into Korea and be Korean tomorrow. Let's talk about SK. Why would we do it with SK? Not only is it a partnership, it's a market. You know, they have the hydrogen, they have the policy in Korea to allow us to put stationary products at scale. We could not do that alone. When I think about the acquisitions we have made, many of them have been technology-oriented to fill in the hydrogen ecosystem. If you think about every one we've done, ones that many in the audience may not remember here, Cellex, which allowed us to get into material handling. AFC, which got us in the membranes business. EnergyOr, which is the aviation platform business that we have. You know, what we've done with Frames has really strengthened our electrolyzer technology. Giner brought electrolyzers to stack to the equation. If I kind of look at, you know, I would say that the partnerships and ventures are probably more sales channel-oriented, while the acquisitions are more technology-oriented so that we can serve every element of the hydrogen ecosystem. Hope that was helpful, Joseph. Yeah, thanks. I appreciate that color. On that note, I think we're done here as far as questions go. I appreciate everyone's patience who's called into this call. Look, we're building something really special here. We are the company. You know, I was at COP, and I was invited to meetings which I never would have been invited to in the past, sitting there with John Kerry side by side, talking about the hydrogen ecosystem. Plug's invited to these meetings because not only are we talking about it, you can see we're doing it. We are the company that if you want to build an electrolyzer system at scale, no one else that has the manufacturing capability to do that. If you want a full range of fuel cell solutions from stationary to on-road vehicles, Plug actually makes systems that are complete, not just components. This is a unique company, and I shouldn't forget the hydrogen green hydrogen network we're building out. We're doing it. We've broken ground. Plants will be online third, fourth quarter. This isn't a pipe dream in PowerPoint. This is real engineering, real people, 2,500 of them now, who are making this business real. Thank you all for listening, and I look forward to talking to you in January for our business update call.