Greetings, and welcome to the Plug Power third quarter earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If you would like the opportunity to ask a question, please press star one on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Teal Hoyos, Director, Marketing Communications. Thank you. Please go ahead. Thank you. Welcome to the 2022 third quarter update call. This call will include forward-looking statements. These forward-looking statements contain projections of our future results of operations or of our financial position or other forward-looking information. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward-looking statements, and such statements should not be read or understood as a guarantee of future performance or results. Such statements are subject to risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including but not limited to, risks and uncertainties discussed under Item 1A, Risk Factors in our annual report on Form 10-K for the fiscal year ending December 31, 2021, as well as other reports we file from time to time with the SEC. These forward-looking statements speak only as of the day in which the statements are made, and we do not undertake or intend to update any forward-looking statements after this call or as a result of new information. At this point, I would like to turn the call over to Plug's CEO, Andy Marsh. Well, thank you, Teal. We have published an investor letter today that provides details about the quarter, status of progress of our projects, and a summary of our midterm ambitions. I know to some our company is tough to financially understand in the near term. It really comes down to two areas, the cost of hydrogen and selling more equipment. The equation for success really comes down to building out our green hydrogen platform, which will transform a negative margin hydrogen business to a growing positive margin business just by turning on the plants. We've already demonstrated this in Tennessee. We can generate hydrogen at one-third the cost we're paying from the industrial gas companies today. We won't be discussing this issue within a year. It'll be in the rearview mirror, and the issue will be how to accelerate the plans. Equipment sales, even for our new electrolyzer business' gross margins, are already over 15%, and we're just starting to scale. We've made fuel cells profitable in material handling and now doing this again in electrolyzers and stationaries. You put these two items together with the real improvements in service, the 2023 targets of $1.4 billion in revenue and exiting the year at break-even operating margins is achievable. The long-term business prospects are even more attractive, and it all starts with Plug doing real things. I know many of you were at the symposium, and you saw a real gigafactory, real electrolyzer systems, real vehicles, real liquid hydrogen trailers, real fueling stations. You were able to touch and feel the hydrogen ecosystem, not in some distant future, but today. Now for the future. Plug is a leader and will continue to be a leader in the energy transition. We have first-mover advantage in the fuel cell and hydrogen industry that we do not intend to cede. We will have the first green hydrogen network across the United States by 2025. When we look out to 2030, we'll have the most commercial vehicles on the road through our Renault JV, HYVIA. We'll have the largest deployments of PEM electrolyzers. We'll be selling fuel cell peaker plants at scale, use our hydrogen, and many, many more activities we'll be engaged with. Finally, there are short-term challenges, but we have a clear, well-defined plan that is being demonstrated. Long term, we are building out our hydrogen ecosystem by ourselves and partners that quite honestly is unmatched in the industry. Paul and I are now ready to take your questions. Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one to register a question at this time. The first question is coming from Colin Rusch of Oppenheimer. Please go ahead. Hi, good afternoon. Thank you for taking the question. This is Kristen on for Colin. Hi, Kristen. Hi, Andy. The first question, just with the substantial pipeline of opportunities, can you discuss how you are down selecting opportunities to pursue and to commit to, particularly for electrolyzer sales and potential hydrogen offtake agreements? Sure. I'm gonna take the electrolyzer sales, and Sanjay's sitting here with me, and he works the hydrogen offtake agreements every day. With electrolyzers, you know, there are a few questions we ask right up front. You know, there are these huge opportunities and, you know, does the customer really have access to renewable electricity or electricity at the scale that's required to generate hydrogen. It may seem like a simple question, but it actually is an important one. The second one is, do they have, you know, real projects, you know, and do they have fundamentally land to be able to build an electrolyzer plant with. You know, we really make sure we understand, you know, what is the application, you know, what are they doing with the hydrogen. The third one is, you know, in an industry like this, you have to always be asking the question, how is the customer going to, quite honestly, pay you? How are they funded? You know, that's kind of the first three items we look at, when we think about doing a deal and working with a customer. On that note, Sanjay, how do you think about, you know, hydrogen itself selling? Sure. Hey, Kristen, how are you? A couple of things on that, right? As we mentioned in our shareholder letter, you know, the plant that we're about to build in Europe, we got 6x demand for that, and we're just about to break ground, right? I think the inbound on offtake for the hydrogen is actually pretty substantial. This is how we think about it, right? We've told you in the past that we do not want to commit more than 80% of the capacity because we wanna leave 20% of that capacity to meet, you know, sort of your peak demand, all the plant outages that we've seen in the industry to be able to support our customer as well as the broader hydrogen economy, number one. Number two, we have a lot of activity going on here. We are, you know, looking at some very, very sizable offtake agreements that are five-seven years in term that are focused on mobility market application. We look forward to actually really updating you all here in not too distant future on some of those activity we got going on. Second, we're also working with some of the industrial gas companies, where it could actually be either like a swap type agreement or those that are not as heavy on the hydrogen side of the business. We're doing some of that work with them as well. Then another thing we're really prioritizing is, as Andy touched on, the activity in our stationary business. That's a huge demand driver for our green hydrogen as well. We wanna make sure that the capacity that we're building is going to be available to support those apps and many of our customers as well. As you guys know, we also have deals already with some of our pedestal customer as well. The way we are looking at it right now, out of that 500 tons, probably about 200 tons of that is going to be for supporting internal activity, internal customer, and another 200 tons of that is likely going to be the third party, broadly speaking, largely in the mobility as well as in some of the industrial gas type customers as well. Kristen, did our answers answer your question? That's incredibly helpful and appreciate that detail. If we think about just the incremental scale-up needed for the supply chain for fuel cells, are you seeing suppliers scaling to support the additional platforms, you know, beyond Plug, or are they really focusing on just you? Just any color on the supply chain scale up. Thank you. Oh, that's another good question. I think many folks on the call went to our gigafactory, and you can see how Plug is thinking about scaling our own manufacturing operations. I think when you take a step, then, you know, look at our Vista plant, which is 400,000 sq ft, you know, which we were able to build in less than a year, to support our business activity. From our own internal capability, we feel very comfortable with. As you know, we've hired people who scaled the Tesla business to run both our operation, and he has reporting into him, folks who worked in the Tesla supply chain. We are looking. You know, we are very focused on some critical items. Some of those items are, I'll say, critical to the performance of the product, things you may not think a lot about, things like humidifiers, hydrogen tanks. You know, we have efforts not only to support strongly our present suppliers, but we really had a focus on diversifying our supplier base. Like many people, we're very focused on semiconductors to make sure we have the appropriate semiconductors that meet our needs. You know, I think there's lots of excitement about this industry. Lots of folks are looking and trying to understand how they can enter. Look, you know, we have volume today, and that makes us attractive. That's really helpful. Thanks so much, Andy. I'll pass it on. Thanks, Kristen. Thank you. The next question is coming from Bill Peterson of JPMorgan. Please go ahead. Yeah. Hi, good afternoon. How's it going, Andy and team? Hey, Bill. How are you today? Yeah, good. Good. Wanted to talk about the, I guess the electrolyzer business merchant. It doesn't seem the backlog has grown, and I'm wondering if this is a function of maybe more your side or if customers are delaying FIDs, perhaps trying to get a better understanding of policy support, benefits of the IRA, you know, maybe renegotiating PPAs. Just I recognize it's probably transient, but I'm just kind of curious on what's happening with the backlog. I guess maybe looking ahead to where do you see more of the interest coming from as you know as you discuss with your sales folks? Ammonia, refining, smaller projects, large scale? Just kind of get a feel for how we should think about it in the next year. Bill, I think that first, you know, I think that the funnel has changed. We probably, you know, we're modest in the investor letter. I think that when you take a look at it, the key areas we're seeing activity in is more in the industrial applications, where you're looking specifically at opportunities with things like fertilizer, e-methanol, are really areas we see lots of activities. You know, as far as scale, and I'm gonna separate scale into, you know, what projects will be the big projects to ship next year. I can tell you, and you may have seen at the symposium, Bill, the 5-MW platform. We're seeing i n many ways it's kind of almost a starter kit, but we see a lot of interest also in things like bottle manufacturing. We think next year, just to give you a gauge, we'll probably ship about 400 MW of that platform. On top of that, there'll be a lot of work done on the development of, you know, more larger scale plants. That's kind of how we see it rolling out. The big numbers for backlogs will roll off, you know, more in the 2024, 2025 timeframe, though there'll be some, you know, upfront charges that you'll see. It'll really... Much of it's in these, you know, industrial markets where, as shown in our investor letter, things like ammonia, methanol, you know, steel, even mixing in natural gas pipeline, there's a lot of work, a lot of activity going on there at the moment. Was that helpful, Bill? Yeah. Yeah, I was just trying to see if there's any near-term delays, but it feels in any case you're feeling pretty good about 2023. Yeah. Just the second question I have is about stationary power. Thanks for giving us the color around how you see 2023 and 2024 evolving. Can you give us a broad feel for how we should think about sort of pricing per megawatt and how should we think about maybe the margin structure? I presume at low scale the margins are not gonna be coming in directly at corporate average, but how should this evolve over the next, you know, few years? Yeah. I'll make some comments and I'll let Paul. You know, Paul's in London at the moment. I'll let him add to my comments. You know, I think that you know, those projects will primarily next year be more geared towards really two applications. One is you know, where grid's not available and charging EVs, where I think half of what we ship next year will fall into that category. I think the second category that is really more with our traditional customers at their distribution centers, where we'll be deploying stationary products. I think you know, Jose you know, our VP of sales in that area you know, is projecting between 20-30 MW. We have the capacity and we're driving the supply chain to make sure we could support 60 MW, you know, just to give you a gauge. We think that business overall, because there's more to that business than just the stationary products, you have to build the hydrogen infrastructure. We see that business next year, when you include everything that needs to be included, probably somewhere between $125 million-$150 million in revenue. Paul, I know, would you like to add to what I've said? Yeah. I just would comment on the margin side. You know, the real big benefit for Plug is that there's a lot of commonality in components in these products and leverage in what we're already established as a base for supply chain and manufacturing. That is a great platform to kick off from. Then too, because the sales opportunities and the funnel's growing so fast, it will scale faster than you know other businesses from early on. You know, all of those factors help kinda mitigate some of the, maybe some of the startup effect you have of ramping newer products. We absolutely expect that product will... You know, we're targeting north of 30% on that product line as we are on any equipment product line, and I think it will absolutely scale, you know, fast in that direction. We expect it to be accretive next year, and we expect it to grow quickly thereafter. Hey, Bill, I would add one other item, that is I think about our ProGen module a lot like a solar panel. That ProGen module, which we're selling to HYVIA, is essentially the same ProGen module from an architecture point of view, especially that we're, you know, that we're going to be using in stationary. There's a lot of, you know, if you think about, there's a lot of economies that come from the fact that those product lines are complementary. You know, just like the solar industry, how solar panels dramatically reduced in cost because you were building the same thing over and over again. In reality, what we're doing in mobility and what we're doing in stationary for the fundamental platform is exactly the same, which should really help our cost position next year, but especially long term. Yeah. Thanks. That makes sense. Thanks for the color. Thank you. The next question is coming from P.J. Juvekar of Citi. Please go ahead. Hi. Good afternoon. This is Eric Petrie for P.J. Hi, Eric. How are you, Andy? Okay. Could you just give us a little bit of sense as to, you know, Amazon's $2.1 billion portfolio deal, you know, going from forklifts and kind of what's next for them looking at, you know, either fuel cell trucks, fuel cell power generation, electrolyzers, you know, what's the next thing that they're looking at? Yes. Why don't we start with green hydrogen, Sanjay? As you saw in the shareholder letter, right, we did do a 30 tons per day green hydrogen offtake agreement with Amazon. Again, that's just the beginning of many portfolio sales opportunity we can have. That's the value of what we talked about, our vertically integrated model and all the effort that we've put into positioning the company to where we are. With that, why don't I turn it to you, Andy. Yeah. If you look at what Amazon said at the symposium, they really highlighted the need for hydrogen across a wide variety of applications, everywhere from stationary products to on-road vehicles to electrolyzers, and obviously, we are engaged in all those areas with Amazon. You know, obviously, I can't say too much more because of nondisclosure agreements, but I can tell you, if you listen to what Dean Fullerton says, who runs over 30,000 people in the logistics group at Amazon, they are committed to green hydrogen. They're committed to Plug. We've been their partner now for a long time, and they're really looking to scale this business with us. Obviously, the size of what we're looking at with them, you know, I think you can... You know, that $2.1 billion gives you a feel for the scale. Thank you. Just turning to, you know, like commercial vehicles, HYVIA, when should we expect kind of going from pilot to commercial orders? You know, we've seen some delays on the truck side as well, so just any thoughts there. You know, first, I'd like to say Renault had their investor day today, and HYVIA was presented as a model of how they would like to think about their future. We have built a facility with them that can support deployment of 800 vans next year. You know, we have already identified nine customers, which we've named, and others who are looking to start using these vehicles. I can tell you, HYVIA expects that facility to be sold out next year and to scale from there. Thank you. Thank you. The next question is coming from Joe Spak of RBC Capital Markets. Please go ahead. Thanks, Andy. Hi, Joe. Hey, good morning or good afternoon. Good afternoon. Look, I know you sort of led off here talking about some of the modeling difficulties and the issues impacting the near term and how you don't think that persists in the future, and I can appreciate all that. In the letter, you know, again, you talked about a step change in fuel margins, for instance. I know at the symposium you guided that to, you know, minus 35%, I think, for the year, which obviously would be a big step change from where you're at now. With all due respect, I mean, we're going on over a year about hearing about step changes and the margins continue to drag. I guess I really wanna understand your level of confidence there. You know, you also sort of talked about or I think earlier today in response to another question, some charges for industrial application. I'm not sure if you meant that was for you or for your customers and if that was contemplated. I guess what I'm really giving you an opportunity to do maybe is, you know, maybe add a range or some sort of sensitivity around, you know, how you feel about the gross margins at the fuel level and the overall company for next year. Joe, I think you've misunderstood us on two levels here. I'll let Sanjay address the hydrogen margins because he's a little perplexed. Let him explain, and then after he gets done, I'll ask you more about the industrial comments. Yeah. Joe, I think, look, I appreciate the question, right? As Andy mentioned in his prepared remarks, there's really two factors to drive this margin, hydrogen and equipment, right? Let me take the hydrogen one first. So far, you know, other than our plant in Tennessee, we have been buying hydrogen from the third parties, as you very well know. That hydrogen price has been a function of the price of natural gas. We know what has happened to the price of natural gas, right? Price of natural gas went up almost 61% in Q2 of this year, and there is a lag in terms of what the hydrogen fuel cost for us in Q3, which is why you're seeing the margin deteriorate from Q2 to Q3 as it relates to what happened to the natural gas prices. Now fast-forward, right? Now we are commissioning our plant in Georgia before the year is over. We'll start our commissioning of our plant in, St. Gabriel, Louisiana before the year is over. We're expanding in Tennessee, right? We have multiple other plants that we're starting to break ground on, we're starting to make progress on, where we'll have that about 200 tons of plant being commissioned by the end of 2023. As this plant start to produce hydrogen, that plants come online, as Andy said, the cost is going to be one-third of what we're paying for that third-party hydrogen cost. Even blending some of the legacy contract that we have, all of whom taper off by 2025, with the blend of what we're gonna be producing and servicing our customer, third-party sale that we're going to have, we absolutely feel very confident that as you go to the end of 2023, we will exit the year with operating break-even performance with our fuel business. That will create a step change in our margin profile. With that, Andy, why don't I turn it over to you- Yeah. -on how that complements with the- Yeah. -equipment margin and expansion with the sales, and how that plays out. Yeah. You know, when Sanjay's, you know, as I mentioned at start, Joe, it's really pretty simple. You know, simple is hard to do. You look at Tennessee, which is about one-fifth of our capacity, we already are producing hydrogen at one-third the cost that we have to buy it for today. We're gonna have a lot more hydrogen, which is our own. I think we're looking at 60 tons of our own next year. Right. Just for our own customers. That's gonna be a very healthy, profitable business for us. It also, with the production tax credit, some of that we'll keep, some of that we'll give to customers, and that combination will actually drive a lot more equipment sales. I guess, when I take a look at the hydrogen portion of this, it's really easy to see if you live it every day. I know, you know, I know that, you know, I can understand your thought process, Joe. Your other question, Joe, I really didn't understand. I didn't really think I said anything. I must have really misspoken or said something that, you know. Yeah. Well, also let me. I guess, like, first of all, I totally get what you're talking about on, you know, the cost of hydrogen coming down. I guess my the point of my question is that underneath that or embedded in that assumption is clearly some glide path on the ramp of plants, right, to sort of be able to produce your own hydrogen. I wanted to. That's what I wanted to, I guess, to better understand because clearly if that doesn't occur, then, you know, the margins will continue to suffer. I guess I wanted to- Yeah. You know, sort of a point estimate seems just a very defined, and I wanted to understand maybe like a little bit more of a range of outcomes as you see it. On the industry, I thought you had mentioned, Andy, that you know, when you're talking about in response to another question some of the industrial applications for hydrogen, there might be some upfront charges. I didn't know if you meant for your customers or for you on those charges. Joe, I have no idea what I said, Joe. Okay. If I said that, there are no upfront charges. You know, I think I don't know, I must have not been clear. There's no upfront charges. Okay. So- Okay. And on the- And then- On the plans, Joe, you know, Georgia, you know, if you go look at our investor letter, it's pretty clear where we are in Georgia. You know, we'll have that plant commissioned by the end of the year. The equipment's there. You know, we're already producing hydrogen there at low volume with our first electrolyzers that have been deployed. That'll be scaling up and putting out hydrogen for production at scale within three months. You know, if I look at what we're doing with Olin, that plant is an exact copy of what we're doing in Tennessee. The equipment's there. I think we scaled additional capacity at Tennessee- Three months. -in three months. That's right. I guess we don't see maybe the risk that I understand you may see. I guess we don't see that I guess the challenge levels we see, Joe, are less than you may think. Okay. Fair enough. If I could squeeze one more in here. It looked like there was a little bit of another inventory build. I'm wondering how much of that is because of some of the project delays you mentioned, or how much is maybe some buffer to be able to meet, you know, demand because of supply chains, and like, what, how should we think about the right level of inventory for what the business is today? I'm gonna let Paul take that one, Joe. Paul? One thing to keep in context when you look at how the timing of the volume is and the sales in context of our guidance. You know, the volume in Q4 could be on the upper end of double Q3 and maybe even more, you know, in the range of possibilities. We're working every day to deliver to all of those programs and, you know, there's a lot of build-up for that and, you know, that's really the drive. What I would also say is that, you know, when you look at the mix of things that we're doing, there's a lot of new platforms between on-road, ELX or electrolyzers, stationary, you know, new programs in Europe. I mean, there's just a broad, you know, all of the companies that we've acquired, all of them have different mix, you know, and supply chain and scaling opportunities that we're working through to quickly. You know, we have the fortunate problem of a big growing backlog and opportunities to scale to meet all those. We're focused mainly on delivering and growing that, and then, you know, you optimize. We've turned on the factory up in Rochester. We've literally just last weekend turned on production in the new Vista facility, and oh, and that scale up in that facility was another record time kind of scale up. Short answer to your question is, you know, I'm a big believer in no inventory. I think just in time is the best answer, but you know, you will see it come down, and you will see it optimize in the near term, as we work through scaling each of those individual businesses. Volume helps a lot, so third quarter should be a big, you know, we'll put a big dent in it. Thank you. I'm sorry, fourth quarter. Yeah. Yeah. Thanks for that color. Thank you. The next question is coming from Alex Kania of Wolfe Research. Please go ahead. Hi, Alex. Hi. Hi there. How are you? Okay. Good. Maybe just one simple kind of clarification question just on the shareholder letter. It's just thinking about interpreting the kind of average fuel molecule cost chart. Is that based on? I guess it assumes, you know, what your expected level of hydrogen sales or production is gonna be over the course of next year. Does that also assume, you know, something roughly close to natural gas forward curves? So we're kinda looking at kind of peak, let's say, margin, you know, margin tightness next quarter, and then it ends up falling, you know, even just based on, are we looking for gas prices on top of the swap to green? I'm gonna let Sanjay answer that, Alex. Yeah, Alex, short answer is yes. We have looked at the future, so the natural gas prices to blend, what we buy from the third party in that, right? You know, obviously that's why you see the peak here. You know, hopefully, this is the peak here in Q3 from the third party purchase perspective. You know, and it takes into consideration what we expect our production cost to be from all of this different green hydrogen plant. And again, we do have the incremental benefit of the production tax credit as well. That's why with the PTC, with our production, despite this third party existing contract in place, is what gives us the confidence why we believe that exiting next year, we'll be able to get to that operating break-even performance in our fuel business. Okay. Great. Thanks. This was talked about maybe a little bit in the prepared remarks, but just could you elaborate maybe a little bit more on discussions with some of these other industrial gas companies? Am I assuming that that would be beyond Olin? Then maybe just really with respect to Olin, if you could maybe talk about, you know, there's also discussion in the investor letter about exploring other sites and things like that. Just kind of what kind of, you know, given Olin's kind of, you know, inherent hydrogen kind of production for their chemical processes, you know, kind of how big, you know, could you see that partnership ultimately getting to? Alex, we're just getting the partnership started, right? Obviously, we've been working with Olin for a long time, right? Tennessee is the plant that is also a feed gas coming from Olin. It's been successful in Tennessee. We expect that success to continue also in Louisiana. As you rightfully pointed out, they certainly do have a lot of feed gas available in the market. There's a lot of discussion going on. Give us some time. We'd be happy to share with you a lot more incremental updates. You know, we're in a discussion and dialogue with the partner right now, but I do want to have some time here before we can get into more specifics on that. I think your thinking and logic is the right one here, because they certainly do have a lot of feed gas available, and we're in discussion with them in terms of how can we rapidly expand this partnership into something much bigger than just the Tennessee and Louisiana as well. That's on Olin's side, right? When we were referring to some of the industrial gas opportunity, look, I mean, over time, this hydrogen should enter into some sort of a swap agreement. If you're looking for a green hydrogen, if you don't have it, if Plug has it, we're happy to provide that green hydrogen to industrial gas companies as well. 'Cause it's a big market, we all have to work together, number one. Number two, there are some of the smaller industrial gas companies that actually don't have a lot of hydrogen capacity, you know, probably would like to have that as a part of their portfolio offering as well. That's where we have some of those discussions going on at a pretty advanced stage, as a matter of fact. That's really what we're referring to. Great. Thanks. Thanks, Alex. Once again, that is star one if you would like to register a question at this time. The next question is coming from Eric Stine of Craig-Hallum. Please go ahead. Hi, everyone. Hi, Eric. Hey. I have been jumping between calls. Apologies. Probably already been asked. Just curious, I mean, I know when you provided the updated guidance back, you know, I mean, it was a couple weeks before the symposium, you know, you certainly contemplated a third quarter, fourth quarter split that was going to be magnified. You know, I'm just curious how the split actually played out. Is that, I mean, was that in line with your expectations? As we think about, I think Paul just referred to potentially fourth quarter being 2x third quarter. You know, I'm just wondering, what are the things that kind of dictate that? I mean, are there large projects? Is it... You know, what are the things that could, you know, either be upside or potentially slip to 2023? Paul, I'm gonna let you take that one. Yeah. Well, the first thing is, we've been pretty transparent about scaling the electrolyzer plant in Rochester, and the volume is dramatically increasing every month. It's just by the nature of that scaling activity, you know, a lot of that volume happens in Q4. The second thing is, a lot of these new programs, you know, and new products that we've been, you know, winning and developing and launching. A lot of them stem from, I'm gonna call it, big lumpy contracts. You know, those were certainly within our expectation in terms of timing when they would close. You know, it's playing out as we thought, and we're closing those now, or have closed them. You know, we're working on delivering them. Those are in line. Then the third thing is just material handling. Every year it tends to flip. Sometimes Q3 is bigger in terms of timing, and sometimes Q4 is bigger in terms of timing. These big pedestal customers, it varies with them. We've launched and completed a number of new pedestal customer programs, which we knew would be kind of the Q4-ish timeframe for those to close. Things like the Grainger programs we've talked about, those are all underway as we speak. That's the first time we've done things for them at scale. It's pretty exciting. You know, things like the Lidl program that we won and other new pedestal customers. Those are in line. I'd say by and large, it's, you know, consistent with what we thought in the context of the updated guidance we gave. Okay. That's helpful. I will jump back into queue. Thanks. Thanks, Eric. Thank you. The next question is coming from George Gianarikas of Canaccord Genuity. Please go ahead. Hi. Good afternoon, everyone, and thank you so much for taking my question. Hi, George. Hey. So just first, when you talk about back leveraging plants to recycle capital to build your hydrogen network, are you assuming you'll be doing that all on your own, or are you looking for more partners, or do you need more partners to help finance that build? Thank you. Sanjay. Thank you. Hey, George Gianarikas. How are you? Look, I mean, I think two things, right, on that. Obviously, we always explore and see what is that right structure a partnership can look like, right? Whether it's a partnership with the likes of Infrastructure Fund or a partnership with the likes of just a straight, you know, strategic funds, that's always an option. You know, given where we are, there are two things that will happen, right? One is, as these plants come online, we'll be able to demonstrate what is the cash flow from these plants, first thing, right? There'll be a track record of that, let's say, for 12 months, number one. Number two, now with the production tax credit, you do have a view on a 10-year forward cash generation just with that PTC as well, depending on what the split of that is between us versus the customer. That part is, you know, really getting refined here at this point in time. Can we do the back leveraging on these plants on our own? Answer is yes, we can. Is that the path we go down? Frankly, we're having a lot of discussion at this point in time. It depends on what is the optimal solution for us. This is no different, though, right, than what really happened in the solar and the wind space when it first kinda got started, call it about 10 years ago, right? First you have the DOE loan guarantee program for a 3-MW solar project, which then led to the back leveraging of those projects. You basically had ITC in the solar space. That became 30% of the capital stack ITC. You had production tax credits in the wind industry, which then became 50%-60% of the capital stack in the wind industry. There should be no change or no difference in terms of how the capital stack will unfold in the green hydrogen industry as well. Once we actually start to really generate cash from these plants, and with the PTC now, you know, as a part of this Inflation Reduction Act, we absolutely believe that we will be able to back leverage. There'll probably be some sort of a tax equity at some point, fast-forward several years out, and we will be really able to not have to do this green hydrogen plant with 100% equity balance sheet financing. We should be able to do that out of the gate, probably it's 40% equity. You know, there is a scenario where you can envision that eventually goes down to 20%, and that's what we mean when we say we should be able to get 4-5x multiplier of available capital to really execute on the green hydrogen generation network that we're looking to build. Thank you. If I could just ask one follow-up. I'd love to get your thoughts on recent traditional energy activity in renewable natural gas, and I'm curious as to how you see that potentially extending more into hydrogen over time and how you see that potentially playing out. Thank you very much. Do you wanna give your view, Sanjay? You can start as well. Yeah, it's an interesting question. You know, I think ultimately, as renewable electricity comes to scale, I think the local carbon footprint of using, you know, green energy coupled with electrolyzers is the long-term solution. I think RNG is an interesting niche market which supports the transition, but is not going to be ultimately the winner. You know, I would put it analogous to blue hydrogen. You know, I was talking to one of the large funds in the Middle East, one of the sovereign funds, and I asked them, "Why are you talking to me when you could be generating blue hydrogen all day long?" Their answer to me, "Once green hydrogen is shown to be competitive with blue hydrogen, no one's going to use blue hydrogen." I think the same holds for RNG versus hydrogen. Absolutely, Andy. Right. Yeah. Again, just to add to what Andy said, George, I think it's really a question of scale. You know, we believe that the green hydrogen is scaled much, much bigger going forward, you know, leveraging off of the renewable assets. Yeah. I'm not against anything that helps accelerate the transition. Absolutely. I think RNG helps accelerate the transition. Thank you. Yeah. Thank you. The next question is coming from Sam Burwell of Jefferies. Please go ahead. Hey, good afternoon, Andy. Hey, Sam. Wanted to dig in on kind of the gross margin trajectory a little bit. I guess first off, for Q4, and Paul already touched on it a lot, like the equipment sales should be up a lot, maybe almost a double in Q4. That should probably drag the company-wide gross margin up. I'm curious, how high should it or can it go in Q4, assuming like roughly 20% equipment gross margins? Are there any other material uplifts we should expect, whether it's fuel or service or PPA? I will let Mr. Middleton take that one, Sam. Yeah. I think the short answer is you hit the nail on the head. You know, it's a significant delta in equipment sales in the quarter, right? That's really, I mean, the recurring revenues, think about it like a layer that you layer in chunks over time. But in short stints like this one, where there's a significant, you know, step function change in the volume, in the sales volume, largely driven by equipment. That'll certainly have a very significant positive impact. There are other things, you know, like the scaling I mentioned a minute ago on electrolyzer. If you think about volume out of that facility driving up substantially in the quarter from previous quarters, that means substantial leverage that we weren't getting those run rates earlier in the year. Those are very positive. We expect. We're seeing big improvements. We see continued improvements in our service offering, which affects our service revenues and our PPA. We have a number of programs we've launched this year, and you're just starting to see the benefits of those parts terms. In some cases, some of the sites where we've launched the upgrades, we're seeing 70%-80% reduction in parts cost. Those benefits are just starting to really manifest and play through our numbers. We think the service costs on a unit basis will be down, you know, in the fourth quarter, about 10%-15% compared to where we were in Q1, as an example. Then there's a bigger step function that almost, you know, as you saw by the charts, is forecasted to be cut almost in half in the course of next year as those programs continue to pay benefits and new units roll out with that better mix offering. There's a whole host of things that are playing in our favor that we'll start to see some of those benefits and certainly in Q4, and then you see it really starting to magnify on into next year. You know, there are headwinds, I mean, like fuel and as Andy alluded to, natural gas prices and other things, but you know, those positive events really help put a you know, more of a positive tailwind to that margin trend. Okay. That's certainly helpful. Maybe shifting to look at 2023, recall from the update that you guys gave on the guidance back in October, you said that some projects were pushed out to next year. Is it right to think that there might be less of a quarter-on-quarter decline in revenues in Q1 versus Q4 than like typically you see because of seasonality? I'm just trying to get a sense of what we should expect for the trajectory of sales on the equipment side through 2023. How should we think about the margin trajectory for that segment in 2023? Is there any fixed cost absorption that should really improve through the year? Or should it be fairly consistent around that 20% mark in all four quarters? Paul, that sounds like a question for you. I would say, in general, I would expect still a 1/3, 2/3 kind of phenomenon in our sales next year, in terms of the first half, second half. We have a number of. The material handling dynamic still is the same, where there's still a heavy push for new facilities and even renewals to happen starting kind of the June-ish timeframe and leading into the busy period. That dynamic hasn't changed. Yes, some programs may slide and that certainly helps Q1. Overall volumes are up, so that helps. You'll certainly see year-over-year growth from Q1 of next year to Q1 of 2022. I guess the best math I would use is just, you know, using a similar split, if you will, of this year as a proxy for kind of how the quarters may play on a percentage basis into next year. You know, I think, having said that, you know, Q4 is gonna be a big quarter for us. I mean, it's just the timing of the way the programs have flown and how this particular year has flown with material handling timing and, you know, that certainly makes Q4 big. It's nothing surprising to us. As we move into next year and work towards hopefully over-delivering, you know, that will compound second half activities, with all the things that we're chasing to try and, as I said, over-deliver on the volume. For all those reasons, I, you know, I expect it to. It will certainly be lower, most likely, than Q4, but, you know, substantially higher than last year's Q1 and compounding thereafter. Yeah. Sam, I'm trying to ship everything I can this year. Just quickly though, what about the margin trajectory in equipment? Should that be fairly consistent or are there a lot of fixed costs that get absorbed just as you ramp up electrolyzers and improve through the year? Yeah. I think we gave 10% as a whole, a holistic number for next year. Because it goes consistent with volume, you'll see, you know, much stronger margin profiles in the second half, both from the fuel activities and from the equipment sales. You know, again, I expect Q1 to be a better margin profile than Q1 of this year. I expect it to be, you know, every quarter to be better next year, given the build of equipment activities and moving on. You know, I think, you know, directionally, that's probably how. Well, that's certainly how it will play. Okay, great. Thanks, guys. Thanks, Sam. Thank you. The next question is coming from Gregory Lewis of BTIG. Please go ahead. Hey, thank you, and good evening, everybody, and thanks for taking my call. Just one question from me. Sanjay, you know, I guess congrats on bringing on FreezPak. Met those guys at the symposium, super nice guys, and they're super pumped about the, you know, using Plug solutions. You know, one of the questions I had, and I know you've talked to in the past, is about the ability to kind of go in the mid end of the market. You know, I guess I'm wondering, any update there on the penetration on the mid or mid and small ends of the market? And really as you look ahead to 2023, you know, how are you thinking about that opportunity? Thanks. Greg, this is Andy. You know, I spent a lot of time with Jose Crespo, who runs that business. I think probably the interesting mix in the fourth quarter is, customers which are smaller probably represent 35% of the shipments this quarter. I think that's a dramatic change. Some of that will continue to improve. I think the, you know, I've made reference to, you know, can you share a bit of the production tax credit to make the value proposition more attractive, and let us sell more equipment. I think you'll see more and more of that. The answer is we're doing much better in smaller applications. I can tell you know, we're also looking at, and there's work going on for much smaller hydrogen infrastructure. I can tell you that we do have solutions that we've developed for Europe and that we're looking to bring them to the United States. It's one of the reasons Jose's been able to be successful to start bringing along more pedestal customers in Europe. Then I guess I'll just follow up on that, Andy. Thanks. Is there any way to think about the margins on the smaller end versus the larger? I mean, I would imagine they have to be at least a little better. Is that kind of a fair way to think about that? They're listening, Greg. Well, hey, they need to buy more then. Yeah. I would just say, you know, and I'll let Paul comment if he has any changes. Yes, obviously, if you buy more, the price is lower than if you buy less across the board for all three elements, hydrogen, fuel, and service. I would think we kinda look like any of the companies you follow that have had that experience. Super helpful. Thank you. Okay. Thank you. The next question is coming from Ameet Thakkar of BMO Capital. Please go ahead. Hi, Ameet. Ameet Thakkar, please make sure your line is not muted. Well, we couldn't mute that. We'll move on to the next. Yes. Okay. All right. The next question is coming from Craig Shere of Tuohy Brothers. Please go ahead. Good afternoon. Hi, Craig. Hi. First, I just wanna make sure I understand the rough next year revenue trajectory we're talking about. It sounds like maybe in the ballpark of $450-$500 in the first half, with every quarter improving sequentially from first to second to third, and then as usual, third and fourth quarter being kind of a toss-up as to what's the top for the year. Paul, do you wanna take that? Yeah. I think that's right. You know, I think you know, because we're chasing programs to, as I said, you know, our goal is to over-deliver. I mean, we're focused on you know, beating our numbers every year, and certainly this year will be the strong push to push that. We expect a lot of programs to come in in the second half, as they always do, and you know, between the material handling dynamic and landing those big programs and working through the timing of when there's volume will probably make Q3 or Q4 a little bit of a toss-up, but most likely Q4 will be a little bit heavier. Gotcha. Okay. One for Sanjay. I think, Sanjay, that the coming out of the symposium, there's a little confusion. I mean, there's been a little horse trading to optimize some of your hydrogen plants and get the most scalability, the best returns. It sounds like you're still targeting, you know, like a nameplate commissioning capacity at year-end about the same. But it's possible that the production that was previously anticipated, actual H2 production through 2023, might be, you know, a little less than was thought a couple quarters ago. That may restrain the ability to raise guidance, but the margins beyond 2023 should, you know, then proportionally benefit with the combination of the scaled fuel and the IRA PTC. Yeah. Let me maybe take a step back, right? Craig, as you know, I think you know this pretty well, right? When we talk about commissioning the plant to full production, there's about a three-four-month lag, right? It depends a bit on whether it's essentially our electrolyzer plus liquefier, or it's just the feed gas and the liquefaction technology, right? You know, if it's just the feed available, sort of like this Olin JV in Louisiana and what we do in Tennessee, the commissioning of that actually could even be faster than that. I don't know if I would say that we're necessarily tweaking or adjusting the view. We've always said that we wanted to be at 200 tons of commissioning by the end of 2023. Look, you know that we're looking at 70 tons of commissioning this year, but we've gone through a lot of detail on why we are gonna be at that 45-50 tons of commissioning by the end of 2022. By the end of 2023, our goal always was to get to that 200 tons of commissioning, and that was a mix of project in New York, project in Texas, right, expansion in Georgia, expansion in Tennessee, and ongoing work that we're doing in Louisiana. From a cadence standpoint, right, the way you should think about is, as you go into Q2 of next year, you should start to see the contribution of that low-cost hydrogen from Georgia. Again, in Q2, you should also start to see the contribution of that low-cost hydrogen coming from Louisiana, some gaseous hydrogen coming out of Tennessee. As you go into the Q4 of 2023, you should start to see some contribution coming from New York and Texas, some incremental contribution, again, coming from Georgia, 'cause we've told you that we're really looking to get that plant to be 30 tons by the end of the year. There is an existing infrastructure that'll be actually faster-moving. By the way, Craig, we also have some of the projects in the hopper that we're working, 'cause it's a development business, and we wanna make sure that we're thinking about optimizing and balancing. If one project is, you know, a month or two behind, then we have something else that we can actually backfill that with, if you would. That's how I would think about it in terms of the cadence of that and how things will play out in 2023. Gotcha. Thank you. Mm-hmm. Thank you. The next question is coming from Greg Wasikowski of Webber Research. Please go ahead. Hey, good afternoon, Andy. How you doing? Okay, Greg. How about yourself? Yeah, doing well. Thanks. A couple quick ones on the pedestal customers, and apologies, I've also been hopping back and forth, so- Oh, yeah. I understand, Greg. Sorry if it's already asked you. I noticed- We're not that fascinating that you spent the whole hour with us. I wish you were the only ones I covered. On the Pedestal customers, just noticed since the symposium, Lidl is now officially named Pedestal. Just curious, any color on, you know, what has developed since the symposium to now, if it's just as simple as, you know, executing an agreement or, you know, if there's anything interesting for us to know there. Also if you could comment on just the relative size of where that stands versus the rest of the stationary power customer or sorry, the Pedestal customers, without giving numbers, but kind of where relatively speaking it may rank among the others, that'd be great. Thanks. Sure. Greg, yes, we signed contracts after symposium, so that was pretty exciting. It happened about two days after the symposium. You know, Lidl has about 150 distribution centers in York, so you can kind of start thinking about them as the size of Home Depot. Okay, great. Very helpful. One more just on pedestal customers, one that we haven't heard about as much over the last year and a half since the original announcement was GM. Just wondering if there's any broad-based updates there? Yeah. Any appetite for expansion or different types of applications, whether it be stationary power or etc? Any update would be great. We are doing deployments with GM this quarter. We've been continuing to work with GM. You know, certainly not as many opportunities there as Home Depot and Walmart and Amazon and Lidl. You know, I'm pretty pleased with the progress. Okay, great. Thanks, Andy. Okay. Thank you. The next question is coming from Ameet Thakkar of BMO Capital Markets. Please go ahead. Oh, let's try this again. Sorry about that, guys. Okay. I'll make it quick because I know it's been a long. Yeah. Evening. Just it's more of a housekeeping question, but, you know, I noticed in the investor letter you guys reaffirmed your kind of 2026 and 2030 revenue and margin targets, and it did the same for 2023 revenues. Should we still be thinking about the 10% gross margins for 2023? I didn't see it in there explicitly. Yeah, Paul, I'll let you answer, but I think we're standing on the chart that you presented on margins and performance for 2023, 2030, 20- 2026. 2026. You know, there's no changes to that. Great. Yeah. Yeah, go ahead, Paul. No, I was just saying, yes, I agree. It's a 10% still our target next year. Yes. Just real quick, and then thinking about like a lot of the electrolyzer contracts you're still equipment you're selling in Europe, is there gonna be like a service revenue part of that as well that's gonna kinda grow as you deploy more capacity out there? Yeah, that's actually a good question, Ameet. You know, so the answer is yes, but what we really haven't talked a lot about is the opportunity for service with electrolyzers, which when I review with the team, may be much more attractive than material handling. You know, a lot of the work we're doing in Europe, as you know, will be associated with electrolyzers and the service business, when we look at it, we think could be very, very attractive. Thank you, guys. All right. Well, thanks everyone. I appreciate everyone who's on the call today. Looking forward in January to provide you the annual update, which will happen probably at the end of January. We'll schedule. Thank you again. Bye now. Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.