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Plug Power Inc (NASDAQ:PLUG)
Q1 2019 Earnings Call
May. 8, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, greetings and welcome to the Plug Powers First Quarter Earnings Call. (Operator Instructions) As a reminder, this program is being recorded.

It is now my pleasure to introduce your host, Teal Vivacqua Hoyos. Thank you. You may begin.

Teal Vivacqua Hoyos -- Director, Marketing Communications

Thank you. Good morning, and welcome to the Plug Power 2019 First Quarter Earnings Call. This call will include forward-looking statements. 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 because they involve risks and uncertainties and actual results may 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, 2018, as well as other reports we filed 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.

At this point, I would like to turn the call over to Plug Power's CEO, Andy Marsh.

Andy Marsh -- President and Chief Executive Officer

Thank you for joining the first quarter conference call today. Today we issued our first quarter shareholder letter which provides details about our first quarter performance as well as our outlook for the remainder of the year. Let me start by saying that we are disappointed with our gross billing numbers during the first quarter, that we shipped 65% more Gen DRI units this quarter versus the first quarter of 2018, gross billings were down. It is important to note that the first quarter gross billings declined because of the timing of closing a project financing deal. The deal closed six days post the close to the quarter and represented a significant portion of our revenue gap. The positive in our financials is the improvement of EBITDA versus prior quarter. Even at a lower gross billing level, EBITDA improved by over $3 million based primarily on lower service costs.

Looking forward, we are expecting gross billings at between $55 to $60 million in the second quarter, reflecting over 100% sequential growth. The first half is in line with our ProGen guidance or approximately one third of our revenue in the first half.

Today we are reiterating our guidance for the year, $235 to $240 million in gross. Bookings positive EBITDA for the full year 2019 and four major announcements during the year. Some of our announcements are tied directly to our ProGen market. In the first quarter we launched our new 30 kilowatt ProGen hydrogen engine, mobility applications, the ProGen product line offers a pre engineered modular and scalable architecture that makes it simple for use by customers. The offering reiterates Plug Power goal of playing a meaningful role in ongoing vehicle electrification on a global basis. Our modular approach in hydrogen engine provides distinct advantage over battery electric vehicles especially in applications which require by asset utilization as well as long range. The offer is starting to generate considerable customer interest globally. One of the four major announcements will be associated with our ProGen line and will be announced in May post customers announcements, contracts have already been executed for this program and we look forward to sharing more information near future. Now I'd like to open the line for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen at this time, we will now be conducting our Q&A Session [Operator Instruction] One moment while we pull for questions. Our first question comes from the line of Eric Stine with Craig-Hallum. You are now live.

Eric Stine -- Craig-Hallum Capital Group, LLC -- Analyst

Hi Andy.

Andy Marsh -- President and Chief Executive Officer

Good morning Eric.

Eric Stine -- Craig-Hallum Capital Group, LLC -- Analyst

Good morning. I'd love to ask more about the the EV announcement that's coming in May but I suspected that's one I'll just have to wait on, but maybe just on the other three announcements that you had targeted, I believe in the past you've talked about a distributor industrial gas company and then the third potentially being stationary, just maybe, I know it's been a couple months but how is your view of those opportunities you know changed or taken shape and your thoughts about all those in 2019?

Andy Marsh -- President and Chief Executive Officer

Sure. You know I'm even going to, you know, I think the word distributor is underestimating the partnership. I would expect that announcement will be in June. And you know, where we are in the programs and the activities I've met with them numerous times and this is someone with a huge global footprint that would give us a reach that we never had in the past. So again, there we are looking to close to where you know the first major deal within and we're going to use that as the opportunity to make the announcement. So that's proceeding, with the stationary power front I actually think that will happen beginning of the third quarter, again, I've had personal meetings with them and going through with their CEO, their program, the company is much larger than Plug Power, who has been active in the fuel cell space. So looking to position products more in the third world and really excited about it, I have been quite impressed with the activity. And there is a lot of activities going on at hydrogen and I think that third, fourth quarter we will be making that announcement.

I have a funnel of announcements, so I know I have four in my pocket and I hope that I'll be announcing more. Its a good time to be in the hydrogen industry.

Eric Stine -- Craig-Hallum Capital Group, LLC -- Analyst

Yes.

Andy Marsh -- President and Chief Executive Officer

You know -- I had Sanjay Shrestha to join us recently and he told me that he was down the recent AMR in the world, where 1,000 engaging in hydrogen discussions and Sanjay pointed to me, it felt like solar in 2007 on the verge of reaching out and taught me about going to hydrogen conferences before and how many of you know -- it felt like a family affair. It doesn't feel that way to him today. I think that's -- that says a lot about the growth and the opportunities in the industry.

Eric Stine -- Craig-Hallum Capital Group, LLC -- Analyst

Got it. One clearly next question here. I mean not one of the four major announcements but just one that's -- I wonder how it helps you, the partnership, I guess what announced within the last month with CHEM for the stationary piece and I know it's a little different but it is targeting some of the same markets, third world. So just wondering, you know, how that helps you, how you see the opportunity with that partnership?

Andy Marsh -- President and Chief Executive Officer

So we are, not only have -- CHEM is really focused on South Africa and in Sub-Saharan Africa. And we have met with folks in the Energy Ministry in South Africa over the last week and a half in DC, not only were they well on, up to date on the activity going on in CHEM but kind of outlined their support, their relationship with CHEM and they see a large opportunity developing and brewing in South Africa. We think there will be -- there could be substantial revenue in the back half of the year associated with CHEM in that activity.

Eric Stine -- Craig-Hallum Capital Group, LLC -- Analyst

Got it. And maybe last one for me just kind of bookkeeping or financial. It looks like, R&D this quarter lowest level that we've seen in quite a while. Just curious is that kind of a new run rate as some of your programs in the development has you know you've gotten -- those are more mature or is this something that's more of a blip than we should see it? turning to previous levels?

Andy Marsh -- President and Chief Executive Officer

Paul, I'll let you answer. But I think primarily it's associated with probably less material used by the R and D association in product development. So you know, I don't expect the run rate for R and D to decrease. Paul do you have any comment?

Paul Middleton -- Chief Financial Officer

I think that's right. Yes, I think you know, we haven't seen it grow tremendously in the last year or so there's avid inflows, but I think this is just a bit of a timing thing in the quarter so I think it'll, you know, in the next quarter we'll be back to our normal run rate.

Eric Stine -- Craig-Hallum Capital Group, LLC -- Analyst

Okay. Got it. Thank you.

Operator

Thank you. Our next question comes from the line of Colin Rusch from Oppenheimer and Company. You are now live.

Colin Rusch -- Oppenheimer and Company -- Analyst

Thanks so much guys. You know, as you move out of the warehouse business into adjacent markets with material handling, can you talk a little bit about the sales funnel and the pipeline and the cadence of moving that into billings and bookings?

Andy Marsh -- President and Chief Executive Officer

Yes. So Colin, hi, we have a board meeting today and tomorrow and we're really just began the big push on this activity and quite honestly I am stunned by the level of activity that we're beginning to see. I think there's probably 10 or 12 programs we're actually talking about on our board meeting today, later in the day, you know, the first announcement I think will be somewhere in the $30 to $35 million range. I look at the opportunity but it actually could be, you know, as it grows it could be significantly larger than that. You know, the funnel is growing. I think part of the challenges, you know, and I see the activity more in Europe, quite nicely in Asia than the US. I think in the US one of the the FedEx program has been, you know, last week in DC, it was probably the star program about the progress that Plug has made. I think one of our challenge is that finding the right system integrator and FedEx has actually made some introductions to us to find someone that, you know, not only can build the products and you know, our up time on that probably close to 99% and we went through the harsh winters but I think the real challenge is finding someone who FedEx has worked with, who they can count on to provide the aftermarket service. One of our challenge is quite honestly Plug had to provide all the aftermarket service even for the itself because the border has been weak in that area.

Colin Rusch -- Oppenheimer and Company -- Analyst

Okay, that's super helpful. And then just, looking at the balance sheet with the new financing can you just help me understand how the restricted cash is going to trend and when that gets freed up going forward is a pretty sizable amount, we'd love to just understand how we start to see that become available for you guys for operational end uses.

Paul Middleton -- Chief Financial Officer

Yes, so the bulk of it will get released if not majority of it in the next four years, think about it like about a $20 million to $22 million runway rate release. It's parallels the underlying project agreements that are associated with that and the particular structure we have with the key PPA customer and the bank it puts it on about a four year amortization period so that's, we got some legacy programs and we got some new ones but the combination puts them on a blended kind of four year amortization program. That money will go to effectively service the principal and interest on our debt facility. Our project lenders generate basically looked at that as very interesting project investment opportunity and they basically look at it as having backed levered existing programs in place and financing that. So it's about $20 million to $22 million this year is the way to think about it.

Colin Rusch -- Oppenheimer and Company -- Analyst

Okay. I'll take some questions around colorization (ph) and a few other things off line. Thanks so much guys.

Paul Middleton -- Chief Financial Officer

Thanks Colin.

Operator

Thank you. (Operator Instructions) Our next question comes in the line of Amit Dayal with H.C. Wainwright. You are now live.

Amit Dayal -- H.C. Wainwright -- Analyst

Thank you. Good morning Andy, good morning Paul.

Andy Marsh -- President and Chief Executive Officer

Good morning Amit.

Amit Dayal -- H.C. Wainwright -- Analyst

So you're maintaining guidance for the year, however, as I was reading between the lines you seem very optimistic about the pipeline building et cetera. So this guidance is not dependent on any of the announcements potentially coming in the next few quarters and once these announcements hit do you expect to potentially raise guidance?

Andy Marsh -- President and Chief Executive Officer

So Amit to answer your questions our guidance is not based on these announcements, they may be a little bit of the revenue associated with that, but look, I think if you go back historically we've been really good about meeting our revenue guidance, there's no reason for us to, this is represents 30% growth. If the opportunity comes and we think it makes sense we'll do that, but I think it'd be premature at this time. And so I've been very cautious about revenue guidance and I'm not going to become overaggressive. And last year we bumped to the low in the fourth quarter, because we saw what we're going to do in the quarter and we had three quarters in our back pocket. As the time comes it makes sense to bump it up we will. But I want to have -- there's ebbs and flows in the world, and I think you know it doesn't hurt to have something in our back pocket for a rainy day.

Amit Dayal -- H.C. Wainwright -- Analyst

Understood and that's fair. Just looking at sort of you know the under recognized portion of the GenDrive shift this quarter. Will inventory et cetera normalize going into say the second and third quarters, or do you still expect to maintain certain high levels of inventory for the next few quarters?

Andy Marsh -- President and Chief Executive Officer

Yes. I think the combination of the programs that rolled over, there was inventory finished goods associated with that, plus the build going on for second quarter and the balance of year is what really drove the investment in inventory in the first quarter. But yes, I expect it to tailor -- tailor off as we deliver those programs, and then that number will come down. And our goal long-term is to run it as nimbly as we can.

So we'll continue to focus on driving that inventory down, and I expect by year end it'll be back in the normal range.

Amit Dayal -- H.C. Wainwright -- Analyst

Understood. Just one last one for me. On the fueling sites, we are at around 72, I think currently, how many should we see maybe added-on on top of this by the end of the year?

Andy Marsh -- President and Chief Executive Officer

I think in the 20 to 25 range.

Amit Dayal -- H.C. Wainwright -- Analyst

Okay. All right. So we should be touching almost a 100 by the end of the year?

Andy Marsh -- President and Chief Executive Officer

I think that's good. I haven't been thinking about on that level you are absolutely right in it. I've been just focusing on $235 to $245, and EBITDA breakeven. But I think you're right on the money.

Amit Dayal -- H.C. Wainwright -- Analyst

Thank you. That's all I have.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Jeff Osborn with Cowen and Company. You are now live.

Jeff Osborn -- Cowen and Company -- Analyst

Great. Thank you. Good morning. Couple of questions on my end, Andy, maybe just following up with Amits question on the hydrogen sites, I thought it was flat. Were all your shipments to existing sites this quarter, no new distribution centers built out?

Andy Marsh -- President and Chief Executive Officer

We have a couple that we're in the process, and I think they were -- I think there's about three that kind of roll into the second quarter. So they weren't any new build, Jeff, but there were -- if you know what I mean, there's whip.

Jeff Osborn -- Cowen and Company -- Analyst

Got it. And then is there a way to quantify the six day lag with the financing, what if that had been in place by March 31st. What that unit number would have been or revenue exposed to that, A, and then the B part of the question is, what happened with the prior facility, are these better terms for your customer or was the prior facility expired and follow the dynamics there?

Paul Middleton -- Chief Financial Officer

Yes I think, well, first of all, on your question there was couple of programs and then collectively it was about $10 million. This was the biggest of it and it was the majority of it $7 plus million range. Some of the other ones closed on the hills of that as well. But, in terms of really the driver, these overall have many factors that drive this, timing, construction, delivery, customer needs and what they got going on in their facilities, and then you got the banks and other players in the market. So it's just sometimes these are long lead cycles, three, four months and sometimes it's just hard to parole everything to happen at one time. So I don't know that there's necessarily one particular driver, but we continue to push and push to try and make those processes more nimble and more efficient. So we can drive them with the shorter lead times.

Andy Marsh -- President and Chief Executive Officer

And so to be straight forward, Paul, I think we started to work this in early March. Yeah. And I think the bank administratively just because maybe some of the other issues they had, had nothing to do with Plug. It just slowed down the internal processes. So we actually gave it -- we actually gave it normal lead time, Jeff. And we would have thought we would have been closed by the third week in March, it just didn't happen.

Jeff Osborn -- Cowen and Company -- Analyst

Okay. But for the rest of the year for it to hit the delivery guidance or the revenue guidance, is there any major new structures or financing partners that are needed for that delivery cadence?

Paul Middleton -- Chief Financial Officer

No, we're working with the exact same partners that we have and I think.

Jeff Osborn -- Cowen and Company -- Analyst

Okay. I got it.

Andy Marsh -- President and Chief Executive Officer

We got, I think this quarter had a little bit of a bump, but we were -- we have a clear view of how it plays out for the remainder of the year.

Jeff Osborn -- Cowen and Company -- Analyst

That's good to hear. Few other ones on my end if you don't mind . On the fuel side, gross margin certainly have deteriorated. Can you just talk about what's transpiring on the fuel segment? Is that also just the whip that you were referring to in the quarter that you had purchased a bunch of fuel and hadn't been paid for it, because the sites weren't built out and more of a timing issue? Or is there something structurally that's going on the fuel delivery side?

Paul Middleton -- Chief Financial Officer

No, I think there's ebbs and flows. I think directionally our efficiencies continue to grow. And I think you're just going to see some ebbs and flows as time goes on. We are investing in an incremental equipment to drive some of that efficiency, so you see some non-cash depreciation starting to kick in, which might have affected some of the timing of it, but, and then you have timing of ebbs and flows with the customers in terms of usage and leverage on those existing assets. But even though it's down, I expect it will continue to trend overall in the right direction and I think as the year goes on, you'll see that continue to improve.

Jeff Osborn -- Cowen and Company -- Analyst

Got it. And then two other quick ones here, in the shareholder letter, there is reference to the cash flow guidance coming down due to receivables that you call out, is that due to what Colin was asking in the $20 million to $22 million amortizing over four years and just the collection of that? I'm trying to understand what the moving pieces are on receivables that would impact cash flows. Is that from the financing structure or some new terms with your customers? That was unclear.

Paul Middleton -- Chief Financial Officer

Yes, I don't think we've actually -- to be honest, Jeff, we haven't given operating cash flow guidance before, but this was an attempt to try and provide some color around that, particularly given some advice and help with the SEC in terms of how to talk about our results. And so, I think we're given some flavor around that. What I do think is that as we've seen that the timing of deployment from the collection of cash can play havoc on our quarter end numbers, and our goal and effort is, as it always has been, drive to close those things as timely as we can.

And so that's why we're just saying that the timing of that in effect that the restricted cash doesn't really play into it, because that doesn't necessarily show up in our operating cash flow. So, with the new presentation that started about a year ago, it shows up in cash overall. And whether it gets released or doesn't get released, it shows up in my cash position. So, that's not necessarily the issue, but it's really just a factor of timing between collections. And so I think that's why we're given the range that we are is if you put it in the context with our EBITDAS numbers, just to give you some reference there.

Jeff Osborn -- Cowen and Company -- Analyst

Got it. And then the last one, if I could, Andy for you. Just on the mobility side, certainly you highlighted FedEx and the delivery van market, can you just talk about the level of enthusiasm you're seeing? Is it all in that sub 150 mile range return to base to Class 4 to Class 6 market? Or are you seeing any development efforts on your end for Class 8? I was just curious on the long-haul side.

Andy Marsh -- President and Chief Executive Officer

Sure, Jeff. So yes, I am focused today on Class 4 to Class 6, but as our plans have rolling out offerings that would address Class A trucks, we do think there is -- where the fuel cells makes sense, it make sense in heavy asset utilization applications where payloads are important. I know in these delivery vans we have some data that shows the payload can be 50% to 60% more versus battery electric vehicles. We are seeing a good deal of interest there. More globally and I would say domestically at the moment, our offering will continue to expand. Our metal plate stack using our own membranes is what we have been putting into these delivery van products. And we don't see any issues how to scale it up.

There's actually own -- it is actually not the stack, its items like compressors and other items that we spend the most time on for its product development to really have a simple package for people to use. So we do see interest there. And look like other folks, we are looking at a variety of different applications, trying to leverage scalable modules to make it as simpler for customers. And one highlight I actually started, and I'm going to say we actually started with the most difficult market first.

I am amazed by how simple these Class 4 to Class 6 delivery vans are versus going into material handling equipment where its minus 40 degree F, or actually minus 30 degree F. Where it is no shock and vibe on the use where you're driving outside from cold to warm and you're putting on as many hours as a car will see in a year. This is actually idea and the learning we've had all over the years has made this a much simpler experience than I ever had in material handling. But all that work, all that value, I can see translating easily into these other markets versus my previous experience.

Jeff Osborn -- Cowen and Company -- Analyst

Makes sense. I appreciate the thoughts. Thank you.

Andy Marsh -- President and Chief Executive Officer

Great.

Operator

Thank you. Ladies and gentlemen, we have no further questions in queue at this time, I'd like to turn the floor back over to Andy Marsh for closing.

Andy Marsh -- President and Chief Executive Officer

Sure. Just a reminder, our shareholder meeting will be held tomorrow at 10 o'clock at Goodwin Proctor's office at the 620 Eighth Avenue in New York, so New York Time building. And during the shareholder meeting, I look forward to giving a presentation in detail, which provides our four -- full year guidance, as well as our expected growth in material handling and also the exciting work we have ongoing in the electrification transportation. For those who can not attend in person, it is webcast and it going to be -- it's available at www.plugpower.com and I hope you find the opportunity to stream the proceedings.

So thank you everyone.

Operator

Thank you ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your line at this time and log off your computer. Thank you for your participation and have a wonderful day.

Duration: 29 minutes

Call participants:

Teal Vivacqua Hoyos -- Director, Marketing Communications

Andy Marsh -- President and Chief Executive Officer

Paul Middleton -- Chief Financial Officer

Eric Stine -- Craig-Hallum Capital Group, LLC -- Analyst

Colin Rusch -- Oppenheimer and Company -- Analyst

Amit Dayal -- H.C. Wainwright -- Analyst

Jeff Osborn -- Cowen and Company -- Analyst

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