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Plug Power, Inc. (NASDAQ:PLUG)

End-of-Year Business Update Conference

December 04, 2013 10:30 am ET

Executives

Teal Vivacqua - Director, Marketing and Communications

Andrew J. Marsh - Chief Executive Officer, President and Director

Erik J. Hansen - Vice President, Sales & Hydrogen

Rick Mason - Vice President, Operations

Teal Vivacqua

[Audio Gap] today for our business update. I am Teal Vivacqua, the company's Director of Marketing and Communications. In a moment, I will introduce Andy Marsh, the company's CEO, who will provide everyone with the update on the company's business development. After today's presentation, this call and slides presented will be archived on our website at plugpower.com, in the Investor Relations section, under Presentations..

This call and the presentation will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to expectations regarding revenues and product orders for 2015 and 2014. These statements are based on current expectations that are subject to certain assumptions, risks and uncertainties, many of which are difficult to predict and are beyond our control and that may cause our actual results to differ materially from the expectations and our forward-looking statements.

We encourage our listeners to refer to our SEC filings for a complete recital of our Safe Harbor statement as well as other risks and uncertainties discussed under item 1A, Risk Factors, and our annual report on Forms 10-K for the fiscal year ending December 31, 2012 with the SEC and on April 1, 2013. Plug Power does not intend to and undertakes no duty to update any forward-looking statements as a result of new information or future events.

At this point, I would like to ask that everyone please silence your cellphones. And I would now like to introduce Andy Marsh, Plug Power's President and CEO.

Andrew J. Marsh

Good morning. I'm Andy Marsh, President, CEO of Plug Power. I'm pleased to be here today, and I like to thank those who are in the audience here at the Plug Power Analyst Day, as well as over 300 people who are on the telephone listening to the presentation.

So we've come a long way this year. We start the year off in very difficult position. And during the first 4.5 months, the company booked only $1 million in business.

Significant event happened on May 15, where Air Liquide made an investment in Plug Power, which really provided the business validation to both shareholders, customers and the market. And our orders start to grow, and it grew by over $11 million from that date to October 7. From there, the company has booked over $17.8 million, and counting this quarter as we continue to grow the business.

By the end of the fourth quarter, the company will book, in the fourth quarter, between $30 million to $40 million. We will announce, before year's end, a major turnkey deal for multiple sites with 1 or 2 of our largest customers. And today, I'm going to tell you a little bit about what one of these typical deals will look like.

Plug Power's turnkey deal will include providing products, service, hydrogen infrastructure and hydrogen. When one take a look back to these deals, we expect a deal to be signed soon for 3 to 6 sites, which would include 750 to 1,500 units. These units will be deployed over a 2-year period, include a 5-year service agreement, and probably exciting to us, provide recurring revenue stream, not only for service, but for hydrogen infrastructure and hydrogen. A typical turnkey deal that Plug Power will provide will generate between $8 million to $12 million in revenues.

I'd like to tell you a little bit more detail about each of the elements of these deals. One is the product itself. I think, one of the unique features of Plug Power and one of the items I want to emphasize today as we deploy these turnkey deals is that no invention is required. Plug Power has a full suite of products that have been qualified with all the large North America OEMs. People like Crown, Raymond Hyster, Yale, Toyota, all our products have been used across the board and qualified in full suite.

Our engineering team, during the coming year, will not have to do any additional work for designing these products to meet our deliveries in 2014. That is significant. They can now be focused on developing new products, new technology and new components, which will give us a differential advantage for the future. I think, before I leave the products slide here, I want to emphasize how tough it'll be and difficult it will be for others to duplicate our accomplishment.

The company has 3 main platforms. Underlying those 3 platforms are over 30 to 40 different products to meet customers' need. I know of no one else who's near -- has nearly the capability, the depth of system experience that Plug has that would be able to provide these products or our customers.

Also, part of this turnkey deal is that we will be providing service. And many of you may not know that the Plug has been in the service business for a while. We provide 5-year parts and labor to people like BMW, Sysco at their Long Island facility, San Antonio, Houston and Boston. This business, really, will become approximately 20% to 25% of our total revenue on an annual basis.

As Plug focus on developing these recurring revenue stream by putting products in the field, servicing them each year, it'll provide greater predictability to investors, as this business grows.

I'd now like to talk about our hydrogen opportunity, and to me, this is rather critical. Hydrogen represents a large opportunity for us. As many of these sites, hydrogen is about 40% of the potential revenue and products.

In Plug Power, what people may not know, and at Walmart, Washington Court House facility, Plug Power provides the majority of the fueling infrastructure to support the efforts. We've been doing our own fueling stations for over 5 years. It's an area we've developed a great deal of capability in and had used as a consultant, a partner, who has done more than 50% of the hydrogen fueling stations for people like Air Products and Linde in North America. We actually have systems that work as good or as a better than the industrial gas companies.

Also, I come from the telecom background and selling bandwidth was part of the business. And today, when I start thinking about hydrogen, we use just with our 4,500 units in the field, 2% to 3% of the liquid hydrogen that's used in North America on a daily basis. The company is using over 9,000 kilograms a day in our products. If you start multiplying that by 365, it's a lot of hydrogen.

When I think about this business long term, it's almost folks would become aggregators of bandwidth. We can buy a lot of hydrogen and then sell it off at small chunks and be able to make a profit. And when I look at the hydrogen opportunity, it is one that our customers have driven us too, because many of our customers, and some we talk about the today, are looking for Plug Power to provide turnkey solutions.

So when you look at our business, we are focusing on 3 main segments. And when -- what we sell, and I think many of you know is, Plug Power sells productivity savings, first and foremost. And larger the fleet and more inventory that is moved by the customer, the stronger our value proposition.

And so when you look at our customers, we have large food retailers like Kroger and Winco who have deployed our products. Retailers like Lowe's and CVS, these are household names, and manufacturers like BMW and Mercedes. I can tell you a little bit more about BMW. And in my mind, this is actually another example of recurring revenue stream.

At BMW, in 2009, we started off with about 80 units in their facility. Today, as they use and expand their business, we have over 300 units operating in their facility in Spartanburg, South Carolina, and during the coming year, it's projected to grow significantly.

And Plug makes an entry into these markets, one of the real value is that Plug is able to start initiating business and it continues to grow. I know it may not be a traditional recurring revenue stream. Mercedes is another example, where we're at their facility in Huntsville, Alabama. We started out with 72 units. We're building a new logistics center. And when you go into company tour today, which I think you'll really enjoy for the folks who are here in the audience, you'll see units being billed for their logistics center -- new logistic center in additional 123 units. No need for new hydrogen infrastructure, nice service personnel in place, and it's really a nice additional revenue addition for Plug Power. And in general, these products have a great deal of value for the auto industry, because we provide predictability.

We expect that by the end of the first quarter, you'll see 2 to 3 more car companies will be added to our list of customers. And why would a car company like these drive so much? And, really, productivity is the key, and predictability. When I talk about predictability, when BMW loses 3 minutes, they lose a car production, and they can't recover that in a year. You have batteries running your fleet. People know batteries are not dependable. That one is always questioned how much charge there is on a battery. The value we bring is that the customer knows when they look at their gas gauge, it's either full or empty, and we can refill in 2 to 3 minutes, where we take 15 minutes to change out a battery. You go into this facility, that battery room, which used to take up 5% to 6% of the manufacturing facility, is eliminated. You take a look at that facility, the trucks run with batteries ran at intermittent speed. When you use Plug Power fuel cells, you get predictability, runs at constant speed, constant performance. And when you're operating a high-precision manufacturing line, that predictability is giving a great deal of value.

And finally, what we sell first, but we do help customers reduce their greenhouse gases by up to 80%.

Another large customer for us is Kroger, and I think this talk that we already know, have a new CEO to join the team out a month ago, Keith Smith. When Keith went out for the Kroger site last week, and he was stunned by the conditions that we had operated. We were in trucks, which were 10 to 15 years old. This facility is 30 to 35 years old and a lots of potholes. We're outside in the rain because they drive the units outside in the rain. But he came back and said and they, "If I were you, as you can operate in those conditions, and I've been in this industry for over 10 years. We can operate anywhere." And that's why Kroger is moving, along with us.

Kroger is a big customer, large potential, operates over 40 distribution centers. We recently closed an order for a new center in Stapleton, Colorado, where Plug will be providing not only products, but service also for an extended period of 5 years. Additionally, we expect Kroger to be a site, where we do 2 to 3 sites per year, and each of these sites have 200 to 300 units.

And for us, we've been partners and friends with Walmart for a long time. And Walmart, in many ways, has been our teacher in how to build material handling products that work and meet customer needs. Today, they operate 3 facilities with our products that have over -- They have over 500 units. They have bought from us service. They have bought from us hydrogen infrastructure. They have bought from us products..

And Walmart, with the normal site has about 250 units, their general view is that they want Plug Power to provide full turnkey solutions, where we provide product, where we provide service, where we provide hydrogen infrastructure and we provide the hydrogen to their sites.

So before I discuss our financial outlook, I just wanted to remind people of the breadth of our customer relationships. We have 23 different customers. These customers own over 250,000 forklift trucks. We only have 4,500 trucks units of their business today, but I think we'll grow.

These trucks, when I look at it, represent the #1 and #2 group retailer in North America, Walmart and Kroger; the #1 industrial food provider, Sysco; retailers like Lowe's and CVS, and people who are providing -- and large and largest consumer product company in the world, P&G.

And when this quarter is ended, next year we're targeting $60 million in product revenue and $10 million in service revenue. What's really great, I think, from a business point of view is we'll work -- walk out a year with 70% of the product revenue needed for the year met. We will also walk away with all the service revenue required to make this a profitable business next year.

In this business -- and let me tell you. This business is all about making it profitable. And when I take a step back, it's actually rather simple. Many who tour our facility today, and you'll see Plug Power can manufacture over 10,000 units a year -- I mean, 3,000 units to be profitable. And I have a workforce that can support $100 million business without any addition.

I have a fully-loaded line. And when I take a step back and I add material costs, which need to be approximately 67% of the product price to reach that goal.

And on the material front, in the fourth quarter, we'll be at 69%.

And so, as I've discussed before, it's not a large stretch for Plug Power to achieve these goals.

And when you look at the service costs, there's been a challenge as we've been working through, and many of you know, a number of systematic failures we had when we introduced the products. But we're through that. And as you can see that this is a chart of failure rate versus time, and this quarter, the present run rate is about half of what it was in January. And by the first quarter, as we finalize addressing all the systematic issues that we saw in the field. But probably more important that, at the moment, there's about 10% of the population, which is about 50% of the problems at the moment. And what we see is that when we go in, retrain the staff, those problems go away at sites. With this systematic addressing of trained staff -- addressing systematic failures and train the staff will allow our failure rate to be 1/4 of what it was at the beginning of the year.

I have to tell you, as I -- our service was a big problem for me a year ago. Today it is a huge opportunity. Most of my service in the fourth quarter -- first quarter last year was on Plug Power folks by need to provide the key customers satisfied. In the fourth quarter, most of those workers are billing out as revenue for Plug Power.

So our customers have been impressed with the quality of our service and the reliability of our products, and want Plug Power people servicing and maintaining the units.

Product costs also continues to come down. As you can see, versus 2010, this year, our product cost has reduced by over 30%. And next year, to meet our targets, we only need a small decrease to 67% of product price to meet our goal. We've done this through design simplification. Last night, Rick Mason, our VP of Operations stopped by my office and told me, that he saved 25% on a chassis that cost $2,000 by a redesign by the development organization, where they reintegrated some of the additional meddling system. Significant reduction, no risk to customers and very, very easy design change.

The other item is, we started shipping more units and shipping 3,000 units next year.

We see advantages in scale, and that scale advantage will allow us -- is allowing us to have better pricing from our suppliers.

Additionally, we need -- with the start of company, and that's what we've been for the last 4 or 5 years. We need to develop a more diverse supplier base.

And Air Liquide, has been a great partner helping us make through second source options. One of the areas that we expect a great deal of time over the last 6 to 9 months, is to find a second source for our stacks.

And we've looked at 2 options. One is alternative stocks from providers who are out there already, as well as developing our own stack internally with Air Liquide and membrane suppliers.

From the alternative stack, the company, over the last 6 to 9 months, jointly with Air Liquide have visited over a dozen stack providers, evaluating technologies. And during the -- and we down selected some for further testing, further evaluation, and we will be deploying in our ground support equipment, trial, which is government funded, with FedEx in the first quarter of next year, a second source of supplier than our present stack provider.

We also were -- we also plan that by the fourth quarter of 2014, Plug Power will be shipping systems with a second source supplier for stack.

Probably what's more exciting is that we've also spent a good deal of time working with membrane and plate suppliers. We spent all day with this plate supplier at Korea yesterday, and we probably visited 4, 5 membrane suppliers, 4, 5 plate suppliers around the world. And Plug Power and Air Liquide, along with the membrane supplier, work comfortably, and we can develop stack from material handling and other applications that Plug Power can do.

Some of you may not know, Plug Power is actually in the stack business. And we developed stacks for our backup power systems and GenSys products. Air Liquide is developing stacks today for a number of different applications. They have strong electrochemists, we have strong system and mechanical designers. Because my mechanical designs have a full suite of products today. We can start to vary some of our present resources to develop our own stack.

This will take time. And in the February, we'll provide an update during our update call about the status of this activity. I think this is example of -- as this business grows, suppliers are excited about doing business with Plug Power. Through the large membrane suppliers like Johnson Matthey and 3M, Plug Power's business represents a significant portion of the fuel cell membrane market today. And they view, since we are the premier integrator in the world, the future.

Finally, I'd like to talk about expansion opportunities. And on the expansion opportunities, we've completed 1 year of our joint venture with HyPulsion in Europe. And during the analyst portion today, Warren Brower, who runs sales and product marketing for the HyPulsion unit, have a renewable [ph] , will be providing an update to the audience. But the business has had good success, has collaborations with all 7 large OEMs in Europe, as well as they have deployed -- during deployed units with, not surprisingly, BMW and IKEA.

We also continue to deploy, look at other markets and looking to move in other markets, which are complimentary to our present market and which is funded by third parties. One of those areas is the ground support equipment where, next year, we'll be doing a deployment with FedEx at their facility in Memphis Airport, where they'll be replacing their present ground support equipment with 15 units, with 15 fuel cell power units. FedEx finds this an opportunity to reduce greenhouse gases at airports.

Linde guys tell you is that I've been stunned by the reception, where we've been received funding both from NYSERDA and the Department of Energy with the transport refrigeration units. We made an announcement that we're going to do a deployment with Sysco in Long Island. Probably within 2 hours, I received calls from our largest customer asking why am I not doing it within, as well as another customer who put an outside hydrogen fueling station in place so that they could also trial and test this unit.

The transport refrigeration unit market could potentially be larger than our material handling market. The value it brings to our customers is logistics simplification. When one would be using hydrogen, they'll be advantages at the site, that the same hydrogen that are used for their fleet -- forklift trucks, they'll also be using for their fuel cells, for their trailers.

It's a great opportunity. Value proposition looks promising today, and we're really looking forward to the deployment in the first half of the year.

Another application, where we have feeds in [ph] with to the Department of Energy and with Federal Express is range extenders for electric vehicles. What many people may not know is that Plug Power actually, product is a hybrid truck with lithium batteries and fuel cells. We match the fuel cells and lithium battery together to provide the optimum performance for our customer experience. This expertise, we believe, will match quite nicely with the needs for fleet vehicles. FedEx has a fleet that has a range of electric vehicles that have a range of 60 to 65 miles per day. By adding a hydrogen fuel-cell of approximately 20 kilowatts and a tank, that range can be all -- can be more than doubled. Again, an interesting opportunity for Plug.

In conclusion, before I go to the next slide, I'd just like to remind everybody of our goal next year. I'm feeling really good about our goals. And I got to tell you, it's a different feel about the company than it was in the last December at this time. We will grow over $70 million in revenue, and we have visibility, which is something this company has never had before.

We have a clear roadmap to meet our product costs and service costs. Company will do $70 million in revenue, 25% gross margin. This will be done at approximately 20 sites, 5 sites in which Plug Power will provide a full turnkey solution.

This is, really a -- as I keep on saying in the press, this is going to be a blowout quarter. We're going to book $30 million to $40 million in revenue, if not more. And that company, without question, will be EBITDA breakeven.

We won't lose our focus on material handling, but as [audio gap] Without question, the premier integrator of PEM fuel cells in the world, and that's why partners are knocking on our doors.

Plug Power is really poised for continual growth, not only in 2014, but throughout the next 2 to 3 years and beyond.

I have been here 5 years, and I got to tell you, I go home, I would say in my first year I was learning the business and I was comfortable. Now I really know the business, and I've never been more comfortable because this is a business that is about to explode. I'm just so pleased to be part of such team.

So on final notes, I'd like to open it up for questions and have Keith Smith and Derek here to help us Erik here, who'll help me on some of these questions -- Erik Hansen here is our VP of Sales. Plus, I put up there for those who are remote who can't ask questions live. But you can email Teal to the email address given, and I'll be happy to answer those questions. So any questions from the audience?

Question-and-Answer Session

Unknown Attendee

[indiscernible]

Andrew J. Marsh

Sure, why don't you just turn that off? So John asked a question about funding for the TRU. The product itself, from a Plug point of view, is actually much simpler than material handling drop. When you go on the tour today, John, you'll see these units with large chassis that have mimic and simulate batteries. It's a constant and has some varying load from almost 0 watts all the way up to surges of 50 kilowatts during operation. This here is actually rather a simple unit, 20-kilowatt, straight power, with some intelligence that have to work back to the truck. But the development cost is relatively minor and will be covered during this phase of development as we determine whether this is a viable market through funding by the Department of Energy and the State of New York. I think that once we go into that stage, obviously, we're -- once we look into fully commercialize the product, it will be added costs with a benefit to the customers. And I would expect, John, that if we move that forward, we'll be looking to have commitments upfront from customers for this product.

Unknown Attendee

[indiscernible]

Andrew J. Marsh

So Erik, do you want to take that one? Why don't you take it?

Erik J. Hansen

So, John, I spent quite a few years in the automotive industry. And I can tell you the vibration and shock that we experienced in the material handling side is far more extreme than what we saw in the automotive world. It's all on the sprung weight. There's no suspension with the lift trucks. So every little crack or rivet in the floor that we hit, all of that shock goes directly through all of the products and through the operator as well. Whereas on the road vehicles, obviously, you have the suspension. And I can remember, when we did our shock testing, we would do typically 100 G-shocks, 30 in a row, that's what we would have to survive. And material handling products are in the thousands of shocks, we have to say.

Andrew J. Marsh

Go ahead.

Unknown Attendee

[indiscernible]

Andrew J. Marsh

Sure. So Dave, if you think about the units sold today, I'm going to use 100% baseline. We would expect that, that parts and labor about 20% per year over 5 years. So within a 5-year period, parts and labor would equal about the original selling price of the product.

Unknown Attendee

[indiscernible]

Andrew J. Marsh

Probably not dramatically. I expect that our margins will settle down in the 32% to 33% range. And that when I look at gross margins, and when I look at the service business, the labor portion of it is little less lower gross margins than the parts business. So overall, about 32% to 33%.

Unknown Attendee

When you think about the [indiscernible]

Andrew J. Marsh

So I'm going to try to repeat your question. I hope I don't oversimplify. I think -- a good question, what asked from the audience is simply why can't we grow this business faster since our present customer base is larger? And when we look at it, I think, actually, it comes down to -- if we could develop business models, which were more operation-oriented and able to adopt more access to capital for debt for our customers, many of our customers work within a certain capital budget. And the capital budgets, even for some of our large customers, limit how many facilities a year they may be able to do. The opportunity, and this is -- we spend a good deal of time, the opportunity is to convert more facility with these customers, if we can turn the capital model for them into more of an OpEx model like finding financiers who would support this business, could dramatically help us grow this business quicker in the next year or 2.

Unknown Attendee

[indiscernible]

Andrew J. Marsh

Yes, I think part of the challenge is, Dave, with some of the large, I mean, large financiers has been the age of the company financials, quite frankly, the financial status of the company, as well as the age of the technology. And it's my belief as commitments are made, for multiple sites by some of our large customers, financiers that we've been talking to, and we have a few that have helped us with some sites for more, I would say, small players. I think we'll become more and more interested if we bring bigger and bigger names to the table. And our CFO probably spends 25% of his time looking to bring name and people to the table. He would look at -- there are long-term financing deals for the product. And one of the challenges is the lack of an aftermarket today and has units come off late for the few that we have on lease out there. And I know a big fleet is about to be renewed. I think it will provide some security to finance [ph] here is also. And people who want to do it were more than happy to be introduced. Some questions?

Teal Vivacqua

We now some questions from email.

Andrew J. Marsh

Okay, then ask it for me?

Teal Vivacqua

The first question. Can you give an update on the 1,900 units and the progress you're seeing?

Andrew J. Marsh

Rick, I'm going to let Rick Mason, who runs our operations to answer that question.

Rick Mason

So we're starting to deploy the first 1,900 units at the Procter & Gamble Mehoopany, Pennsylvania site. We've deployed half of their fleet so far, and expect to deploy the second half over the next week and a half. They're running well, and customers are very happy as they're starting to put those into service.

Unknown Attendee

And folks will see them in the shop floor, is that correct?

Rick Mason

Yes, we have 2 to 3 units that are finishing up manufacturing going into our tests that you can see on the tour today.

Andrew J. Marsh

What else you got, Teal?

Teal Vivacqua

Besides economy of scale, what is the strategy for reducing material cost to 67%? Is there a plan to fully phase in the new suppliers of stack in 2014?

Andrew J. Marsh

So in the fourth quarter, our material cost of product price will be under 70%. During the time -- so to achieve 67% is actually a very small jump for a company at this stage of development. The primary focus -- move to reach that goal will come from scale and some simplification of design. I talked about one $500 saving that Rick Mason described to me about reducing castings from multiple parts to one part, which reduced the cost from $2,000 to $1,500. I think that's Phase 1. And reaching to 67% next year actually is not my main worry at the end of 2013. My main worry is 2015 and how we achieve the 58%. And some of that will come from design simplification. We have projects ongoing, where we're looking to change stacks -- change the suppliers for items like our tank. There's an integrated hydrogen tank valve [ph], which we'll put in place, which will help reduce our costs significantly. There's simplifications of the electronic boards and cabling, which will reduce our cost. And we still keep on doing creative items, such as eliminating the DC-DC converters in as many products as we can, which can represent over 20% of our product cost. So there's a good deal of effort going on. With stack work, finding a second supplier for stack, which is one of the second source activities we had going on in the business. Go ahead.

Teal Vivacqua

Okay. What is your sales and marketing infrastructure? Do you use independent representative, distribution or your out sales focus?

Andrew J. Marsh

We use our own sales team. If you think about it, it's really clear why. Plug Power is targeting large customers, customers around over 100, 150 units. These customers buy their batteries directly from the OEM battery supplier, and therefore, we're mimicking their sales channel. In time, as the cost of hydrogen infrastructure comes down, we will look at alternative distribution strategies. But primarily today, in North America, it's a direct sales team. In Europe, we sell through our joint venture with Air Liquide, HyPulsion. We're not only -- are their direct sales people like Warren Brower, who is in the audience today, but also leveraging the Air Liquide sales force in 25 different countries in Europe. Go ahead, John.

Unknown Attendee

[indiscernible]

Andrew J. Marsh

I guess, first, I would mention, John so I think Erik would will agree. The deployment we did at Washington courthouse probably work best. It's a hydrogen infrastructure that we've put in place. And if you go, and I don't know with everyone -- I'm going to give a very, very simple description of hydrogen infrastructure. Inside it's the fueling station. The fueling station looks very much like a fueling station for gasoline pitch. And Plug Power has had that part -- has had that product for over 5 years, deployed at many sites, high level of confidence and actually had some of the most, if not the most sophisticated data collecting system at fueling stations than anyone of the industrial gas companies. From there, it runs from tubing the storage of hydrogen, which combined with the manifold, when I take a look back, it's really commodity-type activity. It's really just implement -- find the tubes, constructing the tubes, making sure they're safely installed, having the right systems in place, which we already have to manage the manifolding with the hydrogen storage. Then finally, there's the compression system, and the compression systems we have qualified -- with sold by Mary Tom Joseph who runs Bethlehem hydrogen. who has done over 50% of the hydrogen installations in the U.S. Liquid pumps, we'll be using, low-cost, high reliability and nothing different than what others are doing in the industry. The liquid tanks will be rented on a monthly basis and provided by whoever is providing us the liquid hydrogen. Is that a clear explanation? Okay. Thank you, John

Yes, Michael?

Unknown Attendee

[indiscernible]

Andrew J. Marsh

The Kroger deal was 200 units, and I'm going to give you a range because I don't want to -- I don't know if they wont' be having a number out there.But I would say it's somewhere between 6 to 10.

Unknown Attendee

[indiscernible]

Andrew J. Marsh

50% product, 50% service.

Unknown Attendee

50% service?

Andrew J. Marsh

Yes, as I mentioned to David here, if you really look over the 5-year term product that, that equals the service.

Unknown Attendee

[indiscernible] 50%...

Andrew J. Marsh

50% service, 50% product.

Andrew J. Marsh

Yes, John?

Unknown Attendee

[indiscernible]

Andrew J. Marsh

John, the -- I would say that you go to my office, which I won't be able to show you what's on the wall. It's probably a funnel of $150 million over the next 6 months. Many of them are people in the food industry and the auto industry. And as we convert more sites for people like Kroger and Walmart, I think that actually is bringing them over the wall quicker today than -- I think the Air Liquide investment widened our present customer base. I think the new customer base becomes interested when they see our present customers buying more and more sites. I see that especially in the auto industry at the moment, where, I think, you can name many auto company, and I would shake my hand and say, "Yes, we're in discussions with them." Other questions? Go ahead, Teal.

Teal Vivacqua

My first question is, can you give an update on standing with the NASDAQ?

Andrew J. Marsh

Sure. Let me check the stock price at the moment, but we're good at the moment. And we can keep on buying out there and keep the stock over $1, I won't have any issue long-term. But on a serious note, we are in continues discussions with NASDAQ, and I think the recent business momentum has provided some level of comfort that the company will be able to escape our noncompliance and stock being under $1. And I would expect that as the company brings more and more good news to the market over the next 3 to 4 weeks, it will have a positive effect on our stock price. And as I've reiterated for the last 9 months, and the goal of this company is to build the business, increase the shareholder value so that there's no need for a reverse stock split.

Teal Vivacqua

We have one last one.

Andrew J. Marsh

Okay.

Teal Vivacqua

Can you please comment on expansion opportunities into Asia?

Andrew J. Marsh

Yes, I would say that we've had reached out from both large international companies, as well as financial players. We're interested in the company expanding into Asia. I believe any deal we -- and the activity in Asia will be a focus in the first half of next year, of what's the right approach should do. I think that the approach that Plug has used in Europe, with a strong partner like Air Liquide, who have strong customer relationships, who has a presence, who understands the culture, is probably the correct model for Plug to expand elsewhere. I would expect the structure more like a JD to expand into Asia and Plug just putting our own people there and trying to build the market. I don't believe we have the depth and financial resources to do that. Four, and probably more important, the cultural understanding of Asia to be successful on our own. That's really one of the values that Air Liquide brings us in Europe, yet people that can go into Germany and be German. And people that can go into U.K. and be British, that people that can go into Spain and be Spanish. I don't see us being able to go into places like Japan and Korea and Singapore alone without a very strong partner, who actually can bring additional value to the table, including technology and sales channels. And that's what Air Liquide is, as you can see from this presentation today. They've provided a sales channel but because of their depth of their organization, they've also provided us the technology link so that the company can have alternative second sources for some of the key components. Anything else, Teal?

Teal Vivacqua

One more.

Andrew J. Marsh

One more?

Teal Vivacqua

Do any of the auto manufacturers look at Plug Power systems as a component for a future car or truck?

Andrew J. Marsh

I would say that I see Plug migrating into more utility-type vehicles applications. I use FedEx as an example here. We also have a number of retailers that we worked with, who are looking to deploy electric vehicles for deliveries in stores, and they've actually talked to us about providing a range extender similar to what we've been working with Federal Express. I don't see us providing systems to North American and European and traditional Asian auto manufacturers in the near future. It would not stun me that without a know-how and expertise that we couldn't end up helping and working with suppliers in China and India to develop their capabilities. But if we do something like that, I want revenue. I'm not looking into a deal that just provides me a service contract. I'm not interested in just being a service company. I'm interested in being a product company with recurring revenue, and just not helping and training somebody to do a product, and that's what we won't do. I guess, I want to summarize today, before we break for lunch, and have a full afternoon, I'd like to remind folks it's going to be a blow-out quarter for Plug Power. We're been booked between $30 million to $40 million in revenue. That will put us in a strong position to meet our revenue goals of next year of $70 million and have more than 75% of it in the bank before we start between products and service. The company has its costs under control and will be EBITDAs breakeven. This is just the start. The company has a large market opportunity in material handling. We believe material handling can be a $400 million market for us in 4 to 5 years, but we also believe that another application ground support equipment, transport refrigeration unit is significant growth opportunity for Plug Power as a company. For those who are on the phone today, I want to thank them for listening. For those who are in the audience today, we have a real interesting presentation this afternoon, and I look forward to more discussions with everyone here. So, thank you, everyone.

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Source: Plug Power's CEO Hosts End-of-Year Business Update Conference (Transcript)

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