Quarter 1
Q1 2026 Earnings Call — May 11, 2026
Colin Rush (Oppenheimer): Thanks so much, guys. You know, Jose Luis, you're close to all these European customers. It's good to see some of the progress that you're seeing on the electrolyzer side. I'm just curious about urgency and what you can comment on that pipeline starting to move towards, you know, final investment decisions besides the projects that you've talked about, and how we could think about that, you know, starting to materialize here later this year and next.
Jose Luis (Executive): We continue working on, as I mentioned, on all the projects that we have in the funnel. These projects are quite complex, as you know, Colin, and they require a lot of different parts of the projects to align to get to FID. I'm just going to give you an example. I have a project in Australia. It's a 50-megawatt project, 5-0. And the project is completely approved by the financial committee of the company that I'm working with. And there is one permit that they need from a port. It's an Eastman permit that is actually holding the FID of the project for a month or so. The project is going to happen, but there's some bureaucracy around it. So my point is that there is a certain level of complexity getting all the things aligned on the FID of the projects, and it takes time to get them to the point of final investment decision.
We have a lot of projects now in the last quarter in the ESAS phase, industry that have started accelerating. As you can imagine, the situation in Iran has created an issue with the availability of jet fuel in many areas of the world. But in Europe, companies like Ryanair announced a couple of weeks ago that they will have limited amount of jet fuel available to run their operations, and they could run out of some of that fuel by the end of May, beginning of June. So this is leading to many companies actually pushing towards trying to accelerate these type of projects. Energy independence is becoming also, and security is becoming also, again, an important item in Europe. And we see that these projects are beginning to accelerate a little bit more than what we were seeing a couple of quarters ago.
Colin Rush (Oppenheimer): That's super helpful. Thanks, guys. Paul, just on the cash, two questions. Just in terms of OpEx run rate on a cash basis, should we think about this first quarter run rate being stable here going forward? And then secondly, the inventory levels continue to remain relatively high. I'm just curious about how quickly you might be able to start drawing those down in a real meaningful way.
Paul (Executive): Thanks, Colin. Yeah, on the OpEx, there was a few charges in there that won't repeat. So we're targeting roughly $75 million per quarter is where we expect that to land in, and we're working hard to provide a lot of scrutiny over that so we can keep it contained and not grow that investment base. On the inventory, there was a slight reduction over the quarter, but the reality is where you're going to see the big movement this year is over the balance. Each quarter we expect to grow sequentially, and even more so in the second half. And so we're targeting about $100 million reduction minimum this year in overall inventory levels, and we're working hard to beat that target. But I think you'll see the majority of that play out in the second half.
Jason Tilton (Canaccord Genuity): Good afternoon, everyone. Thanks for taking my questions. I think last quarter, and even in prepared remarks, you've talked about the value proposition for the materials handling solutions only getting stronger with rising electricity prices. Just curious, can you talk a little bit more specifically to some of the conversations you've had with the prospective customers, not necessarily some of the core pedestals, but some of the ones that are either smaller current customers or prospective customers, and how those conversations have evolved over the past few months? Thanks.
Jose Luis (Executive): Hi, Jason. Thank you for the question. So mainly is the conversations are always around productivity, or that's our traditional value that we bring to the table. The addition of IDC or the renewal of IDC, it definitely helps in the business case. But in the latest type of conversations that we're having with customers, there's an addition, which is the reduction of electricity demand on the site. Usually in a site with 200 forklifts, you can reduce the demand on the site by two megawatts or so. And that is really helpful given the constraints of utility power that we're seeing in the country due to the demand from other industries like data centers. So that is a huge value for customers. Added to our traditional value on productivity gains, it creates an additional tailwind for the business case. That is the main topic that we usually discuss with new customers and even with existing customers.
Jason Tilton (Canaccord Genuity): Right, that's really helpful. And then just one follow-up. In terms of the gross margin improvement, I believe you called out specifically the GenDrive service cost reduction. Maybe talk to some of the specific operational improvements and blocking and tackling that you've done that are really driving those savings there.
Paul (Executive): Yeah. So, you know, it's multifaceted because there's lots of elements to it. But if you just think about it fundamentally, you know, we have equipment, we've got service, we've got fuel. On the equipment, you know, as we continue to grow sales, you're going to get volume leverage. There's a lot of things we're doing in our production processes, you know, especially when you ramp electrolyzers as we have, as an example. We talked last year about a program we rolled out at the end of the year, which we called a new diffusion bonding process that's just a microcosm example of cost reduction opportunities. And that, by using a new process, we were able to cut the cost of that component almost in half. You know, and as you scale and you get more of those opportunities with volume, you can do more of those kind of things.
On the service front, you know, we've rolled out a lot of programs, which is driving that per unit cost reduction with less touches. We've actually been able to reduce the labor tax this quarter and increase the unit per labor tax rate. And we've rolled out more programs and expect more that will continue to drive increased reliability on that. And on the fuel, you've seen over the last, you know, year and a half, you know, a continued progression in the margin every quarter continues to get better. And that's a combination of leveraging on our plants, taking advantage of the new supply agreement with the third-party provider, driving enhanced delivery, reducing delivery costs and optimizing that network, and driving network efficiency. So, We've still got a long way to go there, but it's going the right direction. We expect those trends to continue. So those are some of the themes that we've been able to take advantage of and certainly consistent with what we're focused on to keep driving in the course of this year.
And on services for GenDrive, for material handling, I'm just going to add that the stack life of the product, we've been able to double it and in some type of models even triple. That helps with the cost of parts for services, which is really important, but also because we're doing less changes in the field and less touches, as Paul was saying, we have also been able to reduce the labor in each one of the sites by one tech in some cases or even two in some cases, which has had an incredible impact on the cost of labor for services.
Eric Stein (Craig Howland Capital Group): Hi, Jose Luis. Hi, Paul.
Jose Luis (Executive): Hi, Eric.
Eric Stein (Craig Howland Capital Group): So maybe just on material handling, as we think about 2026 and 2027, just curious thoughts on how we should view the makeup, new versus existing customers. And then also, in your prepared remarks, you talked about with Walmart and Amazon that you've got some new sites, but also some refreshes. And so just curious kind of where you see things in terms of that refresh of sites that maybe you did five, 10 years ago.
Jose Luis (Executive): So thank you for the question, Eric. On material handling for refreshes, we're going to see in the next few years, specifically for Amazon, a refresh of the complete fleet. Our first site with Amazon was in 2016, and we are in 2026. And they basically are using the GenDrives for about 10 years. So our first site, as I said, was in October of 2016. We're going to begin to see big refreshes at the end of this year because the following year we did about 12 sites. So we're going to see a refresh of 12 sites between the end of 2026 and 2027. And then you will see a cadence of around 10 to 12 sites for the next five or six years or so. So we're going to get refreshes of around 20,000 units during that timeframe. Walmart is similar. With Walmart, we have done refreshes in years five and six. And we are right now discussing a substantial refresh of the install base in 2026 and 2027. So that is going to create an increase on demand for GenDrives. And as Paul was saying before, equipment margins are usually healthy. So we will see the impact of that in the next few years.
In terms of new and even growth with other existing What we're seeing is, for example, on the automotive side, we are doing refreshes on new sites with BMW, a couple of new sites in Europe with BMW. We are also seeing some growth with Stellantis and other European automakers. And we are signing either second sites or new sites with other customers. Like, for example, this quarter we signed a brand new pretty large site with a Southwire with a value of $11 million. So we're seeing activity everywhere. We still see, you know, obviously our two main customers, Walmart and Amazon, and two of the largest companies in the world. So you're going to see, you know, a lot of impact on their demand in the next couple of years. But that's just healthy. And then we have the diversification of all of our other products. So we see the material handling market moving forward and growing in this year and the following years.
Sharif Al-Moghrabi (BTIG): Hey, good afternoon. Thank you. Paul, you touched on this, but Q1 saw another big improvement in fuel margins, and the new gas supply contract is obviously helping with that. But have all of your legacy contracts with the IGCs rolled off at this point? And I guess, really, I'm trying to understand if there's room to increase utilization at your captive plants in Louisiana, Georgia, and Tennessee.
Paul (Executive): Yeah. The short answer to
your question is on the sourcing. The portfolio runs at different cycles in some of those contracts, and so they're all terminated at different time periods. Today, consciously, it's roughly 50-50 sourcing third-party versus internally leveraging our plants. And there's strategic reason why to keep that relationship in good standing and leverage those because Our plants are, as an example, in the southeast. And so it can be expensive to truck hydrogen all the way over to California or up to the northeast. Fortunately, with the agreement that we signed, it put us in a good footing with a substantial reduction in the cost per molecule, as well as a means by which to work with them to continue driving improved efficiencies and network optimization.
But the drivers for us as we go forward, you know, leveraging our plants, you know, and as we continue to grow sales and more sites we certainly will do and third-party sales, you know, you've seen some smaller announcements recently where we're starting to sell into the merchant market as an example and not take an opportunistic opportunities there where we can to do that so leveraging those plants will continue to grow and scale and leverage that overhead. The second is really optimizing the delivery network really getting into, you know, how you deliver and when you deliver and how you manage that. You know, there's tons of opportunities there. And then the efficiency network. We've made huge strides on improving efficiencies of our storage systems and our dispensing, you know, capabilities, but there's still opportunities there as well. So those are some of the drivers as to what you've seen as to why the margin continues to get better quarter after quarter. And it's certainly the same themes that we've got a daily focus on across all those opportunities that will continue to drive that over the course of this year.
Sharif Al-Moghrabi (BTIG): Got it. That's helpful. Paul, I have one more for you. I missed how much you're expecting from the monetization of the Louisiana tax credit. And if you could share how that compares with Georgia, that'd be helpful.
Paul (Executive): Yeah. So absolute value, it's actually a little bit more. On a gross basis, it's like $39.4 million, I think the number was. And it's just to clarify, it's for our joint venture that we have in Louisiana. So that's proceeds that that joint venture will get for selling that. And we obviously, as I think you probably know, we consolidate that entity so those results will show up in our consolidated results. And we'll work with the JV partner whether we leave that $39 million in the JV to fund operations or whether they take their portion and we take our portion. Obviously, if we do take – if it goes that route, we've got that. It's incremental 20 per plug to fund operations, which is obviously very helpful. But it is – we actually got better terms on that than we did in Georgia just because of the, you know, passage of time and the learnings that we got out of the Georgia sale. So – on a net basis in terms of the gross tax credit, we got a better rate.
Deshaun Alaini (Jeffrey): Thanks for taking my question. Just one quick one. I guess if you're talking about the revenue progression for the year, I think it implies that maybe 2Q might be slightly down quarter over quarter. Is that correct? And then maybe, you know, what's kind of driving that? Is there, was there any demand kind of pulling into 1Q? And then also, if 2Q is going to be down quarter over quarter, then how do we think about just the margin progression there in terms of, you know, the volumetric leverage that you shared previously?
Paul (Executive): Yeah, so let me try. There's many parts to your question, but so... You know, if you look historically, we're somewhere between one-third to 40%. You know, it's slightly on the first half of any year. It varies a lot based on timing of customer programs. And, you know, sometimes Q1s, most times Q1 is lower than Q2. But, you know, let me be clear. We expect Q2 to grow sequentially. I think, you know, we're giving you guys a directional guidance and using that 40% in relation to our 13% to 15% growth rate for this year. It may only be slight growth off of Q1, but it's definitely going to be slightly better. And then you have the second half. And the timing of that, we'll see as we continue to progress through the year how that's going to play. On the margin progression, again, just to be direct, we absolutely expect the margin rate to continue to improve sequentially quarter over quarter. All the costs down and things that we're doing should continue to drive incremental benefits. We expect that margin rate to improve in Q2 and then continue to ramp from there. Volume makes a big difference.
The fact that the second half is, using my math, roughly 60% of the sales means there's even more equipment sales in that second half. That means it's even more accretive, but I think what you're going to see is quarter over quarter, you're going to see growth in the sales number, and you're definitely going to see growth in – or I should say we expect it to see growth in the margin rate. And I just want to reinstate what you just said, Paul. Q2 will be progression in terms of top line compared to Q1.
Chris Dendrinos (RBC Capital Markets): Yeah, thank you. I just wanted to circle back to Europe a little bit here, and I'm curious, you know, looking at some of these refineries and the customer base there, are they kind of ultimately settling out on a long-term partner here and picking tech? I guess just looking back over some of these, you know, the competitors out there, it looks like there have been testing of different technologies, et cetera. And so I'm just kind of curious what you're seeing on that front. Thanks.
Jose Luis (Executive): We're seeing specifically with the companies that we're doing business in the refinery side, the largest ones that I mentioned during the call, we're seeing that they are looking at expansions in the sites that we have done and in other sites. We're seeing that the progression that we're making on the commissioning of the product is very satisfactory, and we are looking with them about working together for some of those expansion projects. Given the directives that the EU is pushing through every country through a process that they call transposition, which is as simple as a European law converted into a law in each one of the countries that are members of the EU, they have a mandate to convert a certain percentage of the hydrogen they use into green hydrogen. And this is what's driving these projects. And they are committing to do it, and we're working with them to satisfy those needs.
Chris Dendrinos (RBC Capital Markets): Got it. Thank you. And I guess maybe as a follow-up here, you know, just on the opportunity with Allied Green in Uzbekistan and maybe in Australia as well. Can you speak to the potential timing of this and how you see that kind of trend, I guess, playing out over the course of the year? Thank you.
Jose Luis (Executive): Yes. I mean, I can speak to the timing that I've discussed with Alfred Fernaldi-Green in the last discussions I had with him as last week, right? Now, these timings, as I said before, because of the complexity of this type of project, usually change. But right now, the idea is to, or the objective would be to do a BDP on the Uzbekistan project. And BDP is the Basic Engineering Design Package in the second half of 2026. And then, his target is to get to FID in the following months with a potential loan notice to proceed to PLAC earlier than that. So it is a project that could, and I insist, I don't want to create an expectation that I cannot live up to because there are so many things that are outside of my control in these projects, right? But in the last conversations, it's a project that should be moving forward in the next 12 months with a BDP happening before with a loan notice to proceed also in that timeframe.
Craig Irwin (Roth Capital Partners): Hey, guys. It's Andrew on for Craig. Thank you for taking my questions. I've been hopping across a couple calls, so I apologize. This has been asked already. Just let me know. I can ask something else. But you guys called out expansion with Amazon and Walmart with the material handling. But can you guys kind of talk to any new logo pipeline expansion and then just overall kind of the mix between, you know, site expansion with the existing customers versus, you know, new customer wins? That would be great.
Jose Luis (Executive): We are, our team was in MODEX. MODEX is the largest event for manufacturing and supply chain in April. And our team met with a large amount of companies, new companies, new logos that were interested in the material handling business case, given the points that I made before, mainly associated with productivity, with the ITC, and also the advantages associated with reducing the grid demand. At this moment, the majority of the growth that I see in 2026 are related to existing customers. As I said before, mainly Amazon, mainly Walmart, and also associated with automotive. We have new projects with BMW, We have projects with Stellantis and with other European automakers. We close another second site with Southwire, as I mentioned before. That's not a new name, but it's a second site that we close with them. And we have a fairly healthy pipeline of new names and new customers. At this moment, I'm not in position to tell you right now that we're going to get orders for certain specific names. But I can tell you that the team is working in a few new potential accounts that could be added between now and the end of the year for projects in 2027.
Jose Luis (Executive): Well, thank you, everyone, for the questions and for your engagement and your support. The first quarter results that we just announced provide a solid foundation for the balance of the year. Our priorities for 2026 are the same. They remain unchanged. Drive continued sales growth, execute with discipline, continue improving our cost structure, reduce cash usage, and deliver positive EBITDAs in the four quarters. The underlying business fundamentals continue to improve. Demand drivers across our core markets are strengthening. And now it's just about consistent delivery. Again, we appreciate your continued support and look forward to updating you on our progress in the next quarter. Thank you, everyone. Have a nice evening.
Quarter 2
Q4 2025 Earnings Call — March 2, 2026
Analyst Colin Rush (Oppenheimer): Guys, and congratulations on the progress here. So as you look at 2026 from a revenue growth perspective, can you just give us a bit more color around which drivers are actually moving the needle from a growth perspective? It looks like you're talking about kind of low double-digit growth overall. I'm just curious if there's one part of the product business that's actually making an outsized impact on that growth.
Executive Name (Title): Hi, Colin. How are you? So for 2026, as I mentioned, we are projecting similar growth as we saw in 2025. The main drivers for that growth are going to be material handling. What we're seeing in material handling is our pedestal customers are going back to growth. We're also seeing refreshes. Some of the sites that we have with some of the pedestal customers are sites that have been running between five and six, seven years. time to refresh. So we see an uptick on that. We also see new customers. As you know, we signed Floor on the Core last year, but we see other customers coming online in 2026. And also, the value proposition is just getting stronger. Our customers are beginning to see also that the material handling fuel cell solution allows them to reduce their utility demand on their sites, which is really valuable for customers in days where we all know that utility and electricity availability is becoming more challenging. But that's not the only area that we're going to see growth. As I mentioned, in the electrolyzer business, we also see growth and opportunities.
We just signed at the end of 2025 We announced that the agreement with Carlton Power for 55 megawatts. And we are looking at, in the next couple of months or so, signing a similar agreement for another project in Australia. We have a lot of the projects that we have in the funnel are beginning to move farther into FID. So we are expecting to see also growth in the electrolyzer business. So those are going to be the two main drivers for growth in 2026.
Analyst Colin Rush (Oppenheimer): Excellent. And, Gans, when you look at the fuel margins and the cost of that fuel, I know you're getting better at optimizing some of the production costs and timing around that, but I'm just curious about how quickly you can start driving some of those margins closer to break-even on the fuel side.
Executive Name (Title): Yeah. Thanks, Colin. You know, I think just to be clarified, if we kind of look back and we think about some of the things we've done, I mean, obviously turning on these three plants and vertically integrate and puts us in a great position. And we've seen that in the benefits and our results. We see that continuing to trend upwards. You know, we've been on this maturity curve of optimizing those facilities. We hit all-time records in the Georgia plant for many of the months in 2025. And we've seen a progression in the utilization and efficiency of the newer plant, Louisiana, as we've turned that on this year and scaled that up. So one thing we expect for 2026 is obviously better leverage on those facilities now that we can take those learnings and run those plants even more efficiently. Second thing is, obviously, we're adding, as Jose mentioned, more sites, more material handling customers, and a lot of that we're going to feed through those plants and so you get greater volume leverage, which is important. We've shown progression in our logistics network and how we can drive greater efficiency through that.
And then the last, one of the other challenges that we've been focused on and really made tremendous progress is efficiencies at the site, in terms of how the systems offer the recapture of the gas, how do you make sure that you minimize any loss of the molecule through the system. The combination of those things, coupled with the new agreement we signed with the third-party gas company last year that's reduced prices but also put us on a platform of working with them to optimize the network with which sites are sourced from which plants, all of those factors are what's been driving the improvement and we're going to see additional improvement this year. So I think we're going to directionally be moving there as we progress through the year. Part of it will be tied to the timing of turning on some of these volumes and getting additional leverage out of those facilities as the year progresses, but we expect that we have been, and we expect that we're going to continue to move in the right direction in that regard for the course of the year.
Analyst Craig Irwin (Ross Capital Partners): Good evening. Thanks for taking my questions. So first one I wanted to ask about is just an update on the cash needs this year. So you guys did a great job last year, $368 million in unrestricted cash exiting the year. You know, you got your cash burn, you know, down dramatically year over year. You know, you've put in place the 275 in asset sales. You're obviously continuing to execute on the... the restricted cash for your PPAs, your historical PPAs, as those roll off, and I guess as you make new sales, which is good. But can you maybe help us understand the tempo of cash needs across this year now that we don't have some of these big construction projects and that you've taken all these other steps to put in place, you know, the actions to get to positive EBITDA?
Executive Name (Title): Thank you for the question, Craig. Paul, do you want to go with that?
Executive Name (Title): Yeah, thanks, Craig, and good to hear from you, man. A couple things. One, if you look at the progression in the last couple years, just the improvements in margin and just overall profitability and how that's been playing, as well as our leverage of our working capital, you've seen the reduction in operating cash flows and cash burn in general. You've also seen a big reduction in the CapEx. I mean, I think if you look at the Q4 rates, they're one of the lowest CapEx rates we've had in a long time. It postures us really well because we expect, you know, certainly as we talk about our financial targets this year and getting to EBITDA, you know, break even to positive in Q4, you know, we expect, you know, a similar reduction, you know, in the cash burn that we've experienced the last couple of years. And so if you just look at that mathematically, coupled with a very, you know, nominal CapEx rate, it mathematically puts you in a position where, you know, the opening cash position we have is almost enough to cover it all. You know, obviously the 275 puts us in a great position to fund the year.
So, you know, we sit today and our working plan is that we've got more than adequate existing capital and access to that capital that's coming in through those projects to fund this year without needing an incremental capital. I do have optionality. I have an unleveraged balance sheet, so it's not my preference to go out and get debt. But, you know, obviously, and now that we've restructured the debt, I've got an incredibly low cost of capital structure in place right now, that 7% range, and so I'm in a good spot overall in terms of lots of other factors. There's other positive things that are happening, like we've gotten past through some of the acquisitions and the earnouts, and we've got some of those things behind us. We've really tempered the JV investments. A lot of things have just put us in a good position where just the overall cash needs have dropped substantially, so I guess in conclusion, you know, and if you look at seasonality of the sales with the one-third, two-thirds, you know, you can expect probably a little bit heavier burn in the first half.
And as the, you know, volume grows in the second half and we convert those into collections and leverage even more inventory, you know, it'll even be better in the second half. And as we sit today, given the working capital position, you know, for me, EBITDA is kind of a proxy of cash flows. So you could almost I think there's a decent chance we might even get to break even a positive cash flow in the Q4, not just the EBITDA's KPI as well. So I think hopefully that helps, Greg.
Analyst Craig Irwin (Ross Capital Partners): Fantastic. That's very helpful. So along a similar theme, right, your new project, new sales commitments that you're making today are obviously made with a different discipline than you had in the market a few years ago with the pricing changes and you know, the complete focus on profitability now at Plugged. You know, can you maybe just give us a little bit more color on the 750 megawatts new engineering design package agreements you signed the quarter? Are customers paying for these engineering packages up front now? What do we see as a potential timeline for some of these fresh new orders to come through and potentially materialize as bookings and then revenue? You know, how do we look at these opportunities And is this mostly a new set of customers, or has this got significant overlap with the existing customer base?
Executive Name (Title): Craig, thank you. I'm just going to, you know, clarify is focus on profitability through growth. So growth is a very important part of our strategy. And yes, the 750 megawatts of BDPs that we have signed and started working in the last few months are all new projects. Some projects are in North America, a couple of them are in North America. We also have projects in Europe. The timeline is a little bit different for each one of them. A couple of them are, at least at the moment, the FID timeline is into 2017, but there is one project that actually we are replacing and an existing prior electrolyzer company that is no longer going to be doing this project, and they have picked us to do this VEDP for them. You can, you know, infer probably what the company is, and that project is already pretty advanced, and what we're doing right now is basically doing a very quick VEDP, and that project has probabilities to BEFID in 2026. So a little bit of a different timeline for the different projects, but all of them are in the next 12 to 24 months in the current planning for the FIDs.
Analyst Luke (Craig Hallam): Hey, this is Luke on for Eric. Thanks for taking our questions. So first one here, just how do you expect activity on the hydrogen pipeline front in Europe to progress after last month's delivery announcement in the Netherlands? Should we expect to see further inroads there in 2026?
Executive Name (Title): Hi, Luke. You mean like the deployment or the development of the actual pipeline in the European market?
Analyst Luke (Craig Hallam): Yeah, and just potential inroads that Plug might be making there in 2026 and beyond.
Executive Name (Title): So if I understand correctly the question, the pipeline that you're referring to is in the Netherlands, which was announced a couple of years ago that we're continuing to do the deployment in that pipeline. What Plug and in general the industry benefits from is that having a pipeline allows us to basically have a pipeline for generation. And what we see, for example, in the Netherlands, we have several projects that we are discussing of companies that are looking into generating to put into that pipeline in particular. So it's a positive development in the industry, and it will help with projects going FID, given that they can deliver hydrogen to that pipeline. I don't know if that answers your question, Luke.
Analyst Luke (Craig Hallam): No, I think so. That's helpful. Thanks for the color. And just as a quick follow-up here, so just quickly on the data center opportunity, I mean, you pointed it out last quarter as having potential for hydrogen-based backup power, obviously framed as very early stages. Just wondering if you had any updated thoughts on potential use cases in this market.
Executive Name (Title): For the particular case of the data center opportunity, we agreed with Stream that we were going to be working on potential use. We have been concentrating with them right now on closing the deal itself, but open discussion on what we could use fuel cells for. So at this moment, we are concentrating on closing the deal. And in terms of applications, we're going to start discussing with them about what stationary applications we could launch together once the deal is closed.
Analyst Jason Tilchen (Canon Core Genuity): Good afternoon. Thanks for taking my question. With regard to material handling, I think the last call you said this is a $14 billion opportunity overall, and you've only really started to scratch the surface with this. Obviously, the price and availability of hydrogen could be a major gating factor. I'm curious, beyond that, what are some of the other things within your control that the company can do to sort of help capture an incrementally greater share of that opportunity going forward?
Executive Name (Title): Well, we're working with all of our main customers, pedestal customers like Amazon and Walmart, making sure that they can extract as much value of the technology as possible. One of the things that we are seeing, I think I mentioned that before, is that many of our customers are seeing the value of the utility advantages of using fuel cells. For many of our customers, they need between one and two megawatts to power batteries if they use batteries in their distribution centers. But when you use fuel cells, you open up that capacity for other uses or actually just to be able to reduce consumption and connection to the grid. Those type of things are the type of things that little by little we are discovering and working with customers to understand better how they can take advantage of the technology and to make sure that the business case can be expanded to as many applications within material handling as possible. We believe that as time goes by, we will be able to unlock further markets within the material handling business.
Analyst Jason Tilchen (Canon Core Genuity): Great. That's very helpful. And one follow-up. In the release, you talked about launching multiple follow-on actions to continue reducing costs and improving cash flow in 2026. I'm wondering if you could share a little bit more about specifics of some of those initiatives.
Executive Name (Title): Yeah. I think, you know... We are constantly looking at things like our bill of materials, our designs. We have opportunities to look at our manufacturing processes and think about how to streamline those. We're thinking about where we deliver from a distribution standpoint, a fabrication standpoint, our network for electrolyzers, for example. If you look at the last 10, 12 years, you know, the things that we've done and from looking at, you know, working with vendors on the supply cost to, you know, structures what we have with how we manage the supply chain to, you know, our manufacturing processes to, you know, even additional ways to optimize facilities as we would continue to reduce inventory. We need less warehouses as an example. So, we look at it holistically, and we believe we're still very early in the curve of opportunities over the next couple of years. So those are just some of the examples and ideas of things that we have active efforts around. We've had some very conscious efforts the last two years to deliver these specific targets and improvements, and we think that it's just themes that we can continue to optimize the overall company to continue driving the margin profile.
Analyst Chris Tendrinos (RBC Capital Market): Yeah, thank you. Maybe just to echo the congratulations on the positive gross margins this quarter. Following up on the last question, the press release I think also says that you're potentially looking at other asset monetizations that have been impaired. Can you maybe discuss what those might be, potential timelines on those opportunities?
Executive Name (Title): Yeah. Well, let me say it this way. If you go back the last couple of years, the themes that we've been talking about in some of these markets, you know, haven't kind of developed as fast as we thought. And so from an accounting standpoint, you do, you go through your accounting exercises and it kind of, you know, you land on the conclusions of what you can include in your forecast and so forth to, you know, that may or may not and create those impairments. But, you know, we still, we have incredible portfolio of assets and opportunities that we can either look for alternative ways to monetize it, like the data center sales, or we still have opportunities in the pipeline, you know, in these different markets that can manifest. And, you know, as they start to manifest, and we really believe it's a question of when. You know, I mean, I don't think anybody doesn't believe markets like mobility and high-power stationery, just to pick a few, aren't going to happen. It's just, you know, a question of when. And so as those things start to unfold, we still have all of these assets that we can really truly leverage. And so it could be a combination of, you know, sales in those spaces, or it could be a combination of alternative uses that we look at. So, you know, it happens, it's just one of the ways that we're really, you know, centering in with how do we get the best value of this big asset portfolio in the short term.
Analyst Chris Tendrinos (RBC Capital Market): Got it. And then I guess maybe as a follow-up here, you know, to You've got the $8 billion pipeline and just trying to think through, you know, maybe how much of this year's outlook is secured by that pipe or maybe what's in the backlog and just how you're thinking about, you know, I guess overall kind of confidence in the year given kind of existing commitments.
Executive Name (Title): So... For the year, on the outlook that we just discussed, which it is a growth similar to what we saw in 2025, we have very high confidence of probably close to 80% of that revenue amount, and also high confidence that we would be able to close the additional 20%. Entering the year with that high backlog, if you want to call it that way, it is a very good position to be able to project where we think we're going to end the year. Obviously, years advance as they go, but at this moment, we feel pretty confident on the projection that we just gave on similar growth as 2025.
Analyst Sherif El-Moghrabi (BTIG): Hey, thanks for taking my question. When you think about a potential hydrogen plant like New York versus the liquidity opportunity that presents, any insight you can share to how you balance that cash with, you know, your hydrogen fuel demand two years down the road, five years down the road?
Executive Name (Title): Hi, Sherif. Thank you for the question. So we have looked very carefully at our hydrogen needs and the potential or the probability or the possibility to monetize the assets like we did, that we're planning to do in New York. We mentioned this also in the prior earnings quote. What we have been able to do is we have been able to get to a an agreement with one of the largest IGCs to provide hydrogen for us at reasonable cost, much better cost than we were getting before. That added to the current capacity that we have right now, which is about 40 tons a day nominal capacity, and added to the possibility that we have also, and we are discussing with some customers that are planning to do liquefaction to take some offtake from those potential projects. We're comfortable that we have a good path to cover the demand in the next few years based on our projections for growth, especially in the material handling market. So we found that the capability to be able to monetize those assets was something that it was more valuable for PLAG at this moment than making the investment of building a plant in New York. We have not.
We put all those plans for growth for production on hold at this moment. That doesn't mean that in the future we may not pick up some of these plans when we are able to show that we can perform financially and maybe able to finance these projects in a much more efficient way. But at the moment, monetizing those projects. And with the hydrogen availability that we have visibility for, we feel that this is the best solution and the best path forward for PLAG.
Analyst Sherif El-Moghrabi (BTIG): Got it. Thanks, Jose Luis. And then the one big beautiful bill act reinstated tax credits, but it also introduced stricter requirements for eligibility. And that's something that's been a supply chain headache for some renewables players. So I'm wondering if Plug Power has had to retool its supply chain meaningfully.
Executive Name (Title): So for the IPC, the investment tax credit, what we have seen is that the requirements to be able to take advantage of the tax credit were meaningfully simplified from what they were before the bill that passed recently. Last year in Congress. So at this moment, actually, this 30% tax credit has become even a simpler way for our customers to take advantage of, and we've been discussing with many of our customers on this, and they agree on this point. So, you know, it's actually been an improvement on the tax credit process for our customers.
Analyst Samir Joshi (H-E-Bain): Hey, good afternoon. Good evening. Thanks for the questions. Hey, congrats on the new role, officially the new role.
Executive Name (Title): Thank you.
Analyst Samir Joshi (H-E-Bain): So I think I just wanted to hit on two broad categories. One, revenues from material handling. Are we looking to add additional pedestal customers just like the flooring company that was at the symposium? And then how on the electrolyzer front, the 8 gigawatt pipeline that you spoke about, how is that planned to be converted into orders?
Executive Name (Title): Thank you, Samir. On the material handling side, we are talking to many new potential customers. I think we're going to see some new customers being signed. And some of them, like you mentioned, floor and decor, can be multi-side or what we call pedestal customers. So there is an open door for new pedestal customers in 2026 and beyond. On the $8 billion funnel for electrolyzers, we continue working with many of the companies that we have in that funnel towards FID, towards the financial investment decision, final investment decision. What we're seeing in many cases is especially in the European market, but also, as I said, we're going to see some new opportunities closing in Australia, and we closed the opportunity in the UK with Cartoon Power and Shredder at the end of last year, which will be executed this year.
What we're seeing in the European market is that the RET3 regulation is being converted into law in many of the countries in Europe, which requires a certain percentage of the hydrogen use for transportation purposes, including refineries, to convert to green hydrogen at a rate of about 1% by 2030. This means that refineries like BP or GALP or other refineries in Europe are looking into ways to meet that requirement those requirements. And this is what is accelerating the investment decision in many of these projects. What we're going to see is in the next 12 to 24 months, as the mandate becomes law, we're going to see these projects come into fruition, and we're expecting to take a fair share of that funnel.
Analyst Samir Joshi (H-E-Bain): Thanks for that, Kala. And then on the margins front, I mean, really congratulations on the success on bringing margins down, especially on the services and also on the equipment. On the equipment sales going forward, should we continue, like, should we see 1Q positive gross margins or because of lower revenues expected seasonally, margins will be still in sort of negative teams. You want to go with that, Paul?
Executive Name (Title): For equipment in specific, yeah.
Executive Name (Title): Yeah, Samir, hey, bud. It's Paul. Yeah, I would say if you just look at it mathematically, with how Q1 typically is in relation to our annual sales on a seasonality standpoint, and you kind of apply that to the, you know, you know, the math that Jose shared with looking at sales projections next year, you know, I think you would see sequentially it coming down from Q4, you know, it should be, you know, probably better than, you know, in that range of the same percentage from last year's Q1. But just sequentially with the lower volume, equipment really is tied to leverage. And most of it is just timing of those sales. And so without that incremental volume in the quarter, comparatively speaking, it's definitely going to affect margins. So you probably see a bit of a dip on the absolute and on the equipment margin in particular. But there are some favorable opportunities events, you know, we definitely, all the rooftop consolidations, all the things we've been doing last year, you know, that play well in terms of mitigating some of that. So, on the whole, yes, but probably directionally better, certainly better than Q1 last year.
You're going to see progress both on sales and margin, you know, quarter over quarter, you know, I'm sorry, year over year on each quarter. So, you know, you probably, but if you look at one-third of sales happening in the first half of the year, you know, in two-thirds in the second half, you know, a lot of it is tied to volume. And, you know, when you look at what we've talked about for Q4 in particular, getting to that EBITDA's positive, you know, range with kind of a 300 million sales proxy, it just gives you a tone of, you know, how that might play for the year. So hopefully that helps.
Analyst Samir Joshi (H-E-Bain): Yeah, no, that is really helpful. And I wanted to reconfirm that. You're still targeting, or from where you sit right now, you still are seeing two-thirds of the field in second half, right?
Executive Name (Title): Yes.
Analyst Samir Joshi (H-E-Bain): Yes. Got it. Okay. Thanks a lot for taking the questions.
Executive Name (Title): No, thank you.
Analyst Chris Sung (Wolf Research Alliance): Hey, guys. Good afternoon. Congrats. Hey, congrats, Jose, on your first day on the job.
Executive Name (Title): Thank you.
Analyst Chris Sung (Wolf Research Alliance): Yeah, so most of my questions have already been asked, but I guess if you were to just provide some sort of guidance on your outlook for 2026, are you able to share the segment mix you're assuming across materials handling, electrolyzers, fueling, et cetera?
Executive Name (Title): So it's going to be similar to what we've seen in 2025. Probably we're talking in the 20, I will have to get the numbers a little bit more detail in there, but probably material handling would be in the 30 to 40% of revenues, right? And then you're going to see a similar amount, probably a little bit less on electrolyzers. And then the rest is going to be, you know, our fuel and cryo business. So that's kind of the mix that we're going to see. Material handling is still going to be the largest revenue generator for the company in 2026.
Analyst Chris Sung (Wolf Research Alliance): Right. And that makes sense. And just to follow up on one of your responses earlier, about 80% of 2026 kind of like firm or high confidence in the other 20. Is that kind of, is the right way to think about that the 20% are external factors for customers that need to hit specific milestones or outside of your control, or how do you think about that?
Executive Name (Title): That 20% is projects that we are in the process of closing right now, that probably we're looking into closing them in the next few months, that will secure the revenue for 2026. The other 80%, 77% to 80% is what I calculated that we have in high probability are projects that we either have a firm commitment from the customer or it's being finalized, the commitment. So that 20% is projects that are right now being negotiated, and we're expecting to close them within the year to be able to realize revenue within the year as well.
Analyst Amit Thakkar (BMO Capital Markets): Your line is now live. Amit, perhaps your phone is on mute. Please pick up your handset.
Analyst Amit Thakkar (BMO Capital Markets): Hi, thank you. Hi, good evening. Thanks for squeezing me in. Just one quick one for us. And Congrats. You mentioned kind of momentum and kind of growing with your existing pedestal customers. One of your larger pedestal customers, Walmart, you executed a release event license agreement with them earlier in this year. I was just wondering with your larger pedestal customers, to the extent they want to add more sites with you, do you anticipate kind of executing similar agreements with them before kind of doing so and throughout 2026?
Executive Name (Title): Are you referring to the licensing agreement? No, that was a very specific agreement with Walmart that we executed an agreement that actually will help us to continue building and growing the relationship with Walmart, but I'm not expecting any similar agreements with any other customers in 2026.
Analyst Amit Thakkar (BMO Capital Markets): Okay, and just maybe one quick follow-up on a different topic. I know Mueve in Spain, in Andalusia, kind of greenlit a very large electrolyzer project today. We're just wondering if you...