Good afternoon, and welcome to the Bloom Energy First Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Suzanne with Investor Relations.
Please go ahead.
Thank you, operator. Good afternoon, everyone, and thank you for joining us on Bloom Energy's Q1 2021 Earnings Conference Call. To supplement this conference call, we have furnished our Q1 2021 earnings press release with the SEC on Form 8 ks and have posted it along with supplemental financial information that we will periodically reference throughout this call to our Investor Relations website. The matters we will be discussing today include forward looking statements regarding future events and our future financial performance. These include statements about the company's business results, products, strategy, financial position, liquidity and outlook.
These statements are subject to risks and uncertainties as discussed in detail in our documents filed with the SEC from time to time, Specifically, the most recent report on Form 10 ks for the year ended December 31, 2020, which identifies important risk factors That could cause actual results to differ materially from those contained in the forward looking statements. We assume no obligation to revise any forward looking During this call and in our Q1 2021 earnings press release, We refer to GAAP and non GAAP financial measures. These non GAAP financial measures are not prepared in accordance with U. S. Generally Accepted Accounting Principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.
A reconciliation between the GAAP and non GAAP financial measures is included in our Q1 2021 earnings press release available on our Investor Relations website. Joining me on the call today are KR Sridhar, Founder, Chairman and Chief Executive Officer Cherilyn Moore, Chief Marketing Officer and Greg Cameron, Chief Financial Officer. KR will begin with an overview of business highlights the quarter. Cherilyn will then provide an update on Bloom's roadmap and Greg will review the operating and financial highlights of the quarter. After the prepared remarks, they will take questions.
I would also like to note that we are all dialed in to this call remotely, so we apologize in advance for any audio issues I will now turn the call over to KR.
Good day and thank you very much for joining us on this call. Bloom sends our prayers and well wishes to the people of India. The safety of our employees and supply chain partners in India is a very high priority for us. And we are delivering equipment that will enable hospitals and medical professionals to provide oxygen to more patients. I'm proud of the Bloom team, which has continued to exhibit ingenuity and community spirit.
Now To the company results, we had a strong Q1 and are reaffirming our previously stated annual guidance. Our revenue is up almost 24% compared to the same period last year. Our gross margin is approaching 30%, almost a 13 percentage point improvement year over year. You will hear more details on the quarter from Greg shortly. Our team has proven its operational excellence by executing on the ambitious roadmap we laid out 3 years ago In the run up to our IPO, here are a few highlights.
We have almost doubled our annual acceptance rate Since 2018, from 2017 to 2020, our revenue has increased By over 30%. During the same period, we have reduced our product price by almost 20% To lower the delivered cost of electricity and enable growth, while increasing our non GAAP product margin From about 28% to 38%, our service business, which lost $17,000,000 2018 is now profitable. We achieved these operational milestones While investing in innovation and extending our core platform to address multiple market adjacencies, Our levers for additional growth. Based on our confidence in the growth of our core business alone, We are doubling our manufacturing capacity from 200 megawatts to 400 megawatts per year. This expansion exemplifies multiple compelling competitive advantages That are unique to Bloom.
1, we can stand up a coffee exact manufacturing line In about a year, for a capital investment which will pay back in less than a year 2, Our manufacturing lines can build both our current core product and our future growth products Such as hydrogen electrolyzers, marine power and carbon capture enabled systems. 3, This enables us to practice flexible manufacturing and dynamically adjust to market demand. This flexibility It's a huge asset in an industry undergoing transformation. It will enable us However, we can utilize our expanded factory to build our current product should the hydrogen economy Be slow to take hold. In contrast to companies building factories Only capable of producing hydrogen electrolysis.
We at Bloom are not exposed In order to carry forward our business momentum with utmost focus on our core competencies Of Technology Innovation, Operational Excellence and Customer Service, we are Actively engaging partners to assume full responsibility for installation. This quarter provides a good window into how this shift will enable us to deliver better margins. Greg will discuss this in more detail. Now, Let us focus on Bloom's role in the energy industry, which is undergoing a seismic transformation. Today, customers are demanding that their energy solutions are cost predictable, Resilient and clean.
Unlike the power grid, which is growing more expensive and less reliable, Bloom offers companies unprecedented reliability at a predictable price. Companies are learning that resilience is imperative. The price of losing power It's catastrophic. And yes, it is very worthwhile to pay for resiliency. In a digitally reliant world, which cannot operate without electricity, our product It's not a luxury.
It is a necessity. Regulators, investors, customers, Employees and citizens are demanding that their companies and governments protect the environment. Bloom's energy solutions offers power that is cleaner than any other Always on source of distributed energy and we offer a clear path to affordable 0 carbon power generation. In this ensuing energy transformation, We are both the bridge and the destination. Indeed, we are the only solution That offers everything that customers are looking for today, cost predictability, resilience And environmental sustainability.
It is little wonder then that we see opportunities to unlock Many new markets. To do that, we plan to form strategic alliances, Emulating our successful model in South Korea. Today, We're excited to announce an important collaboration with Baker Hughes. We will work together to build microgrids for our many clients who demand resilient power. Baker Hughes will also collaborate with us to develop and deploy Integrated Carbon Capture and Hydrogen Solutions.
The announcement Should facilitate high growth. I want to note that our current factory expansion plans Are based on the demand we are anticipating through expansion of our core business in the U. S. And internationally. It is also based on the changing business behavior we see now, influenced by power disruptions, There is a tremendous potential for additional growth.
In Europe and Asia, Policymakers are advocating for investments and incentives in clean energy. The infrastructure bill in the U. S. Will catalyze demand for clean and resilient power At a scale never seen before, our financial forecasts do not account for potential benefits from these tailwinds. But we have strong policy and global business development teams in place and well positioned to seize these opportunities.
Finally, I'm very encouraged by the progress we are making on our growth levers. I'd like to invite Cherilyn Moore, Our Chief Marketing Officer to provide more detail. Cherilyn?
Thank you, KR. And you're right Today's announcement with Baker Hughes is a great example of how Bloom Energy is executing to plan with tangible progress and an increasing list Our strategic relationships and collaborations. Baker Hughes is the most recent strategic announcement, so stay tuned for more. As versatile as our products and capabilities are, we know that the energy transformation is a multi $1,000,000,000,000 effort That is going to require a large ecosystem that works synergistically over the next few decades. The multifaceted energy industry has several players That specialize in industry and customer segments and know the needs of their segment well.
That is why obtaining key strategic partnerships, Agreements and collaborations are critical to our strategy. Baker Hughes stated it perfectly in the joint press release today, The path to net zero carbon emissions must include partnerships and collaboration. We couldn't agree more. Now I would like to take a step back and provide a broader perspective of Bloom Energy's strategic approach and how we are positioned to win now And for the long term, Bloom Energy has one primary platform with the core being our solid oxide energy server. This remarkable technology has been proven in the field and it is commercially successful.
We have been focused on ensuring we meet the needs of our customers With resilient 20 fourseven always on power. And as we've discussed previously, in light of our ongoing cost reductions, We are now expanding into more U. S. States and have recently announced the appointment of international leadership to strengthen our global expansion efforts. Coupled this expansion with an increasing need for resiliency due to extreme weather events and the fact that we require hardly any water And do not admit any harmful air particulates.
We are seeing a market increase in demand. As Pierre mentioned earlier, regardless of the end use of our Bloom Energy servers, the engineering, sourcing and manufacturing All use the same existing infrastructure. This also means that discoveries or cost downs in one application can be quickly applied across the platform, benefiting multiple product lines in a cost efficient manner. Each of our 5 levers of growth, marine, carbon capture, biogas, Hydrogen fuel cells and electrolyzers are rooted in this breakthrough technological platform, which speeds product development and deployment. For full appreciation of Boom Energy's revenue trajectory, we need to view the growth levers not simply as expansions into different verticals, but also as unlocking interrelated total addressable markets of enormous size.
The success of each initiative opens new end users and perfects our technology by subjecting our solutions to unforgiving real world conditions. For every hour our products are in use, there is knowledge gained that is transferable across the entire platform, thereby fueling additional growth, growth of experience, expertise, relationships and revenue with corresponding cash flow Used to invest in R and D and Manufacturing, Achieving Economies of Scale. We continue to make significant progress on our anticipated business roadmap. And I would like to now share some important updates on the milestones that have been achieved, as well as the application of each Of our growth levers in the sizable total available market, each end use unlocks. For the sake of time, I won't discuss the interrelation of the technology from each segment now, but we can address that in the Q and A.
Marine. First, let's discuss marine. Ocel Powered ships will help realize our shared vision of a more sustainable, eco friendly marine shipping industry. This would virtually eliminate harmful air pollution, including sulfur dioxide, nitrogen dioxide and particulate matter. This could be achieved with only negligible methane slip and will accomplish sharply reduced CO2 emissions.
Superior energy efficiency will also reduce Fuel consumption. The modularity of our fuel cell improves the flexibility of ship design and increases power reliability. Each design win opens a new addressable market from cargo vessels of all sizes to cruise ships. And as the underlying technology is the same, we can quickly expand upon prior wins. As most of you know, we have announced a joint development agreement with Samsung Heavy Industries with whom we're working with to realize the potential of fuel cell powered shipping.
The certification process of marine fuel cells requires the new technologies be subjected to rigorous testing Under a variety of operating scenarios to ensure that the products can withstand harsh sea conditions, Classification societies like the American Bureau of Shipping or ABS require a series of tests such as tilt and vibration tests To be granted an NTQ, New Technology Qualification, we have dedicated engineering and product teams who are readying our field cells And we have pulled in naval architects and marine engineering firm for ship to collaborate on engineering aspects Specific to the marine environment, following extensive testing on land, simulating the ocean environment, we will complete Present our designs to customers. The testing of marine fuel cells is well underway and we will update you as additional milestones are achieved. While we are readying our technology for the sea, we are engaging with other partners as well, with the goal of forging additional relationships We'll help accelerate our deployment and shipping as soon as possible. We see marine as a significant opportunity with an estimated addressable market Of $165,000,000,000 Now on to carbon capture. Our carbon capture technology is unique.
It splits out hydrogen and carbon dioxide, effectively extracting carbon from the emissions of natural gas powered fuel cells. This allows our customers to deliver carbon neutral generation, utilizing abundant natural gas or even carbon negative generation with biogas. This could be helpful during the energy transition. Carbon Capture is a natural complement to our solid oxide technology. This technology completely changes the profile of industrial organizations with a heavy carbon footprint.
Implementation will save time, money, regulatory compliance and deployment. Rather than emitting greenhouse gases, outputs will be a near pure stream of CO2, which can be utilized or geologically sequestered. This additional capability allow us to further differentiate our core microgrid Continuous power offering. We are having positive discussions with potential customers and are getting strong feedback on this add on option. Next up is biogas.
Our biogas technology is the epitome of expression turning a negative into a positive. Methane emissions caused from livestock manure and landfills accounts for 44% of daily carbon released into the atmosphere in the United States. By working collaboratively with industry partners such as CalDio, our technology harnesses harmful greenhouse gases and converts them to a renewable Carbon neutral baseload with 20 fourseven availability. Our platform is designed to utilize any source of biogas, including the dirtiest sources from landfills and wastewater treatment facilities. We offer an end to end solution for gas conditioning, Power Generation and Interconnection Services.
The addressable market is estimated at $140,000,000,000 and essentially includes Every livestock farm, landfill or wastewater treatment facility on the planet, of course, no single company would have the production capacity To serve the entire market, but the sheer size should help you gauge the value of the opportunity. During our 2020 Analyst Day, We provided a slide that shows our anticipated business roadmap for all of our growth levers and the progression segmented into phases: Manufacturing demo, demonstration projects, 1st commercialization and finally production ramp. The progression in biogas follows the same roadmap and our work with various partners and customers continue. Now, I'd like to take a moment To discuss our hydrogen fuel cells, which run on pure hydrogen and provide 20 fourseven always on power without harmful emissions. Our hydrogen fuel cells offer superior efficiency compared to other fuel cell technologies and they leverage the same core platform Technology that has decades of experience and testing behind it.
Climate experts and governments across the globe increasingly recognize Hydrogen as an essential tool for full decarbonization. Although hydrogen has been identified for decades As a clean alternative, a commercially viable technology did not exist until now. As you saw in our recent announcement, we have successfully deployed On schedule, 100 kilowatts of fully operational solid oxide fuel cells powered solely by hydrogen in South Korea, generating 0 carbon on-site electricity. Our development roadmap has our first commercial project Shipping later this year, 600 kilowatts followed by an additional 1.2 megawatts that will ship in 2022 In support of South Korea's Changwon RE100, a global renewable energy initiative led by the Climate Group to accelerate the move As announced in November 2020, Bloom Energy and SK E and C When a competitive bid for the Chain 1 RE100 to supply Bloom Energy hydrogen powered fuel cells and electrolyzers To an industrial complex, our full commercial ramp will occur in 2023. Given the progress we've made to date, We remain confident that we are on track.
I open my comments by stating that all of our growth levers are rooted in the same breakthrough Our solid oxide electrolyzer is a perfect example. It is an efficient way to create hydrogen to produce clean Fuel for carbon free power generation injection into the natural gas pipeline or for use in industrial processes. Bloom Energy's electrolyzer requires less electricity to create hydrogen than alternative electrolyzer technologies, thereby Offering superior efficiency. Green Hydrogen has tremendous promise as a carbon neutral energy solution. We can produce green hydrogen when utilizing electricity from excess renewables.
This technology is highly flexible in its application. It can be employed to create hydrogen from multiple generation sources, allowing us to adapt to whatever the macro Fuel environment is. Finally, our announcement of Baker Hughes is yet another example of what a powerful strategic partnership can yield. By coupling Baker Hughes compressor technology with Bloom Energy's electrolyzer technology, we can commercialize and deploy Integrated power generation and hydrogen solutions to decarbonize energy and industrial sectors around the globe. We are excited about our clean hydrogen offering and our growing list of strategic relationships, which will enable us to capture a portion Of the $300,000,000,000 addressable hydrogen market, Bloom Energy will hold a hydrogen focused investor event in the near future, which we expect to provide further updates on our progress and discuss details of forthcoming demonstration projects.
Information for that event will be shared very soon. In conclusion, we continue to execute successfully Our business roadmap and expected new applications, and we are well positioned to meet increasing demand for clean renewable energy Across industries, we have created multiple paths to deploy environmentally friendly energy solutions that are commercially viable. Each development path has its own challenges and opportunities, but they are not entirely independent because they are supported by the same Underlying platform. Research dollars spent and lessons learned on each development path benefit the entire system. And we are in the market engaging with partners and customers so that as these markets develop and mature, we are in front of the demand curve and not Thank you.
I will now turn it over to Greg for further updates.
Thank you, Cherilyn. It's great you were able to share the progress that the engineering, product management and commercial teams are making on our growth initiatives. This work is positioning Bloom for our future growth and most folks don't have the opportunity to see the advancement the teams are making across these initiatives. Also, the points you and KR both made about what's unique to the Bloom technology and its flexibility to address multiple market opportunities Leveraging the same platform, it's important not only in our time to market, but also the flexibility of our investments. Our energy server can support our expansion initiatives with minimal customization.
Sure, our server will be optimized for each application, But it's the same basic design of a solid oxide fuel cell that will utilize the same supply chain, manufacturing capacity and engineering teams. This flexibility dramatically changes the economics of new product and market expansion opportunities It gives us a cost and time to market advantage when entering these high growth adjacencies like marine, carbon capture and the hydrogen economy. Within our core, the growing emphasis and awareness on climate issues is accelerating the demand For clean, efficient natural gas fuel cell deployments, for resilient baseload power and our cost down efforts continue to open up markets In the U. S. And internationally, as Cherilyn described, we are building the direct and partnership origination models to access additional states and countries to capture this accelerating demand.
As the world moves forward with hydrogen, We are confident our solutions will be competitive in their inherent efficiency advantages and leveraging our current supply chain and manufacturing scale. As hydrogen adoption accelerates in markets and applications, we can allocate manufacturing capacity to meet the demand and global suppliers for our land based servers. This singular platform creates tremendous flexibility. I'll spend more time on our capacity builds later, but I thought it was important to reinforce how key this is to our investment thesis. Now let me spend some time reviewing the Q1 financial performance.
We've kept the format for earnings release and supplemental information similar to last quarter. I'll be referring to slide presentation posted on our website. We're off to a good start for the year. We had strong growth versus Prior year and our mix of accepted deals resulted in attractive margins. We achieved a record first quarter acceptances of 359, Up 23.8% versus the Q1 of 2020.
Non GAAP gross margins of 29.7 Increased 13.5 points and positive non GAAP operating income of 2,800,000 Increased $26,200,000 both versus prior year. As you can see from the revenue and margin analysis, Slide 4 of the presentation, There were several factors underlying this performance. 1st, based on our strong growth and acceptances, our product revenue was up 38.5% Versus the prior year, product margin improved 7.9 points as product costs were down 12% versus the prior year. Overall revenue growth was impacted as many of these acceptances did not have installations, either because the installation was done by our partner in Korea or for a specific customer, the installation will be performed later in the year, thus reducing our installed revenue 83.7% versus the Q1 2020. It's important to remember, most installs are targeted at breakeven.
So as we find more installation partners, it will provide the margin improvement that we saw this quarter. We are having discussions with potential partners that could provide the installation services and earn the revenue on future projects. While this may reduce our revenue, It should be a benefit to our margins and reduce our operating complexity. What may be most important in the margin analysis Is that the service business reported non GAAP gross profit in the Q1 of $1,000,000 As we discussed during our service business presentation a few months ago, The significant improvements in our power module life, cost reductions and our actions to proactively manage a fleet accelerated our expectations on profitability for our service business. I'd like to congratulate Glenn Griffiths, Dupak Shuka And Carrie Bache on achieving profitability in the Q1 and relaying their goal to be profitable each quarter As we work towards our targeted services non GAAP gross margin of 20% by 2025.
We delivered adjusted EBITDA of $16,100,000 for the Q1, an improvement of 25.9 versus the same period prior year and our adjusted EPS improvement of $0.27 versus the prior year. With respect to our cash flow and debt analysis on Slide 5, our usage of $89,000,000 in operating cash Or CFOA reflects an increase in working capital to support shipments later this year without the benefits of receiving deposits from our customer financing At the end of last year, we did not renew our 2020 PPA financing providers as they were tax equity constrained. We had already engaged with several new and former financiers to support conversion of our backlog and growth. Our Q1 did not require these new financing vehicles to be in place to facilitate acceptances, but not having them did reduce our CFOA just over $20,000,000 as we were not collecting the milestone payments we generally receive prior to acceptance. In the Q2, we expect to close these financials to support the Q2 in nearly all of our 2021 U.
S. C and I acceptances. Before I leave the debt analysis, I want to note we adopted new accounting guidance for 2.5% green convertible notes Due August 2025. Under prior guidance, we were required to allocate the principal between debt and equity because of the embedded conversion features.
Beginning in
the Q1, we'll be accounting for the entire unamortized balance of debt. While this increases the debt balance on our balance sheet, it does not change the amount we owe on the notes and we feel it more closely aligns with our capital structure. There is an impact to interest expense as we are no longer amortizing the debt discount. And the first quarter results best reflect Our current quarterly interest expense run rate. Non GAAP operating expenses of 54,800,000 Have increased $6,000,000 versus the Q1 of last year.
The increase was driven by investments in our on end originations capability both in the United States and as we announced a few weeks ago by building our international resources under Aziz Mohamad. We also continue to invest in R and D capabilities to support the technology roadmap. I would expect as we continue to invest in these areas, there will be increasing operating expenses in the coming quarters. While we only provide booking and backlog annually, In our early stage pipeline, we are seeing an increase in commercial momentum for our current product offering. Our always on energy server offering 20 fourseven resilient base load power with a greater percentage of large megawatt opportunities in that pipeline.
Pipeline reflects the changes we've made to include new states, international and focus on larger transactions. We are encouraged by this progress and look forward to moving these and additional opportunities through the pipeline and into bookings. Our supply chain team continues to execute in a challenging environment. Even with the significant impacts of COVID, especially in India, And the logistic disruptions from the Suez Canal blockage, the team has successfully secured The inventories we need to run our factories. We are working with our suppliers and logistics providers to proactively identify potential disruptions And mitigates, we are experiencing some increased costs for expediting airfreight and safety stock.
We are mitigating most of these increases through logistics optimization, but we still expect cost increases in the range of 1% to 2% of material costs. We expect these costs to be temporary but necessary to meet our customer commitments. Overall, we are pleased with our performance in the Q1. As I said at the end of last year, we believe these financial and operating provide meaningful proof points on our growth journey. Now let me turn to manufacturing capacity investments.
It's important for me to point out that we currently manufacture our fuel cell stacks in California and do the remaining manufacturing and final assembly Our facilities in Delaware were constructed to support over 1 gigawatt of annual production And we can scale quickly by adding additional manufacturing employees in that attractive market. In fact, With minimal capital investment and the right labor planning, we can increase our capacity to nearly 2 gigawatts of annual production there. In addition to Delaware, as our Korean volumes continue to grow, we are building capability in our joint venture with SK E and C to support not only that market, but also help us enter additional markets across Asia. Our pressing constraint is unlocking additional capacity is production in our fuel cell stacks at our Sunnyvale, California facility. We currently have about 200 megawatts of Bloom 5.0 revenue stack manufacturing capacity there with no remaining additional space to increase capacity To support our growth expectations and with the introduction of Bloom 7.5, this quarter, We secured a 154,000 square foot facility for additional stack manufacturing capacity.
The facility is in Fremont, California to our engineering team, which we think is important. Since this coincides with our introduction of the next generation of technology, Bloom 7.5, We are ordering the tooling required to build this platform. As I discussed previously, we're investing 50,000,000 to 75,000,000 To bring additional 200 megawatts of capacity online over the course of the next year as we operationalize manufacturing of Bloom 7.5. The facility we've secured is large enough that for a total investment of $200,000,000 we can increase the capacity roughly to around 1 gigawatt Our introduction of Bloom 7.5 remains on track. We are seeing the performance that we We will continue to reduce that product into additional field sites.
We will cadence balloon 7.5 manufacturing investment With the demand for additional capacity, we believe this could be an attractive return profile to allocate capital. We have the additional confidence given the stack capacity can be utilized across applications. Given the inherent advantages That we have with our platform, we believe that our investment strategy, which is to focus on technology innovation of the platform, manufacturing excellence And the distribution of our product in our core and adjacent markets with meaningful partnerships is the most efficient value maximizing approach. From an investment thesis, the diversification across end markets provides us with significant opportunity to de risk our investments. That's what gives us such strong confidence to make the investments in technology and additional manufacturing capacity.
On Slide 7, we highlight our 2021 outlook and we're reaffirming all of our 2021 targets. For revenue, after a strong start, we maintain our expectation to be between $950,000,000 to 1,000,000,000 Based on our mix of expected acceptances and increases in installations over the next several quarters, we expect Total year non GAAP gross margins to be around 25% and positive non GAAP operating income Of roughly 3% of revenue. As I previously mentioned, we expect to continue to invest in our sales and marketing and our research and development, Increasing each quarter and I would expect operating expenses as a percentage of revenue for 2021 to be similar to 2020. We are also maintaining our outlook on CFOA as approaching positive. While we do not provide quarterly guidance, there are a few aspects of the Q2 that I wanted to highlight.
All of these are accounted for in our 2021 framework and do not change our yearly targets. On revenue, I would expect 2nd quarter revenue growth to be similar to our annually targeted revenue growth, with inflation revenue more in line with the 2020 as a percentage of revenue. Gross margins may be sequentially lower Due to one large transaction in the quarter that was booked 18 months ago and has lower product margin than our norm, as well as the dilution from increased installations. It's likely that when incorporating second quarter into the first half twenty twenty one results, Non GAAP gross margin percentages will be in line with our total year expectations. These factors combined with an increase in operating expense Will result in sequentially lower operating income in the 2nd quarter that are all factored into our full year targets.
In summary, we had a strong operating performance in the Q1 and are very confident in our future. We're gaining momentum in our commercial operations and we're seeing opportunities with new customers in new geographies. We are investing in our technology, manufacturing and front end originations teams. Our service business has improved As demonstrating in its results, and we are reaffirming our 2021 framework. We feel Bloom Energy is well positioned and has a product team To be the leader in distributed generation and we're doing this with real focus on disciplined financial management and operational excellence which creates value for our shareholders.
With that, operator, let's open up the line for questions.
Thank you. We have your first question from Noel Parks
Hi. I wanted to touch on the Baker Hughes, the new agreement. I'm more familiar with the company's sort of Legacy Oilfield Service Business, their gas turbine business. And so is Is there an expectation that they would ultimately have direct involvement in manufacturing? And is the gas turbine business sort of like the main thrust of the opportunity, sort of utility scale projects?
No. So, this is KR. There are 3 ways to think about this potential collaboration that we are looking together that can be very strategic to both First is, if you look at the if you look at Bloom's Hydrogen electrolyzer project. And if you look at the compressor line that Baker Hughes has, They can take that electrolyzer, use the Baker Hughes compressors and inject the hydrogen into the pipeline and they're very big In the gas pipeline compression business and therefore thereby offer a blended fuel to Right. So then that blended fuel can be used both by Bloom's fuel cells As well as by Bakar uses advanced in gas turbines to provide Baseload and peak load and therefore provide both our end customers with tremendous opportunities for microgrid That offer the 3 things, cost predictability, the resiliency and the reliability using a microgrid, and the
Great. Thanks. That clarifies a lot. And I guess I want to turn to the Marine business. It sounds like it's at least the way you presented today was more sort of front and center.
And I guess, could you just talk a little bit in the market about So the replacement cycle, I guess, I'm thinking of the ships that it might be longer than, for example, Commercial vehicle, heavy duty, ground transportation application. So, I just trying to get a sense of maybe where things stand with
the business. And you did, Of course, we
have the direct development agreement, so with Samsung. So any updates on that over the last quarter or so would be great.
Yes. Hello, Cherilyn. Thanks for the question. We are in the midst of working with Samsung. We are going through The testing and the certification processes, we are talking to other shipbuilders and customers and potential partners as well.
So there is quite a bit of activity. As I mentioned in my remarks, we'll go through the testing phases And we'll be in the position to start showing designs to customers in 2022. And ramp up would likely be in the 2023 timeline. It's not an industry that is going to be extraordinarily rapid. And we think by putting the time into it To really work with the right players early, we're really ready to start meeting their demand, really the 2023 timeline from a commercial
We have your next question from Michael Blum with Wells Fargo. Your line is open.
Thank you. Good afternoon, everybody. Hey, Michael.
So you announced a series of new hires Globally, so I wonder if you could talk about some expansion plans in these new geographic regions and what these Global initiatives include all the different applications you're developing or are there specific applications that you're targeting for different markets?
Yes. Thank you. We have made a series of announcements regarding our international We have our office open in Dubai, our leader appointed with Aziz Mohammed and a series What we believe are the industry best leaders in key markets and we have leaders established markets that we've announced in Germany, U. K, France, Australia and clearly the Middle East, as well as appointments in Southeast Asia. So that gives you an idea of where we see particularly interesting Market inroads.
While we're assessing those markets, our goal is really we have really viable, a Strong core business today, but it will start both solid oxide fuel cells for resiliency to help with time to power and to really chart a path to clean energy solutions in the future. So that's where we start. Certainly, longer term, all of the growth levers that I talked about today, we see widely applicable in most of the markets in which we serve. So to wrap up, the markets that are most interesting to us are the ones that have viability for our core I feel so offering today and inroads into the growth levers for tomorrow.
Great. Thank you. I guess my other question I wanted to ask was just about the average selling price, obviously down year over year. And I just Want to get a sense for how we should think about how that should trend over time, maybe throughout this year or just any kind of timeframe you're willing to talk about? Thank you.
Yes. Hey, Michael, it's Greg. So when you look at the slide that we've got in there, you got to take the selling price and take it apart 2 ways, Right. Because one, we include both there, the product cost and the install. So knowing that we didn't do the installs this quarter, you take that revenue as well as the cost So when you take it down year over year and you can extract the install out of there, there really wasn't a lot of difference in our ASPs given the mix of deals we had this quarter year over year.
And you can deconstruct that just taking the total numbers Dividing that by the acceptances that are in there. Listen, over time, I would expect is the easiest way I can think about it is In order to get to that 25% to 30% revenue growth numbers that we talk about, you're looking at about 10 points more in volume growth In order to get there. So, we're always targeting about 10% to 15% down on cost. So, that gives us a bit of an Expanding margin, if we hold that. But over time, we should be pretty well close to our cost down targets in our ASPs because that's a way to open up More markets for us, which we think is important now that we've got our product margins where they are, where we want them to be.
We have your next question from Michael Weinstein with Credit Suisse. Your line is open.
Hi, KR, Greg. Hi, Mike.
Hey, Greg. You mentioned that you were seeing some traction And some of the new markets that you guys are targeting this year, obviously, you're not going to update the backlog In the middle of the year, but maybe you can give some more color on what you're seeing and the degree of improvement or degree of excitement that you're seeing in these new markets?
We are
seeing some
interesting momentum commercially, In the first place, you begin to see that in the numbers that I look at is really around the pipeline. We think now that we Have the opportunity to expand our sales force, both in the U. S. And international. As we start to talk to More and more companies, we find them to be excited about the product that we're bringing, which is really around the resiliency and the cost and all the benefits in our machine.
So, we're not surprised by the fact that we're seeing a lot of commercial momentum there. It's exciting every Monday when we get together and we go through it. And the trick here, right, is to stay focused as a team and move those opportunities through the pipeline with discipline, Which share a line is built out and take those in the bookings and I'm looking forward to sharing that strong backlog with you guys We report at the end of
the year. Great. And could you talk
a little bit about Any potential for other JVs as additional partners as you move forward perhaps with some of these new products?
I'll kick that one over to Cheryl Lynn.
Yes. So, we do see that Baker Hughes is a great example of the type of partnerships that we wish to pursue. Having a partner That is really has the depth of expertise in their segment and vertical and potential geography, along with Value added components of a full solution make those types of partners really a great fit for us and a great win for them. So we do have a variety of partnerships we're pursuing. And as soon as both parties are ready, we'll be putting out more announcements.
Michael, let me add to that here the following, right. If you think about the multi $1,000,000,000,000 opportunity And if you look at the scale of what is going to happen, companies that believe that they can vertically integrate and grow Are just not going to make it. It is going to take a variety of technologies And each one is going to sit in certain areas. And this energy market is so diverse. And there are so many players in this field that understand their particular customers very well and their needs very well.
So, Boon's strategy for growth is finding win win collaboration, win win partnership To, A, serve the customer extremely well. B, To create that synergies between the two companies, such that 1 plus 1 is greater than 2. So what the reason we are excited about Baker Hughes It brings that kind of an opportunity to the table, very similar to what we did in Korea. And yes, you are going to hear more in the near And they will be very similar to the principles that I just laid out to you because that is our strategy.
We have your next question from Stephen Byrd with Morgan Stanley. Your line is open.
Hi. It's Dave Arcaro on for Steven. Thanks so much for taking my questions. Hope you're doing well.
Hi, Steve.
I was hoping that you
might be able to give just
an update on your latest thinking for the carbon capture prospects here. Partner announced something commercially and then also kind of early aspirations or thinking on the cost of that technology solution.
Yes, great. Thanks. We are in demonstration of Our carbon capture technology now, and we look forward to talking about that more publicly towards the back half of this year. We really see this year as being a demonstration phase and looking at continued customers and projects into 2022, and we'd be ramping in the 2022 likely back half of that year as we see things really ramp up. So we are in that demonstration phase and we are getting really great input In that, we give a great option for where the fuel cell is already a fit, but the ability to separate and actually Pull the carbon out of that solution is really additive to the value proposition.
So that's we again I see continued interest and we'll see what next year brings. And I'm going to also ask KR to weigh in.
So, Stephen, if you just look at our joint press release between Baker Hughes and Bloom today, We are talking about that as one of the potential areas of collaboration. Why is that relevant, right? Baker Hughes is in the business of Serving the gas industry with their compressors for compression. They are in the business of serving the oil and gas industry with what they need. And if they can help that industry decarbonize using carbon So using the same technology and the same customer base they have, combining that with our CarbonStrip This would be an example for you in terms of how we are thinking about doing this.
Going back again to my point, it is going to take Significant large collaboration to make things like this happen. And what we are doing now is Validation in our own facilities and perfecting this technology, Such that it can be then plugged and integrated with these other things to serve the customer.
We have your next question from Colin Rusch with Oppenheimer. Your line is open.
This is Brandon Keaton on for Colin. Just first, for North American customers, can you give us a sense of how the
sales cycle is trending from
And we have a sales cycle that is roughly 9 to 12 months, which I think we've mentioned in the past. It is a consultative sale And we really partner with our customers. What I can say is that as we look at where we are this year, Typically, our business has a seasonality to it. It is typically a larger back half of the year where we see the larger uptick. But when we look at the back half this year with what we have in our pipeline, it has never been healthier than it is today.
And we're really seeing the consolidation of factors of increased interest and actually wanting to Check themselves for resiliency. It's less of a nice to have and more of a need to have. We are seeing a lot of great upside in Expanding into additional U. S. States.
In that area, we can now work with customers to expand current customers in those states, As well as we're actually talking to customers in these states that we haven't talked to before. So the results of all of those three things are really additive We are directly seeing the impact of that in our pipeline and we're really excited about this year.
We have your next question from Paul Coster with JPMorgan. Your line is open.
Yes. Thanks for taking my question. I think, KR, The Baker Hughes partnership sounds very exciting, but it also sort of marks a departure from a prior strategy, at least it sounds like it, which is that The one size fits all type of solution set that you'd have, the beautiful Bloom Energy Servers outside In parking lots, in San or wherever, very modular, very scalable Business and it sounds like a huge you're going to start to go the more sort of installation specific route. Is that correct? And if it is correct, is it scalable on The number of projects, finite number, isn't each one a very complex sales and lengthy sales process?
So, Paul, thank you for that question. We clearly I think your question illustrates that we clearly have not articulated Our vision of what the product looks like well to you all. It couldn't be farther from what you said. What I've always said is that the core product is modular Copy, exact, always on. And I've used the example of the computer chip.
If you just remember the chart of the computer chip, it's the same chip. But that gets integrated to so many applications. The input, output, we have talked about us being the Swiss Army knife, Being able to adapt to any input on the inside, any output on the outside, right? So what we're thinking here, Paul, is Our core product does not change when we integrate something with what we do with Big Red Hills. But Imagine our core product and a variation of that being hydrogen.
When that hydrogen comes out, How is that going to get compressed? How is that going to get liquefied? How is that going to go into a pipeline? Is that core to us or is that context to us? It is context to us.
It is course to Baker Hughes. Why would you not marry core and core and provide the customer what they need We are not changing anything in what we do. And again, in this particular case, it will not change the model because we will ship the core product. They will integrate what it needs to get integrated in this particular example. So it is the reaffirmation of We are a platform onto which you can pick on so many different apps.
If you want to think about your iPhone, we are the iPhone and you can pick a lot of apps
on that. And there are
so many app speakers this brings in and we are delighted. Okay. With that, I just want to say, we are running out of time. We are 3 minutes past. We apologize.
Good evening.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.