AGM 2019

May 9, 2019

Slides

Good morning. Before we begin, I'd like to ask everyone to join me in With the Annual Meeting of Shareholders, Plug Power, please come to work. It's a pleasure to welcome you to the 2019. I'm George Magnini, Chairman of the Company, and I'll act as Chairman of Smedes. Now I'd like to introduce Andy Marsh, our CEO and my fellow In addition to Andy and I, we're fortunate to have services of some distinguished directors, Jeff Willis, Maureen Elmer, Snyder, Gregory Knowsetz Gregory Graves and Jonathan. Of my notes. Right. Okay. Jonathan Silver. So, also serving as a Director, but unable to be with us today is Johann Minowrath. The draft said no, it's plural. It's not plural in any language right now. I'd also like to introduce our executive officers, Paul Middleton, our Chief Financial Officer Gerry Conway, General Counsel Keith Schmidt, our Chief Operating Officer Tim Cortez, Vice President of Hydrogen Energy Dustin Skidmore, our Vice President of Engineering Sanjay Suresh, our Chief Strategy Officer Teal Hoyos, our Director of Marketing and Marty Hull, our Chief Accounting Officer. Only record holders of shares of Plug Power common stock and Series C redeemable convertible preferred stock as of the close of business on March 22, 2019, and their newly appointed proxies may address the formal portion. Further, all comments and questions should stockholders and proxy should be addressed to the share. Now proceed to formal business of the meeting. Secretary does inform me that notice of the meeting was sent to all stockholders of record as of March 22, 2019, record date and only stockholders of holders of record on that date are entitled to voters. Complete list of the shareholders of record as of March 22 and certified by an officer of Broadridge will be available and open for examination by any stockholder during the and lists each shareholder of record as of the close of the business on March 27, their address and the number of shares registered in their name. The list is located at the registration table and they'd be inspected by any stockholders. Company has designated Tom Thai to serve as the Independent Inspector of Elections. And immediately prior to calling this meeting to order, I confirm the following, Mr. Todd. As of the record date, there were 243,000,000 shares of common stock and 2,620 shares of Series C Redeemable preferred, convertible into 2,782,000 shares of common stock. Time. Outstanding and entitled to vote, accordingly 121,953,000 represent Quorum substantially in excess of that are represented at this meeting either in person or by proxy. And I therefore declare that a quorum is present. For simplicity, when I refer to shares of common stock that includes the Series C redeemer. There are 4 orders of business on the agenda. 1st order of business is the election of 3 Class II directors for 3 year term. Such term to continue until the Annual Meeting of Shareholders in 2022. And until each director's successor is duly elected and qualified or until his earlier resignations. As set forth in the proxy statement, the Board of Directors nominated George McNamee, Johan Rolf and Gregory Ganoussis as Class 2 directors. The affirmative vote of a plurality of the votes cast of this meeting is required for the election of any director nominee. Each shareholder is entitled to vote for or withhold his or her vote from the nominee and cumulative voting is, of course, not left. 2nd order of business is approval of an amendment and restatement of the company's 2nd amended and restated 2011 stock option and incentive plan. 3rd order of business is the approval of an advisory resolution regarding the compensation of the company's named executive officers described proxy statements. The 4th order of business is ratification of KPMG LLP as the company's 2019 independent auditors. The affirmative vote of majority of shares of common stock present in person by proxy and entitled to vote on this proposal is strictly concerning the form of activity. If you have a question, please raise your hand. Please identify yourself. Seeing no questions. I'm seeing that there is no further discussion on the matters to be voted on in this meeting. I now declare the it's open for a vote of the stockholders on the Board of Directors. We'll assume that all stockholders who have signed a return to proxy card even though present intended their shares proxy may of course vote. For those shareholders or their proxies who wish to vote by ballot, please raise their hands. At this time, the Inspector of Elections will inspect the legal proxies and public results. We'll now announce results of the 4th form of Inspector of Elections that are plurality of the votes cast at this meeting, either in person or by proxy, have been voted in favor of the election. George Mackenzie, Johan Minow Roth and Gregory Knaussis as Class 2 Presidents. Quarterly, they are elected for a 3 year term. Such term qualifying or until his or her earlier resignation. I've been further informed by the Inspector of Elections that a majority of shares of common stock have been voted in favor of the amendment restatement of the company's stock option 2011 stock option and incentive plan and in favor of the resolution regarding the compensation of the company's named executive officers and the ratification of KPMG LLP as the company's 2019. Accordingly, these proposals is approved. There being no further business to come before this meeting, I hereby declare this meeting Thank you all for your participation. And I now would like to ask my colleague and partner, Andy Marsh to take the podium. Well, good morning, everyone, and thank you for showing up to the Plug Power Annual Meeting, both those who are here in person and those on the webinar today. So wrong one, I'd like to jump to the punch line to start in the first slide. We created the first market for hydrogen fuel cells. This isn't a statement that Plug Power believes. Yesterday, we had a leader in the industry from one of the largest industrial gas companies talk to our Board and one of the items he brought up was we created a business in an industry where one didn't exist. And we've done it with some of the premier customers in the world, Walmart, Amazon. We built them a system, not only just the fuel cells that power their electric engines, but also we built the hydrogen stations and provide the aftermarket service. This is an incredibly difficult application, quite honestly much more difficult than the Class 4 to 8 trucks that we're looking to pursue in the very near term future. These products run at -thirty degrees C instantaneously go out to 40 degrees C. We operate in an environment with no shock and vibration and we've been able to build a product line, build a business that we believe we can leverage into other applications sooner rather than later. We've put a lot of money to build this business. We've built a technology set. We've built a product set. We've built a customer base and we're beginning to see the benefits of all that work and all that investment. Last year, we did over $185,000,000 in gross billings. We achieved EBITDAS breakeven for the first time in the 4th quarter. And in 2019 we're going to continue to grow. Business will achieve between $235,000,000 to $245,000,000 in revenue and the EBITDA at breakeven. And you step back and say, what have we done to achieve these goals? And the numbers are staggering. We have more product in the field than anyone else. We've deployed and shipped over 25,000 products. Today, we've built 80 hydrogen stations and are the largest user of liquid hydrogen, not only in the United States, but in the world, surpassing NASA last year. And as I've spoken, I've been up here for about 2 minutes, we've done about 40 hydrogen fuelings. And overall we've done over 19,000,000,000 fuelings in our lifetime. We are pioneering this industry. And in material handling, it's a big opportunity in this niche market. We've been primarily North American focused and we view that the annual servable market for this industry is over $4,500,000,000 We have a lot of activity going on in Europe today. I'm just going to talk about quickly the meeting I was in Europe at BMW at Leipzig, which was a public meeting about 3 weeks ago. And at that meeting and this is a facility where they built the I3 and I8, the electric vehicle offering. The General Manager of the facility said, I wished I built fuel cells because I think fuel cell vehicles are superior. They also run Plug Power Sport Lift Trucks in facility. They had people from Porsche there, Daimler there, from Volkswagen there and they talked about the advantages of fuel cells operating their material handling equipment. It was I was sitting back astonished. I've never seen an event like this in the United States. They had all their competitors there. They had all their suppliers there and they were saying fuel cells made a difference. We see great opportunities for growth in Europe. I've talked about that we should see significant growth in the next 18 months, but it's certainly a main target of our business as well as the whole global market of over $30,000,000,000 I just want to go over to folks what are the products today. And I mentioned that we sell our products under Jeng and includes the fuel cell products that go into the forklift truck, which is electric which is driven by electric motors. We provide the hydrogen we built the hydrogen fuel cell system for generating, developing and providing the hydrogen as well as aftermarket service and a great deal of work within our business. And I've been told by some of our customers over and over again, when you look at the logistics industry, how we leverage the Internet of Things, how we manage automatic software downloads, how we leverage artificial intelligence is ahead of every logistics supplier they use. But our customers don't do this just because it's green. They save money. It's the productivity savings. It's the elimination of battery room. It's elimination of the operational space, which can either allow them to add more SKUs to offer their customers as well as the possibility of reducing the number of distribution centers they have to build. And we've done this, as you know, with prestigious customers around the world, household names, Walmart, Amazon, BMW, Volkswagen, Honda, General Motors, Kroger, IKEA. This customer said, I think it says a great deal about this business and its opportunity just in this small niche $30,000,000,000 market for material handling that we've been able to prove that we can operate 20 fourseven a day providing service and products that work as many hours in a year as a car will win its lifetime. And it's really a differential advantage that Plug has. When you look at Walmart, we've been doing a long time, done 38 sites with Walmart. We've today they have 8,000 of our products. Few years ago they announced a press release that they're looking to do 40 more sites with us in the near term. Product performance, I am quite proud of. Today, as it has been for months months months months, these products have been up and working 99% of the time, much better than the forklift truck fleet that they power. Walmart does this for simple reason. It saves them money. They move about 8% of pork goods in a day because they use plug power products instead of batteries. Amazon, as many of you know, is another big customer. And we engaged with Amazon in 2016. We've done over 20 sites with Amazon. They have over 4,000 units. Amazon's value proposition is a little bit different. Amazon is able to reduce the amount of forklift trucks they actually have to use in the facility. We've seen numbers like 15% to 20%. And when you think about that productivity savings, it makes sense. And when you're dealing with Amazon, by moving goods faster, you're able to deliver to the house faster and help them meet their one day goal delivering products to people. We see great opportunities with Walmart and Amazon in the logistics market well beyond our material handling. We're looking at items like robots and delivery vans and a whole multitude of different applications, which I'll explain a little bit more in this presentation, why fuel cells make sense. Finally, to kind of wrap it up in material handling, it's really simple. So why do you do this? Today, you save money. And when you look at that savings and the savings are for large distribution centers can be well over $1,000,000 a year. When you look at it, a lot has to do with labor savings. 79% of the savings come from labor, about 11% comes from reducing their forklift truck fleet. Strong value proposition, pending upon how customers buy, they can have instantaneous payback or payback in 2 years. And that's why this business has been successful. For this $30,000,000,000 opportunity, about 5, 6 years ago, the Board and the management team sat back and decided, today we can build a real viable market material handling, but we always view that as the beginning, that there was an opportunity well beyond that. And that the work and the investments we've made in material handling to understand from a technology point of view how the day we make our own membranes, we build our own stack, we have products which have the highest or have the highest power density in the industry. We've reduced our cost by over 70 percent during this journey and we're on a 25% learning curve here to drive down cost. Every time we double the number of products in the field, costs have come down 25%. And we've operated and this number is astonishing, over 200,000,000,000 hours. There's one thing with you have the technology and you're working in these very, very difficult applications. And I think I've said those who've listened to previous talks, we've done this in incredibly difficult environment. You would have told me 6 years ago this journey of how tough this environment was. I would have sat back and probably re thought about what direction we took because it's really hard. But let me tell you today, it makes these other markets much easier. We've had experience with FedEx putting vans on the road. Products just run. They don't go through nearly the considerable environmental characteristics we have to live within a distribution center or manufacturing facilities. These other markets and transportations where we're heading, we see that the potential long term TAM for this entire business is over $300,000,000 This, even though we've grown rapidly over the year, this is a considerable growth story and the hydrogen industry is about to take off and Plug has been the leader and the pioneer of developing it. And you want to and when you think about transportation, I'm not going to make the argument why electric vehicles are better. I believe Elon Musk has actually done a really good job in convincing people they're more reliable, ultimately they're lower cost, fewer parts, better for the environment. There's a place where fuel cell vehicles really make the most sense. And I look at it as really simple. If you are in light material and and the application which really uses the assets, think about delivery veins on the road 16, 18 hours a day. So what advantages do fuel cells have? For certain payloads, for certain range and operations, you can put twice the number of goods in a Class 4 to 6 delivery van. This isn't data that I came up with 1 of the largest automotive manufacturers in the world in trucks provided me this data, which allows them to move twice as many packages. Additionally, think about vehicles, want them on the road all the time. When you think about fleet vehicles for commercial use, you have 10 times faster fueling and you get twice the range. Really differential advantages of fuel cell powered electric vehicles for transportation versus batteries. Additionally, when you start thinking about infrastructure and you start thinking about tether fleets, fleets that come home, When you get past having 10 vehicles, commercial facilities, the infrastructure for fuel cells are competitive and when you go past 10 units, more cost effective than putting in battery charge. And then let me take you to the future. I know in my lifetime, so I plan to live a long, that I'll be riding around in an automatic guided vehicle. I actually use one today with my car. It could drive me down to almost now be touching it from Saratoga Springs to here on Route 87. But when New York City in the next 10 years, the taxis and the vehicles are all automatic guided vehicles without drivers. Fuel cells for fleet vehicles are far superior solution because you can better use the assets. And just like Amazon in warehouses can eliminate forklift trucks, drivers owners of the vehicles on the road will be able to eliminate number of cars and they'll be working all the time and be able to provide more goods than you can get in a battery electric vehicle. So the future is coming and Plug Power is part of that. So if I go on and I take a step back, how are we going to do it? It? And we've actually spent a good deal of time thinking about how we scale a product line so that we have a great competitive advantage for a distinct competitive advantage forever. And we've looked at a wide variety of applications from ground support equipment, forklift trucks, delivery vans, to 1 row vehicles. And we've come up with 4 basic vehicles. First, the ship this quarter, which actually provide us a vehicle to continuously provide our customers higher power density, more reliable products as well as make it simple for them to use. So why do a lot of people use battery electric vehicles to debt instead of fuel cells. To be quite honest, they're easier if you just put them in and it works. Don't have a lot of even though fuel cells These fuel 4 boxes make for a user to deploy in their application the same simple experience. I can take Plug Power's 30 kilowatt ProGen engine, take that box, put it in your truck and can treat it like a battery and not have to do a lot of external work to sell. And that advantage takes a step back. It provides you more flexibility as you can do it less. You can drive the asset to use this long, build a simplified infrastructure. That's how we're attacking. But to do this right, we need technology. And last year, we purchased a company which was composed of General Motors engineers in Western New York where General Motors dislocated those individuals and they went and started a company. And they developed a business to build members. And like many folks we talk to, they want to work with Plug Power because we actually build prop. And we today, when we're doing our Board meeting today, when we look at our MBA performance versus some competitors' performance, we were getting about 50% more life out of our 2MPA. If you think about that long term from a shareholder perspective, it means less warranty cost. Customer perspective, it means I have less downtime of my equipment. It's a real distinct advantage. And Plug Power, I think, has been incredibly efficient in thinking about technologies to acquire and develop, which we can integrate into our product offering, which keeps us at a competitive advantage versus the competition. We're doing this work. We demonstrate this work at FedEx. And last week and maybe 2 weeks ago in Washington, the DOE holds an annual and brings in many projects to talk. And this project actually was the star, what they call the annual review. FedEx start came up and said, we've never had a program that ran as smoothly and efficiently as this project. When you take a step back, think about what I said earlier about this application is much easier. I have to say it has required very little development effort using our ProGen engine. FedEx hits 40 percent, 50% for range. It's safe and it really has led us and I talked about on the earnings yesterday, we'll be making a significant announcement this month in the 1 Brodie space. A lot of that has to do success of this FedEx program demonstrating to the world that Plug Power can offer superior product versus our competition. These are big markets that are going to grow. Now we've been, I'll say, shy about promoting this business in the past. We wanted to make material end right first, and we have. This year, I think Q4 of last year. And today, the TAM is nice $30,000,000,000 There's an opportunity mid term to grow this business significant opportunity significantly. It's not just plug power is a leader. Long term, this is a large market opportunity for these customers, for our investors that I think is we're at a point in transportation where the world's changing and Plug Power has most experienced than anyone else in the world and are well positioned to take advantage of it because all the work, all the investment we've done over the past years. So let me bring you back to today. We're going to do $235,000,000 to $245,000,000 in gross billings achieved. We'll be even breakeven the entire week. In the medium term, in 2022, we will continue to grow this business and you'll start seeing the financial leverage as we shift and deliver products and provide better service to the bottom line. By 2022, we expect revenues to be between $450,000,000 to $515,000,000 dollars at 18% to 22 percent EBITDA. And how should you manage and look at it? As you see us deploy more and more material handling equipment and you see us announce deals for on road vehicles during the year, you'll know we're on track. So kind of in conclusion, we have a badge of honor that no one can take away from us. We created 1st market in fuel cell industry and material handling. In this market, you'll see throughout the years as you can see through the last slide that there is continual opportunity to grow in this $30,000,000,000 niche opportunity as well as opportunities to expand margins to ship more and more products. When I take a step back though, the future is even more exciting, leveraging our ProGen engine, leveraging all the investment, all the activities we've put into both technology, customer acquisition, building the business today, we see meaningful opportunities to leverage this work to build a bigger and bigger and bigger. And we're just at the right place as the transportation industry starts to move into electrification. And over the years, we've built the team and we'll add to the team in time because as you get bigger, you need more and more talent. But this team today is a team that brought us to $203,000,000 this year and has the dreams, aspirations and capabilities to continue to grow this business from here. So I want to thank you for listening to the presentation today. And I'm opening the floor for questions. Yes, Michael. Let's grab we have the webcast, Michael. So you have to talk. Michael? So Michael, let me take a step back. Let me take a look. I'm going to give you an example why and look, I'm a huge Musk fan, but he's not right about everything. And I'll give you an example. So in the Port of Long Beach, they have a garage which supports 50 Class 8 trucks. They have enough power that goes to that to support 1 Tesla Class 8 truck. I sat at a meeting listening to Daimler, BMW, GM talk about the commercial vehicles on the road. And when you take a step back, listen to them, the issues with how you perhaps the utilities bring all that power to facilities, they tell me it takes 3 years at a minimum. Even when you go to California, when they talk about the bus fleets, they realize they can't bring the power in to electrify buses' efficient. So I would say that you're driving less than 100 miles a day and you can afford it, buy a Tesla, buy a battery electric vehicle. If you need range, there's a basic mathematics, Michael, when it comes to cargos in the commercial markets. It's not going to be addressed with batteries. As I mentioned in my talk, one of the largest automotive companies in the world came to our facility and told us, here's the range and you can put 2x the amount of packages on a truck using a fuel cell. And quite honestly, that's what they're seeing in China, who has more battery electric vehicles than anyone and actually beginning to turn back and come to commercial vehicles vehicles and recognize that fuel cells are the So, reason I hate to agree with Mike, What has to do with Michael's statement is today, one country in Europe has over 135 stations already available for usage to cover the whole country. And in Europe, in general, building a hydrogen fuel station is much more significant next to the activity going here on California. When I talk about our large customers, we've been talking them about many times they say our customers actually almost exclusively we have actually a fuel station in place today that we've built into the hydrogen infrastructure. So when we think about those relationships, it's how to use the present 80 infrastructures that BUG has built, which will be over 100 by year end and how to help use that to leverage and facilitate other markets. Look, if you think about, Michael, the recent announcement I'm offering Sande and Sherry Stone. We, Board and the management team, recognize that we want to add higher level of sophistication with financial investors and book dynamic models that were successful in solar. Sanjay has over 15 years of experience building solar PV. First analyst actually to buy and has in relationships with the financial community. So we're very sensitive to that. And we're working together packages and tell our story in a way and makes it attractive for financing business. So if you look at the goals I set for the Board this year, had discussions. Really simple, meet our financial goals this year, make sure we have strong financing packages in place across the business, deleveraging to take advantage of all these growth opportunities. That's a business that hit on one of the three areas that we spent a lot of time bringing out focus on. We look at when we look at the logistic market, we recognize that there's going to be more automation in warehouses and in manufacturing facilities. And today, probably we probably power almost 2,000 automatic lighter vehicles with many of our large customers. We do have a technology path to actually bring the power back. And we're the level we're thinking about to John is around 1 kilowatt. And that roadmap, we're kind of refining as we talk to OEMs and potential customers for that offering. So first, they did not say the downtime in the fuel cell. The issues actually all had to do with the supplier of the vehicle itself. And as I mentioned in the earnings call yesterday that FedEx is working with us to find another supplier. They highlight let me be clear, they highlighted that that program, that project that Plug Power Sport performance better than they've ever seen any prototype. It was actually pretty brutal to acquire We actually bring it open in our facility. So we have a truck that delivers the hydrogen. We do that about once a week. So it's a as you think about that, it's actually in line with a lot of how we think about using resources of hydrogen that have been developed centralized. We actually do this with Southern Company where we use one of our customer sites, fill up trucks with gasoline that with hydrogen and bring them to the backup power sites. We're actually using the same model with FedEx Air Force. And when you think about expanding the product line, pipe, expanding the business, the more we can leverage the Hydrogen assets and the investments that are already bootcased, easier it is to grow and expand this business. So the more hydrogen stations we have, the more interest we have, it helps you move into delivery vans, it helps you move into ground support equipment, it helps you move into smaller sites. We're seeing all It actually helped me accelerate my development, so I have lower costs and better performance. If you think about the value proposition, where we work best is in heavy asset utilization applications. I think that to move deeper into retail, like Home Depot has excuse me, has about 6 forklift trucks. As we work through how to bring down the cost of hydrogen infrastructure, and there is work going on, I think it's a while out. That's when the value proposition could make sense. It's not really the cost of fuel cell. And you can actually see from a CapEx point of view that over long term, it's much lower cost because they have issues with not managing them. And if you have 16 people, youngsters not plugging in batteries, overcharging batteries, it's a pretty dirty process. But until we bring down the cost of delivering items into a site like that and this hub and spoke up, which we do at Albany Airport, could be viable there. We still have to simplify fuel infrastructure. I believe cars are further out. I think that gaps today were associated with vehicles and commercial fuel fleet vehicles. And we've been talking to people about potential in building stations. It's not core to a business model. But I think I know the cars are viewed as exciting part of the market. But fuel cells, I think, for today because why did we go into forklift trucks because we can see where we can see that. When we look at commercial vehicles from the 4th class class 8, we can envision where value is added to that. When you get to the point where it's more of a sharing automatic die of cars, that's where fuel cell cars really take off. So I think a positive to make you better, I think a positive is the investments that the industrial gas companies have announced. So you have to have a few but there's one thing going to the station, there's another having the fuel available. And over the past 3 months, Air Products, Air Liquide, Praxair have announced a 50% increase in the hydrogen capacity. You're also beginning to see large oil companies and large utilities becoming excited about providing hydrogen. Shell has been increasingly aggressive about building stations and looking at models about how they put hydrogen present stations. People like NG, as they look to think about their electric, as they towards clean energy. I know you're well aware of this, Mike. What do you do when you have too much wind, too much soul generating hydrogen is a high value activity, distributing and most many of the utilities are looking at that business model for the future. And the investment in people like Air Liquide, Air Products, Shower Making or not Vulcan, it's an executed review. I actually view it as a positive. If you first look, if there's a market with 1 doesn't drive that competitive aspect, doesn't really show shareholder view that it's exciting, There's more and more people who will sell. We see that as a real positive. Quite honestly, we've also been doing this for 20 years, learned a lot, gone through 25,000 vehicles. We've gone through harsh operations. We figured out how to talk to units. We've had this incredible stuff. Quite honestly, people are going out to spend a lot of money to catch up. So we welcome to have people 1st, as a New York, John, or write your state assembly senator to allow hydrogen to go under the bridges and on the tunnels in New York. It's actually delaying the deployments in New York, so I would ask you to do that. I think that the reliability of the box are reaching I've always taken a step back and not move to markets until I could appropriately support. Probably why we haven't been as aggressive as Europe. Now I feel ready. The products are really, really and I talk to customers like Walmart. I think that these other applications using scalable products like what we've done ProGen, I think makes those other apps much interesting to us. Anything else today? I think I actually gave you those numbers. So you take a look back on the one slide, we said that 2022, the revenue would be between $550,000,000 and approximately 20 percent EBITDA. So I want to thank everybody for the questions today. And I'll hang around a little if you have some more. So we really enjoyed the discussion. So thank you everyone.