Plug Power Inc. (PLUG) Earnings Call Transcript & Summary

Greetings, and welcome to the Plug Power Second Quarter 2026 Earnings Conference Call webcast. [Operator Instructions] as a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Vice President, Marketing and Communications, Teal Hoyos. Please go ahead, Teal.

Thank you. Welcome to the 2026 Second Quarter Earnings Call. This call will include forward-looking statements. These forward-looking statements contain projections of future results of operations or of our financial position or other forward-looking information. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements. contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward-looking statements, and such statements should not be read or understood as a guarantee of future performance or results. Such statements are subject to risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including, but not limited to, risks and uncertainties discussed under Item 1A Risk Factors in our annual report on Form 10-K for the fiscal year ending December 31, 2025, our quarterly reports on Form 10-Q for the quarter ending March 31, 2026, as well as other reports we file from time to time with the SEC. These forward-looking statements speak only of the date that the statements are made, and we do not undertake or intend to update any forward-looking statements after this call or as a result of new information. At this point, I would like to turn the call over to Plug's CEO, Jose Luis Crespo.

Good afternoon, everyone, and thank you for joining our second earnings call of 2026. And also thank you for your continued confidence in the Plug team. Q2 was a strong step forward and is giving us real conviction about the rest of the year. We are executing. Our numbers are moving in the right direction across the board. And today, we are raising our full year revenue growth guidance as a result. Paul will walk through the financial details in a moment, but let me start with why we are excited. Revenue was $178.3 million in the second quarter, up approximately 9% sequentially from the first quarter. This is continued proof that our commercial engine is accelerating. Gross margin improved to approximately breakeven. It was about negative 0.9% compared to a negative 30.7% a year ago and a negative 13% just last quarter. That's a meaningful step in a single quarter, and it's the direct result of the operational discipline we have built into Quantum Leap, which is our restructuring program, combined with improving service margins and better planned utilization in hydrogen production. But just as important, our breakeven revenue thresholds keep on coming down, which puts positive EBITDA in the fourth quarter is squarely within reach. Operating expenses declined approximately 50% year-over-year to $62 million, again, a direct reflection of the discipline we have driven through Quantum Leap and our continued asset monetization efforts. And on the cash side, net cash usage improved to $61 million this quarter, a reduction in cash usage of about 58% compared to the first quarter. Our cash burn is coming down, and the trend line matters enormously as we head towards profitability. Our priorities for 2026 are clear, and they haven't changed. Disciplined execution, profitable growth and continued improvement in cash utilization and operating leverage. What has changed is our confidence in how the year plays out. On our last call, we guided full year revenue growth of 13% to 15%. Based on our first half results and the visibility we now have into the second half, we are raising that guidance today to 15% to 16% for the full year. Our business has historically been second half weighted with the fourth quarter benefiting from year-end deployment cycles. And everything we are seeing tells us that pattern is expected to hold again this year with even more strength behind it. Material handling continues to be a genuine bright spot on the growth story here just -- and the growth story here just keeps on building. We deployed 1,666 GenDrive units in the quarter, more than double the 739 units we deployed in the second quarter of last year. Service revenue grew 82% year-over-year to $29.8 million, with service margin of 27% as improving reliability lets us -- lets our technicians cover more units and drive real overhead leverage. And we're not just growing. We're building a durable recurring revenue base. Two of our largest material handling customers are planning to refresh more than 20,000 GenDrive units over the next three years. This is a multiyear revenue opportunity sitting right in front of us and is exactly the kind of embedded growth that gives us confidence well beyond this year. Our electrolyzer business continues to build real commercial momentum. We announced the FID of the 30-megawatt Barrow Green Hydrogen project for Carlton Power in the U.K. This is part of the 55 megawatts we were awarded in November of 2025, and we expect the additional 25 megawatts to be -- to reach FID in 2026. In Q2, we were also selected for the 275-megawatt FEED on the Hy2gen's Courant Project in Quebec. And on July 7, we announced that Plug secured a 50-megawatt GenEco electrolyzer order following the final investment decision for Orica's Hunter Valley Hydrogen Hub in Australia, and this is the largest renewable hydrogen project to reach FID in Australia. As an update on the business, our 100-megawatt project with GALP in Portugal and our 25-megawatt project with Iberdrola and BP in Spain continue progressing positively on the commissioning. But I also want to flag something bigger on the horizon here because I think it is an important part of the electrolyzer story for the next several years. Europe continues to advance the conversion of the Renewable Energy Directive III, is called RED II into a national law across EU member states. Spain is the latest country to release a draft framework, establishing a 11% renewable fuels on nonbiological origin, which is the RFNBOs by 2040. This is backed by a specified noncompliance penalty and a system of tradable carbon reduction certificates. Based on our preliminary internal analysis, we believe Spain's framework alone could drive approximately 10 gigawatts of electrolyzer demand by 2030. In addition, the European Commission approved a EUR 780 million Dutch subsidy scheme targeting 400 megawatts of electrolysis capacity with an auction plan for early 2027. And also the European Commission plans on launching a fourth hydrogen auction in December of 2026 with a budget of up to EUR 500 million. Now this is the kind of regulatory tailwind that turns a strong pipeline into a durable multiyear growth runway, and we like our position to capture it. Now turning to hydrogen. Our fuel business delivered approximately 15% revenue growth year-over-year to $39.5 million. This is driven by continued growth in hydrogen consumption across our expanding customer base. Fuel gross margin improved to negative minus 48% -- negative 48%, from negative 91% a year ago on improved plant utilization, production efficiency and network optimization across our production facilities in Georgia, Tennessee and Louisiana. We still have work to do here, obviously, but the trajectory is decisively in our favor, and we expect that progress to continue through the second half of the year. We ended the period with $161.9 million of unrestricted cash, with net cash usage improving to $61 million for the quarter, down approximately 58% sequentially. We are also executing on our asset monetization programs and as an update to the Stream transaction we announced on July 13, where we indicated approximately $80 million of expected near-term liquidity, we have already received $47 million. This is a step forward of our initiative to unlock more than $275 million through this asset monetization and non-dilutive financing, and we expect to keep delivering on this initiative in the coming quarters. So put simply, this was a good quarter, and it sets up an even better second half. Revenue is growing. Margins are approaching breakeven. Operating expenses are down 50%. Cash burn is falling, and we are raising our full year guidance to 15% to 16% growth. We remain on track to deliver positive EBITDA in the fourth quarter, a milestone that marks a real turning point for the company. We're building Plug into the profitable, cash-generative hydrogen leader we set out to become. We have work to do, but Q2 is more evidence that we are getting there. And with that, I'll turn the call over to Paul for a more detailed review of the quarter, including our liquidity position and financial outlook. Thank you. Paul?

Thank you, Jose Luis, and good afternoon, everyone. Building on Jose Luis' comments, I want to leave you with three key takeaways from the quarter. First, the margin transformation is real and it is compounding. We exited Q2 at essentially breakeven gross margin, roughly a 30-point improvement from a year ago. Second, our cost discipline is showing up everywhere it should, including improved margins and reduced OpEx, which yields reduced cash use. And third, we believe we have the capital and the levers in place to execute the balance of the year. This stems from current cash balances, continued improvements in margins, reduced CapEx and the ongoing asset monetization efforts. And diving into the details of the quarter, as Jose outlined, net revenue for the quarter was approximately $178 million, which was up 9% sequentially, bringing the first half to $342 million, up 11% year-over-year. The first half is slightly ahead of the range we outlined in May, so the shape of the year is playing out slightly better than the way we told you it would. And as Jose Luis outlined, given our traction and pipeline, we are increasing our full year projection to 15% to 16% growth off of 2025. We expect some growth in Q3 ' 26 sequentially and over the Q3 of prior year, but the majority of the volume in the second half forecast, we expect unfolding in the fourth quarter of '26. On margins, let me expand a bit because this is where the last two years of work really are starting to show off. Gross margin came in at essentially breakeven versus the 31% a year ago, as I outlined. Every platform contributed. Equipment margin was positive, driven from volume leverage, continued manufacturing cost optimization and supply chain leverage. We're also recognizing benefits based on the tariff recoveries and reduced tariff spend. Service margin was 27% positive as unit reliability keeps improving. Our cost of service is down materially, and that's letting us expand the tech unit coverage and drive overhead leverage. PPA loss rates improved to roughly negative 30% from negative 92% a year ago, which is driven from cost reductions to service this PPA fleet, coupled with the sale-leaseback buyback program, which reduces our equipment lease cost. Fuel margin improved to roughly negative 48% from negative 91%, as Jose Luis outlined, driven by the increased plant utilization, improved network optimization and benefits of our supply agreements. Still a lot of work to do, but these are structural improvements, not one quarter effects, and they keep in lowering our breakeven threshold. Just to prelude the second half in context of our target to achieve positive EBITDA in Q4, this will come mainly from increased gross margin and will stem from many factors. driving more sales as the second half will be 40% higher than the first half, and this will mostly come from equipment volume, driving more cost downs in manufacturing and supply chain, such as ramping our diffusion bonding process for ELX stacks as an example, continuing our service reliability improvement trends and driving enhanced tech leverage, especially given the number of sites and GenDrives being deployed in the second half, further improving the fuel network leverage given continued growth in fuel sales and focus on network logistics cost and network efficiency and driving even more improvements in our PPA platform by further service cost reductions and completing more sale-leaseback buybacks. GAAP operating expenses were the $62 million, down the 50% year-over-year, but I want to be transparent on the composition. This includes $39.7 million of recoveries of previously impaired assets, principally the $37 million gain from a resolution of a customer contract dispute we settled in June. Excluding that recovery and the IT sales transaction fees for this quarter and excluding impairment, restructuring and other noncash changes in contingent consideration, as example, operating expenses continued to decrease, and we believe we remain on the path towards the roughly $75 million a quarter run rate we discussed in May. The OpEx reduction stems from continued scrutiny over headcount, discretionary spend discipline and from reduced CapEx spend yielding lower depreciation. On the bottom line, GAAP EPS was a loss of $0.14 versus a loss of $0.20 a year ago. I'd note that the GAAP result in Q2 of '26 carries about $104 million of noncash mark-to-market valuation charges for our convertible debt and warrant liabilities, driven primarily by our own stock price appreciation in the quarter. Adjusted EPS was a loss of $0.07 versus $0.18 a year ago, and reconciliations on these adjusted EPS numbers are in our tables. The net cash usage for the quarter was roughly $61 million, an improvement of 58% over Q1 of '26. The continued asset monetization efforts contributing to margins and overall reduced cash usage. But even setting those aside, the underlying burn continues to improve and the step down on margin improvement, working capital leverage and reduced CapEx spend. Inventory is down about $28 million from year-end, and we still expect at least $100 million of inventory reduction for the full year weighted to the second half. Capital spending remains light under $9 million in the first half. We ended the quarter with $162 million of unrestricted cash and $510 million of restricted cash, which means we have over $670 million in total cash. The restricted cash continues to keep coming back to us, more than $115 million released in the first half and roughly $155 million of the remaining balance is scheduled to release over the next 12 months. It is effectively a built-in nondilutive funding stream. And subsequent to quarter end, we announced the transaction expected to generate approximately $80 million of near-term liquidity through the sale of our Graham, Texas project and the staged closing of New York Great Gateway. The first phase of the program to unlock more than $275 million through this overall asset monetization nondilutive financing program. Out of this initial $80 million in July and August to date, we received already $47 million, bringing the total for this endeavor so far to $52 million. For the full year, we plan for our sales growth of 15% to 16%, and we believe that the first half puts us squarely on that trajectory. We remain laser-focused on our Q4 goal of positive EBITDA. The levers are the ones that you watch us pull on all year and the ones that I've outlined today. We believe we have the balance sheet and clear nondilutive capital opportunities to execute. In summary, we believe we are postured to deliver on our targets we have set for ourselves this year, and we look forward to sharing more as our progress progresses throughout the year. With that, I'll turn it back over to Jose Luis.

Thank you, Paul. So now again, thank you for attending the call, and we'll go to the questions part of the call.

[Operator Instructions] Our first question today is coming from Colin Rusch from Oppenheimer.

Can you talk about the drivers for the service margins? How much of that is being driven by the improved contracting and how much of it is being driven by better performance of the assets out in the field?

Colin, thank you for the question. The improvement on services really is driven by several factors. One of them is the reliability of the units is improving. The stack performance is improving. And that's leading to us being able to use less tech to actually service the units. So the overhead is also improving. And added to that, over the last couple of years, as you know, we went through a process of cautiously increasing pricing on services to be aligned to the reality of the cost of servicing the units. So all of that together has contributed to this 27% margin that you see right now and it's actually structural. It's something that we believe is sustainable.

Excellent. And then just thinking about the pipeline of hydrogen projects. You guys have made a nice dent in moving these things forward. I just -- I'm curious about urgency around some of these projects in Europe starting construction and really starting to see some of the ramp on equipment orders. How should we think about that as we get through the balance of this year and into next year?

So we haven't really seen not necessarily in Europe, Orica, for example, I think it got lost a little bit in the market dynamics, but Orica is a 50-megawatt order, first FID project in Australia. And if you think about it, our largest order was 100 megawatts from Gulf. This is the second largest order. The award of 55 megawatts from Carlton Power in the U.K. is now becoming FIDs. We saw the first FID with 30 megawatts. And we are already manufacturing and getting ready for implementation in the U.K. for those projects. We see even our own projects that we have in Spain with our joint venture with ACCIONA moving towards FID with subsidies being awarded by the European Hydrogen Bank. I think those two projects have the largest per kilogram award in the market. So we see a lot of activity in the European market. We see many projects that are coming along to get to FID by the end of the year, beginning of 2027. And you will be hearing more news about those projects in the coming quarters.

Next question is coming from Eric Stine from Craig-Hallum.

So I was hoping we could talk about material handling interested in these two customers, the 20,000 units over three years. As I think about how you've talked about the repowering opportunity, it's been something that you've been optimistic about, but it seems like it was off a little ways. So now you're talking about these three customers. I'm curious, I mean, is this -- is it fair to say that this has kind of sped up a little bit versus previous expectations? Or is this more kind of a normal refresh versus their proactively deciding to do it for the next-gen fuel cell system?

It is really being driven by the refresh timing. We are going to refresh some of those units in the range of around 2,000 of them already in 2026. And then as the year progresses, we are expecting to start refreshing with the two largest customers in the next three years to complete the total fleet. In both cases, what we're seeing is that we're reaching in many of the sites over the next three years, the time to refresh the units. And as the units are becoming more reliable and as we are basically coming with all the upgrades and all the improvements that we've done through to the units in the field, the new units are going to have that in -- already in the production units. The customers are also interested in doing the refreshes. But mainly, they are driven by the normal natural timing of the refreshes, which is starting now.

Okay. And so these are your two largest customers. Is this -- did you say that this kind of completes their -- I mean, this would be their footprint? Or it would seem like this could be a multiyear beyond the three that you were talking about for this specific opportunity with these two?

This would be their normal footprint for renewals or refreshes of the units that they have in the field right now. I'm not sure maybe if I didn't understand the question correctly, please.

Well, there's -- if you think about it like a portfolio, there's more and more sites, and they're adding sites this year as an example. So they go through a normal reset cycle, but this is kind of -- one of them, in particular, has hitting a major refresh cycle starting here now. And the other one, although they've been on refresh, it's starting to grow and build on that. And as they add more sites, it will become bigger and bigger. So we expect a pretty incremental step function in terms of this refresh activity starting from here on out just because of those dynamics.

So I guess it's going to be refreshes on top of the normal growth on those customers.

Our next question today is coming from Sherif Elmaghrabi from BTIG. Our next question is coming from Chris Dendrinos from RBC Capital Markets.

Maybe just on the fueling margins here, and I think pretty solid improvement year-on-year sequentially, call it, relatively flat. Just what are the next big drivers to push or to fuel no pun intended more fueling improvement?

Thank you, Sherif (sic) [ Chris ]. Thank you, Sure. We're going to continue operating more efficiently the plants. We have the three plants, Tennessee, Georgia and Louisiana. So as we continue operating them, we are getting more efficient and higher utilization of the plant. On the logistics side, we're going to continue also improving our logistics. We are continuously trying to make sure that we deploy and send hydrogen to our customers in the most effective way, and we are implementing systems to be able to do that the most effective way that's possible. And finally, we are working in each one of the sites and also in the plants to make sure that the actual efficiency of the systems is improving over time. So those are the items that we're working on to improve our margins in hydrogen.

Got it. And maybe just as a follow-up to an earlier question on the electrolyzer pipeline here. You had highlighted Spain being a potential, I think, 10 gigawatt market. by 2030. What are kind of the key markers here? What should we be looking for in terms of, I guess, the cadence of when demand would potentially pick up for that market specifically?

So, RED III, which is the regulation that has been implemented as a law in the different countries in the different European member states, mandates a certain amount of hydrogen being used in transportation and specifically for refineries to be converted as different percentages in different countries, but there is numbers for each one of the countries before 2030. So what we're going to see and 2030 is here. I mean we are right now mid of 2026. So we have basically 3.5 years to make those conversions. So we are already seeing some of those projects moving. The projects that we already have and we are implementing Iberdrola and BP and the project with GALP and some of the projects that we have smaller projects on the refinery side is a result of this legislation becoming a reality. So as this gets -- the draft in Spain, for example, gets approved, which is expected to be in the next few months, and it becomes an actual law, we are expecting that companies to start actually executing and moving forward with the projects. We have many of those projects are already in our funnel. This is the $8 billion funnel that we've been talking about. These are not new projects that we're going to basically pick up right now. It's projects that have been -- many of them, we've done the engineering phase. They are ready to go. And once this happens, the project will start moving forward. And we are hoping that by the end of this year, beginning of next year, you will start seeing some of these projects becoming a reality by reaching FID.

Our next question is coming from Saumya Jain from UBS.

Congrats on the quarter. So now that gross margins have approached breakeven, can you provide more color on the primary structural drivers, whether it's pricing power, product mix or lower input costs that are expected to push margins into the positive territory in the second half of the year?

I'm going to let Paul take that one.

Yes. I think -- so -- the first thing is sales volume. If you think about us with the numbers that we've shared in the forecast of our guidance, as I said earlier, that suggests mathematically that we'll be up to meet those forecasts, it's about 40% growth off of the first half. And that mostly is equipment volume. And that's where we really become very accretive because of the contribution margin since we're already covering the fixed overhead. So that's a big driver. The second is we still got lots of opportunities on the manufacturing cost. And so we're still very early in the electrolyzer scale and manufacturing processes and still have a lot of opportunities to optimize that cost structure. And we have already driven a lot of cost out of that equipment and continue to plan further cost downs on that as an example. The other two big buckets really is service. You've seen big moves on service margin. We have seen -- we see continued improvements in reliability, which gives us opportunity to leverage more units per tech as we continue to scale. And since we have a lot of units and sites going live in the second half, we're continuing to take advantage of that. But we continue to invest in more reliability improvement processes. And so that's continued to pay off. And then lastly, as we just talked a few minutes ago, it's about the fuel. And so as we continue to scale volume on our fuel network, drive out improved logistics costs and efficiencies of the systems, those are the themes that you're going to continue to see collectively drive margin. But in the second half, in particular, it's mainly sales volume. It's just such a big step function in context of our targets and our forecast.

Okay. Great. And then with recent milestones like the order for Orica and the Carlton Power FID, what is the conversion rate time line for turning FEED scopes such as the Quebec project into firm FIDs?