Andrew J. Marsh - Chief Executive Officer, President and Director David P. Waldak - Chief Financial Officer

Philip Shen - Roth Capital Partners, LLC, Research Division Al Sullivan - Lake Street Capital Markets, LLC, Research Division

Greetings, and welcome to the Plug Power Third Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andy Marsh, President and Chief Executive Officer for Plug Power. Thank you. Mr. Marsh, you may now begin. Andrew J. Marsh: Good morning. Thank you for joining Plug Power to discuss our 2013 third quarter results. I'm Andy Marsh, the company's CEO. And we'll be joined by Dave Waldak, our interim CFO, on today's call. Once finished, this call will be archived on our website at plugpower.com in the Investor Relations section under Presentations. This conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to expectation regarding revenue and product orders for 2013. These statements are based on current expectations that are subject to certain assumptions, risks and uncertainty, any of which are difficult to predict, are beyond our control and that may cause our actual results to differ materially from the expectations in our forward-looking statements. We encourage our listeners to refer to our SEC filings for a complete recital of our Safe Harbor statement as well as other risks and uncertainties discussed under item 1A-Risk Factors, and our annual report on Form 10-K for the fiscal year ending December 31, 2012, filed with the SEC on April 1 2013. Plug Power does not intend to and undertakes no duty to update any forward-looking statements, as a result of new information for future events. Moving on to the discussion of Plug Power's business. The company continues to execute on its plan to achieve profitability in the second or third quarter 2014 at a steady pace. Order flow has displayed positive growth for the past 6 months, and has been strong since our last update call on October 8. It's quite clear to see our progression path. Plug Power saw a critical investment from Air Liquide in May 2013. On May 15, 2013, Plug Power had $1 million bookings for the year. From May 15 to October 8, the date of our last business update call, Plug Power secured another $11 million in bookings. And since October 8, Plug Power has booked an additional $14 million. The $14 million in orders since October 8 has come as a mix of product sales and maintenance orders from such noteworthy customers as Kroger, Procter & Gamble, Bridgestone, Wal-Mart, BMW, Sysco and Ace Hardware. In addition to these bookings, Plug Power is currently in negotiations with a number of key customers to deploy GenDrive at notable site distribution centers. In some of these deals, Plug Power will provide hydrogen refueling services and fuel infrastructure. We expect a portion of these agreements to close before the end of 2013. These orders could expand our bookings significantly in the fourth quarter. I'll provide an update on the status of these orders at the upcoming Analyst Day on December 4. I'd like to speak in more detail about a few of the deals that closed since October 8. Plug Power received an order from Kroger for 201 GenDrive units to deploy at a new site in Stapleton, Colorado. And I used the word, new site. This is a site that has existed for over 10 years, and is a brownfield facility. And as you all know on the call, Kroger is the second largest food distributor in the United States, has realized the benefits provided by GenDrive through previous fleet deployment. Kroger initially deployed 161 GenDrive units at their food distribution center in Compton, California. GenDrive's unit uptime, productivity increases and operator acceptance at the Compton site gave Kroger the confidence it needed to deploy more GenDrive units at the Colorado site. This particular order at Stapleton includes product and service revenue. Plug Power has seen an inclusion of service revenue and contract evolving more robustly and rapidly than expected. We believe that service will become an increasing significant opportunity for Plug Power in the future. Plug Power [Audio Gap] also saw follow-up orders from Bridgestone as they renewed their fleet of GenDrive products. Bridgestone has currently run their fleet for over 6 years in their Tennessee facility, operating the units for more than 40,000 hours in an automatic guided vehicle application. Not only does Bridgestone's GenDrive fleet run over 21 hours a day for 6 years, but data shows the units lasted almost 2x longer than the expected life of the product and 4x longer than the life of a lead acid battery. We believe this is a testament to the long-term life of fuel cells versus batteries, and can be leveraged to strengthen our value proposition. There are advantages of using fuel cells in an AGV application, a situation where a product can flow 24/7 without manpower intervention. AGVs move heavy loads, upwards of 40,000 pounds for 21-plus hours a day. The load demand causes significant wear and tear on lead acid batteries, as the batteries just can't keep up. Productivity drains as the vehicles need to have their battery changes. By using GenDrive, the AGV's power remains constant and consistent, increasing productivity and reducing operational costs. It's clear that Plug Power has its sales momentum back in material handling. And this remains our primary focus, selling more GenDrive fuel cell units to power forklift trucks. But we're also evaluating market expansion opportunities. This can be done with our present customers whereby leveraging our technology that -- via third-party funding. One example is yesterday's announcement that Plug Power received $500,000 in funding from NYSERDA to demonstrate the viability of replacing diesel generators with hydrogen fuel cells. Fuel cells units will be powering transport refrigeration units or TRU on trailers hauled by trucks, delivering perishable goods. Plug Power also recently announced it had won a $650,000 contract from Pacific Northwest National Laboratories via the Department of Energy to develop fuel cells for the TRU market. Through these programs, Plug Power will develop a fuel cell and interconnect hardware based on GenDrive fuel cell architecture. The Plug Power TRU unit fuel cell will power the Carrier Transicold refrigeration unit for Sysco in Long Island and Wegmans in Pottsville, Pennsylvania. Plug Power's expiration in the TRU market was initiated by our current customers. The use of fuel cells will simplify logistics for customers allowing for round-the-clock delivery. Plug Power believes that successful trial completion may provide an opportunity to expand hydrogen fuel cells into the refrigerated transport market. As Plug Power grows and expands our business, we've strengthened the Board of Directors and senior management team. In late October, Plug Power announced the addition of 2 new members to our board, Mr. Xavier Pontone, Managing Director of Air Liquide Advanced Business; and Dr. Gregory Kenausis, Founding Partner and Chief Investment Officer at Grand Haven Capital AG. Mr. Pontone brings a wide range of operations and new business development experience. Additionally, he sits on the board of HyPulsion, Plug Power's joint venture with Air Liquide, is very active in expanding the market opportunity for hydrogen-powered material handling vehicles throughout Europe. Dr. Kanesis is extremely knowledgeable regarding investment, technology and business development. He is based in Zurich, and brings a unique set of capabilities to the Plug Power's team. As Plug Power looks to scale the business, I also brought in Keith Schmid to join as Chief Operating Officer. Keith has more than 20 years of global experience in industrial business-to-business technology markets. He also has a successful track record in driving growth through new product development, market entry, geographic expansion and acquisition. Keith was General Manager for Excide Industrial Energy, where he managed the activities for a $250 million division consisting of 2 business units: motive power, where they sell material handling batteries; and network power. Keith successfully brought the motive power unit back to life, restoring profitability, establishing strong market growth and delivering an industry-leading product line. The impressive and unique skill set, we've been able to capture through the newest addition of Plug Power's leadership group is critical as we scale the business. Dave will speak shortly about our financial performance in the third quarter. But I like to set fourth quarter expectations. In the fourth quarter, we expect overall revenue in excess of USD 7 million. We are projecting overall negative gross margins. The product business will have a positive gross margin. Greater utilization of our factory and in material cost of product price under 70% will allow the margins to be positive. As I've discussed previously, the best long-term indicator of our profitability is the relationship in material cost of product price. In the third quarter, we were slightly above 70%. And we will be under 70% in the fourth quarter. Company is targeting 67% material cost to product price and 700 units shipments per quarter to achieve profitability. And our present performance would indicate this is clearly within range. With respect to service business, a year from now in third quarter 2014, we are projecting revenues at USD 2.5 million. And through our efforts to continue, improve the reliability of the units and better workforce utilization, this activity will be EBITDAS breakeven. In the long term, the service business will become over 20% to 25% of our revenue with gross margins equal to our product margins and represent the recurring revenue stream for the business. I'd like now to move the conversations to address our current status with the NASDAQ. We're still in discussions with NASDAQ concerning our listing pricing deficiency. We have conveyed our potential remedies to rectify this situation. Our focus remains on increasing the stock price to resolve this issue organically. As I mentioned earlier in the call, we're currently in negotiations with customers who would deploy GenDrive units at more notable distribution centers. This could expand our bookings in the fourth quarter significantly. We believe orders from customers in truck deploying Plug Power's turnkey solutions at notable distribution centers will result in an increased stock price. I'd like now to turn the discussions over to Dave Waldak for a discussion of our third quarter financial results. David P. Waldak: Thank you, Andy, and good morning, everyone. We shipped 155 GenDrive units during the third quarter of 2013. As of the end of September 2013, our backlog was comprised of 1,162 unit orders for a total of $20.2 million. Product and service revenue for the third quarter was $4.2 million, which was comparable to $4.3 million from the third quarter of 2012. Cost of goods sold for products and services for the third quarter 2013 was $7.8 million. The gross margin for products and services for the third quarter 2013 was a loss of $3.6 million, which was an improvement compared to the gross margin loss of $6.6 million for the third quarter of 2012. The gross margin loss in the third quarter of 2013 resulted primarily from fixed overhead costs, associated with the number of units shipped compared to our capacity, as well as costs incurred to service the installed base. Research and development contract revenue for the quarter was $462,000 compared to $502,000 during the third quarter of 2012. In our operating expense category, selling, general and administrative expenses were $2.8 million for the quarter compared to $3.1 million in the third quarter of 2012. The decline in SG&A expenses from the prior year is attributable to the restructuring plan announced in December of 2012. Research and development expense for the quarter was $769,000 compared to $1.3 million during the third quarter of 2012. The operating loss for the quarter was $8 million compared to an operating loss of $11.8 million in the third quarter of 2012. Our net loss for the quarter was $15.9 million or $0.19 per share on a basic and diluted basis. Included in the net loss for the third quarter of 2013 was an $8.2 million non-cash charge related to the change in fair value of common stock warrants. In total, our loss before taxes for the quarter included $9.8 million in non-cash expenses from a combination of depreciation, amortization, non-cash stock compensation and the change in fair value of the stock warrants. The net loss for the third quarter of 2012 was $10.3 million or $0.27 per share. Weighted average shares outstanding for the quarter were 84.1 million. EBITDAS loss for the quarter was $6.4 million compared to an EBITDA loss of $10.2 million in the third quarter of 2012. As of September 2013, the company had $11 million in cash and cash equivalents and $14.6 million in working capital. Working capital has increased each quarter in 2013 and was $11.1 million at the end of the second quarter. We would now like to open the call to any questions.

[Operator Instructions] Our first question comes from the line of Matt Koranda from Roth Capital Partners. Philip Shen - Roth Capital Partners, LLC, Research Division: Andy, this is Phil on for Matt. To that end, in your release, you talked about a blowout number of orders in Q4. You've already had a really nice Q4 for bookings. How much better can it get? Andrew J. Marsh: That's a good question, Phil. And I think it easily could be 2 to 3x higher. Philip Shen - Roth Capital Partners, LLC, Research Division: Wow, great. And given these bookings, what is the mix between repeat customers versus new customers? Andrew J. Marsh: Yes, that's actually a good question. I think, Phil, if you look at the list, it has been dominated since October 8 with our present -- with present customers. I think that on December 4, you will hear about some new customers. But since October 8, it was all our present customer base. But there may be a name or 2 come December 4 that we'll be talking about which are new. And I think that's -- Phil, I don't know if it came out on the call. But to me, it's a small order. It was about 26 units from Bridgestone when they were running those AGVs, but they were running those AGVs for 6 years. It came time to make a change, replace. And they never even gave a consideration to put batteries in. And when you think about the fact that the units ran twice as long as we ever expected they would run and 4 times longer than batteries, to me, all the other orders are really impressive, but to me, that one is the strongest statement is that -- that was one of our first 2 customers. And they're just beginning their buying cycle again. And when they bought again, they bought Plug Power again. And the primary reason is that the performance of the units exceeded their expectations. Philip Shen - Roth Capital Partners, LLC, Research Division: Great. Let’s explore that a bit in terms of Bridgestone. How big of an opportunity is Bridgestone alone? Andrew J. Marsh: I think Bridgestone long-term, Phil, could become an account that's probably in the range. It could be an annual account of $7 million or $8 million per year. Philip Shen - Roth Capital Partners, LLC, Research Division: Okay, good. Let's change gears for a bit here. What's the latest update on HyPulsion and selling into Europe. Are you getting any traction there? Obviously, Air Liquide, is it one of your key partners? And any visibility there would be helpful. Andrew J. Marsh: Yes. So we have -- we're getting -- start the deployment with units with HyPulsion. Again, we have not been overly aggressive in our expectations. What I will talk about is that we are deploying 20 units with Linde at a BMW facility in Germany in the fourth quarter here. And to me, that's a nice little -- nice deal because we have over 300 units of BMW here in United States. They're starting testing in another facility in Germany. And BMW in Germany is about 8 to 9x larger than here in the States. So that's one opportunity that I can publicly talk about. The other one is IKEA, where we're doing some initial deployments in France this quarter. So we're beginning to have some sales traction. Next week, I'll be actually spending the entire week in Europe reviewing and evaluating the sales, traction and projection and seeing what we can do to help accelerate that. Philip Shen - Roth Capital Partners, LLC, Research Division: Great, good. And what you talked, with the TRU market on the call, it was very interesting. And obviously, you've had a few releases about this as well. But can you summarize in a nutshell the economics of your TRU solution versus diesel on a total ownership basis, cost of ownership basis? Andrew J. Marsh: I think the TRU, it's probably not simply, but on a straightforward basis, without putting in items like logistics cost, the payback time is probably in the 4-year range. But the real value long-term is understanding what it means to people like Sysco about how it helps their logistics system be able to deliver all times of the day. They have a lot of problems with the noise associated with the refrigerated trailers, eliminating their ability to go into the communities. So I can't tell you exactly, Phil, how to model that yet. All I can tell you is that probably every food distribution company I have, when I put these releases out, pick up the phone and ask me if I would trial and test the unit with them. The other item is that we're still trying to get our hands around the -- in places, in states like Californian on pollution issues, the additional value of having hydrogen fuel cells power their trailers from emission issues because there's been continuous upgrade programs over 4, 5 years to keep the emissions down. I don't know if that helped you a great deal. But as I said, I'm doing this without spending Plug Power's money. And learning about a market that's being driven by customers. Now I'll give you an example. Wegmans went out on their own and put a fueling station outside so they could do the trial with -- before I even knew about it when they heard I was doing this. Philip Shen - Roth Capital Partners, LLC, Research Division: Wow, good. And obviously, this is early on and you're just kind of doing the market analysis. But what you guys are seeing as to when, if and when commercial sales could come from this opportunity? Andrew J. Marsh: I don't think it's out of the question that we could have commercial sales in 2015. Philip Shen - Roth Capital Partners, LLC, Research Division: Okay, good. Question on your outlook. You talked about 700 units shipped per quarter for profitability. On the last call, I think I recall you're talking about 3,000 units in 2014 and $7 million in revs and EBITDAS breakeven as soon as Q2 and 3. I mean, what's -- do you feel like you're on track to hitting these goals? What's your latest view on when breakeven on an EBITDAS basis may occur? Andrew J. Marsh: We remain consistent, Phil, second, third -- and going to talk to that I mentioned second, third quarter of 2014. So we are on track. The key item is this order flow, Phil. The momentum needs to continue. And we're very confident it will.

[Operator Instructions] Our next question comes from Al Sullivan from Lake Street Capital Markets. Al Sullivan - Lake Street Capital Markets, LLC, Research Division: So I just had a real quick question I want to follow up on something Phil said about the volume outside being potentially 2 to 3x higher. What's your capacity right now? And kind of a follow-on to that, are you at all constrained on the supply side from Ballard? Andrew J. Marsh: I would say, on the capacity of the facility, we have the ability to make 2,500 units a quarter. I mean, this company, as many on this phone knows, had a good deal of invested capital. And we built a manufacturing facility that will support us up to approximately $200 million of revenue. So that's not a concern. I think that Ballard, I don't foresee any issues with Ballard. We are one of their primary customers. And I think that their capacity is sufficient to meet the needs and the other businesses that they continue to bring in.

Thank you. At this time, I will turn the floor back over to Andrew Marsh for closing comments. Andrew J. Marsh: Plug Power has seen order flow increase significantly over the past 6 months. And we expect this momentum to grow throughout the quarter. From an order perspective, I believe this will be Plug Power's breakout quarter. And I look forward to updating the investment community on December 4. Dial-in and webcast details for the December 4 meeting will be posted at our website at www.plugpower.com. I also suggest that callers follow Plug Power Inc. on Facebook, LinkedIn and Twitter where we periodically post interesting updates and insights about Plug Power and the fuel cell industry, ongoing efforts and activities. Thank you for joining us for a review of Plug Power's third quarter 2013 business results and financials. Have a nice day.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation.