Teal Vivacqua - Director, Marketing Communications Andy Marsh - President and Chief Executive Officer Paul Middleton - Chief Financial Officer

Eric Stine - Craig-Hallum Capital Group Carter Driscoll - FBR Capital Markets & Co. Amit Dayal - Rodman & Renshaw LLC Jeff Osborne - Cowen and Company

Greetings, ladies and gentlemen and welcome to the Plug Power Inc., First Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode [Operator Instructions]. It is now my pleasure to introduce your host, Teal Vivacqua, Director of Marketing Communication. Thank you, Teal. You may begin.

Thank you. Good morning and welcome to the Plug Power first quarter 2017 earnings conference call. This call will include forward-looking statements, including but not limited to, statements regarding 2017 objectives including goals related to revenue, sales, bookings, gross margins, and GenKey and GenFuel installations. 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 that not to unduly rely on forward-looking statements because they involve risks and uncertainties and actual results may differ materially from those discussed as a result of various factors, including but not limited to the risks and uncertainties discussed under item 1A, risk factors, in our Annual Report on Form 10-K for the fiscal year ending December 31, 2016, as well as other reports we file from time-to-time with the SEC. These forward-looking statements speak only as of the day on which the statements are made and we do not undertake or intend to update any forward-looking statements after this call. At this point, I would like to turn the call over to Plug Power’s CEO, Andy Marsh.

Thank you, Teal, and thank you everyone for joining Plug Power's first quarter conference call. We released our earnings this morning. As you may have noticed, we changed the structures of our earning release to shareholder letter format. The format is one used by other technology companies and we believe this approach provides greater detail and transparency for investors. This shareholder letter provides management views about the quarter, the rest of the year and let’s sees developments to our long-term strategy. The earnings call will also be different. Management will review the highlights for the quarter as well as our financial expectations for the remainder of 2017. The majority of the call that will be devoted to questions and answers. First, I would like to reiterate our guidance for the year. We expect GAAP revenue of $130 million with GAAP gross margins between 8% to 12%. We will deploy 5,500 to GenDrive units at 25 sites as well as 100 ProGen engines. And the Company will quote between book $325 million and will use between $25 million to $35 million in net cash including operating and investing activities. First quarter was in line with our internal expectations and we expect 30% to 35% of our revenue in the first half of the year. Our deployment for consists of 600 GenFuel sites in the first half with 12 sites schedule for the third quarter and the remainder in the fourth quarter. I would like to highlight and I think this is really important to the businesses and backlog. Going back to the quarter, I am sure people may have been surprised by our cash use in the first quarter. As we mentioned in our shareholder letter, we are in negotiation with our key PPA customer to change terms to allow for lower cost financing for these deal. We are waiting for the conclusion of these discussions to finance the first quarter deals. Referring financing in these deals had an impact of approximately $9 million on our cash used in the quarter. Of course the big news for the first quarter was the announcement of our strategic agreement with Amazon valued it up to $600 million. The deal highlights our leadership position in the material handling market. We are confident the transaction will accelerate business with new and existing customers to drive penetration new applications to the market and only support our path to profitability. Amazon’s commitment to Plug Power is also a significant milestone for the fuel cell industry. As a whole as this validates the industries path and commercially viable solutions, the agreement not only establishes Amazon as an important long-term customer for Plug Power by given the warrant component of the deal also makes them an important stakeholder aligning power interest as we grow the relationship. We are now focusing when executing this deal and making sure that Amazon experience the complete value of our offering. Paul and I are now ready for any of your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Eric Stine from Craig-Hallum. Please go ahead.

Hi, Andy. Hi, Paul.

Good morning, Eric.

Good morning. Just wanted to touch on guidance just as thought process there how we should think about that. I was little surprised that you didn't take that up, I mean clearly you with Amazon you've now got virtually 100% visibility into your – what you're guiding for revenues, but just want to clarify I mean is this more the thought process that it's early in the year or things can move around or I mean any read through to the base business, because I would guess the base business you still expect a pretty nice growth?

Eric, I think that we want to make sure that we meet market expectations and we’ve given in a lot of thoughts and we thought these are the numbers we know we can hit. So we do not want any surprises, and that’s really what we’re working to minimize and I think later in the years, if there is a changes on the positive side will be able announce those changes, but we're looking at our backlog. We have 100% in backlog. We’re confident of course we're going to be trying to do other deals throughout the year. But why add more risk, we have a healthy business is growing or going to have an incredibly strong third and fourth quarter. The third quarter we're going to do almost 45% of the sites never forecasting at the moment. So I feel that when investors will be soften is that we're going to do what we say and if there's good news later on will magic.

Yes. I can appreciate that. And then you mentioned working on the financing solution, I mean is that also something that depending on the form of that could impact the guidance as well, I mean just in terms of how you're able to recognize revenues?

That is correct and that not included in the guidance projections year-to-date. Eric.

Okay, good. I'm just sticking with the guidance quick, just wanted to double check. I mean it's very similar to how you laid our guidance last time, and you are including the 100 ProGen modules for China. I just want to clarify, are you still not including China in the guidance given just some of the timing uncertainly in that market?

That’s correct Eric. Plug approach ProGen engines will deploy but revenue recognition for China quite honestly we’re still getting our hands around I mean – and actually products in China at the moments and one of the issues that we’re making sure that we set up LCs, we set up financing, Chinese have financings that they have backhaul fees in place that we get paid up front for not only the unit, but make sure of the working capital. If that is possible those units because of the – could be shift that we could receive the cash for, but we may not be able to recognized revenue. I hope that clarify.

Yes, now that very helpful. All right, maybe last one from me. This is more high level, but just as you think about on the fueling side and reformers, I mean is that still something in 2017, your bookings or the business that you'll be booking during the year. The reformers are still a fairly small part of the business, but how do you think that that can trend longer-term and what is that mean for the market opportunity?

I think that we are remaining bullish about reformers. We've done our first deployments with reformers, we are pleased with the performance and we believe that reformers offer an opportunity to expand our value proposition beyond distribution and manufacturing facilities with 50 to 75 units. We believe it allow us to move down at this smaller facilities. It also – and I haven't talked much about this, but I think it may have implications about our channel strategy long-term that I think for the smaller sites, the relations – could the relationship with those customers maybe dealt through – dealt with through some of the fork lift truck OEMs.

Got it, okay. Thank you.

Thank you. Our next question comes from the line of Carter Driscoll from FBR. Please go ahead.

Good morning, Andy. Good morning Paul.

Good morning, Carter.

Good morning Paul. I want to make sure by those are here. So first question just kind of housekeeping, so the $9 million deferred as you're working to change in terms of relationship, so if you had done four sites, is it fair to say obviously don’t like the economics, but – that $9 million would have been in the revenue figure for the quarter?

Paul, you want to take that one?

Yes, so that was two sites we did in the first quarter Carter and basically if we had financed those with the bank, we projected the proceeds that we would get from that. I think the follow on is as we finalize those financing terms whether they account – whether accounting rules provide for revenue recognition as we have in the past and so I think it's fair assumption to assume that that's kind of what would be total revenue associated with those transactions and should they come to terms.

Excellent, okay. Thank you. Is there any additional color Andy you can add on – you're very excited when you announced the Amazon agreement, but the technology collaboration maybe got overshadowed by the nominal models of the multi-year order, any additional you can add on that technology collaboration whether it's timing of form and whether you think you can address, the on-road versus potential off-road applications, just try to give us a flavor of how this is going to proceed? Who is responsible, any milestones you are looking for near-term or medium-term? Then I have one last follow-up. Thank you.

Carter, I really can’t commit when specific applications at this time. I can say – we can say that we will strategically value opportunities where there was a real use case with fuel cells. We do have staff dedicated to work directly with Amazon to identify those applications and the work with the appropriate teams within their organization.

Okay.

And obviously – and Carter look what I say that Amazon is covered by MDA, so I am cautious about what I can publicly share at this time beyond those statements.

That’s fair, I mean notably viewed on there – on the technology path. Europe, so is it fair to say that your deployment with our Carrefour group was that’s an additional deployment app, the first existing site. So as they came our comfortable the technology that rolling out further the net distribution center? And then may be your expectations for both the opportunity with that organization and then you had a win in Norway, which is going to identify, but maybe just talk about where you stand in Europe and how you are approaching that similarly or differently your approach in North America?

Yes, I think first, we are very excited about Carrefour and again it kind of get, if you think about the companies strategy, it is how the line up the big retailers, the big large manufactures who can see the immediate value of our products in their application and I know over the next three to four years, Carrefour has plans to rollout one year so distribution centers of similar size to the one we have deploy at the moment and I view that have success from today this has been success with Carrefour that we will provide opportunities to continue to expand within their footprint. And knowing that the new distribution centers are actually Greenfield, our value proposition is even stronger because the cost applied to hydrogen infrastructure and the cost of batteries rooms or similar propositions. So we are excited about Carrefour and the team has done a good job. I think in Europe in general, again the sales strategy is again focused on large retailers and manufactures as well as I think this is important leveraging our U.S. relationship over in the Europe and we expect that Carrefour few other companies will be the based move from and I think from a hydrogen perspective you will see more partnering. The deployment with Carrefour with Air Liquide who has been a long-term partner with Plug Power and I suspect that between Air Liquide will probably be doing a good deal of work over the coming years.

Okay. Andy just last one for me, you mentioned in your prepared remarks introduced senior versions for Class 2 units and you talk about the form that you re-architected did you pull some cost out and maybe put a number around where you think maybe on the material cost or process savings done a very good job over the last several years to bring cost out of the out stacks and markets themselves. Just maybe put that in perspective and the timing of when you expect that will fall through?

We expect to see that in the third quarter, so the timing of the pull through quarter – when I look at the business, we essentially have two base platforms of low power and the high power platform in material handling and we may integrate them into different packages. That every two years like most technology companies, we redesign the products based on advancements that we are making with the technology. And generally what we’ve seem with each generation is about 20% cost reduction. So I think that when we provide you the projections here and look those units are actually running and operating, so we're pretty comfortable they're actually part of the third and fourth quarter projections we've already shared.

Got it. Okay. I’ll get back in the queue. Thanks.

Okay.

Thank you. Our next question comes from the line of Amit Dayal from Rodman & Renshaw. Please go ahead.

Thank you. Good morning, Paul. Good morning, Andy.

Good morning, Amit.

Most of my questions have been asked, but just wanted some clarification on a few things. In the press release you said you did not finance the two PPA sites that were deployed in the first quarter, so going forward the terms of these PPA deal should – should they kind of be reflecting more over what we saw in the first quarter. It looks like you have made some adjustments on that side and will we see any formal announcement on this front?

Paul do you want to take that and maybe – let me say quick now as you dig into details, as I mentioned during the call here Amit that we decide to defer to financing the deals and possible those deals will look more like sale leaseback in the future because we're working with our PPA partner to reduce the cost of financing those deals in general. And that's why we did not conclude the financing because it could have a dramatic impact on the level of cash that Plug could receive for those deals. We think that the deals could look like our present form with much lower lease rates or could look like traditional sale leaseback just depending upon the structure with the bank and our partner. Paul do you want to add to that. I think I captured it, but you probably can add a little bit additional insight.

Sure. So when you say first quarter there was two sites that we did in Q1. And for transparency we've disclosed in the press release the value associated with those that we financed them with institutions similar to what we’ve done in 2014 and 2015. So at least for now I think it's a proxy of what we're targeting and as Andy said depending on the final terms of that structure that'll basically drive whether from the accounting rules from what you probably know kind of dictate whether it’s an operating lease or capital lease, if it's operating lease then there would be revenue recognition associated with it.

Understood. And just moving on to the ProGen side, just wanted to confirm if we have shipped any ProGen units yet against that 100 unit sort of expectation you have?

Yes, but not many Amit, so we’ve shipped a few units so far and we’ll be shipping a few more in the month of May. We would expect most of these shipments to be in the fourth quarter.

Got it. Thank you so much. And maybe one last question on any updates on the range extend or related opportunity with FedEx and anybody else working under this?

Sure. We have integrated the ProGen engine into the FedEx project. It’s being tested with our partner workforce to eventually move the units into the FedEx. We are watching the unit run it around our parking lots about three or four weeks ago. So it appears that the unit is performing and that I think people should work with that as a little bit different in China. I think that’s probably 12 months to 18 months strategy before testing in that qualification by FedEx. Take about really interest in that because we’ve been looking at cost and one can think of that the cost in fuel electric vehicle, the cost of the diesel engine vehicle or the cost of the hydrogen fuel cells vehicle. And if you think of that a pure easy you got two issues with that kind of product. One you had an issue with the range. The present battery solutions that are deployed by FedEx as a range of 60 miles by adding a fuel cell, one can achieve a 175 miles a range. I think the second item that really is fascinating these when you look at the cost of energy and especially when you look at the all-in fixed costs for a typical size fleet, but electrical cost actually especially infrastructure for electrical deployment actually scales with unit, both hydrogen units actually kind of stayed flat as you reach a certain point for the infrastructure. And what we actually see is that versus those fuel cells in batteries can actually be one of total kilowatt hour basis, today the one par with diesel as the present cost of diesel, and if you go back to 2008 pricing for diesel, the solution is actually half the cost. So we believe it’s really a viable market and can provide both the clean environment as well as an environment – as well as offering that has a value proposition that reduces the operating costs. As you know everyone wants to be green, but everyone wants to be green with cost savings. And when we start looking at this delivery van market more and more, we actually believe there's an opportunity, reduce the operating costs for folks like FedEx. And if you think about FedEx, so much of their business is driven by their cost of fuel and the solution that reduced the cost of fuel will be quite attractive.

Understood that was really helpful. Thank you so much. Andy. That’s all I have.

Okay.

Thank you. [Operator Instructions] Our next question comes from the line of Jeff Osborne from Cowen and Company. Please go ahead.

Hey, good morning, guys. Good evening Paul to you.

Good morning, Jeff.

Good morning Jeff.

Good morning, a couple of questions on Wal-Mart. So given the uncertainty on how the accounting treatment will be to Wal-Mart? Is Wal-Mart expected units this year in the 5,500 units or is that upside?

Yes Jeff, look it’s not a – it is included and we’re not – the risk there is very, very low.

Got it, are you assuming as sale lease back then in terms of reference in the 150 depth or 130 depth right now?

No.

No, okay and maybe just the last one…

And I think that we’re always talking Eric I may or not been clear. I was mentioning that until with the deal gets done, we’re not going to change our forecast for the year. So it’s all papered up.

Got it, may be just the last question, sorry to beat this one to debt.

Yes.

But what is the gating factor with your – I assume you’re using the same partner that you used last year and it sounds like you have a third-party bank involved. Does that just due diligence that they have? Is it something with Wal-Mart on their end in terms of accepting this? I’m sure they have a bunch of things up there quite. I'm just trying to get a sense as an outsider what is the rating issue to now moving us forward.

Yes, I would just say Paul you can add to this. You're dealing with a large commercial bank, you're dealing us, you're dealing with Wal-Mart and just the legalities to make in sure, and I think a lot of it is associate with illegal details. And I think and obviously we're trying to structure it so that accounting treatment that may not – I don’t say is going anything we have to go on to impact the cash flows how we negotiate, I think part of the negotiations actually often had to do with how account treatment, because quite honestly, look I rather recognize it is revenue immediately to makes our financial statements easier to read, but they're kind of the details are going on.

That makes sense. So it sounds like you're pretty confident there. I just want to get a sense of that the cash used in the year that 25 to 35 just in might of the uncertainly of Wal-Mart at least over the next few months. Should you expect a similar run rate of cash burn in 2Q and then I guess more importantly as you ramp up for the 12 states in 3Q, I’d think that that would take up a lot of cash as well. So is it right to think about the middle months of the year when the bulk of the cash gets used and then maybe the fourth quarter you recoup some of that?

Paul let’s you add I know the third quarter is going to be a very good cash quarter for us. I mean good in the way cash coming in and I think we're actually just doing some of the ramp up for the second and third quarter even at the end of the first quarter. But I’ll let Paul comment additionally on that. Paul?

Yes, so when you look at the first quarter in the fact that we didn't finance any employment really and so you've got to that rolled into Q2 and you've got four sites planned for Q2. As those sites start turning that’s obviously very cash accretive and helpful and then of course you look at Q3 with the volume plan there. It just gets better as the year goes on. So yes there's a builder early on and then obviously we start turning a lot of cash out of those systems as the year goes forward.

Got it. That's helpful. And then the last question just big picture wise. Can you just talk about the scope of what’s your doing in China vis-à-vis that the FedEx program with your partner Workhorse. In terms of your content in the vehicle or use the system integrator with doing the battery integration with your fuel cell, Andy in China versus FedEx is using the Workhorse battery system, I just want to get a sense of if that's the case, how do we think about like the revenue content per vehicle as we think about those 100 ProGen engines?

Yes, so I would think Jeff from a revenue contribution is in the range of $50,000 to $60,0000 per engine. I think from a battery point of view we will not be providing the batteries but we are providing good deal of the – we’re providing all the technology to integrates the batteries. So essentially it's actually the OEM that’s providing the batteries but we're providing all the interfacing system work from the batteries to the fuel cell. I hope that so you don't we're doing you know I'm going into details the tax, the balance of plans, the radiation systems, the control systems, the OEM is buying separately to hydrogen as well as the interface to the hydrogen system. There really we just buying the tank and the batteries and we're doing all the interface to the system. So 80% of the system is us. And as you know our fuel cell products for material handling, hybrid units that we used lithium batteries and just one of the core capabilities the company has is the ability to integrate battery successfully with fuel cells, and even with Workhorse, Jeff a lot of the control work is I’ll say joint.

Thanks for the clarification there. At what point – so it sounds like you've got initial shipments here and more in May, but with the ramp in the fourth quarter as you provided earlier, but at what point Andy do you think that the ecosystem of vendors that – the end customer for this arrangement in China would be made public, so that investment will have a better appreciation…

Yes. I think Jeff probably between now and the August call we should be able to give a great lot more clarification of what's going on. I've probably been a little bit more hesitant to some when it comes to negotiating these terms in some ways because with Amazon and Wal-Mart we have strong fundamental business here and it probably allow me to be not that any other folks are being cautious because they are, but it allows us to kind of made a deal take a little bit slower because it really doesn't – if China successful or not successful this business will be successful Plug Power and I think that puts me in a rather unique position when it comes to the fuel cell industry as far as mobility type applications.

Excellent. Thanks for all the details. Appreciated.

Thank you. Our next question is a follow-up from the line of Carter Driscoll from FBR. Please go ahead.

Andy just didn’t know if you could answer this or not, but is there any material change in what you are sourcing in fact in-house and then maybe high versus low power in the initial portion of Amazon in the third quarter?

Yes. So Jeff – sorry Eric or Carter I want to get it right here. We are to be putting the shareholder letter that will bring more and more in-house and I would expect 90% of the stack shipped to Amazon will be Plug stacks and that’s – we’ve will continue to have a certain level of diversification there. As you know we continue to look at – where it is the right items to outsource and the right items to do inside. But we've got our batteries inside and we source sales. We are building our own stacks and I think that from a cost point of view we are always thinking about what items to vertically integrate. And I think Carter, and if you really think about it from a design point of view, we are always going to thinking about integration and how to simplify the designs and with possible what can we do inside and makes sense to do outside. At the moment stacks and batteries we concluded to our part of our internal offering as well as hydrogen infrastructure is ultimately an item that we vertically integrated.

And then just maybe anticipated mix of the initial kind of push in Amazon in terms of different classes?

Good question. A good deal of the Amazon products will be – I'm trying to think whether I should say this or not and looking at my lawyer here. So I would say that the mix is similar to what you've seen with our other business.

Okay. Thank you very much.

You bet. End of Q&A

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I would like to turn the floor back over to Mr. Andy Marsh for closing comments.

Thank you, everyone. We're excited about the coming year. I think that there is a few points I just like to end up re-highlight. One, we've provided our guidance and like different from many other year, it's all backlog and it’s May and it should provide investors a great deal of confidence that we’ll hit the numbers we’ve outlines. As you could tell from the call the PPA agreements that we are working through to make sure that we can maximize the cash flow for Plug Power and make sure we can continue to satisfy our customers. And as the world moves through its electrification, we believe that when we look at some of the underlying value propositions especially for delivery band that we can provide value today for customers who want to make this transformation to electric. So I appreciate the call and we look forward to sharing more with investors over the coming quarter. Thank you.

Thank you. Ladies and gentlemen, this does conclude the teleconference for today. You may now disconnect your lines at this time and log off your computers. Thank you for your participation and have a wonderful day.