Month: February 2015

 

This past Wednesday, Plug Power christened the new year with a much-anticipated business update. The goal of the conference call was to sum-up the successes of 2014 (and even a few mistakes) and to give the investment community a look into 2015. As is human nature, though, different people took away different things from the event. As for me, I came away from the call incredibly impressed and excited, and here’s why:

1. Plug nailed their lofty $150-million bookings goal and their shipments goal

Leading-up to the day of the conference call, analysts and investors alike were skeptical about Plug’s ability to achieve their bookings and shipments goals, but Plug nailed these two numbers in 2014. They continue to struggle with revenue recognition, though, but they’ll likely figure it out with experience as they move out of the start-up phase.

For a start-up company like Plug, bookings are a critical number and deserve major emphasis. It might not look pretty to the pocket book initially, but start-ups have to ‘start-up’ somewhere. In order to ensure long-term success, Plug needs to get companies into the habit of using Plug hydrogen and eventually re-buying Plug fuel cells every few years.

Ideally, all bookings turn into this growth-friendly recurring revenue stream down the line. Plug can never establish that recurring revenue stream without an initial crop of GenKey bookings, though. By closing-out GenKey’s first year with $150 million worth of orders, Plug has demonstrated the potential value of this stream in a big way, all while reassuring shareholders that many different companies are quickly getting into the habit of using Plug products. Plug continues to land new deals and prove that they can diversify their client-base while keeping existing customers happy (according to Marsh, some distribution centers are seeing a record output per individual since switching to Plug fuel cells). Plug has given me every reason to believe that this trend will continue.

[As a small aside, if you do the math, only $126 million of the $150 million in orders have been announced via PR to-date. That means there are at least $24 million in bookings from 2014 lingering in the background waiting to be announced. Coincidentally, we never got a PR for that eighth Walmart DC in Calgary, Alberta that Marsh mentioned on the call.]

2. Marsh stated that Plug will make an extensive investment in hydrogen generation and distribution in 2015

During July’s shareholder meeting, Marsh first revealed his plans to make a significant investment in hydrogen generation and distribution. This made me a little nervous at first, especially when Marsh stated that the company would likely spend about one-third of their total cash on this endeavor. Once I took my blinders off, though, I began to see the potential. . . I started to dream of analogies between Plug and Hewlett Packard. . . instead of selling massive amounts of ink, though, Plug would sell massive amounts of hydrogen. I eventually came back to reality, and my skepticism-turned-dream became curiosity. Ever since that meeting, I’ve wanted to hear more details about Plug’s plan to monetize their hydrogen vision and improve their current GenFuel margins.

During Wednesday’s conference call, Marsh resurrected this subject. He talked about testing electrolyzers in retail stores later this year. He talked about using Plug’s old reformer technology with a new focus. Then he capped the conference call by saying:

Just as 5 years ago I said the key to Plug’s future was to invest in material handling and build out a full product line, we will be putting a similar focus on hydrogen this year. . . We are going to be the ones who figure out hydrogen fuel. . . We can open-up the $40-billion global market and expand our reach past material handling.

Marsh is raising the bar quite high for this company, and I’m eager to see if Plug can deliver on his promise. Plug has proven their worth at promoting and growing GenDrive, so I have no problem giving them another opportunity to prove themselves with hydrogen generation/distribution. I really can’t wait to see what they come-up with this year.

3. They have $146 million in the bank to help grow the company

Plug has $146 million in cash going into 2015, leaving them a lot of room to invest and expand; the CFO promised to invest this money “aggressively, but prudently.” As a long-term investor, I appreciate a company’s willingness to spend aggressively when the right opportunity presents itself. . . and $146 million gives them plenty of firepower to do just that.

4. There were more than 600 people listening to Wednesday’s conference call

It may seem like something ridiculous to get excited about, but I truly believe this is a positive that most people overlook. Such a large turnout on the call demonstrates the growing popularity of PLUG stock, and that popularity continues to serve as free advertising for the company. Whether it’s from happy investors or disgruntled traders, one cannot underestimate free advertising (wherever it’s source). The company’s lore continues to spread through word-of-mouth (for free). And because of this popularity, Plug is quickly becoming synonymous with hydrogen fuel cells, a coveted position in the alternative energy sector previously held by Bloom Energy.