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This episode is brought to you by Charles Schwab Timing the market, Fighting inflation Managing risk Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites, and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab, can help join host Mark Riepe as he breaks down practical strategies to help overcome the mental traps that may affect your investing decisions. Listen@schwab.com financial decoder for Friday, May It's
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Blue Markets Daily, and I'm Anne Barry. There's growing concern that along with the AI boom, there may not be enough energy to sustain it. The Electric Power Research Institute says data centers could consume up to 17% of U.S. electricity generation by 2030. That's more than double today's levels, which raises some big questions. How can utilities keep up? Well, households foot the bill. What's the environmental cost? And can the grid even handle it? Well, one company thinks it has the answer, and that's Bloom Energy. The company builds solid oxide fuel cells that can operate independently of traditional power grids and be deployed directly on site at data centers, allowing companies to generate power on location rather than relying entirely on the grid. Well, investors have certainly noticed because Bloom has seen its stock on a tear over the past year. The company went from losing money to posting record revenue in its latest quarterly results, raising guidance and generating positive cash flow. And its share price has been ripping up more than 1,500%. Most recently, Bloom announced a partnership with Oracle to help power what is slated to be one of the largest data centers in the United States. All of which just gives you a sense for why I'm so glad to welcome to the show Bloom Energy's chief commercial officer, Armin Joshi. We discuss his approach to scaling operations informed by more than 22 years at General Electric. Plus we talk about his perspectives on the role of nuclear power in the United States. Plus what it's like to work alongside Bloom's founder and CEO and engineer and inventor. It's a conversation you won't want to miss just a moment. It's coming on up. But first, timing the market, Fighting inflation, balance and risk. No one says financial decisions are easy. In fact, they can be tricky. And often the forest in your head can lead you sideways. Financial Decoder, an original podcast from Charles
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Schwab can help join host Mark Riepe, head of the Schwab center for Financial Research, as he offers modern strategies to help combat the Wait. What in your head? Like overconfidence, loss, aversion and Recency bias that may cloud your investing decisions. Listen@schwab.com financialdecoder or wherever you get your podcasts.
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And now my conversation with Armin Joshi, Chief Commercial Officer of Bloom Energy.
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Across the whole spectrum of stocks out there, no one can deny that Bloom Energy has been right up there at the top over the last year or so.
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Just to level set for us, just
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explain, if you don't mind, in your own words, the core of what Bloom Energy does.
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Sure. Thank you, Anne. It's great to be on this podcast. Bloom Energy is world's largest solid oxide fuel cell platform company. We are producing and fuel cells are best suited for on site power generation. The way the electrochemical reaction happens in a fuel cell, you can have various sources of different kinds of gas, natural gas, hydrogen, biogas, but let's use natural gas because that's the most predominant and widely available fuel. The natural gas goes into a fuel cell, it reacts with ambient air and without combusting. On the other side of this chemical reaction, there's electricity, pure carbon and pure steam that comes out. So we are essentially converting natural gas into electricity at a very high efficiency of conversion without combusting and without consuming water.
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So when we think about the demand for Bloom Energy's products that's been powered by this enormous surge in demand for data centers, when we take a look at what Bloom is doing versus others and versus your competitors, one of the things that Bloom really talks a lot about publicly and is speed. Last year Bloom Energy delivered a fully
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operational fuel cell system to oracle in just 55 days.
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How does that compare to other solutions out there?
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Why is this such a competitive advantage?
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It's the simplicity of our solution. Right there is an electrochemical reaction happening and if you look at our energy server which comes prepackaged from the factory, our ability to install and commission these things is just a matter of days. All you need is bas utility connection. The speed is also enabled by the fact that we qualify as a minor source air permit because we don't. We have zero particulate matter, which means that we are very friendly for communities or for on site generation. And we don't need water except for startup. When you think about what takes time for projects to get their equipment installed and commissioned, it really first starts with getting the equipment on site. It's not just fuel cells or any combustion technology, be it gas turbine, recipe engine. First you've got to get the core equipment. Then you need all the ancillary balance of client equipment, which then needs to be physically integrated And Bloom, because of the very design of our system, has a lot of these things prepackaged, which is why we are able to quickly install and commission and deliver very reliable power to our customers.
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So you can move very quickly at Bloom Energy. I want to just put that in contrast with some other elements of data center expansion. I was at Nasdaq last week and I listened to a very senior investor at Blackstone which has been aggressively investing behind building out data centers. And what he said, just as an anecdote, is that the wait list now to get a turbine to install at a data center is five years. Walk us through how we reconcile the fact that Bloom Energy can move very quickly for their end market application. But if we're to look at the pipeline of new projects to come, the bottleneck, frankly to your growth because of the data center expansion plan, isn't you or the energy side necessarily, perhaps it's on other components.
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Correct. So it fundamentally comes back to we are not threaded to the same supply chain limitations that legacy turbines or reciprocating engines have. Doom doesn't have any rotating equipment, so let's start there. Right.
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But your customers are subject to them, so how does that affect your growth rate?
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But when you say our customers are, again, for our power solution, whatever ancillary microgrid equipment that is needed, we've got that equipment with us or we have long term contracts with our suppliers, so we've got the full ecosystem of components that are needed or balance of plant with us, which enables us to move fast. We're not waiting for any microgrid equipment or a switchgear or a small transformer. We've got it. We've aligned our supply chain to be able to react at the speed at which our customers want. So if the customers are building their data centers, have got their chips and everything that they have to put inside their building ready, we can move really fast and give them the electrons that they need. So in some ways whatever is happening in the turbine world or recip world is completely irrelevant for us. That's their industrial age supply chain and their manufacturing and supply chain model. We are, as our chairman calls we are, digital power for a digital age.
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Yes, your CEO did say on your Q1 earnings call that your revenue growth is though limited by how fast customers can build their greenfield sites. So there is relevance to the obstacles that your customers face to your own financial performance. Let's talk about your recent earnings. Arman, you had fantastic Q1 results. Congratulations. Really turning the profile of the business financially from you know a question mark around profitability to increasing adjusted ebitda. I think it was sixfold. Now being cash flow positive, your share price has reacted appropriately given that kind of change. So where next, you know, what are the signs that this is going to be a durable financial moment of financial momentum for you?
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Yeah, look the financial indicators and again our chairman mentioned that are a bit lagging indicators. I don't think any investors or customers should be surprised and you should see a similar trend continue. We are a new asset class that is getting adopted at scale. It's no different than how wind turbines got adopted at scale some 25 years ago, solar PVs 15 years ago, battery storage 10 years ago. You know, while we got a lot of buzz and press around Oracle, who are a very big customer of ours, what is noteworthy is that our chairman also mentioned that Oracle is less than 50% of our backlog. So think of us as a new Bloom fuel cell asset class that is getting adopted for on site generation at scale, be it AI factories, be it inference, be it with colos. So I wouldn't be surprised if and in fact, you know, the market should expect to see similar growth and results from Bloom in quarters and years to come.
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Let's take a quick break and when we come back, more of my conversation with Armin Joshi. And now a word from our sponsor, CME Group. Capturing opportunities can be like catching lightning in a bottle, especially when you're juggling risk management in an unsteady market. That's where CME Group comes in.
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And now back to my conversation with Armin Joshi, Chief Commercial Officer of Bloom Energy.
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Let's talk if you don't mind. Armen about some of the partnerships that you have. Oracle is a very big partner of yours. You're working on Project Jupyter together. That's the first announced data center designed to run 100% on Bloom at this kind of scale.
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You do have others.
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You have a partnership with Brookfield.
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Talk to us about the level of
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diversification of your revenue both today and where you see that going a couple of years from now.
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Sure. First, obviously, Oracle is a very big publicly announced partner and a customer of ours. But I go back to what I mentioned, that they represent less than 50% of our backlog. And in due course, and as the hyperscalers get ready, you should see similar announcements from others on large scale projects that we are doing with them. We always let our customers decide when they want to announce these projects. So I'll start with that. When you think about even diversification as it relates for data centers. Right. I keep bringing you back to the fact that Oracle's less than 50%. So hopefully in a matter of weeks and months, you should see a couple of other big announcements to come through.
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Got it.
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I mean, 50%, even though less than 50%, that it's rare to find a company with as much customer concentration as even in the multiple tens of percents. Let's also talk about SK Ecoplant, which is your biggest international customer. You've also got an equity partnership with them and they're your construction partner in Asia.
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When you think about Brookfield, they are our partner and there's multiple layers to that partnership. They are our financing partner for power purchase agreements that we offer to our customer. Brookfield is also a customer to us because they themselves are building their own AI factories and they own a lot of data center companies.
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Yeah.
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And then Brookfield is also a partner for their other portfolio companies. Slash customer for various industrial companies that they own who also have power needs. Right. So I say Brookfield partnership is three layered and we are very excited about that partnership. And it continues to expand rapidly as it relates to SK eco. Yes, they were an equity shareholder of Bloom, but last I checked, they have, I think, divested their stake. Nonetheless, they are a very big partner for us, for the South Korean market, which adopted fuel cell as critical part of the energy transition. And there's an annual auction that happens in Korea that SK ECO participates. And we participate in that auction through SK eco. And at this point, I think we've got about somewhere between 400 to 500 megawatts of fuel cells deployed in South Korea. And again, a steady market that continues to grow.
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Could you provide some color as to why SK divested some of their stake? Amar, you know, just from an investor perspective, a markets persp. Obviously we track insider sales, not just management teams. But I would put in the bucket of insider those who have been holding equity for a longer period of time. Why did SK decide to sell?
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I think they'll be the best ones to comment on that. It's no different than if you are a Bloom shareholder or happen to be. I will not be able to comment as to what were your own investment thesis and decisions and the timing of when you decide to buy or when you want to sell.
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In terms of industrial activity in South Korea, Arman, there has been a lot of concern regarding the closure of the Strait of Hormuz. Just given the dependence on Korean and other parts of Asia's reliance on natural resources that come through the Strait, how is that manufacturing partnering, holding up?
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So we have a joint venture in Korea with SK that is to address the local market. But given where Blum is today, Korea, quite frankly is a very insignificant portion of our annualized volume. And so the, you know, the auctions keep happening, we keep participating. But when I think about Bloom and our revenue mix and concentration, Korea is almost, maybe less than 5% of our annualized revenue, if not less. So we are not heavily threaded to Korea.
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Got it. Would you mind talking just from your commercial perspective about how you see nuclear ramping up? You know, we see the hyperscalers investing in that sector. We're seeing White House being, the White House being open to the United States, building out its nuclear infrastructure. What do you think about that and its potential impact on Bloom Energy's offering?
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So first we're pro nuclear. I think the country needs it, US needs it. And we should absolutely be adding as much nuclear as we can as a country. The way we think about this is that look, nuclear, be it small, modular or large scale, is maybe a decade away, if not more. However, the most abundantly available fuel in the country in US is natural gas. And we are competitive even versus the grid cost today on natural gas. And then you will see a large scale project get announced this year that of course we've contracted. But we have to wait for the customer to get ready to announce it, which is with Bloom fuel cells, carbon capture sequestration, thereby producing electricity in record time. That is the project supposed to fully get commissioned next year with net zero power. So think about this, you know, while the nuclear infrastructure gets built out in the country over a 10 year period, how strong of a momentum it will create for us AI dominance if we can use natural gas with carbon capture and sequestration and hold up to all our climate goals while providing timely reliable power to our customer. So we don't, we don't, we, we don't see nuclear as an or solution to Bloom fuel cell. We see this as an end solution.
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You've had a lot of change, Armand and I want to just come back to what's been going on at Bloom Energy from a structural perspective. You have a new chief financial who joined last month on April 13 joining from Grok where he served as CEO and previously as Chief Financial Officer. Are you expecting to see more big changes at the top over at Bloom?
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We're excited to have Simon join as our Chief Financial Officer. The position obviously was open for a year and we were looking for the right candidate. Look, I think Blooom is at a very different trajectory and as a fast growing company it is but natural for us to keep adding senior executives in our team. That adds to our strength. So I wouldn't read anything beyond the fact that we are a company that is rapidly expanding. We are becoming a new energy generation asset class in itself. And as we continue at this rapid growth trajectory, we will continue to add executives as our overall business footprint keeps expanding globally.
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Let's talk about your background if you don't mind. Armand. You spent 22 years at GE which is a very different kind of business. You are at a fast growing one now. GE's been in a through a different point of its cycle. It's actually been through a number of separations and spinoffs in recent years. What is it like to go from somewhere like GE where you involved in across a number of different parts of the business including GE Capital. What is it like to go from that kind of company to come to a Bloom Energy?
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I think my experience in GE was tremendous. It was a perfect training ground over the two decades that I worked through in various segments and I enjoyed every minute of working either in GE Capital or GE Aviation or almost spending 15 years in GE power now Vernova a lot of fundamental training around leadership, around how to think about scale operations, how to grow the business, how to manage through different business cycles. I have nothing but very fond memories and a lot of the toolkit and things that I learned were deploying some of that as we think about scaling Bloom.
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They're very different vibes. So Armand, you know I actually I was CEO of a manufacturing business and my, my mentor there and board member there was Larry Bossidy and I would talk to him about the pace of execution somewhere like a big company, in that case a Honeywell versus at a small, more, a smaller, more nimble business with very different growth expectations.
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What are the differences?
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And I hear you, I'm training on the fundamentals. Before that, of course you're an accountant, but in terms of the energy and
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the pace of a startup, how would
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you describe the differences?
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I worked with some incredible executives in General Electric company who taught me a lot. And the big difference here is we're working with an inventor, founder, chairman, CEO. Right. His ability to technically problem solve things is like nothing that I've ever seen before. Right. When you're, when you're, when you, when you've got someone who's leading the company like Our chairman is Dr. K.R. sridhar who invented the product, who has deep understanding of the technology. He probably is the only CEO who knows the entire bill of material of our fuel cell. He knows exactly what part was created for what reason. It's a huge advantage when we think about our ability to scale up supply chain seamlessly and our ability to continue to move fuel cell technology forward. So that for me is fascinating while I brought a lot of energy experience. But to work with a founder engineer at heart who's still continuing to invent and move the technology forward is very different and I'm loving it. And that is the broom differentiation. While we are scaling up and becoming big as a company, but we still feel like we're a scaled startup and we want to remain like that so that we can continue to bring new technology and solutions to our customers and to the market at large.
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Arman Joshi, Chief Commercial Officer at Bloom Energy. Thank you very much for joining. Appreciate your time.
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Thank you.
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Well, huge thanks to Arman Joshi for joining us. That's it for today's Brew Markets Daily.
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Brew Markets Daily is hosted by Anne Berry and produced by John Curto, Tarkab delatif, Omni La Roya and Emily Millarn. Our Technical director is Uchena Waoghu. Brittany Dotako is our audio engineer booking by A.B. silver and the president of Morning Brew Inc. Is Devin Emery. If you have any feedback or a company you'd like us to COVID leave a comment or send an email to bluemarketshoworning Broadcom.
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Well, have a brilliant weekend and we'll see you back here on Monday. Same time, same place.
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