Good afternoon. My name is Joel and I will be your conference operator today. At this time, I would like to welcome everyone to the Bloom Energy Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Thank you. I would now like to turn the conference over to Ed Vallejo, Vice President of Investor Relations. Sir, you may begin your conference.

Thank you, and good afternoon everybody. Thank you for joining us for Bloom Energy’s third quarter 2022 earnings call. To supplement this conference call, we furnished our third quarter 2022 earnings press release with the SEC on Form 8-K and have posted it along with supplemental financial information that we will reference throughout this call to our Investor Relations website. Our third quarter 2022 10-Q is also in the process of being submitted today as we speak. During this conference call, both in our prepared remarks and in answers to your questions, we may make forward-looking statements that represent our expectations regarding future events and our future financial performance. These include statements about the company’s business results, products, new markets, strategy, financial position, liquidity and full-year outlook for 2022. These statements are predictions based upon our expectations, estimates and assumptions. However, as these statements deal with future events, they are subject to numerous known and unknown risks and uncertainties as discussed in detail in our documents filed with the SEC, including our most recently filed Forms 10-Q and 10-K. We assume no obligation to revise any forward-looking statements made on today’s call. During this call and in our third quarter 2022 earnings press release, we refer to GAAP and non-GAAP financial measures. The non-GAAP financial measures are not prepared in accordance with US Generally Accepted Accounting Principles and are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between the GAAP and non-GAAP financial measures is included in our third quarter 2022 earnings press release available on our Investor Relations Web site. Joining me on the call today are K.R. Sridhar, Founder, Chairman and Chief Executive Officer; and Greg Cameron, our Chief Financial Officer. K.R. will begin with an overview of our business, then Greg will review the operating and financial highlights of the quarter. And after our prepared remarks, we will have time to take your questions. I will now turn the call over to K.R.

Thank you, Ed. Hello, everyone. Good day to you. We are very pleased with our financial and operating results in the third quarter and the outlook for the fourth quarter and fiscal year 2022. Greg will go into details on the financial and operating performance in his remarks in a few minutes. Before that, let me share with you some observations on market dynamics and two company highlights. On the market dynamics. The world lacks energy security. The disruption of oil and gas supplies to Europe [audio gap] and the long duration power outages that affected large populations in the aftermath of Hurricane Ian in Florida, all demonstrate the fragile and brittle nature of our fuel and electricity infrastructure. And it could have been worse. We came perilously close to catastrophic power outages in Texas and California during the summer months. Now, the Northeast fears its power reliability over the winter. Businesses and governments are quickly realizing that absent significant changes, power disruptions will increase in severity and frequency as extreme weather events become more frequent. In addition to energy security, the volatility and price increase for both fuel and electricity are contributing heavily to economic insecurity. But the fuel and power industries are not responding to these challenges with alacrity. Instead, they're waiting for the perfect zero carbon solution of the future. They are reluctant to deploy anything that may become a stranded asset due to policy and regulatory bans. This wide creates a large opportunity for Bloom. We see that our commercial and industrial consumers want pragmatic solutions that can power their growth today and meet their zero carbon needs in the future. In Bloom, our customers see a peerless platform that is purposeful and practical. By powering them with non-combustion based always on clean power today, using…

Thanks, K.R. I agree with you. We had a very strong operating and financial quarter and are well-positioned for the future. To begin, let me point to a few key highlights. We had a record third quarter total revenue of $292 million, up 41% versus the third quarter 2021 on increased product acceptance. We improved our liquidity through a successful completion of a secondary equity offering. We are on track for doubling our manufacturing capacity this year. We continue to see strong customer interest across our energy server and electrolyzers. We are reaffirming our 2022 guidance. With those highlights, let me provide some additional context to our third quarter performance. Our ending cash balance for the third quarter was nearly $670 million, up over 100% versus the same quarter last year and compares favorable to our recourse debt of $294 million. In August, we executed a secondary offering of 15 million Class A shares. The deal was oversubscribed at $26 a share yielding 389 million of gross proceeds. We also received notice from SK ecoplant that they were executing their second tranche option to purchase an additional 13.5 million Class A shares at $23.05 per share for gross proceeds of 311 million. They also will be converting their 10 million redeemable convertible preferred shares to Class A shares. The share purchase is subject to the completion of regulatory reviews, and both conversion and the purchase are expected to close in the first quarter of 2023. Our partnership with SK ecoplant is strong and continues to find new avenues for growth. Our value proposition for the energy servers in electrolyzers is robust. The energy servers quickly bring additional resilient power to a client site, while providing a pathway to decarbonize. Our customers need solutions today to reduce their carbon intensity, while…

[Operator Instructions] The first question is from the line of Sam Burwell with Jefferies. You may proceed.

Hi, there. I was wondering if we could start off actually on the nuclear integration with solid oxide electrolyzers. And curious if there's anything on the horizon that we can expect to see you guys leverage out of the Westinghouse agreement?

So first and foremost, welcome to Bloom team coverage. We're glad to have you on board. And this is K.R. So, we clearly, I think the IML demonstration, which is what you're referring to, and to bring everybody up to speed. We demonstrated using the Department of Energy that our electrolyzer is significantly, significantly even our early iteration 30% better in terms of energy efficiency when we do heat integration, that where we need to go with significant room on the upside. So, this is what got Westinghouse excited, and this is where we form the relationship. Currently, as we sit here, we are jointly working with them on several opportunities. And again, as is tradition in Bloom, we will speak about it when something actually materializes and the customer allows us to speak about it. But we see this as a huge opportunity.

Thank you. The next question is from the line of Michael Blum with Wells Fargo. You may proceed.

Thank you. Good afternoon, everybody. Wanted to ask in terms of hitting the guidance for the year. Service margins are still in negative territory. So why don’t if you could just speak to is part of the plan to get to these numbers for the year include service margins turning positive, and if so, what's going to drive that? Thanks.

Yes. Hey, Michael, it's Greg. So as we put the construct together this year around service, a biggest component of that service is product costs related to replacement power modules that we put into the fleet. The same issues that we've had, making sure that we continue to drive the cost down of our new product is the same thing that translates over into our service business. So as we've been building out the Fremont facility and carrying more capacity than we were currently outputting and absorbing that, those unit costs for both the new product as well as for replacement modules has been somewhat elevated. Our expectation is as we move through the remainder of this year and into next year, and we're building more units, better absorption, lower product costs, you should see that in our new product business as well as our services business. If you look particularly within the fourth quarter around how we're building that framework, I would expect some improvement in our service margins, given that, but there's still about a breakeven assumption within the business that we're still able to get to our full year guidance around gross margins.

And one more thing I'd add, Sam (sic) [Michael], when you think about -- this is K.R, is the following right? Look at the fundamentals of the service business, as Greg said. We are seeing the lifetimes improve with time on our modules, which is key to service. Our costs while COVID-related, supply chain related, they're in a standstill. We are going to get back to that treadmill of bringing the cost down quarter-after-quarter, that is going to happen. So you put those things in place if the life gets longer, and the cost of replacement gets cheaper. Clearly the units we are shipping, we will see the costs come down. Now, there'll be other pressures that we will be willingly taking, which is when we go into new territories, that will be in the early days with low volume, you will see that service will be a cost center there. But that is necessary for growth and we will do that. So that's the balance you will see. But fundamentally, the thesis that we presented to you of service being accretive to the business as we go forward is solid and we stand by. Thanks, Michael.

Thank you. The next question is from the line of Maheep Mandloi with Credit Suisse. You may proceed.

Hey, good evening. Thanks for taking the questions and congratulations on the ramp there. First, just want to touch upon the revenue growth and the gross margin you're expecting in Q4. Greg, you talked about favorable mix of [indiscernible] projects. Could you just provide some more context around those specific customers in the U.S? So like a PPA 4, PPA 5 simplification, which is driving that. And also just wanted to understand I think the Q you've talked about ITC benefiting Q3 revenues or higher ITC rather? How should we think about that [indiscernible]? Thanks.

Yes. Thanks, Maheep. So a couple of things are impacting there. One is we've definitely seen an increase in our acceptances each quarter, and thus an increase in our revenues each quarters we've gone through the year, and we brought Fremont stack manufacturing online. Stack manufacturing, as you know, has been our capacity constraint. We have more than enough capacity in our Newark Delaware facility around assembly, it's really about been about stack. And we've built that out each quarter. Expectation, I think I even said it in the script was we would expect about 40% of our annual build to this year to be done within the fourth quarter. So that was really going to help us as we continue to drive forward to get to a revenue guidance on the year. Listen on mix in ITC, for the quarter, as we look at the fourth quarter, we're very much focused on making sure that we can deliver the revenue against our backlog and pipeline to continue to grow our revenue to where our guidance is. We do see a path to get to our 24% gross margin targets for the year, really driven by a couple of few things. One is unit costs should continue to come down like it's come down every quarter so far this year as builds have been increased, we would expect to see those unit costs to come down and that's a margin improvement. The second thing is we've been shipping, we've been prioritizing our shipments to SK ecoplant as part of their take or pay contract because we've been constrained. So we wanted to make sure we could meet our requirements then for the year. We've been shipping them through the course of the year and are nearly done on that. So…

Thank you. The next question is from the line of Julien Dumoulin-Smith with Bank of America. You may proceed.

Hey, good afternoon. Thanks team for taking the time. I appreciate it. So, first off, just keeping with this IRA focus, if I can. What geographies and applications are seeing greater attention? Are clearly, commercial utility rates and demand charges going higher, ITC should be invigorating. Can you talk a little bit more about the backlog? And then related there, you all at the Analyst Day talked a bit about the interconnect opportunity. Utilities is obviously having challenges, data centers talking that up of late. Are you still seeing an opportunity for novel load, which can't be met with utilities, as you look at your backlog creation to '23?

Yes, hey, Julian it's Greg. So let me kick it off and what I miss, I'll ask K.R. to clean up for me. So there's an IRA, we are still really encouraged by everything that we're seeing in there. We’re -- whether it is the ITC benefit on our core micro grid equipment, or whether it's on the ITC benefit being extended into our biogas, waste to energy business and more of that product getting in, we're really encouraged about that, as that helps our projects become more attractive to our customers. The 45Q credit around carbon capture were important to us. We've talked before, now only going from $50 to $85, but the size of the projects were before about 200 megawatts and now can get down into single megawatts probably makes sense for us in the 20 to 30 megawatts, but a lot more opportunity to play in there. And then obviously, with the hydrogen PTC at $3 for our electrolyzer business within the U.S., given its performance for there. We're really excited about that. What I'd say generally about how we think about the IRA within our business, across all those different applications, product lines and geographies within the U.S., I would say that our velocity within the deals that we've seen is definitely increasing. It has created some scarcity around resources and other things that we can use to our advantage to make sure that we're moving these deals through the system quickly. No big announcements to make for you or no insights into where we think the backlog will be for the end of the year. But we're really excited about the activity we're seeing. Yes specifically about the interconnection the time to power within whether it is in the data center space, the advanced…

Julien, I would add to that a couple of things, right. The new look at that growth because of onshoring of manufacturing and data centers and look at specific hotspots in the country where that gap between supply and projected demand is in the hundreds of megawatts. That could be a deal play. The deal players, like Greg mentioned, it would be a freebird, a self operating micro grid that supplies power for that customer. The other one could be in front of the meter working with the utilities being able to provide the utility with the tools to put this power for their customer. But as they bring transmission distribution and as alleviated, thanks to our skid mounted platforms. They can move those around where they need to move. So this must be super attractive for a utility to be interested. So not only are we talking to potential customers in our funnel, we are also engaged with utilities to say how can we partner. And this should be a win for the utilities. Number one. The other question you asked in IRA and Greg alluded to this, biogas and waste to power, right? Waste to power, and I will tell you, we have seen an order of magnitude increase in the funnel that we are seeing because of IRA. So I'll tell you it's somewhere between 200 and 300 megawatts worth of funnel inquiry that we have in the, like waste to power market. These are project developers. Many of these are brand new trying to utilize all the IRA benefits. What will actually materialize, what will not, time will tell. But we clearly see a 200 to 300 megawatt funnel out there in terms of opportunity. So super exciting. Thanks, Julien.

Thank you. The next question is from the line of Martin Malloy with Johnson Rice. You may proceed.

Thank you for taking my question. I wanted to ask about the Taylor Farms press release that you had during the quarter. I thought that was particularly interesting. And maybe if you could just give any insight that you can into the customer's thought process in leaving the grid and going with Bloom servers and if you're seeing similar kinds of inquiries from other industrial users.

Martin, this is K.R. Thanks for asking that question. Look, Taylor Farms is a great example for us of a repeat customer who started very small with us and grew with us as we went along. For people that are not familiar with the name, if you go to a grocery store and buy good salad mix, chances are that’s the Taylor farms packaged salad mix, okay. They are the country's largest provider of this. So very, very large footprint serving a very important need for the country. Now, they're fantastic example of what again, we are seeing with our current electricity system. These farms and where these packaging plants are typically at the very end of the line in rural areas. As the energy system is getting constrained, the electricity system is getting constrained. Even on a good day, the quality and the reliability of the power that they have at the end of the line is terrible. And God forbid things like PPS -- PSP happen, which they have experienced for days on end, they don't have power. And the amount of damage it does to their ability to do business is profound. And therefore, they wanted a micro grid that was completely independent of the grid, and they could just operate. And this was the requirement. And what we have always said, is when you combine our baseload power, with a little bit of energy storage, with a little bit of engines, if you need it, with solar, you put all that together, you get the Goldilocks of electricity, okay. And what you get is energy security, economic security and environmental stewardship. We put the three together, that is Taylor Farms is an example of where we believe in their strong conviction, the rest of the -- like business world is going to go when they realize what is needed.

Thank you. The next question is from the line of Noel Parks with Tuohy Brothers. You may proceed.

Hi, good afternoon. I want to touch a bit more back on biogas. You've talked about the funnel of inquiries you have and just how big it is in the waste to power space. I recall you having some optimism earlier in the year that it would be a big second half for that business line. So wonder if you could just expand a little bit on that. Are the drivers pretty much everything you anticipated? Of course, IRA is helpful. And do you have any sense about what trajectory the growth might take as you cross into next year?

That's a great question. We are -- yes, when we talked about the IRA, and the benefits that it had created for taking what would be a problem in that methane from the waste going into the atmosphere, and converting that into an opportunity. Everything was lined up there, right. So that story, absolutely [indiscernible]. And we are seeing that more people are realizing that is not only a good thing to do for the environment, it's a good thing to do for their wallet, okay? And then those two things combined, market takes off. So there are two aspects of this waste energy that I want to focus. One aspect of the waste to energy is whether it's landfill, whether it is like dairy farms, and like animal waste, and all that, there you would see that our systems require minimal cleanup, our systems don't need to be very large. And for the amount of biomethane, that you've produced, they will deliver the maximum amount of electricity under the same. For those reasons, we are the preferred choice by most developers in this field, whether it's a wastewater treatment plant, whether it's a dairy farm, any anybody else, right. So that's the value proposition there. We see multiple opportunities there. In places like wastewater treatment, it's also a resiliency play, because should there be a big national disaster and the grid not operate, they're eating their own dog food, right? So they're able to make methane and then convert that to electricity and operate their way, like wastewater treatment plant, and that resiliency brings a fantastic advantage. But then you go to the other side of the clean fuel credits, whether it's [indiscernible] CFS, it's all that there is a very strong formula on CI score. And these are very large projects being developed in the Midwest, for example. And even though they have to pay a slightly higher premium to use Bloom's electricity, by using Bloom's electricity as opposed to the grid, they lower their CI score. And the advantage they get on the biofuel is significantly greater than the premium they pay for the electricity. So we have 8 to 10 projects between all these. We are actively working on right now. So while it's difficult for me to handicap for you, and even if I could, I wouldn't give you a number as you know. From that 200 to 300 megawatts, we would expect a pretty reasonable chunk to actually go into contract next year.

Okay.

Thank you. The next line -- the next question is from the line of Kashy Harrison with Piper Sandler. You may proceed.

Good afternoon, everyone, and thank you for taking the questions. Just two quick ones for me. I was wondering if you guys could give us a sense of your current system contract value backlog. I notice the metric you typically provide annually, but I was wondering if maybe we could get a sneak peek of where it stands today. And then also,, looks like non-GAAP OpEx pickup quarter-over-quarter because of investments. And is maybe tracking up 25% year-over-year versus revenues up about 20%-ish. And so just wondering how you guys are thinking about operating leverage entering 2023. Thank you.

Hey, Kashy, thanks. Listen on GAAP and OpEx, right, so as we went through and looked at where we needed to make investments in the company, clearly we are investing in R&D. That's both in engineers to develop projects, but materials that they can use in the laboratory. And we are putting a foot to the accelerator to make sure that especially post IRA that we can bring these products to market resiliently and hardened quickly from the team. So we've definitely put an accelerator to our technical team to go do. On the commercial side, listen, we're continuing to build out our capability, whether it is with resources in the sale of our hydrogen electrolyzers, in the waste energy that KR was just speaking about, to utilities or to building out our international platform, we are adding resources to there. And then lastly, on making sure that we are running this business in a controlled fashion as you would expect us to make sure we have the resources we have in place. We've done that. With each quarter, there's a few things that pop through on the OpEx that were one timers or things you hadn't planned on. There was a couple that came through this quarter. But from a discipline standpoint, this business is all about getting from, as you said, the low 20s as OpEx as a percentage of revenue to that 15% OpEx as a percentage of revenue by the middle part of this decade. And we're committed to do that. There was a bit of catch up, while we had made over the last couple of years. And as we pull our plans together this year, KR my expectation is we won't continue to grow at that rate and get to see some operating leverage out of it. But clearly we've made sure that we are. If we're going to err [ph], we're going to err on the side of growth in being able to sell our project and control our product. But we ought to get some operating leverage to your point, especially as we move into next year, given the revenue expectations that we see. In regards to our bookings in the sneak peek. I invite you back in 90 days when we do our year-end call. And we'll be happy to lay out then what a great success the team has had and landing, landing the opportunities for this year. And I'll say no more other than I'll see you in 90 days on that one. Thanks, Kashy.

Thank you. The next question is from the line of Alex Kania with Wolfe Research. You may proceed.

Great. Thanks for taking my question. Just thinking about your cash balance, turning to positive, I guess, plus or minus operating cash flow, I guess, depending on the accounting, President of the era, then also the additional cash sitting in the beginning part of next year. Just kind of thinking about, how are you looking at kind of capital investment, kind of in this environment? And kind of if you like, it's because of all the backlog that you've got. Are you already thinking about the need to add new manufacturing capacity?

Yes. Hey, Alex, thanks for the call. It's Greg. So, listen on the cash balance in part around the secondary, a lot of that was to make sure that we had properly capitalized to display not only to our supply chain, but to developers or projects, especially as we've gotten into some more complicated that we had the substantial financial resources to be able to participate at the level that we needed to. And we wanted to signal to the supply chain, that we are increasing our capacity significantly and we have the financial wherewithal to encourage them to invest. And that was the primary reason that we did the secondary over the summer in August. On capital investment as we're very focused on bringing the Fremont facility up this year and next year. So where we were about 300 megawatts of total stack capacity at the end of last year, will be 600 megawatts of total stack capacity and a fuel cell basis. And that's over a gigawatt of electrolyzer capacity that we have, as of today, based on the investments that we've been able to make so far this year. We'll continue to bring those online next year. And the investment for it is about $200 million. And from that we'll be up -- we'll double our capacity again next year on that same $200 million that we've been investing this year and next year. So the payback on that is incredibly attractive at 6 to 8 months and we'll go from there. So far, we think after we've gotten that, that manufacturing capacity in Fremont, we're encouraging the team that they can be able to get more capacity out of that same facility going forward. We don't think we stop at the gigawatt a fuel cell capacity, or the 2.5 gigawatts of electrolyzer capacity in Fremont. But to the extent we need to build another factory down the road in a different location, we're glad to know that we have the financial wherewithal to make those investment decisions. And once you've got the building, it's fairly quick to make those investment decisions. So it's about 6 to 8 months to bringing online. And once you get a full utilize, its 6 to 8 eight months to get it done.

Now, there's one more thing that I want to add to what Greg, [indiscernible] question was, would we continue to invest to double the capacity next year? The answer is absolutely yes. And while we understand the context of the economic environment that we are all seeing in the macro, just look at electricity and look at the drivers for the demand, whether it is electrification of transportation, whether it is digitization and datacenter growth, whether it is waste to energy, and that being an opportunity that's already been created.. There whether it is electrolyzers, or the PTC. From their reset, this is not going to slow down for us. The astronomical pace at which it needs to happen may come down, a little bit down to earth, but you'll still be huge growth opportunity. And both with the previous question on our OpEx as well as this question on our CapEx, we are going to meet the moment. That's the reason why we raised the money and we are sitting with a product and a platform that is relevant for today, relevant for tomorrow, relevant for the long-term future. So, [indiscernible] and we see nothing, but opportunity and we will continue to invest both in building the team as well as investing in the CapEx to go lead and be the lead player in this transmission.

Thank you. The next question is from the line of Sangita Jain with KeyBanc. You may proceed.

Hi, thanks for taking my question. Can you share with us how Bloom is participating in the [indiscernible] hydrogen hub proposals that are being prepared for submission to DOE?

We are in active conversations with multiple hubs. And again, these are the hubs [indiscernible], how they talk about and which hubs who participates fairly competitive at this stage. So I don't know that I'm at liberty to talk about which hubs. But trust us there are multiple hubs competing. And I think when it comes to hydrogen, I have used this before, I think in the last call, we sell the [indiscernible] for the people who want to go hunt for [indiscernible], okay. So we are participating with anybody and everybody that wants our superior electrolyzer to put together a superior proposal [indiscernible]. Thanks, Sangita.

Thank you. The next question is from the line of Colin Rusch with Oppenheimer. You may proceed.

Thanks so much guys. Could you speak to the improvement in yields that you're getting out of that California facility at this point?

The improvement in yields?

Yep, out of the factory. How that's trending?

Yes, listen, listen, it is a copy exact pace process right. So the same printer technology, the same furnace technologies, the same manufacturing processes, the same part go through both our Sunnyvale factory, that go through our Fremont facility. And in some cases, as we brought the Fremont facility on, we were using both facilities to create stacks as we brought that process through. So it's not as there's not a different manufacturing process nor a different outcome between what we get out of Fremont versus what we get out of Sunnyvale. The capacity that we've been able to add has really been amazing over the course of the year. And this is really speaks to the ability of the team to bring this tooling on place very quickly. Kudos to the team that built the original manufacturing line, that they've been able to bring these processes in and build out this manufacturing line. And we've got it 95% up, and we'll have the remainder up by this year. And we'll add, like two more lines next year. But our expectation is that the yield from it from a process standpoint, will be equivalent to where we had in the first place. While we always look to improve that with automation, in improving our manufacturing processes, we spend a lot of time on that is way to help drive an improvement in quality as well as a reduction in cost. But no real difference between the California facilities.

And one very important thing. If you're thinking about it this way, right? Our copy exact, but also our modular technology, right? Means that it is giving you not a on off function or starting a new factory. You keep adding capacity every week, every month as a new tool comes on board. So if I were to give you the example, right, in our Fremont factory, bringing tools on every month means that in October, we were able to produce 17% more fuel cells than in September. 25% more than in August, and 40%, more than in July. So every week, every month as we go on, we keep ramping up from that 1x to 2x. So by the end of the year, we will be at two extra capacity over everywhere. So this is a low risk approach to scaling out. Thanks, Colin.

Thank you. The next question is from the line of Ameet Thakkar with BMO Capital. You may proceed.

Hey, good evening, guys. Thanks for squeezing me in. Maybe a quick one for Greg. But it looks like the installation margins were like 140 basis point drag on gross margins this quarter. And that's been kind of you guys have said that, that this is kind of going away. And you can kind of see that it's kind of fading. Is that like another kind of potential kind of tailwind for you guys in the fourth quarter? Is that kind of like basically kind of ceased by the fourth quarter?

Yes, it's a good question. Ameet, thanks. So we are definitely engaging more and more with EPC partners here in the U.S. They're taking this work away from us, and they're bringing their expertise to help drive lead times with the customers as well as to improve the profitability, given that it's their core competency and not ours. I think if you look at particularly at the fourth quarter, though, the one thing I'd caution you on is you probably going to see something very similar to what we saw on the third quarter, just given the amount of U.S domestic installations that we're going to do. So while we may improve on each project, in our expectation with the SEC team is that they will, but just you'll nominally have more deals in the U.S in the fourth quarter. So it'll be there. Over the long-term, right, the way we get to our margin levels at 30% by the middle of this decade is we continue to make the product at the profitability we are now. We get service profitable, and we make install a smaller part of the overall P&L. So even if it loses a few dollars, it doesn't impact our margins negatively going forward. So it remains a key part of our framework and on improving our margins.

Thank you. The last question today is from the line of Jeff Osborne with Cowen and Company. You may proceed.

Yes, thanks for getting me in here. Just curious on two things. One, any commentary you have on pricing in particular on the electrolyzer side? I'm just curious what you're seeing as you're going out, bidding projects.

What was your second one, Jeff, so we can get them both and get them answered?

Certainly. And I hopped on a few minutes late so, I don't know if it's in the prepared remarks you addressed. Eversource's comments earlier in the week on gas shortages. How we should think about that? What your exposure is to the Northeast? Thank you.

Yes. Great. On pricing of electrolyzers, I will tell you our view on this remained -- this is not a bomb, but times 1.4 targeting a 40% margin business. Our technology we think is proven out to be second to none around efficiencies. We are somewhere between 15% to 30%, maybe even 40%, if we can find access sources of heat to bring in displace the need for electricity within there. [Indiscernible] the 70% to 80% of the cost of breaking water and creating hydrogen is going to be the input energy costs. We think we've got a competitive advantage. As we look to build our pricing over the long-term, we're going to value price, meaning as we pull together with project developers, whether they're doing ammonia, whether green ammonia, whether they're doing clean hydrogen, whether they are manufacturers that are decarbonizing using our technology on site. We're going to look to create value for them and share value from them. So I do not -- I don't generally get into the discussions of how many hundreds of dollars per kilowatt will our electrolyzer be? And how do we compete versus alkaline versus [indiscernible], plus it's not the right discussion to go have. This is all about creating value for our customers, and making sure that their projects get to their economic hurdles. And we think we can do that while we meet. We meet our economic hurdles on it. So we're excited about it. On the gas side, clearly, I didn't read, particularly on Eversource. But we spend a lot of time talking to the gas companies in the U.S and there is a process here that they are getting a lot of phone calls and a lot of demand. It's the second order question when first when the local utilities can't provide the electricity. And people begin to say how do I then do on site generation, whether it's with a fuel cell or some other type of technology that they're getting asked to do a lot going forward. We see it as a short-term issue. And we think we can work our way through it. We found the community to be incredibly engaging, and in problem solving. And the projects are not -- I’m going to say this right, are not LCOE driven in most cases, it's really about a time to power in the missed opportunity. So there is opportunity here and value the creation that allows you maybe to spend a little bit of money in the short-term to get power to them, while the overall deal hurdles for everybody, But that's the focus. Maybe not saving the last $0.07 on the length of pipe. It's really about how quickly we move that process forward. So I hope that answers your question, Jeff. I'm going to turn it over to KR, we're right at the top of the hour and let me close out here for the team.

Thank you, Greg, and thank you all for taking the time to join us today. As you can tell, we are super excited about the opportunity. And you're in front of us. You've seen us. And you’ve seen us tell you what we will do in terms of not just what the product can do, not in terms of the revenue we can generate, but also in terms of our -- the ability of our platform to be versatile, and be able to plug into so many applications. The marine application that we just talked about during the prepared remarks is an example of that. But we see very similar stories in our other growth drivers we have spoken to you about. In terms of the overall demand in the marketplace, we think the electricity demand is going to continue to be robust. And there is going to be in specific areas that are extremely well suited for Bloom. There is a big supply demand mismatch, and it's all about the time to power. We see that as a huge opportunity. And we continue to be thankful and amazed at the execution of our team in delivering on time, development projects, production capability, supply chain readiness and being able to deliver to a customer. All this put together, We are excited about the future and look forward to talking to you in 90 days about how we finish the year. Thank you.

Thank you.

This concludes today's conference call. You may now disconnect your lines.